-----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, A9fMf8E5n8zsaiyvVLvx0yRwCCwbDClw9sctlpW6aL8dPcsPTQQ0CRO7SNWsTcAz IDWceNjVXoRYutaAeGCQRQ== 0001005477-01-003070.txt : 20010510 0001005477-01-003070.hdr.sgml : 20010510 ACCESSION NUMBER: 0001005477-01-003070 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010509 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: 1626340 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 0001.txt QUARTERLY REPORT 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 March 31, 2001. |_| 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.) 325 Duffy Avenue, Hicksville, N.Y. 11801 ---------------------------------------- (Address of principal executive offices - Zip code) Issuer's telephone number, including area code: (516) 935 - 1300 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 4,948,392 - ----------------------------- ----------------------------------- (CLASS) (Shares Outstanding at May 9, 2001) PART I ALLIED DEVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS 2 Allied Devices Corporation Consolidated Balance Sheets ================================================================================ March 31, September 30, 2001 2000 ------------------------------------------------------------------------------- (Unaudited) (Audited) Assets Current: Cash $ 172,042 $ 410,186 Accounts receivable 4,155,710 4,939,164 Inventories 10,723,049 10,298,923 Prepaid and other 399,414 119,961 Deferred income taxes 554,000 554,000 ------------------------------------------------------------------------------- Total current 16,004,215 16,322,234 Property, plant and equipment, net 13,157,989 9,750,586 Goodwill 5,224,514 5,061,944 Other 369,407 429,009 ------------------------------------------------------------------------------- Total assets $ 34,756,125 $ 31,563,773 =============================================================================== Liabilities and Stockholders' Equity Current: Accounts payable $ 2,224,819 $ 3,539,960 Taxes payable 430,840 881,801 Accrued expenses 1,033,492 1,158,941 Current portion of long term debt and capital lease obligations 3,509,256 2,896,742 ------------------------------------------------------------------------------- Total current 7,198,407 8,477,444 Long term debt and capital lease obligations 14,620,546 11,257,491 Other liabilities 116,645 91,218 Deferred taxes 781,000 781,000 ------------------------------------------------------------------------------- Total liabilities 22,716,598 20,607,153 Stockholders' Equity: Capital stock 5,049 4,948 Paid-in capital 3,958,470 3,624,721 Retained earnings 8,205,179 7,456,122 ------------------------------------------------------------------------------- Subtotal 12,168,698 11,085,791 Less treasury stock, at cost (129,171) (129,171) ------------------------------------------------------------------------------- Total stockholders' equity 12,039,527 10,956,620 ------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 34,756,125 $ 31,563,773 =============================================================================== 3 Allied Devices Corporation Consolidated Statements of Income ================================================================================
Quarter Ended Six Months Ended March 31, March 31, ------------------------------------------------------------------------------------------------------------------------------- 2001 2000 2001 2000 ------------------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $9,507,643 $7,734,983 $19,104,762 $14,428,470 Cost of sales 6,502,097 5,018,272 12,968,618 9,396,670 ------------------------------------------------------------------------------------------------------------------------------- Gross profit 3,005,546 2,716,711 6,136,144 5,031,800 Selling, general and administrative expenses 2,129,726 1,762,169 4,210,806 3,358,171 ------------------------------------------------------------------------------------------------------------------------------- Income from operations 875,820 954,542 1,925,338 1,673,629 ------------------------------------------------------------------------------------------------------------------------------- Other expense (income) - (9,659) - 37,440 Interest expense (net) 398,689 286,405 753,105 558,493 ------------------------------------------------------------------------------------------------------------------------------- Income before provision for taxes on income 477,131 677,796 1,172,233 1,077,696 Taxes on income 172,244 244,653 423,176 389,018 ------------------------------------------------------------------------------------------------------------------------------- Net income $ 304,887 $ 433,143 $ 749,057 $ 688,678 =============================================================================================================================== Basic earnings per share $ 0.06 $ 0.09 $ 0.15 $ 0.14 =============================================================================================================================== Basic weighted average number of shares of common stock outstanding 4,948,392 4,847,592 4,922,915 4,847,592 =============================================================================================================================== Diluted earnings per share $ 0.05 $ 0.08 $ 0.13 $ 0.13 =============================================================================================================================== Diluted weighted average number of shares of common stock outstanding 5,682,692 5,636,681 5,733,857 5,353,854 ===============================================================================================================================
