0000950115-95-000325.txt : 19950816
0000950115-95-000325.hdr.sgml : 19950816
ACCESSION NUMBER: 0000950115-95-000325
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950815
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: 95564034
BUSINESS ADDRESS:
STREET 1: 625 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 June 30, 1995
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
625 Willowbrook Lane, West Chester, PA 19382
(Address of principal executive officers) (Zip Codes)
(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 July 31 , 1995
5,098,595 shares of Common Stock, par value $ .60 per share.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ADAGE, INC.
Condensed Consolidated Balance Sheets
JUNE 30, 1995 DECEMBER 31, 1994
------------- -----------------
(Unaudited) (Unaudited)
000's Omitted
-------------
ASSETS
Current Assets
Cash $ 462 $ 184
Accounts receivable, net 12,397 16,354
Inventories 21,301 29,425
Marketable securities 210 175
Other current assets 1,907 1,885
-------- --------
Total Current Assets 36,277 48,023
Property, plant and equipment, net 13,528 21,136
Investments and long-term receivable 696 941
Net assets of discontinued segments 10,447 5,983
Intangible and other assets 3,977 2,829
-------- --------
Total Assets $ 64,925 $ 78,912
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of
long-term debt $ 2,316 $ 3,034
Accounts payable 9,243 13,735
Accrued expenses 4,652 6,750
Income taxes payable -- --
-------- --------
Total Current Liabilities 16,211 23,519
Long-term debt 16,824 22,891
Minority interest in subsidiaries - 1,266
Stockholders' equity 31,890 31,236
-------- --------
$ 64,925 $ 78,912
======== ========
Note 1. The consolidated balance sheet at December 31, 1994 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
--------------------------
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
(Unaudited) (Unaudited)
Income
Sales $ 22,606 $ 22,027
Investment income 188 (24)
Other 126 131
-------- --------
22,920 22,134
Costs and Expenses
Cost of sales 18,298 16,465
Selling, general & administrative 4,532 4,906
Interest 165 170
-------- --------
22,995 21,541
Income (loss) from continuing
operations before income taxes
and minority interest (75) 593
Provision for income taxes (benefit) (28) 225
-------- --------
Net income (Loss) from
continuing operations $ (47) $ 368
Income from discontinued
operations net of applicable 449 183
-------- --------
taxes
Net income $ 402 $ 551
======== ========
Earnings Per Common Share
Continuing operations $ (.01) $ .07
Discontinued operations .09 .04
-------- --------
Net Income $ .08 $ .11
======== ========
Weighted Average Common Shares
Outstanding 5,098,595 5,088,595
========= =========
3
ITEM 1 - FINANCIAL STATEMENTS - continued
ADAGE, INC.
Condensed Consolidated Statements of Income
FOR THE SIX MONTHS ENDED
------------------------
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
(Unaudited) (Unaudited)
000's Omitted
Income
Sales $ 42,873 $ 40,372
Investment income 194 17
Other 211 159
-------- --------
43,278 40,548
Costs and Expenses
Cost of sales 34,705 30,940
Selling, general and administrative 8,648 9,305
Interest 410 299
------- -------
43,763 40,544
Income (loss) before income taxes (485) 4
Provision for income taxes (benefit) (184) 1
------ -------
Net income (loss) from
continuing operations (301) 3
Income from discontinued
operations net of applicable
taxes 825 119
------- -------
Net income $ 524 $ 122
======= ========
Earnings Per Common Share
Continuing operations $ (.06) $ .00
Discontinued operations .16 .02
------- -------
Net Income $ .10 $ .02
======= =======
Weighted Average Common Share
Outstanding 5,098,595 5,088,595
========= =========
See Notes to Condensed Consolidated Financial Statements.
4
ITEM 1 - FINANCIAL STATEMENTS - continued
ADAGE, INC.
