-----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, C3Ma98T5TGc45QuvCLUByfKjajdR60v0KNPDuBQi9miRCkIoM8p9cdAvshHBzgnZ JnosWBMgq3MK4SJJ6OydCw== 0000950115-97-001273.txt : 19970815 0000950115-97-001273.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950115-97-001273 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97662116 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 June 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 342 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 August 8, 1997. 5,032,057 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, 1997 DECEMBER 31, 1996 ------------- ----------------- (Unaudited) ASSETS 000's Omitted - ------ ------------- Current Assets $ $ 502 Cash Accounts receivable, net 8,615 11,469 Inventories 15,852 16,219 Marketable securities 709 723 Other current assets 3,708 2,474 ------- ------- Total Current Assets 28,884 31,387 Property, plant and equipment, net 6,886 12,632 Net assets of discontinued segments 2,693 5,883 Intangible and other assets 4,488 2,151 ------- ------- Total Assets 42,951 52,053 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Bank overdrafts 134 Current maturities of long-term debt 553 868 Accounts payable 3,942 4,874 Accrued expenses 2,492 2,721 Income taxes payable 303 ------- ------- Total Current Liabilities 7,121 8,766 Long-term debt 7,627 14,073 Stockholders' equity 28,203 29,214 ------- ------- 42,951 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 -------------------------- JUNE 30, 1997 JUNE 30, 1996 1997 1996 ---- ---- (Unaudited) (Unaudited) 000's Omitted ------------- Income Sales $ 13,609 $ 11,614 Investment income (loss) (58) 62 Other 1 ----------- ----------- 13,551 11,677 Costs and Expenses Cost of sales 10,073 8,554 Selling, general & administrative 3,001 2,713 Interest 271 220 ----------- ----------- 13,345 11,487 Income from continuing operations before income taxes 206 190 Provision for income taxes (benefit) 64 74 ----------- ----------- Net income (Loss) from continuing operations 142 116 Income (loss) from discontinued operations net of taxes (145) (41) Gain (loss) on sale of discontinued operations net of taxes (287) ----------- ----------- Net income (loss) (290) 75 =========== =========== Earnings Per Common Share Continuing operations .03 .02 Discontinued operations (.09) (.01) ----------- ----------- Net Income (.06) .01 =========== =========== Weighted Average Common Shares Outstanding 5,105,166 5,129,175 =========== ===========
See Notes to condensed consolidated financial statements. 3 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. ----------- Condensed Consolidated Statements of Income -------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1997 JUNE 30, 1996 1997 1996 ---- ---- (Unaudited) (Unaudited) 000's Omitted ------------- Income Sales $ 23,069 $ 23,986 Investment income (loss) (14) 62 ----------- ----------- 23,055 24,048 Costs and Expenses Cost of sales 17,105 17,589 Selling, general & administrative 5,546 5,353 Interest 592 518 ----------- ----------- 23,243 23,460 Income (loss) from continuing operations before income taxes (188) 588 Provision for income taxes (benefit) (70) 225 Net income (loss) from continuing operations (118) 363 Income (loss) from discontinued operations net of taxes (213) (86) (Loss) on sale of business segments (287) ----------- ----------- Net income (loss) (618) 277 =========== =========== Earnings Per Common Share Continuing operations (.02) .07 Discontinued operations (.10) (.02) ----------- ----------- Net Income (.12) .05 =========== =========== Weighted Average Common Shares Outstanding 5,105,166 5,129,175 =========== ===========
See Notes to condensed consolidated financial statements. 4 ITEM 1 - FINANCIAL STATEMENTS - continued ADAGE, INC. ----------- Condensed Consolidated Statements of Cash Flows
FOR THE SIX MONTHS ENDED ------------------------ JUNE 30, 1997 JUNE 30, 1996 1997 1996 ---- ---- (Unaudited) (Unaudited) 000's Omitted ------------- Operating activities: Net income (loss) $ (618) $ 277 Adjustments to reconcile net income to cash flows Depreciation and amortization 414 1,617 Gain (loss) on marketable securities (52) Deferred Income Tax (94) Gain (loss) from sale of business segment (287) Decrease (increase) in current assets Accounts receivable, net (62) 20 Inventory (1,367) (91) Other current assets 14 (630) Increase (decrease) in current Liabilities Accounts payable (357) (1,641) Other current liabilities 1,398 868 Discontinued segment-noncash charges and working capital changes 614 ------- ------- Cash (used) provided from operations (959) 982 Investing activities: Property, plant and equipment Purchases (1,267) (450) Long-term investments and receivables Additions and purchases (27) Proceeds from sale of segments 7,693 Other items 337 (518) ------- ------- 6,763 Cash (used) provided by investing activities (995) Financing activities: Long-term debt Additions 3,289 Payments (163) (1,590) Changes in lines of credit (9,526) 1,556 Purchase of stock (40) ------- ------- Cash (used) by financing activities (6,440) (36) ------- ------- Decrease in cash (636) (49) Cash at beginning of period 502 134 ------- ------- Cash at end of period (Overdraft) (134) 85 ======= =======
