-----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, U7fQHTqNeX6QvxVQWvfRLnDGDzmorAmvF3hydtdXedm9LvQbx9Oy97i2/IIUefx1 5zF6tm5r7i2QX5ZH7Xq/5g== 0001005477-99-003357.txt : 19990805 0001005477-99-003357.hdr.sgml : 19990805 ACCESSION NUMBER: 0001005477-99-003357 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990804 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: 99677259 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 10-QSB 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 June 30, 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 4,858,142 (CLASS) (Shares Outstanding at July 30, 1999) - ----------------------------- ------------------------------------- PART I ALLIED DEVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS 2 Allied Devices Corporation Consolidated Balance Sheets ================================================================================ June 30, September 30, 1999 1998 - -------------------------------------------------------------------------------- (Unaudited) (Audited) Assets Current: Cash $ 108,292 $ 275,238 Accounts receivable 2,664,928 2,526,068 Inventories 9,458,933 8,903,220 Prepaid and other 179,943 366,057 Deferred income taxes 41,000 41,000 - -------------------------------------------------------------------------------- Total current 12,453,096 12,111,583 Property, plant and equipment, net 7,373,846 7,607,246 Goodwill 3,639,224 2,880,523 Other 460,446 374,267 - -------------------------------------------------------------------------------- Total assets $ 23,926,612 $ 22,973,619 ================================================================================ Liabilities and Stockholders' Equity Current: Accounts payable $ 1,154,950 $ 1,243,306 Taxes payable 109,458 -- Accrued expenses 171,323 286,900 Current portion of long term debt and capital lease obligations 1,423,605 986,625 - -------------------------------------------------------------------------------- Total current 2,859,336 2,516,831 Long term debt and capital lease obligations 11,382,668 11,031,687 Deferred taxes 309,000 309,000 - -------------------------------------------------------------------------------- Total liabilities 14,551,004 13,857,518 Stockholders' Equity: Capital stock 4,948 4,948 Paid-in capital 3,624,721 3,624,721 Retained earnings 5,861,296 5,486,432 - -------------------------------------------------------------------------------- Subtotal 9,490,965 9,116,101 - -------------------------------------------------------------------------------- Less treasury stock (115,357) -- - -------------------------------------------------------------------------------- Total stockholders' equity 9,375,608 9,116,101 - -------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 23,926,612 $ 22,973,619 ================================================================================ 3 Allied Devices Corporation Consolidated Statements of Income ================================================================================
Quarter Ended Nine Months Ended June 30, June 30, - ------------------------------------------------------------------ ------------------------- 1999 1998 1999 1998 ------------------------- ------------------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $ 5,688,164 $ 4,226,230 $16,689,098 $13,165,992 Cost of sales 3,795,103 2,896,717 11,222,657 8,795,877 - ---------------------------------------------------------------------------------------------- Gross profit 1,893,061 1,329,513 5,466,441 4,370,115 Selling, general and administrative expenses 1,414,583 881,905 4,120,901 2,989,821 - ---------------------------------------------------------------------------------------------- Income from operations 478,478 447,608 1,345,540 1,380,294 Interest expense (net) 249,443 64,119 758,898 150,061 - ---------------------------------------------------------------------------------------------- Income before provision for taxes on income 229,035 383,489 586,642 1,230,233 Taxes on income 82,682 139,844 211,778 445,344 - ---------------------------------------------------------------------------------------------- Net income $ 146,353 $ 243,645 $ 374,864 $ 784,889 ============================================================================================== Basic earnings per share $ 0.03 $ 0.05 $ 0.08 $ 0.17 ============================================================================================== Basic weighted average number of shares of common stock outstanding 4,903,532 4,669,525 4,903,532 4,634,850 ============================================================================================== Diluted earnings per share $ 0.03 $ 0.05 $ 0.08 $ 0.17 ============================================================================================== Diluted weighted average number of shares of common stock outstanding 4,995,471 4,741,435 4,995,471 4,697,550 ==============================================================================================
4 Allied Devices Corporation Consolidated Statements of Cash Flows ================================================================================
