-----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, CXOJXR8BI/zm5usPSZHPt4Raser3h3KbPaKyDqSrvsoBxqLKhqqNjvMd7t5Ybt9z cgOtdUofyyaOMsjwjBkLBw== 0001047469-99-017060.txt : 19990430 0001047469-99-017060.hdr.sgml : 19990430 ACCESSION NUMBER: 0001047469-99-017060 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990429 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: 99604765 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 MARCH 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 4,928,442 (CLASS) (Shares Outstanding at April 29, 1999) - ----------------------------- -------------------------------------- PART I ALLIED DEVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS ALLIED DEVICES CORPORATION CONSOLIDATED BALANCE SHEETS
MARCH 31, September 30, 1999 1998 ----------- ----------- (UNAUDITED) (Audited) ASSETS CURRENT: Cash $ 188,484 $ 275,238 Accounts receivable 2,552,541 2,526,068 Inventories 9,354,721 8,903,220 Prepaid and other 208,148 366,057 Deferred income taxes 41,000 41,000 ----------- ----------- TOTAL CURRENT 12,344,894 12,111,583 PROPERTY, PLANT AND EQUIPMENT, NET 7,582,248 7,607,246 GOODWILL 2,771,898 2,880,523 OTHER 476,239 374,267 ----------- ----------- TOTAL ASSETS $23,175,279 $22,973,619 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT: Accounts payable $ 1,121,561 $ 1,243,306 Taxes payable 88,244 -- Accrued expenses 140,915 286,900 Current portion of long term debt and capital lease obligations 1,227,789 986,625 ----------- ----------- TOTAL CURRENT 2,578,509 2,516,831 LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS 10,943,158 11,031,687 DEFERRED TAXES 309,000 309,000 ----------- ----------- TOTAL LIABILITIES 13,830,667 13,857,518 STOCKHOLDERS' EQUITY: Capital stock 4,948 4,948 Paid-in capital 3,624,721 3,624,721 Retained earnings 5,714,943 5,486,432 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 9,334,612 9,116,101 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,175,279 $22,973,619 =========== ===========
ALLIED DEVICES CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Quarter Ended Six Months Ended March 31, March 31, -------------------------- --------------------------- 1999 1998 1999 1998 ---------- ---------- ----------- ---------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $5,630,480 $4,556,993 $11,000,934 $8,939,762 Cost of sales 3,834,284 2,937,385 7,427,554 5,899,160 ---------- ---------- ----------- ---------- Gross profit 1,796,196 1,619,608 3,573,380 3,040,602 Selling, general and administrative expenses 1,340,469 1,136,272 2,706,318 2,107,916 ---------- ---------- ----------- ---------- Income from operations 455,727 483,336 867,062 932,686 Interest expense (net) 256,112 47,710 509,455 85,942 ---------- ---------- ----------- ---------- Income before provision for taxes on income 199,615 435,626 357,607 846,744 Taxes on income 72,040 152,500 129,096 305,500 ---------- ---------- ----------- ---------- Net income $ 127,575 $ 283,126 $ 228,511 $ 541,244 ========== ========== =========== ========== Basic earnings per share $ 0.03 $ 0.06 $ 0.05 $ 0.12 ========== ========== =========== ========== Basic weighted average number of shares of common stock outstanding 4,947,942 4,472,141 4,947,942 4,472,141 ========== ========== =========== ========== Diluted earnings per share $ 0.03 $ 0.06 $ 0.05 $ 0.11 ========== ========== =========== ========== Diluted weighted average number of shares of common stock outstanding 4,961,504 4,751,739 4,961,504 4,751,739 ========== ========== =========== ==========
ALLIED DEVICES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 1998 - ----------------------------------------------------------------------- --------- ----------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 228,511 $ 541,244 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 738,683 236,289 Gain on sale of equipment -- (2,825) Decrease (increase) in: Accounts receivable (26,473) (55,596) Inventories (451,501) (234,233) Prepaid expenses and other current assets 157,909 (123,067) Other assets (97,976) 2,310 Increase (decrease) in: Accounts payable (121,745) (33,842) Taxes payable 88,244 (64,914) Accrued expenses (145,985) (23,408) --------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 369,667 241,958 --------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (126,118) (164,361) Acquisition of Kay Pneumatics -- (850,000) Proceeds from sale of equipment -- 3,000 --------- ----------- NET CASH USED IN INVESTING ACTIVITIES (126,118) (1,011,361) --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in bank borrowings 150,000 (75,000) Increase in term debt -- 1,000,000 Proceeds from sale of common stock -- 20,000 Deferred financing costs (55,350) -- Payments of long-term debt and capital lease obligations (424,953) (98,314) --------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (330,303) 846,686 --------- ----------- NET (DECREASE) INCREASE IN CASH (86,754) 77,283 CASH, AT BEGINNING OF PERIOD 275,238 162,094 --------- ----------- CASH, END OF PERIOD $ 188,484 $ 239,377 ========= ===========
ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR MARCH 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 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 March 31, 1999 and 1998, 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, 1999 are not necessarily indicative of the results that may be expected for the entire year ending September 30, 1999. ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR MARCH 31, 1999 AND 1998 IS UNAUDITED) 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 and six months ended March 31, 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 ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR MARCH 31, 1999 AND 1998 IS UNAUDITED) 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. (E) EARNINGS PER SHARE ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR MARCH 31, 1999 AND 1998 IS UNAUDITED) 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. ALLIED DEVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION FOR MARCH 31, 1999 AND 1998 IS UNAUDITED) 3. INVENTORIES Inventories are summarized as follows:
MARCH 31, September 30, 1999 1998 ----------- ----------- Raw materials $ 1,218,296 $ 1,056,504 Work-in-process 1,034,572 964,563 Finished goods 8,612,605 8,392,905 ----------- ----------- 10,865,473 10,413,972 Less: adjustment to LIFO (1,510,752) (1,510,752) ----------- ----------- $ 9,354,721 $ 8,903,220 =========== ===========
4. SUBSEQUENT EVENTS Pursuant to the announcement by the Board of Directors relating to the Stock Buy Back Program, the Company acquired 19,500 shares at a cost of $ 25,000, during the month of April 1999. ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 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 six months ended March 31, 1999, were $5,630,000 and $11,001,000, respectively, as compared to $4,557,000 and $8,940,000 in the comparable periods of the prior ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1998 year, increases of approximately 23.5% and 23.0%, respectively. Management attributes these increases principally to the following factors: o two businesses acquired in fiscal 1998 (during the second and fourth quarters, respectively) increased sales volume in the second quarter and first six months of fiscal 1999 approximately $2.1 million and $4.2 million, respectively; and o all of the Company's operating units (including the acquired businesses) were impacted in varying degrees by general economic conditions and experienced a decline in sales volume for the second quarter and first six months of fiscal 1999 when compared to the same periods of the prior year, resulting in approximately $1.0 million and $2.2 million less in shipments, respectively. Many capital goods industries slowed down sharply in mid-1998 as a result of economic and financial turmoil in offshore markets, principally East Asia, and many of the Company's most prominent customers in these sectors saw their volume of shipments shrink by as much as 40%. Management believes that more intense marketing efforts have served to mitigate the impact of these conditions on the Company when compared to its competitors. Some sectors of the U.S. economy appear to have remained healthy through this general slowdown, with the Company continuing to see growth in sales to customers in those sectors. The Company has sharpened its focus on providing superior ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1998 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 recovery will come to the affected sectors, it is management's opinion that signs of a recovery are evident now. Nonetheless, general consensus currently holds that it will be June, 1999, at the earliest before conditions improve materially. Reported gross margin for the second quarter and six months of fiscal 1999 were 31.90% and 32.48% of net sales, respectively, as compared to 35.54% and 34.01% for the comparable periods of fiscal 1998. Lower levels of sales activity (when compared to historical levels) impacted all operating units of the Company, including the newly acquired businesses. This served as an opportunity 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 3.80% and 5.55%, respectively; and (2) the Company shipped a lower volume of product on relatively fixed costs of factory operations, decreasing gross margins by 7.44% and 7.08%, respectively. Towards the end of the second quarter of fiscal 1999, management instituted certain cost cutting measures to reduce