-----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, SpYKcvEWRzEtNPLwZHDEKJ85gRNGLycKjMBAymj8+UBmJUIF5cZMvRKstXqRvume BnJ8LW5AXD5lpAYylYdzwQ== 0000912057-00-003148.txt : 20000203 0000912057-00-003148.hdr.sgml : 20000203 ACCESSION NUMBER: 0000912057-00-003148 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED DEVICES CORP CENTRAL INDEX KEY: 0000869495 STANDARD INDUSTRIAL CLASSIFICATION: BOLTS, NUTS, SCREWS, RIVETS & WASHERS [3452] IRS NUMBER: 133087510 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24012 FILM NUMBER: 518247 BUSINESS ADDRESS: STREET 1: 2365 MILBURN AVENUE CITY: BALDWIN STATE: NY ZIP: 11510 BUSINESS PHONE: 5162239100 FORMER COMPANY: FORMER CONFORMED NAME: ILLUSTRIOUS MERGERS INC DATE OF NAME CHANGE: 19600201 10QSB 1 FORM 10QSB FORM 10-QSB QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended DECEMBER 31, 1999. ----------------- / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-24012 ALLIED DEVICES CORPORATION -------------------------- (Exact name of small business issuer as specified in its charter) NEVADA ------ (State or other jurisdiction of incorporation or organization) 13-3087510 ---------- (I.R.S. Employer Identification No.) 2365 MILBURN AVENUE, BALDWIN, N.Y. 11510 ---------------------------------------- (Address of principal executive offices - Zip code) Issuer's telephone number, including area code: (516) 223 - 9100 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 ---- ---- Common Stock, Par Value $.001 4,847,592 - ----------------------------- --------------------------------------- (CLASS) (Shares Outstanding at January 31, 2000)
PART I ALLIED DEVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS 2 ALLIED DEVICES CORPORATION CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- DECEMBER 31, September 30, 1999 1999 (UNAUDITED) (Audited) ASSETS CURRENT: Cash $ 288,000 $ 443,039 Accounts receivable 3,162,320 3,050,884 Inventories 9,908,777 9,731,773 Prepaid and other 468,395 126,902 Deferred income taxes 165,000 165,000 - ------------------------------------------------------------------------------------------------------- TOTAL CURRENT 13,992,492 13,517,598 PROPERTY, PLANT AND EQUIPMENT, NET 7,353,768 7,335,000 GOODWILL 3,514,669 3,584,512 OTHER 467,567 420,916 - ------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 25,328,496 $ 24,858,026 - ------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT: Accounts payable $ 1,943,846 $ 1,867,578 Taxes payable 423,828 280,778 Accrued expenses 444,158 392,772 Current portion of long term debt and capital lease obligations 1,719,118 1,577,539 - ------------------------------------------------------------------------------------------------------- TOTAL CURRENT 4,530,950 4,118,667 LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS 10,734,087 10,931,435 DEFERRED TAXES 326,000 326,000 - ------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 15,591,037 15,376,102 STOCKHOLDERS' EQUITY: Capital stock 4,948 4,948 Paid-in capital 3,624,721 3,624,721 Retained earnings 6,236,961 5,981,426 - ------------------------------------------------------------------------------------------------------- SUBTOTAL 9,866,630 9,611,095 LESS TREASURY STOCK, AT COST (129,171) (129,171) - ------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 9,737,459 9,481,924 - ------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,328,496 $ 24,858,026 - ------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------
3 ALLIED DEVICES CORPORATION CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 1998 - ---------------------------------------------------------------------------------------------- (UNAUDITED) (Unaudited) Net sales $6,693,487 $5,370,454 Cost of sales 4,378,398 3,593,270 - ---------------------------------------------------------------------------------------------- Gross profit 2,315,089 1,777,184 Selling, general and administrative expenses 1,596,002 1,365,849 - ---------------------------------------------------------------------------------------------- Income from operations 719,087 411,335 - ---------------------------------------------------------------------------------------------- Other expense 47,099 -- Interest expense (net) 272,088 253,343 - ---------------------------------------------------------------------------------------------- Income before provision for taxes on income 399,900 157,992 Taxes on income 144,365 57,056 - ---------------------------------------------------------------------------------------------- Net income $ 255,535 $ 100,936 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- Basic earnings per share $ 0.05 $ 0.02 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- Basic weighted average number of shares of common stock outstanding 4,847,592 4,947,942 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- Diluted earnings per share $ 0.05 $ 0.02 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- Diluted weighted average number of shares of common stock outstanding 5,206,778 4,965,738 - ---------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------