For the nine months ended June 30, 1999 1998 - ------------------------------------------------------------------------------------------ (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 374,864 $ 784,889 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,091,237 359,094 Gain on sale of equipment (2,300) (5,825) Decrease (increase) in: Accounts receivable (138,860) 99,569 Inventories (555,713) (404,511) Prepaid expenses and other current assets 186,114 (368,579) Other assets (110,271) (9,556) Increase (decrease) in: Accounts payable (88,356) (93,871) Taxes payable 109,458 (69,130) Accrued expenses (115,577) (103,460) - ------------------------------------------------------------------------------------------ Net cash provided by operating activities 750,596 188,620 - ------------------------------------------------------------------------------------------ Cash flows from investing activities: Capital expenditures (170,906) (381,920) Acquisition of Kay Pneumatics -- (850,000) Proceeds from sale of equipment 2,500 7,000 - ------------------------------------------------------------------------------------------ Net cash used in investing activities (168,406) (1,224,920) - ------------------------------------------------------------------------------------------ Cash flows from financing activities: Increase (decrease) in bank borrowings 150,000 (175,000) Increase in term debt -- 1,000,000 Proceeds from sale of common stock -- 71,000 Treasury stock acquired (115,357) -- Deferred financing costs (55,350) -- Payments of long-term debt and capital lease obligations (728,429) (181,471) - ------------------------------------------------------------------------------------------ Net cash (used in) provided by financing activities (749,136) 1,064,529 - ------------------------------------------------------------------------------------------ Net (decrease) increase in cash (166,946) 28,229 Cash, at beginning of period 275,238 162,094 - ------------------------------------------------------------------------------------------ Cash, end of period $ 108,292 $ 190,323 ==========================================================================================
5 Allied Devices Corporation Notes to Consolidated Financial Statements (Information for June 30, 1999 and 1998 is unaudited) ================================================================================ 1. Business Allied Devices Corporation and subsidiaries (the "Company") are engaged primarily in the manufacture of standard and custom precision mechanical components and a line of screw machine products and their distribution and sale throughout the United States. 2. Summary of (a) Basis of presentation/principles of consolidation Significant Accounting The accompanying consolidated financial statements Policies include the accounts of Allied Devices Corporation and its wholly-owned subsidiaries, Empire-Tyler Corporation and APPI, Inc., (collectively, the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements and related notes thereto as of June 30, 1999 and 1998, and for the three and nine 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 nine months ended June 30, 1999 are not necessarily indicative of the results that may be expected for the entire year ending September 30, 1999. 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, 1998. 6 Allied Devices Corporation Notes to Consolidated Financial Statements (Information for June 30, 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 and nine months ended June 30, 1999 and 1998, inventory was determined by applying a gross profit method, as opposed to the year ended September 30, 1998, when inventory was determined by a physical count. (c) Depreciation and amortization Property, plant and equipment is 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 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 June 30, 1999 and 1998 is unaudited) ================================================================================ (e) Earnings per share In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 Earnings per Share. Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. (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. 8 Allied Devices Corporation Notes to Consolidated Financial Statements (Information for June 30, 1999 and 1998 is unaudited) ================================================================================ 3. Inventories Inventories are summarized as follows: June 30, September 30, 1999 1998 ------------------------------------------------------- Raw materials $ 1,233,296 $ 1,056,504 Work-in-process 1,044,572 964,563 Finished goods 8,707,605 8,392,905 ------------------------------------------------------- 10,985,473 10,413,972 Less: adjustment to LIFO (1,526,540) (1,510,752) ------------------------------------------------------- $ 9,458,933 $ 8,903,220 ======================================================= 4. Stock Buy Back Pursuant to the Stock Buy Back Program authorized by the Program Board of Directors, the Company acquired, from time to time, an aggregate of 89,800 shares of the Company's common stock at a cumulative cost of $115,357 during the period from April through June, 1999. 