-----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, JQhA5mPd5g1WaPmb3yugRFWkwajBmX0O9Q/SLwHXHTsVilGPdya/vpLmIwIDttmt USkYerGJzBfwnMrG0L0y0Q== 0000950115-96-001630.txt : 19961118 0000950115-96-001630.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950115-96-001630 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96663499 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 September 30, 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 Identification Incorporation or organization) 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 November 11, 1996 5,129,175 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, 1996 DECEMBER 31, 1995 ------------------ ----------------- (Unaudited) (Unaudited) ASSETS 000's Omitted - ------ ------------- Current Assets Cash $ - $ 134 Accounts receivable, net 10,698 10,853 Inventories 21,666 21,261 Marketable securities 227 177 Other current assets 1,996 2,114 -------- -------- Total Current Assets 34,587 34,539 Property, plant and equipment, net 13,050 13,562 Investments and long-term receivable 618 980 Net assets of discontinued segments 4,621 5,376 Intangible and other assets 3,200 3,080 -------- -------- Total Assets $ 56,076 $ 57,537 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt $ 804 $ 1,403 Accounts payable 4,447 6,838 Accrued expenses 2,167 3,221 Income taxes payable 1,473 301 -------- -------- Total Current Liabilities 8,891 11,763 Long-term debt 14,477 13,154 Stockholders' equity 32,708 32,620 -------- -------- $ 56,076 $ 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 -------------------------- SEPTEMBER 30, 1996 1995 ---- ---- (Unaudited) (Unaudited) 000's Omitted ------------- Sales $ 18,608 $ 19,257 Expenses Cost of products 14,764 16,247 Selling, general & administrative 3,868 3,985 -------- -------- 18,632 20,232 -------- -------- Operating Income (24) (975) Other Expenses (income) Interest 268 230 Investment and other income (153) (127) -------- -------- 115 103 Income (loss) from continuing operations before income taxes and minority interest (139) (1,078) Income taxes (Benefit) (55) (347) -------- -------- Income (loss) from continuing operations (84) (731) Discontinued Operations Income from discontinued operations net of income taxes (benefit) - 189 Gain on sale of discontinued operations net of taxes - 1,409 -------- -------- Net income $ (84) $ 867 ======== ======== Earnings (Loss) Per Common Share Continuing operations $ (.02) $ (.14) Discontinued operations . - .04 Sale of discontinued operations . - .27 -------- -------- Net Income (Loss) $ (.02) $ .17 ======== ======== Weighted Average Common Shares Outstanding 5,126,698 5,105,440 ========= =========
3 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Income
FOR THE NINE MONTHS ENDED ------------------------- SEPTEMBER 30, 1996 1995 ------ ------ (Unaudited) (Unaudited) 000's Omitted ------------- Sales $ 59,074 $ 62,130 Expenses Cost of products 46,025 50,952 Selling, general & administrative 12,246 12,633 -------- -------- 58,271 63,585 -------- -------- Operating Income 803 (1,455) Other Expenses (income) Interest 786 640 Investment and other income (293) (532) -------- -------- 493 108 Income (loss) from continuing operations before income taxes and minority interest 310 (1,563) Income taxes (Benefit) 117 (531) -------- -------- Income (loss) from continuing operations 193 (1,032) Discontinued Operations Income from discontinued operations net of income taxes (benefit) - 1,014 Gain on sale of discontinued operations - 1,409 -------- -------- Net income $ 193 $ 1,391 ======== ======== Earnings (Loss) Per Common Share Continuing operations $ .04 $ (.20) Discontinued operations . - .20 Gain on sale of discontinued operations . - .28 -------- -------- Net Income (Loss) $ .04 $ .28 ======== ======== Weighted Average Common Shares Outstanding 5,124,473 5,100,875 ========= =========
4 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. Condensed Consolidated Statements of Cash Flows
FOR THE NINE MONTHS ENDED September 30, 1996 1995 ------ ------ (Unaudited) (Unaudited) 000's Omitted ------------- Operating activities: Net income (loss) $ 193 $ 1,391 Adjustments to reconcile net income to cash flows Depreciation and amortization 1,840 1,968 (Gain) Loss on sale of marketable securities (50) (187) Gain on sale of property (449) - Decrease (increase) in current assets Accounts receivable, net 154 1,335 Inventory (405) (1,608) Other current assets (337) (671) Increase (decrease) in current liabilities Accounts payable (2,778) (2,320) Other current liabilities 427 (206) Discontinued segment-noncash charges and working capital charges 535 678 Gain on sale of discontinued operations - (1,409) ------- -------- Cash (used) provided from operations (870) (1,029) Investing activities: Property, plant and equipment Purchases (755) (588) Sales 633 - Long-term investments and receivables Sales - 184 Investing activities of discontinued segment - (193) Sales of discontinued operations - 6,804 Other items (118) (14) ------- -------- Cash (used) provided by investing activities (240) 6,193 Financing activities: Long-term debt Additions - 345 Payments (1,270) (3,511) Changes in lines of credit 2,246 (2,293) Financing activities of discontinued segment - 111 ------- -------- Cash (used) by financing activities 976 (5,348) ------- -------- Increase in cash (134) (184) Cash at beginning of period 134 184 ------- -------- Cash at end of period $ - $ - ======= ========
