UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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| þ | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 29, 2007
OR
| | | |
| o | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number 0-14275
EDAC Technologies Corporation
(Exact Name of Registrant as Specified in Its Charter)
| | | |
| Wisconsin | | 39-1515599 |
| | | |
(State or Other Jurisdiction of
Incorporation or Organization) | | (I.R.S. Employer
Identification No.) |
| | | |
| 1806 New Britain Avenue, Farmington, Connecticut | | 06032 |
| | | |
| (Address of Principal Executive Offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (860) 677-2603
Securities registered pursuant to Section 12(b) of the Act:
| | | |
| | | Name of Each Exchange |
| Title of Each Class | | on Which Registered |
| |
| N/A | | N/A |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0025 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| | | | | | | |
| Large accelerated filer o | | Accelerated filer o | | Non-accelerated filer o | | Smaller reporting company þ |
| | | (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
As of June 30, 2007, the aggregate market value of the registrant’s Common Stock (based upon the $9.28 closing price on that date on the NASDAQ Capital Market) held by nonaffiliates (excludes shares reported as beneficially owned by directors and officers — does not constitute an admission as to affiliate status) was approximately $37,626,298.
As of March 18, 2008, there were 4,666,970 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
| | | |
| | | Part of Form 10-K |
| | | Into Which Portions of |
| DOCUMENT | | Document are Incorporated |
| | | |
| Annual Report to Shareholders for the fiscal year ended December 29, 2007 | | Part II |
| | | |
| Proxy Statement relating to the 2008 Annual Meeting of Shareholders | | Part III |
All statements other than historical statements contained in this Annual Report on Form 10-K or deemed to be contained herein due to incorporation by reference to a different document constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Without limitation, these forward looking statements include statements regarding the Company’s business strategy and plans, statements about the adequacy of the Company’s working capital and other financial resources, statements about the Company’s bank agreements, statements about the Company’s backlog, statements about the Company’s actions to improve operating performance, and other statements herein that are not of a historical nature. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside of the Company’s control, that could cause actual results to differ materially from such statements. These include, but are not limited to, factors which could affect demand for the Company’s products and services such as general economic conditions and economic conditions in the aerospace industry and the other industries in which the Company competes; competition from the Company’s competitors; the Company’s ability to reduce costs; the Company’s ability to effectively use business-to-business tools on the Internet to improve operating results; and the adequacy of the Company’s revolving credit facility and other sources of capital. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
TABLE OF CONTENTS
PART I
Item 1.Business.
General
The accompanying consolidated financial statements include EDAC Technologies Corporation (“We”, “Us”, “EDAC” or the “Company”) and its wholly-owned subsidiaries, Gros-Ite Industries and Apex Machine Tool Company, Inc. We provide complete design, manufacture and service meeting the precision requirements of some of the most exacting customers in the world for tooling, fixtures, molds, jet engine components and machine spindles. The Company and its subsidiaries operate as one business segment.
Products
We currently offer design and manufacturing services for a wide range of industries in areas such as special tooling, equipment and gauges, and components used in the manufacture, assembly and inspection of jet engines. We also specialize in the design and repair of precision spindles. Spindles are an integral part of numerous machine tools which are found in virtually any type of manufacturing environment. We have introduced new spindle proprietary products for the woodworking and automotive markets, and in July 2003, we entered into an exclusive worldwide licensing agreement to develop, design, manufacture and market a patented hydrostatic spindle product line.
We maintain manufacturing facilities with computerized, numerically controlled machining centers, and grinding, welding, painting and assembly capabilities. Products manufactured by us include precision rings, and other components for jet engines, industrial spindles and specialized machinery designed by us or others and other assemblies requiring close tolerances.
Patents and Trademarks
We currently hold no patents or registered trademarks, tradenames or similar intellectual property. We believe that the nature of our business presently does not require the development of patentable products or registered tradenames or trademarks.
Marketing and Competition
The Company developed its high skill level by serving the aerospace industry for over 50 years. For the fiscal year ended December 29, 2007, sales to United Technologies Corporation amounted to approximately 46% of our net sales. We provide a range of components, tooling, fixtures and design services for this aerospace company. Although, we have expanded our commitment to serving the manufacturing needs of a broad base of industrial customers, the loss of this customer, or a significant decrease in the amount of business we do with this customer, could have a material adverse effect on our business.
