-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A0R6FXfdv6zhPySmO2LKUT0IZloqMAmYX3E4qaTN9FCV9ZADODQafTRjm4eXTgPX lgxnDfPFGullcQyXMoEt2w== 0000950115-97-000865.txt : 19970528 0000950115-97-000865.hdr.sgml : 19970528 ACCESSION NUMBER: 0000950115-97-000865 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970527 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADAGE INC CENTRAL INDEX KEY: 0000002186 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 042225121 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07336 FILM NUMBER: 97614332 BUSINESS ADDRESS: STREET 1: 400 WILLOWBROOK LANE CITY: WEST CHESTER STATE: PA ZIP: 19382 BUSINESS PHONE: 2154303900 MAIL ADDRESS: STREET 1: 625 WILLOWBROOK LANE STREET 2: 625 WILLOWBROOK LANE CITY: WEST CHESTER STATE: PA ZIP: 19382 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1997 ---------------------- Commission file number 33-31797 -------------- ADAGE, INC. -------------------------------------- (Exchange name of registrant as specified in its charter) Pennsylvania 04-2225121 ------------------------------ ------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Incorporation or organization) Number) 400 Willowbrook Lane, West Chester, PA 19382 --------------------------------------- ---------- (Address of principal executive officers) (Zip Code) (215) 430-3900 ----------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date of May 22, 1996. 5,129,150 shares of Common Stock, par value $ .60 per share. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ADAGE, INC. Condensed Consolidated Balance Sheets March 31, 1997 December 31, 1996 -------------- ------------------ (Unaudited) ASSETS 000's Omitted Current Assets Cash $ 976 $ 502 Accounts receivable, net 7,186 11,469 Inventories 16,129 16,219 Marketable securities 672 723 Other current assets 3,156 2,474 ------- ------- Total Current Assets 28,119 31,387 Property, plant and equipment, net 6,110 12,632 Net assets of discontinued segments 13,858 5,883 Intangible and other assets 2,431 2,151 ------- ------- Total Assets $50,518 $52,053 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt $ 653 $ 868 Accounts payable 3,840 4,874 Accrued expenses 2,175 2,721 Income taxes payable 62 303 ------- ------- Total Current Liabilities 6,730 8,766 Long-term debt 14,942 14,073 Stockholders' equity 28,846 29,214 ------- ------- $50,518 $52,053 ======= ======= Note 1. The consolidated balance sheet at December 31, 1996 has been condensed from the audited financial statements. See Notes to condensed consolidated financial statements. 2 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Income FOR THE THREE MONTHS ENDED MARCH 31, --------------------------- 1997 1996 ---- ---- (Unaudited) (Unaudited) 000's Omitted Income Sales $ 9,460 $ 12,372 Investment income (51) -- Other 95 (1) ----------- ----------- 9,504 12,371 Costs and Expenses Cost of sales 7,032 9,035 Selling, general & administrative 2,545 2,640 Interest 321 298 ----------- ----------- 9,898 11,973 Income (loss) from continuing operations before income taxes (394) 398 Provision for income taxes (benefit) (134) 151 ----------- ----------- Net income (Loss) from continuing operations $ (260) $ 247 Income (loss) from discontinued operations net of taxes (68) (45) Gain on sale of discontinued operations net of taxes -- -- ----------- ----------- Net income (loss) $ (329) $ 202 =========== =========== Earnings Per Common Share Continuing operations $ (.05) $ .05 Discontinued operations (.01) (.01) ----------- ----------- Net Income $ (.06) $ .04 =========== =========== Weighted Average Common Shares Outstanding 5,129,150 5,125,234 =========== =========== See Notes to Condensed Consolidated Financial Statements. 3 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Cash Flows FOR THE THREE MONTHS ENDED MARCH 31, -------------------------- 1997 1996 ---- ---- (Unaudited) (Unaudited) 000's Omitted Operating activities: Net income $ (329) $ 211 Adjustments to reconcile net income to cash flows Depreciation and amortization 242 707 (Gain) Loss on sale of marketable securities (51) (76) Decrease (increase) in current assets Accounts receivable, net (260) (1,336) Inventory (859) 857 Other current assets (631) 21 Increase (decrease) in current liabilities Accounts payable 1,754 (3,018) Other current liabilities 893 1,413 Discontinued segment-noncash charges and working capital changes (557) (47) ------- ------- Cash (used) provided from operations 304 (1,268) Investing activities: Property, plant and equipment Purchases (675) (255) Investing activities of discontinued segment (25) -- Other items -- (124) ------- ------- Cash (used) provided by investing activities (700) (379) Financing activities: Long-term debt Borrowings 2,132 -- Payments (142) (413) Changes in lines of credit (1,120) 1,926 ------- ------- Cash (used) by financing activities 870 1,513 ------- ------- Increase in cash 474 (134) Cash at beginning of period 502 134 ------- ------- Cash at end of period $ 976 $ 0 ======= ======= See Notes to Condensed Consolidated Financial Statements. 4 Notes to Condensed Consolidated Financial Statements (Unaudited) (000's Omitted) 1. Condensed Consolidated Financial Statements The condensed consolidated balance sheet as of March 31, 1997, the consolidated statements of operations and the consolidated statements of cash flows for the three months ended March 31, 1997 and 1996 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows at March 31, 1997 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1996 Annual Report to Shareholders. The results of operations for the period ended March 31, 1996 are not necessarily indicative of the operating results for a full year. 2. Inventories March 31, December 31, 1997 1996 --------- ------------ Inventories consisted of: Raw Material $ 7,264 $ 7,424 Work in Process 4,351 3,286 Finished goods 4,514 5,509 ------- ------- $16,129 $16,219 ======= ======= 3. Stockholder's Equity Stockholder's Equity is comprised of the following: March 31, December 31, 1997 1996 --------- ------------ Common Stock $ 3,076 $ 3,076 Additional Capital 20,500 20,500 Retained Earnings 5,270 5,638 -------- -------- $ 28,846 $ 29,214 ======== ======== 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS - $000 Omitted Results of Operations As an aid to understanding the Company's operating results, the following table shows each item from the consolidated statement of income expressed as a percentage of net sales:
