-----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, VVddXoNqcEpHVIT3u9cpjPY5/VPE5MukB9U/fyWRZQMvVc1K8BC1c19XOl6MZmf2 D5idjGKBYgxp4wN8+8h7Sw== 0000950115-97-001788.txt : 19971117 0000950115-97-001788.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950115-97-001788 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-07336 FILM NUMBER: 97721517 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 September 30, 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 7505 Technology Drive, West Melbourne, Florida 32904 ------------------------------------------------------------ (Address of principal executive officers) (Zip Codes) (407) 984-1414 ----------------------------------------------------- (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 November 7, 1997. 5,030,387 shares of Common Stock, par value $.60 per share. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ADAGE, INC. Condensed Consolidated Balance Sheets September 30, 1997 December 31, 1996 ------------------ ----------------- (Unaudited) (Unaudited) ASSETS 000's Omitted Current Assets $ $ Cash 502 Accounts receivable, net 8,161 11,469 Inventories 15,224 16,219 Marketable securities 892 723 Other current assets 2,390 2,474 ------ ------ Total Current Assets 26,667 31,387 Property, plant and equipment, net 8,853 12,632 Investments and long-term receivable 2,400 0 Net assets of discontinued segments 2,617 5,883 Intangible and other assets 2,370 2,151 ------ ------ Total Assets 42,907 52,053 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Bank overdrafts 221 0 Current maturities of long-term debt 553 868 Accounts payable 4,463 4,874 Accrued expenses 2,088 3,024 Income taxes payable 0 0 ------ ------ Total Current Liabilities 7,325 8,766 Long-term debt 7,160 14,073 Stockholders' equity 28,422 29,214 ------ ------ 42,907 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 SEPTEMBER 30, 1997 1996 ----------- ----------- (Unaudited) (Unaudited) 000's Omitted Income Sales $ 10,973 $ 11,596 Expenses Cost of products 8,451 8,733 Selling, general & administrative 2,549 2,558 ----------- ----------- 11,000 11,291 Operating Income (loss) (27) 305 Other Expenses (income) Interest 99 163 Investment and other income (320) (116) ----------- ----------- (221) 47 Income from continuing operations before income taxes 194 258 Income taxes 66 102 ----------- ----------- Income from continuing operations 128 156 Discontinued Operations Income (loss) from discontinued operations net of income taxes (benefit) 92 (240) ----------- ----------- Net income (Loss) 220 (84) =========== =========== Earnings (Loss) Per Common Share Continuing operations .02 .03 Discontinued operations .02 (.05) ----------- ----------- Net Income (Loss) .04 (.02) Weighted Average Common Shares Outstanding 5,030,387 5,126,698 =========== =========== See Notes to condensed consolidated financial statements. 3 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Income FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 1996 ------------ ------------ (Unaudited) (Unaudited) 000's Omitted Sales $ 34,042 $ 35,582 Expenses Cost of products 25,608 26,452 Selling, general & administrative 8,185 8,174 ----------- ----------- 33,793 34,626 Operating Income 249 956 Other Expenses (income) Interest 691 436 Investment and other income (306) (179) ----------- ----------- 385 257 Income (loss) from continuing operations before income taxes (136) 699 Income taxes (52) 264 ----------- ----------- Income (loss) from continuing operations (84) 435 Discontinued Operations Loss from discontinued operations net of income taxes (benefit) (412) (242) Gain on sale of discontinued Operations 98 0 ----------- ----------- Net income (loss) (398) 193 =========== =========== Earnings (Loss) Per Common Share Continuing operations (.02) .09 Discontinued operations (.08) (.05) Gain on sale of discontinued Operations .02 0 ----------- ----------- Net Income (loss) (.08) .04 Weighted Average Common Shares Outstanding 5,080,977 5,124,473 =========== =========== See Notes to condensed consolidated financial statements. 4 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Cash Flows FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 1996 ----------- ---------- (Unaudited) (Unaudited) 000's Omitted Operating activities: Net income (Loss) $ (398) $ 193 Adjustments to reconcile net income to cash flows Depreciation and amortization 479 1,840 (Gain) Loss on marketable securities (169) (50) Deferred Income Tax (Gain) Loss from sale of property (242) (449) (Gain) Loss on sale of discontinued operations (98) 0 Decrease (increase) in current assets Accounts receivable (9) 154 Inventory (739) (405) Other current assets 1,598 (337) Increase (decrease) in current Liabilities Accounts payable (295) (2,778) Other current liabilities 1,626 427 Discontinued segment-noncash charges and working capital changes 535 -------- -------- Cash (used) provided from operations 1,753 (870) Investing activities: Property, plant and equipment Purchases (3,618) (755) Sales 633 Long-term investments and receivables Additions and purchases (27) Proceeds from sale of discontinued operations 7,693 Other items (118) -------- -------- Cash (used) provided by investing activities 4,075 (240) Financing activities: Long-term debt Additions 4,300 Payments (640) (1,270) Changes in lines of credit (10,171) 2,246 Purchase of stock (40) -------- -------- Cash (used) by financing activities (6,551) 976 -------- -------- Decrease in cash (723) (134) Cash at beginning of period 502 134 -------- -------- Cash at end of period (Overdraft) (221) ======= ======== See Notes to condensed consolidated financial statements. 