4 Allied Devices Corporation Consolidated Statements of Cash Flows ================================================================================ For the six months ended March 31, 2001 2000 ---------------------------------------------------------------------------- (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 749,057 $ 688,678 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,214,885 781,015 Loss on sale of equipment - 45,949 Decrease (increase) in: Accounts receivable 783,454 (782,492) Inventories (415,126) (339,203) Prepaid expenses and other current assets (243,245) (214,849) Other assets (16,000) (144,341) Increase (decrease) in: Accounts payable (1,191,381) (153,584) Taxes payable (450,961) 229,703 Accrued expenses (125,449) 171,456 Other liabilities 25,427 - ---------------------------------------------------------------------------- Net cash provided by operating activities 330,661 282,332 ---------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (382,407) (167,115) Business acquisition (682,975) - Proceeds from sale of equipment - 57,050 ---------------------------------------------------------------------------- Net cash used in investing activities (1,065,382) (110,065) ---------------------------------------------------------------------------- Cash flows from financing activities: Increase in bank borrowings 1,600,000 300,000 Deferred financing costs - (25,000) Proceeds from equipment financing 224,111 - Proceeds from sale of common stock 2,600 - Payments of long-term debt and capital lease obligations (1,330,134) (759,614) ---------------------------------------------------------------------------- Net cash provided by (used in) financing activities 496,577 (484,614) ---------------------------------------------------------------------------- Net decrease in cash (238,144) (312,347) Cash, at beginning of period 410,186 443,039 ---------------------------------------------------------------------------- Cash, end of period $ 172,042 $ 130,692 ============================================================================ 5 Allied Devices Corporation Notes to Consolidated Financial Statements (Information for March 31, 2001 and 2000 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 throughout the United States. 2. Summary of Significant Accounting Policies (a) Basis of presentation/principles of consolidation The accompanying consolidated financial statements include the accounts of Allied Devices Corporation and its wholly owned subsidiaries, the 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 March 31, 2001 and 2000, and for the three and six month periods 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 six months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the entire year ending September 30, 2001. 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, 2000. 6 Allied Devices Corporation Notes to Consolidated Financial Statements (Information for March 31, 2001 and 2000 is unaudited) ================================================================================ (b) Inventories Inventories are valued at the lower of cost (last-in, first-out (LIFO) method) or market. For the three and six months ended March 31, 2001 and 2000, inventory was determined by applying a gross profit method, as opposed to the year ended September 30, 2000, 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 5-10 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 March 31, 2001 and 2000 is unaudited) ================================================================================ (e) Earnings per share Basic earnings per share are 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. A reconciliation of the shares used in calculating basic and diluted earnings per share follows: Quarter Ended Six Months Ended March 31, March 31, 2001 2000 2001 2000 - ----------------------------------------------------------------------------- Weighted average shares outstanding - - basic 4,948,392 4,847,592 4,922,915 4,847,592 Dilutive effect of options and warrants 734,300 789,089 810,942 506,262 - ----------------------------------------------------------------------------- Weighted average shares outstanding- diluted 5,682,692 5,636,681 5,733,857 5,353,854 ============================================================================= (f) Intangible assets The excess of cost over fair value of net assets acquired is being amortized over periods of 15 and 20 years. 8 Allied Devices Corporation Notes to Consolidated Financial Statements (Information for March 31, 2001 and 2000 is unaudited) ================================================================================ (g) Revenue recognition Sales are recognized upon shipment of products. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition in financial statements. There has been no effect to the Company's operating results as a result of adopting and applying SAB 101. (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: March 31, September 30, 2001 2000 - -------------------------------------------------------------------------------- Raw materials $ 989,988 $ 1,076,603 Work-in-process 1,130,937 1,112,276 Finished goods 8,753,561 8,261,481 - -------------------------------------------------------------------------------- 10,874,486 10,450,360 Less: adjustment to LIFO (151,437) (151,437) - -------------------------------------------------------------------------------- $10,723,049 $10,298,923 ================================================================================ 4. Supplemental Cash Flows During the quarter and/or six month period ended March 31, 2001, the Company booked certain non-cash transactions, including the following: (1) the Company entered into capital leases with a capitalized value of $3,182,000 for new machinery and equipment; (2) the Company issued $300,000 in notes payable in connection with the acquisition of Martin Machine, Inc. ("Martin") (see note 5); and (3) the Company issued 100,000 shares of common stock valued at $331,250 in connection with the purchase of Martin. (see note 5). 