Percentage of Net Sales Quarter Ended Year Ended March 31, December 31, 1997 1996 1996 ------ ------- ------- Sales 100.0% 100.0% 100.0% Cost of sales 74.3% 73.0% 76.7% Selling, general administrative 26.9% 21.3% 21.6% Interest expense 3.4% 2.4% 1.1% Net Income (Loss) from continuing operations (2.7%) 2.0% (0.3%)
Net Sales Net sales for the three months ended March 31, 1997 decreased $2,912 or 23.5% compared to sales for the same period in 1996. Sales decreased due to lower demand in the utility sector for load management switches. Declines were also experienced in land-mobile product lines serving both commercial and public safety markets. Cost of Sales Cost of sales as a percentage of net sales increased 1.3% to 74.3% for the quarter ended March 31, 1997 from 73.0% for the quarter ended March 31, 1996. Increased labor and material costs resulted from unfavorable sales mix in land-mobile products. Sales of higher margin products in the public safety and communication component markets declined in 1997 from 1996. Selling, General and Administrative Expenses Selling general and administrative expenses which consist primarily of commissions, marketing, salary and related costs, data processing and occupancy costs increased to 26.9% from 21.3% for the quarter ended March 31, 1997 from the quarter ended March 31, 1996. 6 However, total spending decreased from $2,640 in 1996 to $2,545 in 1997. Selling expenses decreased due to lower sales volumes. Expense reductions in date processing were realized from consolidating operations. These reductions were partially offset by increased engineering expenses for new product development. Interest Expense Interest Expense was $321 for the quarter ended March 31, 1997 compared to $298 for the quarter ended March 31, 1996. This increase was due to increased debt levels due to the construction of a new facility in West Melbourne, Florida. Income Taxes Income taxes (benefit) represented a 34.0% effective tax rate for the quarter ended March 31, 1997. This rate is made up of a 34% federal tax rate and varying state tax rates. The effective tax rate for 1996 was 15.4%. The effective tax rate for the quarter ended March 31, 1996 was 38.0%. Inflation and Changing Prices Inflation and changing prices for the three months ended March 31, 1997 and the three months ended March 31, 1996 have contributed to increases in wages, facility and raw material costs. The Company believes that it will be able to pass on most of its future inflationary increases to its customers. The Company also subject to changing foreign currency exchange rates in its purchases of raw materials. The Company employs several methods to protect against increases in costs due to currency fluctuations. It is not always possible to pass on the effects of currency fluctuations to customers. However competition in these markets are subject to similar fluctuations in product costs. Liquidity and Capital Resources Working capital decreased by $1,232 during the quarter ended March 31, 1997. This decrease was due primarily to the reclassification of the current assets and liabilities of the paper manufacturing segment. The Company has credit available under its existing lines of credit in excess of $2,000,000. Capital expenditures for the three months ended March 31, 1997 were $675 which was paid from operating cash flow and bank loans. 7 Capital expenditures for 1997 for the combined entity are expected to be approximately $3,000,000. Inventories increased $1,644 for the three months ended March 31, 1997 after the reclassification of the inventories of the discontinued paper manufacturing segment. Discontinued Operations In December 1996 the Company agreed in principal to sell its specialty manufacturing segment subsidiary to an officer and director of the Company. The sale which is conditional upon the buyer obtaining the necessary financing is anticipated to be concluded in the second quarter of 1997. The Company has entered into an agreement to sell its paper manufacturing subsidiary. No material gain or loss is anticipated from the sale. This segment has been reported as a discontinued operation for the three months ended March 31, 1997 and 1996. 8 ITEM 6. Exhibits and Reports of Form 8-K b.) Reports on Form 8-K The Registrant was not required to file reports on Form 8K during the quarter ended March 31, 1997. 9 Pursuant to the requirements of securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADAGE, INC. \s\Robert T. Holland ------------------------- Robert T. Holland Vice President - Finance Date: May 23, 1997 10 EX-27 2 FDS
5 1,000 U.S. dollar 3-MOS Dec-31-1997 Jan-1-1997 Mar-31-1997 1 976 0 7,186 0 16,129 28,119 6,110 0 50,518 6,730 0 0 0 3,076 25,770 50,518 9,460 9,460 7,032 0 0 0 321 (394) (134) (260) (68) 0 0 (329) (.06) (.06)
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