The competition for design, manufacturing and service in precision machining and machine tools consists of independent firms, many of which are smaller than we are. We believe that this allows us to bring a broader spectrum of support to our customers who are consistently looking for ways to consolidate their vendor base. We also compete against the in-house manufacturing and service capabilities of our larger customers. We believe that the trend by large manufacturers to outsource activities that are outside their core competency is an opportunity for us.
The market for our products and precision machining capabilities continues to change with the development of more sophisticated use of business-to-business tools on the internet. We are actively
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involved in securing new business leads on the internet and have participated in internet auctions and research for quoting opportunities.
We believe that we have a distinct competitive advantage through our ability to provide high quality, high precision, quick turnaround support to customers from design to delivery. Our experience and reputation in the demanding aerospace business provides an extra level of expertise in meeting our customers’ requirements. We believe our commitment to continuous improvement and the latest technology will generate the productivity improvements required to respond to the increasing price pressure of the competitive marketplace in which we operate.
Backlog
Our backlog as of December 29, 2007, was approximately $30,100,000 compared to $28,800,000 as of December 30, 2006. The increase is primarily due to increased orders in our Precision Aerospace product line and our Apex Machine Tool product line, partially offset by decreased orders in our Gros-Ite Spindle product line. Backlog consists of accepted purchase orders that are cancelable by the customer without penalty, except for payment of costs incurred, and may involve delivery times that extend over periods as long as three years. We presently expect to complete approximately $21,400,000 of our December 29, 2007 backlog during the 2008 fiscal year. Total Company backlog increased from $30.1 million at December 29, 2007 to $51.0 million at February 23, 2008. Approximately $18 million of this increase was from a new aerospace customer with deliveries scheduled from 2009 through 2012.
We maintain a website with the addresswww.edactechnologies.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.
Employees
As of March 4, 2008, we had approximately 223 employees.
Item 1A.Risk factors.
Our business, operating results, financial condition and cash flows can be impacted by a number of factors, including but not limited to those set forth below, any one of which could cause our actual results to vary materially from recent results.
For a discussion of other matters which may affect our financial condition, results of operations or cash flows, see the further discussions in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2007 Annual Report.
We depend on revenues from a small number of significant customers. Any loss, cancellation, reduction or delay in purchases by these customers could harm our business.
Our top customer accounted for 46% of our net sales during fiscal 2007. Our success will depend on our continued ability to develop and manage relationships with this and other significant customers. Some of our customers could in the future shift some or all of their purchases from us to our competitors, or to other sources, or bring such business in-house. The loss one or more of our largest aerospace customers, a significant reduction or delay in sales to one or more of these customers, an inability to successfully develop relationships with new customers, or future price concessions we could make to retain customers could significantly reduce our sales and profitability.
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Our financial performance is dependent on the conditions of the aerospace industry
Shipments to our aerospace customers, which generated 74 percent of our revenues in 2007, are directly tied to the economic conditions in the commercial aviation and defense industries. The aviation industry is cyclical, and capital spending by airlines and aircraft manufacturers may be influenced by a wide variety of factors including current and predicted traffic levels, load factors, aircraft fuel pricing, labor issues, competition, the retirement of older aircraft, regulatory changes, terrorism and related safety concerns, general economic conditions, worldwide airline profits and backlog levels. Also, since a significant portion of the backlog for commercial customers is scheduled for delivery beyond 2008, changes in economic conditions may cause customers to request that firm orders be rescheduled or canceled. A reduction in capital spending in the aviation or defense industries could have a significant effect on the sales of our Precision Aerospace and Apex Machine Tool product lines, which could have an adverse effect on our financial performance or results of operations.
Additionally, during a downturn in the cyclical aviation industry, there is substantial pressure on suppliers like us from OEMs in the aerospace industry to reduce prices on new orders. We attempt to manage such downward pricing pressure, while trying to preserve our business relationships with our customers, by seeking to reduce our production costs through various measures, including purchasing raw materials and components at lower prices and implementing cost reduction strategies. If we were unable to offset OEM price reductions, our profitability and cash flows could be adversely affected.