9 Allied Devices Corporation Results of Operations: Nine months ended June 30, 1999 Compared with nine months ended June 30, 1998 ================================================================================ Item 2 - Management 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 nine months ended June 30, 1999, were $5,688,000 and $16,689,000, respectively, as compared to $4,226,000 and $13,166,000 in the comparable periods of the prior year, increases of approximately 34.6% for the quarter and 26.8% for the nine month period. Management attributes these increases principally to the two acquisitions completed in the second and fourth quarters of fiscal 1998, the operating results of which did not contribute materially to the volume of revenues or profit during the first nine months of fiscal 1998. Absent the contributions from these two acquisitions in fiscal 1999, revenues would have been lower by $ 2,232,000 during the nine-month period, a decline of 17.0% from prior year sales. Management attributes this slowdown to the impact of the fiscal and economic crisis in Asia on various industries serviced by the Company. Shipments to those industries slowed markedly in the fourth quarter of fiscal 1998 as capital goods manufacturers experienced order cancellations and revenue declines of as much as 40% in the semiconductor equipment and related 10 Allied Devices Corporation Results of Operations: Nine months ended June 30, 1999 Compared with nine months ended June 30, 1998 ================================================================================ sectors of the U.S. economy. This slowdown has continued through the first three quarters of fiscal 1999. Until July, 1999, there have been few indications of improvement in these sectors, but recent developments appear to portend a recovery in these markets as the fourth quarter of fiscal 1999 unfolds. Reported gross margins for the third quarter and nine months of fiscal 1999 were 33.28% and 32.75% of net sales, respectively, as compared to 31.45% and 33.19% for the comparable periods of the prior year. Materials expense (as a component of cost of goods sold) decreased to approximately 29.4% of net sales during the first nine months of fiscal 1999, from approximately 33.3% in the first nine months of fiscal 1998. Factory payroll and overhead during the nine months increased as a percentage of net sales, from 33.5% in fiscal 1998 to 37.8% in fiscal 1999. These changes reflect management's decision to manufacture more and purchase less during the downturn in shipping volume. Prices remained effectively unchanged during the nine-month period of fiscal 1999. Likewise, LIFO reserves remained effectively unchanged during the quarter and nine months of fiscal 1999. Selling, general and administrative expenses as a percentage of net sales were 24.86% and 24.69%, respectively, in the third quarter and nine months of fiscal 1999, as compared to 20.86% and 22.70% in the comparable periods of fiscal 1998. Comparing the nine month period of fiscal 1999 with the comparable period of fiscal 1998, marketing and selling expenses were cut as a percentage of sales by 2.73%, while payroll increased as a percentage of sales by 1.51% and other expenses increased as a percentage of sales by 3.21%. The increase in administrative payroll as a percentage of sales was principally the result of the sudden downturn in shipments; cuts in payroll were made a few months after the slowdown occurred, bringing payroll back into line with budgeted levels, but the net effect of that lag is a modest increase as a percentage of sales. Of the increase in administrative expenses (expressed as a percentage of sales), 1.16% is attributable to increases in non-cash expenses (depreciation and amortization), 0.82% resulted from increases in medical insurance premiums, 0.63% was related to professional fees associated with the acquisition and integration of Atlantic Precision Products into the Company's operations, and the 11 Allied Devices Corporation Results of Operations: Nine months ended June 30, 1999 Compared with nine months ended June 30, 1998 ================================================================================ balance was the result of temporary diseconomies related to the decline in sales volume and the integration of Atlantic Precision into the Company. Interest expense during the third quarter and nine months of fiscal 1999 was $249,000 and $759,000, respectively, as compared to $64,000 and $150,000 in the comparable periods of fiscal 1998. These higher levels of interest expense are principally the result of indebtedness incurred to acquire Atlantic Precision Products in the fourth quarter of fiscal 1998. Provision for income taxes is estimated at 36.1% of pre-tax income for the fiscal 1999 period, as a combination of federal and state taxes. LIQUIDITY AND FINANCIAL RESOURCES During the first nine months of fiscal 1999, the Company's financial condition remained sound. Operations provided cash of $750,000. Capital expenditures (net) used $168,000, financing activities used $749,000, and cash on hand provided $167,000. Working capital decreased by $1,000 to $9,594,000 during the nine months, principally as a result of the following changes in current