Condensed Consolidated Statements of Cash Flow
FOR THE SIX MONTHS ENDED
------------------------
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
(Unaudited) (Unaudited)
000's Omitted
Operating activities:
Net income (loss) $ 524 $ 122
Adjustments to reconcile net income
to cash flows
Depreciation and amortization 1,379 908
(Gain) Loss on sale of marketable
securities (35) (9)
Decrease (increase) in current assets
Accounts receivable, net (167) (1,642)
Inventory (1,149) (1,633)
Other current assets 103 (540)
Increase (decrease) in current
liabilities
Accounts payable (301) 4,240
Other current liabilities 153 (387)
Discontinued segment-noncash
charges and working capital
changes 1,306 (112)
-------- --------
Cash (used) provided from operations 1,813 947
Investing activities:
Property, plant and equipment
Purchases (848) (394)
Long-term investments and receivables
Additions and purchases -- --
Investing activities of
discontinued segment (441) (562)
Other items (20) --
-------- --------
Cash (used) provided by investing
activities (1,309) (956)
Financing activities:
Long-term debt
Additions 361 --
Payments (1,429) (1,123)
Changes in lines of credit 976 2,147
Financing activities of
discontinued segment (134) (960)
-------- --------
Cash (used)by financing activities (226) 64
-------- --------
Increase in cash 278 55
Cash at beginning of period 184 39
-------- --------
Cash at end of period $ 462 $ 94
======== ========
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 June 30, 1995, the
consolidated statements of operations and the consolidated statements of cash
flows for the three months ended June 30, 1995 and 1994 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 June 30,
1995 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, 1994 Annual
Report to Shareholders. The results of operations for the period ended June 30,
1995 are not necessarily indicative of the operating results for a full year.
2. Inventories
June 30, December 31,
1995 1994
-------- ------------
Inventories consisted of:
Raw Material $ 10,346 $ 18,375
Work in Process 2,939 2,447
Finished goods 8,016 8,603
-------- ---------
$ 21,301 $ 29,425
======== =========
The excess of current cost over LIFO inventory value at December 31, 1994
is: $ 452.
June 30, December 31,
1995 1994
------- ------------
Inventories valued at FIFO -- $20,152
Inventories valued at LIFO 21,301 9,273
------- -------
$21,301 $29,425
======= =======
6
3. Stockholder's Equity
Stockholder's Equity is comprised of the following:
June 30, December 31,
1995 1994
--------- ------------
Common Stock $ 3,059 $ 3,059
Additional Capital 20,424 20,349
Retained Earnings 9,076 8,553
Net unrealized loss on
marketable securities (669) (725)
--------- ---------
$ 31,890 $ 31,236
========= =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS
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 Six Months Ended Year Ended
June 30, June 30, December 31,
1995 1994 1995 1994 1994
------ ------ ------ ------ ------------
Sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 80.9% 74.7% 80.9% 76.6% 75.5%
Selling, general
administrative 20.0% 22.2% 20.1% 23.0% 22.9%
Interest expense .7% 0.8% 0.9% 0.7% 0.8%
Income (loss) from
continuing operations
before income taxes (.3%) 2.7% (1.1%) 0.0% 0.9%
Net Income from
continuing operations (0.2%) 1.6% (0.7%) 0.0% 0.6%
7
Net Sales
Net sales for the quarter ended June 30, 1995 increased compared to sales
for the same period in 1994. This increase is made up of the following:
Increase
(Decrease)
----------
Wireless Communication Equipment $ (791)
Paper Manufacturing 1,424
Specialty Manufacturing 29
Sales in the wireless communications equipment business segment decreased
due to parts shortage which constrained production of certain products.
Increases in the paper manufacturing segment were due to price increases and
increased volume.
Cost of Sales
Cost of sales as a percentage of net sales increased 6.2% to 80.9% for the
quarter ended June 30, 1995 from 74.7% for the quarter ended June 30, 1994. Cost
of sales was 75.5% of net sales for the year ended December 31, 1994. Details of
this cost of sales as a percentage of net sales for each segment follows:
Quarter Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------ ------ ----- -----
Wireless Communication Equipment 74.7% 76.5% 76.8% 73.6%
Paper Manufacturing 85.1% 78.1% 88.0% 82.9%
Specialty Manufacturing 88.1% 84.4% 85.0% 83.5%
Material costs, primarily recycled paper fiber, have increased
approximately 400% over the past year. Prices for paperboard have increased also
but have generally lagged price increases in raw materials. Cost of steel and
electronic components have increased in the specialty manufacturing business.