Further, the consolidation and combination of defense or other manufacturers may eliminate customers from the industry and/or put downward pricing pressures on sales of component parts. For example, the consolidation that has occurred in the defense industry in recent years has significantly reduced the overall number of defense contractors in the industry. In addition, if one of our customers is acquired or merged with another entity, the new entity may discontinue using us as a supplier because of an existing business relationship of the acquiring company or because it may be more efficient to consolidate certain suppliers within the newly formed enterprise. The significance of the impact that such consolidation may have on our business is difficult to predict because we do not know when or if one or more of our customers will engage in merger or acquisition activity. However, if such activity involved our material customers it could materially impact our revenues and profitability.
The aerospace industry is highly competitive, and this competition could reduce our profitability or limit our ability to grow.
The aerospace industry is highly competitive. We compete with many U.S. and non-U.S. companies as well as the in-house manufacturing and service capabilities of large manufacturers, some of which may benefit from lower labor costs than ours. We compete primarily based on product qualifications, service and price. Certain competitors are larger than we are or are subsidiaries of larger entities and may be better able to manage costs than us or may have greater financial resources than we have. Due to the competitiveness in the aerospace industry, we may not be able to increase prices for our products to cover increases in our costs, or we may face pressure to reduce prices, which could materially reduce our revenues, gross margin and profitability. Competitive factors, including changes in market penetration, increased price competition and the introduction of new products and technology by existing and new competitors could result in a material reduction in our revenues and profitability.
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We may not realize all of the sales expected from our existing Precision Aerospace backlog.
There is an ongoing risk that aerospace orders may be cancelled or rescheduled due to fluctuations in our customers’ business needs and market conditions. We consider backlog to be firm customer orders for future delivery. Certain of our customers have the right to terminate, reduce or defer firm orders that we have in backlog. If a customer terminates or reduces firm orders, we are able to invoice for work performed, but our future sales would be adversely affected.
Also, the realization of sales from new and existing programs of all of our customers is inherently subject to a number of important risks and uncertainties, including whether our customers will execute the launch of product programs on time, or at all, and the number of units that our customers will actually produce.
We maintain a frozen defined benefit pension plan.
Declines in the stock market and prevailing interest rates could cause an increase in our pension benefit expenses in the future and result in reductions in our pension fund asset values and increases in our pension benefit obligations. These changes could cause a reduction in our net worth and may require us to make higher cash contributions to our pension plan in the future.
Any product liability claims in excess of insurance could adversely affect our financial condition.
There are potential product liability risks that are inherent in the design, manufacture and sale of certain of our products. While we believe that our liability insurance is adequate to protect us from these liabilities, our insurance may not cover all liabilities. Any material liability not covered by insurance could have a material adverse effect on our financial condition, results of operations and cash flows.
We depend heavily on our senior management and other key personnel, the loss of whom could materially affect our financial performance and prospects.
Our business is managed by a small number of key executive officers, including Dominick Pagano, Lou Melluzzo and Glenn Purple. Our future success will depend on, among other things, our ability to keep the services of these executives and to hire other highly qualified employees at all levels. We compete with other potential employers for employees, and we may not be successful in hiring and retaining executives and other skilled employees that we need. Our ability to successfully execute our business strategy, market and develop our products and serve our customers could be adversely affected by a shortage of available skilled employees or executives.
We face costs and risks associated with maintaining effective internal control over financial reporting.
Section 404 of the Sarbanes —Oxley Act of 2002 (“Section 404”) requires our management to include in our annual reports on Form 10-K, their report on the operating effectiveness of the Company’s internal controls over financial reporting. Carlin, Charron & Rosen, LLP, our independent registered public accounting firm, will be required to attest to the effectiveness of our internal control over financial reporting beginning with the year ended January 2, 2010. The process of maintaining and evaluating the effectiveness of our internal control over financial reporting requires us to incur expense and to devote resources on an on-going basis.
