-----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, RLbL0Y4SBqHXOmfN9ops/8lu3EI8SAWtGBnuQcurcFwuahfV+t3uorGVZLSoUcuK Qc0bijoauEqDBoFVQ4c6SQ== 0001047469-99-004097.txt : 19990210 0001047469-99-004097.hdr.sgml : 19990210 ACCESSION NUMBER: 0001047469-99-004097 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990209 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: 99526430 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 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, 1998. [ ] 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 4,947,942 (CLASS) (SHARES OUTSTANDING AT DECEMBER 28, 1998) - ------------------------------ ----------------------------------------- 1 PART I ALLIED DEVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS 2 ALLIED DEVICES CORPORATION CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 September 30, 1998 - ----------------------------------------------------------------------------------------------------------------------- (Unaudited) (Audited) ASSETS CURRENT: Cash $ 411,755 $ 275,238 Accounts receivable 2,290,991 2,526,068 Inventories 9,170,915 8,903,220 Prepaid and other 378,788 366,057 Deferred income taxes 41,000 41,000 ----------------------------------------------------------------------- ---------------------- ---------------------- TOTAL CURRENT 12,293,449 12,111,583 PROPERTY, PLANT AND EQUIPMENT, NET 7,598,611 7,607,246 GOODWILL 2,826,625 2,880,523 OTHER 373,935 374,267 ----------------------------------------------------------------------- ---------------------- ---------------------- TOTAL ASSETS $23,092,620 $22,973,619 ----------------------------------------------------------------------- ---------------------- ---------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT: Accounts payable $ 1,192,242 $ 1,243,306 Taxes payable 16,100 - Accrued expenses 245,035 286,900 Current portion of long term debt and capital lease obligations 1,155,964 986,625 ----------------------------------------------------------------------- ---------------------- ---------------------- TOTAL CURRENT 2,609,341 2,516,831 LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS 10,957,242 11,031,687 DEFERRED TAXES 309,000 309,000 ----------------------------------------------------------------------- ---------------------- ---------------------- TOTAL LIABILITIES 13,875,583 13,857,518 STOCKHOLDERS' EQUITY: Capital stock 4,948 4,948 Paid-in capital 3,624,721 3,624,721 Retained earnings 5,587,368 5,486,432 ------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 9,217,037 9,116,101 ------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,092,620 $22,973,619 -------------------------------------------------------------------------------------------------------------------
3 ALLIED DEVICES CORPORATION CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 1997 ------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) NET SALES $5,370,454 $4,382,769 COST OF SALES 3,593,270 2,961,775 ------------------------------------------------------------------------------------------------------------------- GROSS PROFIT 1,777,184 1,420,994 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,365,849 971,644 ------------------------------------------------------------------------------------------------------------------- INCOME FROM OPERATIONS 411,335 449,350 INTEREST EXPENSE (NET) 253,343 38,232 ------------------------------------------------------------------------------------------------------------------- INCOME BEFORE PROVISION FOR TAXES ON INCOME 157,992 411,118 TAXES ON INCOME 57,056 153,000 ------------------------------------------------------------------------------------------------------------------- NET INCOME $ 100,936 $ 258,118 ------------------------------------------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE $ 0.02 $ 0.06 ------------------------------------------------------------------------------------------------------------------- BASIC WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 4,947,942 4,609,942 ------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS PER SHARE $ 0.02 $ 0.06 ------------------------------------------------------------------------------------------------------------------- DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 4,965,738 4,681,448 ------------------------------------------------------------------------------------------------------------------- 4
ALLIED DEVICES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 1997 ----------------------------------------------------------------------- ---------------------- ---------------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 100,936 $ 258,118 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 358,159 108,892 Provision for bad debts - - Reserve for note receivable - - Gain on sale of equipment - (2,825) Decrease (increase) in: Accounts receivable 235,077 208,053 Inventories (267,695) 11,026 Prepaid expenses and other current assets (12,731) (127,571) Other assets (18,761) 3,305 Increase (decrease) in: Accounts payable (51,064) 121,867 Taxes payable 16,100 92,013 Accrued expenses (41,865) 24,933 ------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 318,156 697,811 ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (199,611) (146,121) Proceeds from sale of equipment - 3,000 ------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (199,611) (143,121) ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in bank borrowings 150,000 (325,000) Payments of long-term debt and capital lease obligations (132,028) (31,916) ------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 17,972 (356,916) ------------------------------------------------------------------------------------------------------------------- NET INCREASE IN CASH 136,517 197,774 CASH, AT BEGINNING OF PERIOD 275,238 162,094 ------------------------------------------------------------------------------------------------------------------- CASH, END OF PERIOD $ 411,755 $ 359,868 -------------------------------------------------------------------------------------------------------------------
5 ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR DECEMBER 31, 1998 AND 1997 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 components and a line of screw machine products throughout the United States. 2. SUMMARY OF (A) BASIS OF PRESENTATION/PRINCIPLES SIGNIFICANT OF CONSOLIDATION 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, 1998 and 1997, 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, 1998 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. (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, 1998 and 1997, 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. 6 ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR DECEMBER 31, 1998 AND 1997 IS UNAUDITED) (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 DECEMBER 31, 1998 AND 1997 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. All earnings per share amounts for all periods have been presented, and where necessary restated, to conform to Statement 128 requirements. (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 DECEMBER 31, 1998 AND 1997 IS UNAUDITED) 3. INVENTORIES Inventories are summarized as follows:
December 31, September 30, 1998 1998 ----------------------------------------- ------------------- ------------------ Raw materials $1,145,157 $1,056,504 Work-in-process 1,000,567 964,563 Finished goods 8,535,943 8,392,905 ----------------------------------------- ------------------- ------------------ 10,681,667 10,413,972 Less: adjustment to LIFO (1,510,752) (1,510,752) ----------------------------------------- ------------------- ------------------ $9,170,915 $8,903,220 ----------------------------------------- ------------------- ------------------
9 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1997 ITEM 2- RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1997: 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 1999 were $5,370,000 as compared to $4,383,000 in the first quarter of fiscal 1998. This increase of 22.5% was principally the result of two partially off-setting factors: (1) the two businesses acquired in fiscal 1998 (during the second and fourth quarters respectively) contributed approximately $2.1 million in sales volume to the first quarter of fiscal 1999; and (2) each of the Company's operating units (including the acquired businesses) was impacted by general economic conditions and experienced a decline in sales volume for the first quarter of fiscal 1999 when compared to the same period of the prior year, resulting in approximately $1.1 million less in shipments. Several capital goods industries have slowed down sharply as a result of economic and financial turmoil in offshore markets, principally East Asia, and many of the Company's important customers in these sectors have seen their volume shrink by as much as 40%. Management believes that its marketing efforts have served to mitigate the impact of these 10 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1997 conditions on the Company when compared to its competitors. Other sectors of the U.S. economy appear to have remained healthy, with the Company continuing to see growth in sales to customers in those sectors. The Company has intensified its attention to providing superior service to customers in those industries, in particular, the aerospace instrumentation, medical equipment, robotics and scientific instrumentation sectors. While it is not possible to forecast with any accuracy when a recovery may occur in the affected sectors, general consensus currently holds that it will be June, 1999, at the earliest before conditions improve materially. Reported gross margin for the first quarter of fiscal 1999 was 33.09% of net sales, as compared to 32.42% for the comparable period of fiscal 1998. The lower level of sales activity compared to historical levels (including the acquired businesses) permitted the Company to manufacture more and purchase less, resulting in the following changes from fiscal 1998: (1) net materials expense decreased as a percentage of sales, increasing gross margins by 6.75%; and (2) the Company shipped a lower volume of product on relatively fixed costs of factory operations, decreasing gross margins by 6.08%. The Company did not increase prices in the first quarter of fiscal 1999. LIFO reserves remained unchanged during the period. Selling, general and administrative expenses as a percentage of net sales were 25.4% in the first quarter of fiscal 1999, as compared to 22.2% in the comparable period of fiscal 1998. While actual expenditures in fiscal 1999 were lower than in fiscal 1998 (after allowing for the additions related to the two acquired businesses), such costs did not decrease as much as sales volume. The following factors account for these changes: (1) selling and shipping expenses and commissions decreased as a percentage of net sales by approximately 2.2% as management reduced spending on certain aspects of the Company's marketing program; (2) administrative payroll, benefits, and related expenses increased by $272,000, primarily arising from the acquisition completed in the final quarter of fiscal 1998, resulting in an increase of such expenses of 3.7% as a percentage of net sales; and (3) other administrative expenses (collectively) increased as a percentage of net sales by approximately 11 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1997 1.7%, again partly as a result of the acquisition completed in the final quarter of fiscal 1998. Management has set into motion a plan to bring administrative payroll and general and administrative expenses into line with historic norms during the second and third quarters of fiscal 1999. Interest expense of $253,000 in the first quarter of fiscal 1999 was $215,000 higher than in the comparable period of fiscal 1998, a result of additional debt assumed by the Company to finance acquisitions during the second and fourth quarters 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 quarter of fiscal 1999, the Company's financial condition remained healthy. Operations generated cash of $318,000, and financing activities generated cash of $18,000. Capital expenditures used $199,000 of this, with the balance increasing cash on hand by $137,000. Working capital increased by $89,000 to $9,684,000 during the quarter, principally as a result of the following changes in current assets and current liabilities: o Accounts receivable decreased by $235,000 as a result of shortening the average collection period from about 45 days at the end of fiscal 1998 to about 39 days at the end of the first quarter of fiscal 1999. o Inventories increased by $268,000 during the quarter. Turns on inventory were 1.6 times during the quarter, as compared to 1.4 times at the end of fiscal 1998. This change is attributable to the increase in shipping volume contributed by the acquisition completed in the fourth quarter of fiscal 1998. o Prepaid and other current assets increased by $12,000 as the Company recorded (and accrued for) certain annual administrative expenses. 12 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1997 o Current liabilities, exclusive of current portions of long-term debt and capital lease obligations, decreased $77,000 as accounts payable and accrued expenses decreased $93,000, and taxes payable increased by $16,000. o Current portions of long-term debt and capital lease obligations increased by $170,000. o Cash balances increased by $137,000. Net capital expenditures in the quarter were $199,000 ($276,000 including capital lease acquisitions) as management continued to add to capacity and to modernize and streamline its manufacturing processes. Management's capital spending plans for the remaining three quarters of fiscal 1999 include additional expenditures of approximately $350,000 for productive equipment and approximately $25,000 for expansion into additional space. Management expects to curtail portions of its capital spending plans until it sees evidence of improvement in its markets. When and if such plans are carried out, 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 1999. 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 13 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1997 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: FEBRUARY 5, 1999 ALLIED DEVICES CORPORATION - ---------------------- -------------------------- (REGISTRANT) BY: /s/ M. Hopkinson ----------------------- M. HOPKINSON CHAIRMAN EX-27 2 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 1998 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000869495 ALLIED DEVICES CORP 3-MOS SEP-30-1999 OCT-01-1998 DEC-31-1998 411,755 0 2,335,282 44,291 9,170,915 12,293,449 13,450,682 5,852,071 23,092,620 2,609,341 0 0 0 4,948 9,212,089 23,092,620 5,370,454 5,370,454 3,593,270 3,593,270 1,365,849 44,291 253,343 157,992 57,056 100,936 0 0 0 100,936 .02 .02
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