These increases have not been passed on fully to customers as of June 30, 1995.
Costs increased in the wireless equipment manufacturing segment due to increased
labor costs associated with the manufacture of certain products in the
Bendix/King product line. These costs are expected to decrease as this product
line is fully absorbed into this segment's facility.
8
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 decreased to 20.0% for the quarter ended June 30, 1995 from 22.2% for the
quarter ended June 30, 1994. Selling general and administrative expenses were
22.9% of net sales for the year ended December 31, 1994. Details of selling,
general and administrative expense by segment follows:
Quarter Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------ ------ ------ ------
Wireless Communication Equipment $2,511 $2,995 $5,314 $5,824
Paper Manufacturing 799 734 1,553 1,492
Specialty Manufacturing 488 471 982 1,005
Corporate 636 702 1,061 1,065
The decreases in selling, general and administrative expense is related to
better absorption of fixed expenses and a general effort to reduce
administrative expenses.
Interest Expense
Interest Expense decreased to 0.7% for the quarter ended June 30, 1995 from
0.8% for the quarter ended June 30, 1994 and increased to 0.9% for the six
months ended June 30, 1995 from 0.7% for the same period of 1994. This decrease
is related to an increase in sales greater than the relative increase in
interest expense. Debt levels have not increased significantly since December
31, 1994.
Investment Income
Investment income for the quarter ended June 30, 1995 was due to the
settlement of a class action suit for a security previous owned by the Company.
Income Taxes
Income taxes represented a 38.0% effective tax rate for the quarter and six
months ended June 30, 1995. This rate is made up of a 34% federal tax rate and
varying state tax rates. The effective tax rate for 1994 was 37.6%.
Inflation and Changing Prices
Inflation and changing prices for the six months ended June 30, 1995 and
the six months ended June 30, 1994 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 wireless
equipment
9
manufacturing segment is 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 cost.
Liquidity and Capital Resources
Working capital decreased by $4,438,000 during the quarter ended June 30,
1995. This decrease was due primarily to the reclassification of the net assets
of the discontinued steel processing segment. The Company has credit available
under its existing lines of credit in excess of $1,000,000.
Capital expenditures for the first six months of 1995 were $848,000 which
was paid from operating cash flow and bank credit lines.
Capital expenditures for 1995 for the combined entity are not expected to
exceed $2.5 million. Management expects that capital expenditures will be funded
through operating cash flow and financing sources available to the Company.
Based on the anticipated replacement needs, and expected purchases of equipment
for additional capacity, management expects that capital expenditures will
continue at these levels for the foreseeable future.
Inventories decreased $8,124,000 due to the reclassification of the
discontinued steel processing.
Discontinued Operations
In February, 1995 the Company decided to discontinue and dispose of its
real estate development and management segment. Real estate inventories were
written down to their estimated orderly liquidation value as of December 31,
1994.
On May 23, 1995 the Board of Directors decided to accept an offer to
purchase the stock of Niagara Cold Drawn Corporation for approximately $6.8
million. The sale is expected to be completed by August 19, 1995. The sale of
Niagara Cold Drawn Corporation will result in a gain. The assets of Niagara Cold
Drawn Corporation have been reclassified as Net Assets of Discontinued Segments
and the income has been reclassified as income from discontinued operations.
Management will consider disposal of subsidiaries that do not earn an
adequate return or fit the long-term goals of the Company.
10
ITEM 6. Exhibits and Reports of From 8-K
b.) Reports on Form 8-K
The Registrant was not required to file reports on Form 8K during the
quarter ended June 30, 1995.
11
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 there unto duly authorized.
ADAGE, INC.
ROBERT T. HOLLAND
-------------------------
Robert T. Holland
Vice President - Finance
Date: August 14, 1995
12