In the event that our management or our independent registered public accounting firm determine that our internal control over financial reporting is not effective as defined under Section 404, we could be
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subject to regulatory scrutiny and a loss of confidence among our current and potential shareholders and customers in our financial reporting and disclosure, which could adversely affect our business.
Item 1B.Unresolved Staff Comments.
None.
Item 2.Properties.
The following table describes the location and general character of our principal plants and other materially important physical properties. The properties at 1790 and 1798 New Britain Avenue were renovated in 1997 to improve production, increase capacity and improve the appearance of both the interior and exterior. A portion of the facility at 21 Spring Lane that had previously been used as warehouse space, was reconditioned in the first quarter of 2006 and is currently being used as manufacturing area.
| | | | | | | | | | | | | |
| | | Square | | Owned or | | Principal |
| Address | | Feet | | Leased | | Activity |
| |
1790 New Britain Ave.
Farmington, CT. 06032 | | | 47,000 | | | Owned (1) | | Manufacturing Design engineering services |
| |
1798 New Britain Ave.
Farmington, CT. 06032 | | | 20,800 | | | Owned (1) | | Design and manufacture of spindles |
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1806 New Britain Ave.
Farmington, CT. 06032 | | | 19,200 | | | Owned (1) | | Manufacturing Corporate offices |
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21 Spring Lane
Farmington, CT. 06032 | | | 44,000 | | | Owned (1) | | Manufacturing Warehouse |
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35 Holland Dr. (2)
Newington, CT 06111 | | | 14,400 | | | Owned | | Repair |
| | |
| (1) | | Property subject to mortgage securing certain corporate indebtedness. |
| |
| (2) | | Property acquired as part of the Company’s acquisition of certain assets of MTU Aero Engines North America, Inc.’s Repair Business Unit. |
Item 3.Legal Proceedings.
We are not a party to any material pending legal proceedings.
Item 4.Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 29, 2007.
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PART II
Item 5.Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases of Equity Securities.
Information in response to this item is incorporated herein by reference to “Market Information” on pages 4 through 5 of our 2007 Annual Report to Shareholders. The information required by Item 5 with respect to securities authorized for issuance under equity compensation plans is set forth in Part III, Item 12 of this Form 10-K
Item 6.Selected Financial Data.
Information in response to this item is incorporated herein by reference to “Selected Financial Information” on page 6 of our 2007 Annual Report to Shareholders.
Item 7.Management’s Discussion and Analysis of Financial Conditionand Results of Operations.
Information in response to this item is incorporated herein by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 7 through 13 of our 2007 Annual Report to Shareholders.
Item 7a.Quantitative and Qualitative Disclosures About Market Risk.
Not required under Regulation S-K for “smaller reporting companies”
Item 8.Financial Statements and Supplementary Data.
Information in response to this item is incorporated herein by reference to pages 14 through 32 of our 2007 Annual Report to Shareholders.
Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
None
Item 9A(T).Controls and Procedures.
Disclosure Controls and Procedures.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 29, 2007. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on this evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures are functioning in an effective manner in that they provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms and that it is accumulated and communicated to our management, including the
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Company’s Chief Executive Officer, and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.
There has been no change in the Company’s internal control over financial reporting during the Company’s fiscal year ended December 29, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Report of Management on Internal Control Over Financial Reporting.
The management of EDAC is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has assessed the effectiveness of EDAC’s internal control over financial reporting as of December 29, 2007. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control-Internal Framework. Management concluded that based on its assessment, EDAC maintained effective internal control over financial reporting of December 29, 2007.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Item 9B.Other Information.
None.
PART III
Item 10.Directors, Executive Officers and Corporate Governance.
Information in response to this item is incorporated herein by reference to “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for our 2008 Annual Meeting of Shareholders (“EDAC’s 2008 Proxy Statement”), which will be filed within 120 days after the end of our fiscal year ended December 29, 2007.
We have adopted a written code of ethics that applies to all of our employees, including but not limited to, our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our code of ethics is publicly available at our website at www.edactechnologies.com/investor/ and is also available without charge by writing to: Glenn L. Purple, Secretary, EDAC Technologies Corporation, 1806 New Britain Avenue, Farmington, Connecticut 06032.