5 Notes to Condensed Consolidated Financial Statements (Unaudited) (000's Omitted) 1. Condensed Consolidated Financial Statements The condensed consolidated balance sheet as of September 30, 1997, the consolidated statements of operations for the three and nine months ended September 30, 1997 and 1996 and the consolidated statements of cash flows for the nine months ended September 30, 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 September 30, 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 September 30, 1997 are not necessarily indicative of the operating results for a full year. 2. Inventories September 30, December 31, 1997 1996 ------------- ------------ Inventories consisted of: Raw Material $ 6,745 $ 6,902 Work in Process 3,307 3,233 Finished goods 5,172 4,351 Discontinued segment 0 1,733 -------- -------- $ 15,224 $ 16,219 ======== ======== 3. Stockholders' Equity Stockholders' Equity is comprised of the following: September 30, December 31, 1997 1996 ------------- ----------- Common Stock $ 3,018 $ 3,076 Additional Capital 20,164 20,500 Retained Earnings 5,240 5,638 -------- -------- $ 28,422 $ 29,214 ======== ======== 6 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 Nine Months Ended Year Ended September 30, September 30, December 31, 1997 1996 1997 1996 1996 ------ ------ ------ ------ ------------ Sales 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales 77.0% 75.3% 75.2% 74.3% 75.8% Selling, general administrative 23.2% 22.1% 24.0% 23.0% 20.5% Interest expense 0.9% 1.5% 2.0% 1.2% 1.4% Income (loss) from continuing operations before income taxes 1.8% 2.4% (0.4%) 2.0% (0.5%) Net Income (Loss) from continuing operations 1.2% 1.5% (0.2%) 1.2% (0.9%)
Net Sales Net sales for the three months and nine months ended September 30, 1997 decreased $623 and $1,540 respectively compared to sales for the same period in 1996. Sales in the land mobile product line have increased 10.2% from the same period for 1996. This is a result of the army contract which started this year. These increases have been offset by decreased customer demand in the load management and components product lines. Cost of Sales Cost of sales as a percentage of net sales increased 0.9% to 75.2% for the nine months ended September 30, 1997 compared to 74.3% for the same period in 1996. For the three months ended September 30, 1997, cost of sales increased 1.7% to 77.0% compared to 75.3% for the same period in 1996. The increase resulted from the installation and start-up of new surface mount equipment during the quarter. During this period, set-up times and throughput were impacted unfavorably. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of marketing, selling, engineering, data processing, occupancy and financial costs. For the three months ended September 30, 1997 these expenses decreased $9 (0.4%) from the same period for 1996. For the nine months ended, these expenses stayed flat 7 compared to the prior year ($8,185 in 1997 compared to $8,174 in 1996). Decreases that have been realized by streamlining and consolidating functions have been partially offset by additional engineering expenses in support of two strategic new-product initiatives. Interest Expense Interest expense decreased to 0.9% for the three months ended September 30, 1997 from 1.5% for the same period in 1996. For the nine months ended September 30, 1997, interest expense increased to 2.0% from 1.2% for the same period in 1996. Interest expense was higher in the first half of the year due to higher debt levels associated with the expansion of the West Melbourne, Florida facility. This debt was subsequently reduced by using proceeds from the sale of the Company's specialty manufacturing and paper manufacturing subsidiaries. Income Taxes Income taxes (benefit) represented a 38.0% effective tax rate for the nine months ended September 30, 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%. Inflation and Changing Prices Inflation and changing prices for the three months ended September 30, 1997 and the nine months ended September 30, 1997 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 is also subject to changing foreign currency exchange rates in its purchases of raw materials. 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 $2,879 during the nine months ended June 30, 1997. Long-term debt decreased by $7,228 during the same period. The Company has credit available under its existing lines of credit in excess of $7 million. Capital expenditures for the first nine months of 1997 were $3,618 which was paid from operating cash flow and bank credit lines. Of these expenditures, $2.0 million is for the expansion of the West Melbourne, Florida facility. The 8 purpose of the expansion is to consolidate operations at this location. Also, $1.4 million is to replace obsolete surface mount equipment. Capital expenditures for the remainder of 1997 will be approximately $0.5 million. Management expects that capital expenditures will be significantly lower in 1998. Inventories, excluding those of the discontinued business segments, increased $738 for the nine months ended September 30, 1997 from December 31, 1996. Discontinued Operations In December 1996 the Company agreed in principal to sell its specialty manufacturing subsidiary to an officer and director of the Company. The sale was completed in June 1997. This segment has been recorded as a discontinued operation for the three and nine months ended September 30, 1997 and 1996. The Company sold its paper manufacturing subsidiary in June 1997. This segment has been reported as a discontinued operation for the three and nine months ended September 30, 1997 and 1996. 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 September 30, 1997. 10 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. -------------------------------------- William P. Kelly Chief Financial Officer and Vice President - Finance Date: November 14, 1997 EX-27 2 FDS
5 1,000 U.S. Dollars 3-MOS DEC-31-1997 JUL-01-1997 SEP-30-1997 1.000 (221) 892 8,161 0 15,224 26,667 8,853 0 42,907 7,325 0 3,076 0 0 25,346 42,907 10,973 10,973 8,451 0 0 0 99 194 66 128 92 0 0 220 .04 .04
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