-----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, QgIiNvwbk+qICP01gWyHc9HHd32UMf6VpGGjePzOt6OVuvt1TTTuholzXncajqmj 7laACryGsGiX7l5PASG5Hg== 0000950115-96-000693.txt : 19960517 0000950115-96-000693.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950115-96-000693 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 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: 96567120 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 March 31, 1996 --------------------------------------------------------------- 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 Incorporation or organization) Identification Number) 400 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 March 14, 1996 5,121,535 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, 1996 DECEMBER 31, 1995 --------------- ----------------- (Unaudited) ASSETS 000's Omitted - ------ ------------- Current Assets Cash $ -- $134 Accounts receivable, net 12,189 10,853 Inventories 20,403 21,261 Marketable securities 254 177 Other current assets 2,113 2,114 ------- ------- Total Current Assets 34,959 34,539 Property, plant and equipment, net 13,502 13,562 Investments and long-term receivable 1,177 980 Net assets of discontinued segments 5,424 5,376 Intangible and other assets 3,167 3,080 ------- ------- Total Assets $58,229 $57,537 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt $1,024 $1,403 Accounts payable 4,208 6,838 Accrued expenses 4,217 3,221 Income taxes payable 702 301 ------- ------- Total Current Liabilities 10,151 11,763 Long-term debt 14,794 13,154 Stockholders' equity 33,284 32,620 ------- ------- $58,229 $57,537 ======= ======= Note 1. The consolidated balance sheet at December 31, 1995 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, 1996 1995 ----------- ----------- (Unaudited) (Unaudited) 000's Omitted ------------- Income Sales $ 21,402 $ 20,267 Investment income 76 6 Other 36 85 ----------- ----------- 21,514 20,358 Costs and Expenses Cost of sales 16,471 16,407 Selling, general & administrative 4,426 4,116 Interest 298 245 ----------- ----------- 21,195 20,768 Income (loss) from continuing operations before income taxes 319 (410) Provision for income taxes (benefit) 117 (156) ----------- ----------- Net income (Loss) from continuing operations $ 202 $ (254) Income from discontinued operations net of taxes -- 376 Gain on sale of discontinued operations net of taxes -- -- ----------- ----------- Net income $ 202 $ 122 =========== =========== Earnings Per Common Share Continuing operations $ .04 $ (.05) Discontinued operations -- .07 ----------- ----------- Net Income $ .04 $ .02 =========== =========== Weighted Average Common Shares Outstanding 5,125,234 5,107,846 =========== =========== 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, 1996 1995 ------- ------- (Unaudited) (Unaudited) 000's Omitted ------------- Operating activities: Net income $ 211 $ 122 Adjustments to reconcile net income to cash flows Depreciation and amortization 707 788 Minority interest in discontinued operations -- 98 (Gain) Loss on sale of marketable securities (76) (6) Decrease (increase) in current assets Accounts receivable, net (1,336) (825) Inventory 857 (98) Other current assets 21 (50) Increase (decrease) in current liabilities Accounts payable (3,018) (1,219) Other current liabilities 1,413 1,036 Discontinued segment-noncash charges and working capital changes (47) 723 ------- ------- Cash (used) provided from operations (1,268) 569 Investing activities: Property, plant and equipment Purchases (255) (513) Long-term investments and receivables Investing activities of discontinued segment (48) Sales of discontinued operations Other items (124) (67) ------- ------- Cash (used) provided by investing activities (379) (628) Financing activities: Long-term debt Payments (413) (838) Changes in lines of credit 1,926 797 ------- ------- Cash (used)by financing activities 1,513 (41) ------- ------- Increase in cash (134) (100) Cash at beginning of period 134 184 ------- ------- Cash at end of period $ 0 $ 84 ======= ======= 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, 1996, the consolidated statements of operations and the consolidated statements of cash flows for the three months ended March 31, 1996 and 1995 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, 1996 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, 1995 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, 1996 1995 --------- ------------ Inventories consisted of: Raw Material $ 8,823 $ 8,688 Work in Process 2,121 3,884 Finished goods 9,459 8,689 -------- -------- $ 20,403 $ 21,261 ======== ======== 3. Stockholder's Equity Stockholder's Equity is comprised of the following: March 31, December 31, 1996 1995 --------- ------------ Common Stock $ 3,073 $ 3,073 Additional Capital 20,477 20,477 Retained Earnings 9,866 9,664 Net unrealized loss on marketable securities (132) (594) -------- -------- $ 33,284 $ 32,620 ======== ======== 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, 1996 1995 1995 ------ ------- ------- Sales 100.0% 100.0% 100.0% Cost of sales 77.0% 80.9% 