Item 11.Executive Compensation.
Information in response to this item is incorporated herein by reference to “Executive Compensation” in EDAC’s 2008 Proxy Statement.
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Item 12.Security Ownership of Certain Beneficial Owners andManagement and Related Stockholder Matters.
Information in response to this item is incorporated herein by reference to “Security Ownership” in EDAC’s 2008 Proxy Statement.
The following table sets forth certain information regarding our equity compensation plans as of December 29, 2007.
EQUITY COMPENSATION PLAN INFORMATION
| | | | | | | | | | | | | |
| | | | | | | | | | | Number of | |
| | | | | | | | | | | securities | |
| | | Number of | | | | | | | remaining available | |
| | | securities to be | | | | | | | for future issuance | |
| | | issued upon | | | Weighted-average | | | under equity | |
| | | exercise of | | | exercise price of | | | compensation plans | |
| | | outstanding | | | outstanding | | | (excluding | |
| | | options, warrants | | | options, warrants | | | securities reflected | |
| | | and rights | | | and rights | | | in column (a)) | |
| Plan category | | (a) | | | (b) | | | (c) | |
| | | | | | | | | | | | | |
| Equity compensation plans approved by security holders | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Equity compensation plans not approved by security holders (1) | | | 604,834 | (2) | | $ | 4.05 | | | | 483,166 | (3) |
| | | | | | | | | | |
| Total | | | 604,834 | | | $ | 4.05 | | | | 483,166 | |
| | | | | | | | | | |
| | |
| (1) | | Consists of the following equity compensation plans: the 1996 Stock Option Plan (the “1996 Plan”), the 1998 Stock Option Plan (the “1998 Plan”), the 2000 Employee Stock Option Plan (the “2000 Plan”) and the 2000-B Employee Stock Option Plan (the “2000-B Plan”), (collectively, the “Plans”). Each of the Plans provide for the grant of stock options to any director, officer or employee of the Company or any of its subsidiaries. The 2000 Plan also provides for the grant of stock options to consultants of the Company and its subsidiaries. Each of the Plans is administered by the Compensation Committee of the Company’s Board of Directors. Options are generally granted for a term of ten years. The exercise price of options granted under each of the Plans must not be less than the fair market value of the Company’s common stock on the date of grant. The 1996 Plan, the 1998 Plan, the 2000 Plan and the 2000- B Plan each provide for the issuance of up to 329,500, 330,000, 300,000 and 500,000 shares of common stock, respectively, upon the exercise of options granted under such plans. |
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| | |
| (2) | | Consists of outstanding options to purchase 5,000 shares under the 1996 Plan, 16,000 shares under the 1998 Plan, 192,500 shares under the 2000 Plan and 391,334 shares under the 2000-B Plan. |
| |
| (3) | | Includes 236,500 shares issuable under the 1996 Plan, 183,400 shares issuable under the 1998 Plan, 45,500 shares issuable under the 2000 Plan and 17,766 shares issuable under the 2000-B Plan. |
Item 13.Certain Relationships and Related Transactions and Director Independence.
There are no related party transactions to report. The information required by Item 13 with respect to Director Independence is incorporated herein by reference to “Board and Committee Meetings and Related Matters” in EDAC’s 2008 Proxy Statement.
Item 14.Principal Accountant Fees and Services.
Information in response to this item is incorporated herein by reference to “Fees of Independent Auditors” in EDAC’s 2008 Proxy Statement.
PART IV
Item 15.Exhibits, Financial Statement Schedules.
(a)Documents filed as a part of this report:
1. Financial Statements.
The financial statements required to be filed by Item 8 hereof have been incorporated by reference to our 2007 Annual Report to Shareholders and consist of the following:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets—As of December 29, 2007 and December 30, 2006.
Consolidated Statements of Operations—Fiscal Years
Ended December 29, 2007 and December 30, 2006.
Consolidated Statements of Cash Flows-Fiscal Years
Ended December 29, 2007 and December 30, 2006.
Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income (Loss)-Fiscal Years Ended December 29, 2007 and December 30, 2006.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedule.