factory operating costs, including a lay-off. It is management's ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1998 expectation that these measures will be reflected in improved gross margins during the second half of fiscal 1999. The Company did not increase prices in the second quarter of fiscal 1999. LIFO reserves remained unchanged during the period. Selling, general and administrative expenses as a percentage of net sales were 23.8% and 24.6% in the second quarter and six months of fiscal 1999, respectively, as compared to 24.9% and 23.6% in the comparable periods 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 4.3% and 3.3% (respectively) as management reduced spending on certain aspects of the Company's marketing program; (2) administrative payroll, benefits, and related expenses increased by $285,000 and $557,000 (respectively), primarily arising from the business acquired in the final quarter of fiscal 1998, resulting in an increase of such expenses of 3.1% and 3.4% (respectively) as a percentage of net sales; and (3) other administrative expenses (collectively) increased as a percentage of net sales by approximately 0.1% and 0.9%(respectively), primarily as a result of non-cash charges related to the acquisition completed in the final quarter of fiscal 1998. Towards the end of the second quarter of fiscal 1999, management implemented a ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1998 plan to reduce administrative payroll and administrative expenses, expecting the results to be evident in the Company's financial results in the second half of fiscal 1999. Interest expense during the second quarter and six months of fiscal 1999 was $256,000 and $509,000, respectively, as compared to $48,000 and $86,000 in the comparable periods of fiscal 1998. These increases are principally the result of the 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 six months of fiscal 1999, the Company's financial condition remained healthy. Operations generated cash of $369,000. Financing activities used $330,000, and capital expenditures used $126,000, with the balance decreasing cash on hand by $87,000. Working capital increased by $172,000 to $9,766,000 during the quarter, principally as a result of the following changes in current assets and current liabilities: ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1998 o Accounts receivable increased by $26,000 as the combined effect of (1) shortening the average collection period from about 45 days at the end of fiscal 1998 to about 42 days at the end of the second quarter of fiscal 1999, lowering receivables $160,000, and (2) improving shipping rates from the end of fiscal 1998 to the second quarter of fiscal 1999, increasing receivables by $186,000. o Inventories increased by $452,000 during the six month period. Turns on inventory were 1.6 times during the six months of fiscal 1999, as compared to 1.4 times at the end of fiscal 1998. This change is attributable to increased shipping volumes. o Prepaid and other current assets decreased by $158,000 as the Company collected cash reimbursements due from its insurance company related to the fire in April, 1998. o Current liabilities, exclusive of current portions of long-term debt and capital lease obligations, decreased $180,000 as accounts payable and accrued expenses decreased $268,000, and taxes payable increased by $88,000. o Current portions of long-term debt and capital lease obligations increased by $241,000. o Cash balances decreased by $ 87,000. Net capital expenditures in the six month period were $126,000 ($554,000 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 six months of fiscal 1999 include additional expenditures of ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1998 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 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 ALLIED DEVICES CORPORATION RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1998 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. 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. 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: APRIL 29, 1999 ALLIED DEVICES CORPORATION - -------------------- -------------------------- (Registrant) By: /s/ M. Hopkinson ---------------------------- M. Hopkinson Chairman EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 1999 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000869495 ALLIED DEVICES CORP 3-MOS SEP-30-1999 JAN-01-1999 MAR-31-1999 188,484 0 2,595,525 42,984 9,354,721 12,344,894 13,727,855 6,145,607 23,175,279 2,578,509 0 0 0 4,948 9,329,664 23,175,279 5,630,480 5,630,480 3,834,284 3,834,284 1,340,469 42,984 256,112 199,615 72,040 127,575 0 0 0 127,575 .03 .03
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