9 Allied Devices Corporation Notes to Consolidated Financial Statements (Information for March 31, 2001 and 2000 is unaudited) ================================================================================ 5. Business Acquisitions On November 15, 2000, the Company acquired Martin, located in Raymond, Maine. The acquisition was accounted for using the purchase method of accounting. Original purchase consideration amounted to $1,031,000, including the value of 100,000 shares of common stock (issued immediately following closing), a $300,000 note payable in twenty equal installments beginning March 31, 2001, and $400,000 in cash. Subsequent to the closing the Company paid an additional $18,912 in cash, all of which was recognized as additional goodwill. The total excess of cost over the fair value of assets acquired amounts to $379,624, which has been recorded as goodwill and is being amortized over a (15) fifteen-year period. 10 Allied Devices Corporation Results of Operations: Six Months Ended March 31, 2001 Compared with Six Months Ended March 31, 2000 ================================================================================ 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 quarter and six months ended March 31, 2001 were $9,508,000 and $19,105,000, respectively, as compared to $7,735,000 and $14,428,000 in the comparable periods of the prior year, increases of approximately 22.91% and 32.41%, respectively. These increases in sales volume were principally the result of two factors: (1) customers in the sectors of the US economy served by the Company continued to show strength well into the second quarter of fiscal 2001, although clear evidence of softening conditions materialized during the final six weeks of the quarter; and (2) the Company continued aggressively to pursue new business as it brought on certain new sales representatives and established new incentives for others. 11 Allied Devices Corporation Results of Operations: Six Months Ended March 31, 2001 Compared with Six Months Ended March 31, 2000 ================================================================================ A substantial portion of the Company's sales are derived from the semiconductor equipment industry, and conditions in that sector are currently weak. The Company remains dedicated to providing top quality and superior service to its customers, whether in the semiconductor equipment, aerospace instrument, medical equipment, robotics, gas flow metering and control, scientific instrumentation or other technology-oriented industrial sectors. Management believes that, as a result of the value package it delivers to its customers, the Company will show above-average rates of growth in sales through consistent application and continuous re-evaluation of its strategies. While management believes economic uncertainties make it impossible to predict when its sales environment will improve, it is management's expectation that, for much if not all of fiscal 2001, the Company will continue to show rates of growth over fiscal 2000. In keeping with that expectation, during the current slow period, management is carrying out a consolidation and expansion of its facilities in the state of Maine. The Company has committed to enter into a ten-year lease on a building in Sanford, Maine, with 83,000 square feet of space. The operations in Biddeford (30,000 square feet) and Windham (10,000 square feet) will be moved into this facility by the early part of the fourth quarter of fiscal 2001. The Company will originate its tenancy in the new building by leasing approximately 57,000 square feet, with options to expand into the full facility in stages. Commitments related to the space originally occupied will require minimum rental payments of $4,018,000 over ten years. Recessionary conditions in the economy, seemingly prompted by downturns in the semiconductor and other technology-oriented industries, became evident in November, 2000, during the Company's first fiscal quarter. The impact on shipping rates occurred during the final six weeks of the Company's second quarter, and there was a negative effect on margins. Reported gross profit for the second quarter and first six months of fiscal 2001 was 31.61% and 32.12% of net sales, respectively, as 12 Allied Devices Corporation Results of Operations: Six Months Ended March 31, 2001 Compared with Six Months Ended March 31, 2000 ================================================================================ compared to 35.12% and 34.87% for the comparable periods of fiscal 2000. The following factors accounted for these changes: (1) high labor hours and overtime expenditures during the first four months of the fiscal year resulted in increased factory payroll costs, decreasing margins by 2.22%; (2) the Company shipped less product than planned and projected, with relatively fixed costs of factory operations, and the commensurate under-absorption of overhead decreased gross margins by 2.15%; and (3) more aggressive buying practices lowered net materials expense as a percentage of sales, increasing gross margins by 1.62%. The Company did not increase prices in the first six months of fiscal 2001. LIFO reserves did not change during the period. Selling, general, administrative and other expenses as a percentage of net sales were 22.40% and 22.04% in the second quarter