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, 1997, the consolidated statements of operations for the three and six months ended June 30, 1997 and 1996 and the consolidated statements of cash flows for the six months ended June 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 June 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 June 30, 1997 are not necessarily indicative of the operating results for a full year. 2. Inventories June 30, December 31, 1997 1996 -------- -------- Inventories consisted of: Raw Material $ 7,147 $ 7,424 Work in Process 3,949 3,286 Finished goods 4,756 5,509 -------- -------- $ 15,852 $ 16,219 ======== ======== 3. Stockholders' Equity Stockholders' Equity is comprised of the following: June 30, December 31, 1997 1996 -------- -------- Common Stock $ 3,019 $ 3,076 Additional Capital 20,164 20,500 Retained Earnings 4,820 5,638 -------- -------- $ 28,003 $ 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 Six Months Ended Year Ended June 30, June 30, December 31, 1997 1996 1997 1996 1996 ---- ---- ---- ---- ---- Sales 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales 74.0% 73.7% 74.1% 73.3% 71.1% Selling, general administrative 22.1% 23.4% 24.0% 22.3% 27.0% Interest expense 2.0% 1.9% 2.6% 2.2% 1.4% Income (loss) from continuing operations before income taxes (1.5%) 1.6% (0.8%) 2.5% (0.5%) Net Income (Loss) from continuing operations (1.0%) 1.0% (0.5%) 1.5% (0.9%)
Net Sales Net sales for the six months ended June 30, 1997 decreased $917 compared to sales for the same period in 1996. In the first quarter, sales decreased $2,912 due to lower demand in the utility sector for load management switches. Declines were also experienced in land-mobile radio product lines. Sales increased $1,995 in the second quarter as both areas, particularly land-mobile, rebounded. Cost of Sales Cost of sales as a percentage of net sales increased 0.8% to 74.1% for the six months ended June 30, 1997 from 73.3% for six months ended June 30, 1996. Cost of sales was 71.1% of net sales for the year ended December 31, 1996. This increase is the result of higher labor and related fringe costs. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of marketing, selling, engineering, data processing, occupancy and financial costs. These expenses increased to 24.0% for the six months ended June 30, 1997 compared to 22.3% for the same period in 1996. This is the result of additional engineering expenses in support of two strategic product initiatives. 7 Interest Expense Interest expense increased to 2.6% for the six months ended June 30, 1997 from 2.2% for the same period in 1996. This increase resulted from higher debt levels associated with the facility expansion in West Melbourne, Florida. Income Taxes Income taxes (benefit) represented a 37.0% effective tax rate for the six months ended June 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 June 30, 1997 and the six months ended June 30, 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 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 decreased by $1,058,000 during the six months ended June 30, 1997. The Company has credit available under its existing lines of credit in excess of $6 million. Capital expenditures for the first six months of 1997 were $1,486,000 which was paid from operating cash flow and bank credit lines. It is estimated that capital expenditures for 1997 will be approximately $4.3 million. Of these expenditures, $2.3 million is for the expansion of the West Melbourne, Florida facility. The purpose of the expansion is to consolidate operations at this location and $1.4 million is to replace obsolete surface mount equipment. Management expects that capital expenditures will be significantly lower in 1998. Inventories, excluding those of the discontinued business segments, increased $1,366 for the six months ended June 30, 1997 from December 31, 1996. 8 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 was completed in June 1997. This segment has been recorded as a discontinued operation for the three and six months ended June 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 six months ended June 30, 1997 and 1996. 9 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, 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 there unto duly authorized. ADAGE, INC. ------------------------- William P. Kelly Chief Financial Officer and Vice President - Finance Date: August ____, 1997 11 -----END PRIVACY-ENHANCED MESSAGE-----