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, 1996, the consolidated statements of operations and the consolidated statements of cash flows for the three months ended September 30, 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 September 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, 1995 Annual Report to Shareholders. The results of operations for the period ended September 30, 1995 are not necessarily indicative of the operating results for a full year. 2. Inventories September 30, December 31, 1996 1995 ------------ ------------ Inventories consisted of: Raw Material $ 10,269 $ 8,688 Work in Process 2,744 3,884 Finished goods 8,653 8,689 -------- -------- $ 21,666 $ 21,261 ======== ======== 3. Stockholder's Equity Stockholder's Equity is comprised of the following: September 30, December 31, 1996 1995 ------------ ------------ Common Stock $ 3,072 $ 3,073 Additional Capital 20,505 20,477 Retained Earnings 9,797 9,664 Net unrealized loss on marketable securities (666) (594) -------- -------- $ 32,708 $ 32,620 ======== ======== 6 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 Nine Months Ended Year Ended September 30, September 30, December 31, 1996 1995 1996 1995 1995 ---- ---- ---- ---- ---- Sales 100.0% 100.0% % 100.0% 100.0% 100.0% Cost of sales 79.3% 84.4% 77.9% 82.0% 78.2% Selling, general administrative 20.8% 20.6% 20.7% 20.3% 21.7% Interest expense 1.4% 1.2% 1.3% 1.0% 1.9% Net income from continuing operations ( .4%) (3.8%) .3% (1.7%) (1.0%)
Net Sales Net sales for the nine months ended September 30, 1996 decreased $649 compared to sales for the same period in 1995. This decrease was made up of the following: Increase (Decrease) ---------- Wireless Communication Equipment $ 2,345 Paper Manufacturing (5,089) Specialty Manufacturing 347 Sales in the wireless communications equipment business segment increased due to increased demand and the ability to source raw materials compared to the prior year. Decreases in the paper manufacturing were due to decreased volume and prices. Cost of Sales Cost of sales as a percentage of net sales decreased 4.1% to 77.9% for the nine months ended September 30, 1996 from 82.0% for the 7 nine months ended September 30, 1995. Cost of sales was 78.2% of net sales for the year ended December 31, 1995. Details of this cost of sales as a percentage of net sales for each segment follows: Quarter Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Wireless Communication Equipment 69.9% 78.1% 74.6% 76.4% Paper Manufacturing 88.4% 92.5% 84.9% 89.7% Specialty Manufacturing 85.1% 83.5% 85.6% 85.6% Costs decreased in the wireless communications equipment manufacturing segment due to increased efficiencies in the manufacturing process. Material costs, primarily recycled paper fiber, have decreased since the end of 1995. Prices for paperboard have decreased also but have generally lagged price decreases in raw materials. Decreased volume in the paper manufacturing segment resulted in less efficient absorbtion of fixed manufacturing costs compared to the prior year. The decrease in the specialty manufacturing segment is due to the absorption of a new product line of 1996. Selling, General and Administrative Expenses Selling general and administrative expenses which consist primarily of commissions, marketing, salary and related costs, data processing, occupancy and product development costs increased to 20.7% for the nine months ended September 30, 1996 from 20.3% for the nine months ended September 30, 1995. Selling general and administrative expenses were 21.7% of net sales for the year ended December 31, 1995. Details of selling, general and administrative expense by segment follows: Quarter Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Wireless Communication Equipment $ 2,336 $ 2,167 $ 7,788 $ 7,482 Paper Manufacturing 673 677 1,978 2,229 Specialty Manufacturing 591 647 1,793 1,529 Corporate 521 482 1,367 1,349 Increases in the wireless communications segment are related to increased product development expenses compared to the prior year and increased selling costs on increased sales volume. Decreases in the paper manufacturing segment are related to decreased variable selling costs of decreased sales compared to the prior year. Increased selling salaries and reallocation of corporate expenses caused the increase in the specialty manufacturing segment. 8 Interest Expense Interest Expense increased to 1.4% for the quarter ended September 30, 1996 and 1.3% for the nine months ended September 30, 1996 from 1.9% for year ended December 31, 1995. This decrease is related to decreased debt levels compared to 1995. Income Taxes Income taxes represented a 38.0% effective tax rate for the quarter and nine months ended September 30, 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%. Inflation and Changing Prices Inflation and changing prices for the nine months ended September 30, 1996 and the nine months ended September 30, 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 equipment 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 increased by $ 2,920 during the nine months ended September 30, 1996. The Company has credit available under its existing lines of credit at September 30, 1996 in excess of $1,000,000. Capital expenditures for the first nine months of 1996 were $755,000 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. 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 increased $405,000 from December 31, 1995. 9 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. 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. 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 September 30, 1996. 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 thereunto duly authorized. ADAGE, INC. \s\ Robert T. Holland ------------------------------- Robert T. Holland Vice President - Finance Date: November 14, 1996 12 EX-27 2 FDS --
5 1,000 3-MOS DEC-31-1996 JUL-01-1996 SEP-30-1996 0 227 10,698 0 21,666 34,587 13,050 0 56,076 8,891 0 0 0 3,073 29,635 56,076 18,608 18,761 14,764 18,632 0 0 268 (139) (55) (84) 0 0 0 (84) (.02) (.02)
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