4 ALLIED DEVICES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 1998 - -------------------------------------------------------------------------------------------------- (UNAUDITED) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 255,535 $ 100,936 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 399,973 358,159 Loss on sale of equipment 47,099 -- Decrease (increase) in: Accounts receivable (111,436) 235,077 Inventories (177,004) (267,695) Prepaid expenses and other current assets (341,493) (12,731) Other assets (50,242) (18,761) Increase (decrease) in: Accounts payable 76,268 (51,064) Taxes payable 143,050 16,100 Accrued expenses 51,386 (41,865) - -------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 293,136 318,156 - -------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (154,896) (199,611) Proceeds from sale of equipment 55,000 -- - -------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (99,896) (199,611) - -------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in bank borrowings -- 150,000 Deferred financing costs (25,000) -- Payments of long-term debt and capital lease obligations (323,279) (132,028) - -------------------------------------------------------------------------------------------------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (348,279) 17,972 - -------------------------------------------------------------------------------------------------- NET (DECREASE) INCREASE IN CASH (155,039) 136,517 CASH, AT BEGINNING OF PERIOD 443,039 275,238 - -------------------------------------------------------------------------------------------------- CASH, END OF PERIOD $ 288,000 $ 411,755 - -------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------
5 ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR DECEMBER 31, 1999 AND 1998 IS UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. BUSINESS Allied Devices Corporation and subsidiaries (the "Company") are engaged primarily in the manufacture and distribution of standard and custom precision mechanical assemblies and components and a line of screw machine products throughout the United States. 2. SUMMARY OF (A) BASIS OF PRESENTATION/PRINCIPLES OF CONSOLIDATION SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements include the accounts of Allied Devices Corporation and its wholly-owned subsidiaries, Empire - Tyler Corporation ("Empire") and APPI, Inc. ("APPI") (collectively, the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements and related notes thereto as of December 31, 1999 and 1998, and for the three months then ended, are unaudited and have been prepared on a basis consistent with the Company's annual financial statements. Such unaudited financial statements include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of such data. Results for the three months ended December 31, 1999 are not necessarily indicative of the results that may be expected for the entire year ending September 30, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the year ended September 30, 1999. 6 ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR DECEMBER 31, 1999 AND 1998 IS UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (B) INVENTORIES Inventories are valued at the lower of cost (last-in, first-out (LIFO) method) or market. For the three months ended December 31, 1999 and 1998, inventory was determined by applying a gross profit method, as opposed to the year ended September 30, 1999, when inventory was determined by a physical count. (C) DEPRECIATION AND AMORTIZATION Property, plant and equipment are stated at cost. Depreciation and amortization of property, plant and equipment is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows: Buildings and improvements 30 years Machinery and equipment 8-10 years Furniture, fixtures and office equipment 5-7 years Tools, molds and dies 8 years Leasehold improvements Lease term
(D) INCOME TAXES The Company and its subsidiaries file a consolidated federal income tax return and separate state income tax returns. The Company follows the liability method of accounting for income taxes. 7 ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR DECEMBER 31, 1999 AND 1998 IS UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (E) EARNINGS PER SHARE Basic earnings per share is computed by dividing income available to common shareholders by the weighted average shares outstanding for the period and reflect no dilution for the potential exercise of stock options and warrants. Diluted earnings per share reflect, in periods in which they would have a dilutive effect, the dilution that would occur upon the exercise of stock options and warrants. (F) INTANGIBLE ASSETS The excess of cost over fair value of net assets acquired is being amortized over periods of 15 years (for fiscal 1998 acquisitions) and 20 years (for prior acquisitions). (G) REVENUE RECOGNITION Sales are recognized upon shipment of products. (H) STATEMENT OF CASH FLOWS For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 3. INVENTORIES Inventories are summarized as follows:
DECEMBER 31, September 30, 1999 1999 ------------------------------------------------------- Raw materials $1,293,065 $1,312,565 Work-in-process 1,025,542 1,041,542 Finished goods 9,217,470 8,990,642 ------------------------------------------------------- 11,536,077 11,344,749 Less: adjustment to LIFO (1,627,300) (1,612,976) ------------------------------------------------------- $9,908,777 $9,731,773 ------------------------------------------------------- -------------------------------------------------------
8 ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR DECEMBER 31, 1999 AND 1998 IS UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 4. NEW LEASE In November, 1999, the Company entered into a lease for a new COMMITMENT manufacturing facility for the purpose of consolidating its four locations on Long Island into one building and allowing for growth of more than 50% in sales volume. Upon completion of consolidation, the leases on all four current locations will expire or terminate. The lease on the new facility expires in April, 2010 and requires total minimum rental payments of $ 4,999,000. 9 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: All statements contained herein that are not historical facts, including, but not limited to, statements regarding the Company's current business strategy, the Company's projected sources and uses of cash, and the Company's plans for future development and operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: the availability of sufficient capital to finance the Company's business plans on terms satisfactory to the Company; competitive factors; changes in labor, equipment and capital costs; changes in regulations affecting the Company's business; future acquisitions or strategic partnerships; general business and economic conditions; and factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission. The Company cautions readers not to place undue reliance on any such forward-looking statements, which statements are made pursuant to the Private Litigation Reform Act of 1995 and, as a result, are pertinent only as of the date made. Net sales for the first quarter of fiscal 2000 were $6,693,000 as compared to $5,370,000 in the first quarter of fiscal 1999. This increase of 24.6% was principally the result of improved conditions in the various sectors of the US economy served by the Company. The semiconductor equipment sector's severe slowdown in 1998 and 1999 had impacted the Company's shipping volume, and its current recovery is having a positive effect. Other sectors, most notably medical equipment and robotics, had remained stable but exhibited low growth, and they are now appearing to show attractive growth potential. The Company remains dedicated to providing top quality and superior service to its customers, particularly those in the semiconductor equipment, aerospace instrument, medical equipment, robotics and scientific 10 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- instrumentation sectors. While it is not possible to forecast with any accuracy how long the current recovery may last, customers in these sectors are predicting two or three years of strong activity. Reported gross profit for the first quarter of fiscal 2000 was 34.59% of net sales, as compared to 33.09% for the comparable period of fiscal 1999. Higher operating rates had, in general, a positive effect on margins, with the following factors accounting for the improvement: (1) net materials expense increased as a percentage of sales, decreasing gross margins by 4.01%, as purchasing efficiencies suffered in favor of timeliness of deliveries; (2) higher throughput in manufacturing resulted in solid gains in labor productivity, improving margins by 3.69%; and (3) the Company shipped a higher volume of product on relatively fixed costs of factory operations, increasing gross margins by 1.82%. In the third quarter of fiscal 2000, the Company expects to consolidate four plants on Long Island into one new facility, allowing for improved control and coordination of manufacturing activities and for expansion of manufacturing capacity. This will entail an increase in occupancy expense that, at current operating rates, would reduce gross margin by approximately 0.50%. Management expects this cost increase to be more than offset by additional increases in sales volume. The Company did not increase prices in the first quarter of fiscal 2000. LIFO reserves increased by $14,000 during the period. Selling, general and administrative expenses as a percentage of net sales were 23.8% in the first quarter of fiscal 2000, as compared to 25.4% in the comparable period of fiscal 1999. The following factors account for this change: (1) selling and shipping expenses and commissions increased as a percentage of net sales by approximately 0.1% as management increased spending on certain aspects of the Company's marketing plan; (2) administrative payroll, benefits, and related expenses decreased as a percentage of net sales by 1.6%; and (3) other administrative expenses (collectively) decreased as a percentage of net sales by approximately 0.1%. 