82.0% Selling, general administrative 20.7% 20.3% 20.3% Interest expense 1.4% 1.2% 1.0% Net Income (Loss) from continuing operations 1.0% (1.2%) (1.7%) Net Sales Net sales for the three months ended March 31, 1996 increased $1,135 or 5.6% compared to sales for the same period in 1995. This change is made up of the following: Increase (Decrease) ------------------- Three Months Ended March 31, 1996 ------------------- Paper Manufacturing $ (876) Specialty Manufacturing 217 Wireless Communications Equipment 1,967 Sales in the Wireless Communications Equipment segment increased due to increased production which was available to fill sales backlogs. The increase in the Specialty Manufacturing segment was due to the acquisition of a new product line in the third quarter of 1995. The decrease in sales in the Paper Manufacturing segment was due to decreased demand for paperboard. 6 Cost of Sales Cost of sales as a percentage of net sales decreased 3.9% to 77% for the quarter ended March 31, 1996 from 80.9% for the quarter ended March 31, 1995. Detail of these changes by segment follow: Quarter Ended March 31, 1996 1995 ---- ---- Paper Manufacturing 82.2% 85.2% Specialty Manufacturing 86.1% 85.0% Wireless Communications Equipment 73.7% 77.0% Material costs, primarily recycled paper fiber, decreased during the first quarter of 1996 compared to the first quarter of 1995. Prices for paperboard increased during 1995. The cost of integrating a new product line into the Specialty Manufacturing segment increased costs. These costs are expected to decrease during 1996. Costs decreased in the Wireless Communications Equipment segment due to increased production rates. 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 20.7% from 20.3% for the quarter ended March 31, 1996 from the quarter ended March 31, 1995. Details of this change by segment follow: Quarter Ended March 31, 1996 1995 ---- ---- Paper Manufacturing $ 645 $ 677 Specialty Manufacturing 609 547 Wireless Communications Equipment 2,816 2,167 Corporate 454 482 The increase in the Wireless Communications Equipment segment is related to increased development expenses related to the engineering and development of new products and increased sales costs related to higher sales volumes. 7 Interest Expense Interest Expense was 1.4% for the quarter ended March 31, 1996. This increase was due primarily to the inability to capitalize construction period interest of the Company's discontinued Real Estate segment. Income Taxes Income taxes (benefit) represented a 38.0% effective tax rate for the quarter ended March 31, 1996. This rate is made up of a 34% federal tax rate and varying state tax rates. The effective tax rate for 1995 was 40.1%. The effective tax rate for the quarter ended March 31, 1995 was 38.0%. Inflation and Changing Prices Inflation and changing prices for the three months ended March 31, 1996 and the three months ended March 31, 1995 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 Communications Equipment 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 costs. Liquidity and Capital Resources Working capital increased by $2,032 during the quarter ended March 31, 1996. This increase was due to the refinancing of the Company's bank debt during the first quarter of 1996. This allowed the Company to reduce current maturities and accounts payable. 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, 1996 were $255 which was paid from operating cash flow and bank credit lines. Capital expenditures for 1996 for the combined entity are not expected to exceed $1.5 million. The current credit agreement that the Company has restricts capital expenditures. Management believes that these restrictions will allow the Company to make the necessary capital expenditures during the term of the credit agreement. 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 8 expects that capital expenditures will remain at this level for the foreseeable future. Inventories decreased $858 for the three months ended March 31, 1996. Discontinued Operations In August 1995, the Company sold its steel processing subsidiary for $6.8 million in cash. Minority interests were decreased by $1.5 million and long-term debt was decreased by this segments debt of $6.0 and payments on the consolidated debt of the Company of $4.0 million. In January, 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. Management of the Company will consider disposal of subsidiaries that do not earn an adequate return or fit the long-term goals of the Company. 9 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, 1996. 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 there unto duly authorized. ADAGE, INC. \s\Robert T. Holland ----------------------------------- Robert T. Holland Vice President - Finance Date: May 14, 1996 11 EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 1000 3-MOS DEC-31-1995 JAN-1-1996 MAR-31-1996 0 0 12,189 (352) 20,403 34,959 27,776 (14,264) 58,229 10,151 0 0 0 3,073 30,211 58,229 21,402 21,504 16,471 20,896 0 0 298 319 117 202 0 0 0 202 .04 .04
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