and first six months of fiscal 2001, respectively, as compared to 22.66% and 23.53% in the comparable periods of fiscal 2000. The following factors account for this change: (1) selling and shipping expenses and commissions stayed in step with shipping levels, increasing as a percentage of net sales by approximately 0.06%; (2) administrative payroll, benefits, and related expenses decreased as a percentage of net sales by 1.50%; and (3) other administrative expenses (collectively) decreased as a percentage of net sales by approximately 0.05%. Interest expense of $399,000 and $753,000 in the second quarter and first six months of fiscal 2001, respectively, was $113,000 and $195,000 higher than in the comparable periods of fiscal 2000, a result of the combined effect of higher interest rates and the higher indebtedness taken on by the Company to finance both the acquisition of Martin Machine, Inc., and various pieces of new production equipment. Provision for income taxes is estimated at 36.1% of pre-tax income for the fiscal 2001 period, the same as in fiscal 2000, as a combination of federal and state taxes. 13 Allied Devices Corporation Results of Operations: Six Months Ended March 31, 2001 Compared with Six Months Ended March 31, 2000 ================================================================================ LIQUIDITY AND FINANCIAL RESOURCES During the first six months of fiscal 2001, the Company's financial condition remained healthy. Operations generated cash of $331,000 and financing activities provided $496,000. Capital expenditures (net) used $382,000 and the acquisition of Martin Machine, Inc., used $683,000, resulting in a decrease in cash on hand of $238,000. Working capital increased by $961,000 to $8,806,000 during the six month period, principally as a result of the following changes in current assets and current liabilities: o Accounts receivable decreased by $783,000 as sales volume decreased during the second quarter of fiscal year 2001. The average collection period remained at about 45 days at the end of the second quarter of fiscal 2001. o Inventories increased by $424,000 during the six-month period. Of this increase, $9,000 was incident to the acquisition of Martin Machine, Inc. Turns on inventory remained at 2.4 times during the six months, as compared to 2.0 times at the end of fiscal 2000. The increase in turns on inventory in the first six months of fiscal 2001 is attributable to increased shipping volume. o Prepaid and other current assets increased by $279,000 as the Company paid certain administrative expenses that will be expensed over the course of the year. o Current liabilities, exclusive of current portions of long-term debt and capital lease obligations, decreased $1,892,000 as accounts payable and accrued expenses were paid down by $1,441,000, and taxes payable were paid down by $451,000. o Current portions of long-term debt and capital lease obligations increased by $613,000. This is a reflection of indebtedness the Company has incurred in carrying out its capital spending program, which includes the financing of over $5 million in new capital equipment during the past year. o Cash balances decreased by $238,000. 14 Allied Devices Corporation Results of Operations: Six Months Ended March 31, 2001 Compared with Six Months Ended March 31, 2000 ================================================================================ Net capital expenditures in the six-month period were $382,000 ($3,564,000 including capital lease acquisitions) as management continued to add to capacity and to streamline its manufacturing processes. Management's capital spending plans for the remainder of fiscal 2001 include additional expenditures of approximately $1,000,000 for productive equipment and $300,000 to consolidate two locations in Maine into a single new manufacturing facility. The objectives in this consolidation are to produce operating efficiencies and to allow for anticipated space requirements as the Company continues to grow. 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, and cash generated from operations appears to be more than adequate to service existing obligations. The unused portion of the Company's credit facility is, in management's opinion, a reserve to protect against current and future downturns and to meet other requirements for cash. The Company is not relying on the receipt of any new capital for its existing operations. Management further believes that, in light of the Company's expansion objectives, the Company will need to supplement existing financial resources to provide for the acquisition portions of its growth plans. Management intends to complete a series of acquisitions during the next several fiscal years, and to do so will necessitate attracting additional capital. 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 stockholders. While this is management's intention, there is no guarantee that it will be able to achieve this objective. 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 15 Allied Devices Corporation Results of Operations: Six Months Ended March 31, 2001 Compared with Six Months Ended March 31, 2000 ================================================================================ 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. 16 Allied Devices Corporation Other Information: Six Months Ended March 31, 2001 ================================================================================ 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: May 9, 2001 ALLIED DEVICES CORPORATION -------------------------- (Registrant) By: /s/ Mark Hopkinson ------------------ Mark Hopkinson Chairman of the Board 17 -----END PRIVACY-ENHANCED MESSAGE-----