11 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other expense is attributable to non-cash losses on the trade-in of certain older machines for more highly productive manufacturing equipment. Interest expense of $272,000 in the first quarter of fiscal 2000 was $19,000 higher than in the comparable period of fiscal 1999, a result of marginally higher debt taken on by the Company to finance new equipment. Provision for income taxes is estimated at 36.1% of pre-tax income for the fiscal 2000 period, the same as in fiscal 1999, as a combination of federal and state taxes. LIQUIDITY AND FINANCIAL RESOURCES During the first quarter of fiscal 2000, the Company's financial condition remained healthy. Operations generated cash of $293,000. Capital expenditures (net) used $100,000, and financing activities used $348,000, resulting in a decrease in cash on hand of $155,000. Working capital increased by $63,000 to $9,462,000 during the quarter, principally as a result of the following changes in current assets and current liabilities: - Accounts receivable increased by $111,000 as a function of offsetting factors: (a) the average collection period decreased from about 45 days at the end of fiscal 1999 to about 43 days at the end of the first quarter of fiscal 2000, reducing receivables by approximately $139,000, and (2) sales volume increased by 24.6%, increasing receivables by approximately $250,000. - Inventories increased by 1.8%, or $177,000, during the quarter. Turns on inventory improved to 1.7 times during the quarter, as compared to 1.6 times at the end of fiscal 2000. This change is attributable to the increase in shipping volume experienced in the first quarter of fiscal 2000. 12 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - Prepaid and other current assets increased by $341,000 as the Company recorded (and accrued for) certain annual administrative expenses and made deposits on three new pieces of equipment. - Current liabilities, exclusive of current portions of long-term debt and capital lease obligations, increased $270,000 as accounts payable and accrued expenses increased $127,000, and taxes payable increased by $143,000. - Current portions of long-term debt and capital lease obligations increased by $141,000. - Cash balances decreased by $155,000. Net capital expenditures in the quarter were $100,000 ($422,000 including capital lease acquisitions) as management continued to add to capacity and to streamline its manufacturing processes. Management's capital spending plans for the remaining three quarters of fiscal 2000 include additional expenditures of approximately $1,700,000 for productive equipment and approximately $500,000 for expansion and consolidation of New York operations into a new facility on Long Island. Management expects to fund such spending out of its working capital and lease lines. Management believes that the Company's working capital as now constituted will be adequate for the needs of the on-going core business. Management further believes that, in light of the Company's expansion objectives, the Company's current financial resources will not be adequate to provide for all of the on-going cash needs of the business. In particular, management expects to require additional financing to carry out its acquisition objectives. It is management's intention to complete at least one significant acquisition during fiscal 2000. Success in this part of the Company's growth plan may rely, in large measure, upon success in raising additional debt and/or equity capital. Management believes that it has several sources for such capital and expects that the combination of capital raised and acquisitions completed will produce anti-dilutive results for the Company's existing 13 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- stockholders. While this is management's intention, there is no guarantee that they will be able to achieve this objective. The Company is not relying on the receipt of any new capital for its existing operations. It is important to note that, absent new capital, the Company will not be in a position to undertake some of the most promising elements of management's plans for expansion. In the event that new capital is raised, management intends to implement its plans and will do so in keeping with its judgment at that time as to how best to deploy such added capital. 14 PART II. OTHER INFORMATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: JANUARY 31, 2000 ALLIED DEVICES CORPORATION - ---------------------- -------------------------- (Registrant) By: /s/ Mark Hopkinson ----------------------- M. Hopkinson Chairman 15 -----END PRIVACY-ENHANCED MESSAGE-----