assets and current liabilities: o Accounts receivable increased by $139,000 principally as the result of two factors: (1) the average collection period was about 43 days, down from 45 days at the end of fiscal 1998, lowering receivables $120,000, and (2) higher shipping rates increased receivables by $259,000. o Inventories increased by $556,000 during the nine month period. Turns on inventory averaged 1.6 times during this period, as compared to 1.4 times at the end of fiscal 1998. This change is attributable to increased shipping volumes during the third quarter. o Prepaid and other current assets decreased by $186,000 as the Company collected cash reimbursements due from its insurance company related to the losses in April 1998. o Current liabilities, exclusive of current portions of long-term debt and capital lease obligations, decreased $94,000 as accounts 12 Allied Devices Corporation Results of Operations: Nine months ended June 30, 1999 Compared with nine months ended June 30, 1998 ================================================================================ payable and accrued expenses decreased $203,000, and taxes payable increased by $109,000. o Current portions of long-term debt and capital lease obligations increased by $437,000. o Cash balances decreased by $ 167,000. Net capital expenditures for equipment in the nine month period were $168,000 ($596,000 including equipment acquired under capital leases) as management continued to add to capacity and to modernize and streamline its manufacturing processes. The Company is upgrading and expanding its computer and information management system, which will involve the expenditure of approximately $150,000 in fiscal 1999. Capital spending plans for the remaining quarter of fiscal 1999 includes additional expenditures of approximately $360,000 for productive equipment. 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 additional acquisition during fiscal 2000. Success in this part of the Company's growth plan will 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 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 13 Allied Devices Corporation Results of Operations: Nine months ended June 30, 1999 Compared with nine months ended June 30, 1998 ================================================================================ implement its plans and will do so in keeping with its judgment at that time as to how best to deploy such added capital. YEAR 2000 Management believes that all of the Company's computer systems, applications and operating software are Year 2000 compliant. The Company has also undertaken a review of the major vendors and third party suppliers critical to its operation to assess their Year 2000 readiness. Although the Company is not aware that any such company's systems are noncompliant in a way that will materially adversely affect the Company, there can be no assurances that the computer systems of other companies upon which the Company's systems rely will be timely compliant, or that such failure to comply by another company would not have a material adverse effect on the Company's business. The statements contained in this Year 2000 readiness disclosure are subject to certain protection under the Year 2000 Information and Readiness Disclosure Act. 14 Allied Devices Corporation Other Information: Nine months ended June 30, 1999 ================================================================================ PART II. OTHER INFORMATION Item 3. Submission of Matters to a Vote of Security Holders On April 13, 1999, the Company held its 1999 Annual Meeting of Stockholders. At the Annual Meeting, the following matters were submitted to a vote of stockholders. 1. The following five individuals, constituting the full Board of Directors of the Company, were nominated and elected to serve as directors of the Company. Mark Hopkinson FOR: 2,986,194 WITHHOLD AUTHORITY: 2,000 P. K. Bartow FOR: 2,986,194 WITHHOLD AUTHORITY: 2,000 Salvator Baldi FOR: 2,986,194 WITHHOLD AUTHORITY: 2,000 Christopher T. Linen FOR: 2,986,194 WITHHOLD AUTHORITY: 2,000 Michael Michaelson FOR: 2,986,194 WITHHOLD AUTHORITY: 2,000 15 Allied Devices Corporation Other Information: Nine months ended June 30, 1999 ================================================================================ 2. The holders of 2,988,194 shares of common stock voted in favor with respect to the ratification of the selection of BDO Seidman, LLP, independent certified public acountants, to serve as independent accountants of the Company for the fiscal year ending September 30, 1999. 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: July 30, 1999 ALLIED DEVICES CORPORATION (Registrant) By: //Mark Hopkinson ------------------------------------ Mark Hopkinson Chairman 16 EX-27 2 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 1999 10-Q. 0000869495 ALLIED DEVICES CORPORATION 3-MOS SEP-30-1999 APR-01-1999 JUN-30-1999 108,292 0 2,709,256 44,328 9,458,933 12,453,096 13,768,643 6,394,797 23,926,612 2,859,336 0 0 0 4,948 9,370,660 23,926,612 5,688,164 5,688,164 3,795,103 3,795,103 1,414,583 44,328 249,443 229,035 82,682 146,353 0 0 0 146,353 .03 .03
-----END PRIVACY-ENHANCED MESSAGE-----