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The following financial statement schedule of EDAC is required to be filed by Item 8 hereof and paragraph (c) below:
Report of Independent Registered Public Accounting Firm on Financial Statement Schedule
Schedule II: Valuation and qualifying accounts
All other schedules for which provisions are made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
3. Exhibits
(b)Exhibits
See Exhibit Index included as the last part of this report on Form 10-K, which Index is incorporated herein by this reference.
(c)Financial Statement Schedules
Refer to Item 15(a) above for listing of financial statement schedules.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors of
EDAC Technologies Corporation
We have audited the consolidated financial statements of EDAC Technologies Corporation and subsidiaries (the “Company”) as of December 29, 2007 and December 30, 2006, and for the years then ended, and have issued our report thereon dated March 14, 2008, such consolidated financial statements and report are included in the Company’s annual report to shareholders for the fiscal year ended December 29, 2007 and are incorporated herein by reference. Our audit also included the financial statement schedule of the Company, listed in item 15. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audit. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements as of December 29, 2007 and December 30, 2006, and for the years then ended, taken as a whole, presents fairly, in all material respects, the information set forth therein.
| | | | | |
| | | |
| | /s/ Carlin, Charron & Rosen LLP | |
| | | |
| | | |
Glastonbury, Connecticut
March 14, 2008
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SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
EDAC TECHNOLOGIES CORPORATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | |
| COL. A | | COL. B | | COL. C | | COL. D | | COL. E |
| | | | | | | ADDITIONS | | | | |
| | | Balance at Beginning | | Charged to Costs | | Charged to Other | | Deductions | | Balance at End |
| DESCRIPTION | | of Year | | and Expenses | | Accounts-Describe | | Describe | | of Year |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| YEAR ENDED DECEMBER 29, 2007: | | | | | | | | | | | | | | | | | | | | | | | | |
| Reserves and allowances deducted from asset accounts: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for doubtful accounts receivable | | $ | 110,000 | | | $ | 121,111 | | | $ | 0 | | | | (1 | ) | | $ | 45,111 | | | $ | 186,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for excess and obsolete inventories | | | 645,567 | | | | 99,108 | | | | 0 | | | | (2 | ) | | | 65,952 | | | | 678,723 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| YEAR ENDED DECEMBER 30, 2006: | | | | | | | | | | | | | | | | | | | | | | | | |
| Reserves and allowances deducted from asset accounts: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for doubtful accounts receivable | | | 184,187 | | | | (24,421 | ) | | | 0 | | | | (1 | ) | | | 49,766 | | | | 110,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for excess and obsolete inventories | | | 680,742 | | | | 16,000 | | | | 0 | | | | (2 | ) | | | 51,175 | | | | 645,567 | |
| | |
| (1) | | Write-off of specific accounts receivable. |
| |
| (2) | | Disposition of inventory reserved against. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
| | | | | |
| | EDAC TECHNOLOGIES CORPORATION
| |
| | By: | /s/ Dominick A. Pagano | |
| | | Dominick A. Pagano | |
| | | President and Chief
Executive Officer | |
| | | | |
| | Date: | March 19, 2008 | |
| |
Each person whose signature appears below hereby appoints Dominick A. Pagano and Glenn L. Purple, and each of them individually, his true and lawful attorney-in-fact, with power to act with or without the other and with full power of substitution and resubstitution, in any and all capacities, to sign any and all amendments to the Form 10-K and file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | |
| Signatures | | Title | | Date |
| | | | | |
/s/ Dominick A. Pagano Dominick A. Pagano | | President, Chief Executive
Officer and Director
(Principal Executive Officer) | | March 19, 2008 |
| | | | | |
/s/ Glenn L. Purple Glenn L. Purple | | Chief Financial Officer, Vice
President-Finance and Secretary
(Principal Financial and Accounting
Officer) | | March 19, 2008 |
| | | | | |
/s/ Joseph P. Lebel Joseph P. Lebel | | Director | | March 19, 2008 |
14
| | | | | |
| Signatures | | Title | | Date |
| | | | | |
/s/ Stephen J. Raffay Stephen J. Raffay | | Director | | March 19, 2008 |
| | | | | |
/s/ Ross C. Towne Ross C. Towne | | Director | | March 19, 2008 |
| | | | | |
/s/ Daniel C. Tracy Daniel C. Tracy | | Director, Chairman of the Board | | March 19, 2008 |
15
EXHIBIT INDEX
| | | | | | | |
| Exhibit | | | | Sequential |
| Number | | | | Page Number |
| | | | | | | |
| 3.1 | | EDAC’s Amended and Restated Articles of Incorporation | | | (1 | ) |
| | | | | | | |
| 3.2 | | EDAC’s Amended and Restated By-Laws | | | (6 | ) |
| | | | | | | |
| 4.1 | | EDAC’s Amended and Restated Articles of Incorporation | | | (1 | ) |
| | | | | | | |
| 4.2 | | Sections of EDAC’s By-Laws | | | (6 | ) |
| | | | | | | |
| 10.1 | | Gros-Ite division Pension Plan | | | (1 | ) |
| | | | | | | |
| 10.2 | | EDAC Technologies Corporation 1996 Stock Option Plan | | | (2 | ) |
| | | | | | | |
| 10.3 | | EDAC Technologies Corporation 1998 Stock Option Plan | | | (3 | ) |
| | | | | | | |
| 10.4 | | EDAC Technologies Corporation 2000 Stock Option Plan | | | (4 | ) |
| | | | | | | |
| 10.5 | | EDAC Technologies Corporation 2000-B Stock Option Plan | | | (4 | ) |
| | | | | | | |
| 10.6 | | Loan Agreement dated February 5, 2001 by and between Farmington Savings Bank and EDAC. | | | (5 | ) |
| | | | | | | |
| 10.7 | | Commercial Mortgage Note dated February 5, 2001 by and between Farmington Savings Bank and EDAC. | | | (5 | ) |
| | | | | | | |
| 10.8 | | Open-End Mortgage Deed and Security Agreement dated February 5, 2001 by and between Farmington Savings Bank and EDAC. | | | (5 | ) |
| | | | | | | |
| 10.9 | | Environmental Indemnification Agreement dated February 5, 2001 by and between Farmington Savings Bank and EDAC. | | | (5 | ) |
| | | | | | | |
| 10.10 | | Form of Agreements regarding Indemnification between EDAC and each of its directors and executive officers. | | | (7 | ) |
| | | | | | | |
| 10.11 | | Note and Mortgage Modification Agreement by and between EDAC and Farmington Savings Bank dated October 15, 2003 | | | (8 | ) |
| | | | | | | |
| 10.12 | | Loan Agreement by and between EDAC, Apex and Banknorth N.A. dated March 5, 2004. | | | (9 | ) |
| | | | | | | |
| 10.13 | | Term Note by and between EDAC, Apex and Banknorth N.A dated March 5, 2004. | | | (9 | ) |
| | | | | | | |
| 10.14 | | Open-End Mortgage, Commercial Mortgage, Security Agreement and Assignment of Leases and Rents by and between Banknorth N.A and EDAC dated March 5, 2004. | | | (9 | ) |
16
| | | | | | | |
| Exhibit | | | | Sequential |
| Number | | | | Page Number |
| | | | | | | |
| 10.15 | | Open-End Mortgage, Commercial Mortgage, Security Agreement and Assignment of Leases and Rents by and between Apex and Banknorth N.A dated March 5, 2004. | | | (9 | ) |
| | | | | | | |
| 10.16 | | Hazardous Substance Certificate and Indemnification Agreement by and between EDAC, Apex and Banknorth N.A. dated March 5, 2004. | | | (9 | ) |
| | | | | | | |
| 10.17 | | Credit Agreement dated as of January 3, 2005 by and among EDAC, Apex Machine Tool Company, Inc., Gros-Ite Industries, Inc. and Banknorth, N.A. | | | (10 | ) |
| | | | | | | |
| 10.18 | | Security Agreement dated as of January 3, 2005 by and among EDAC, Apex Machine Tool Company, Inc., Gros-Ite Industries, Inc. and Banknorth, N.A. | | | (10 | ) |
| | | | | | | |
| 10.19 | | Open-End Mortgage Deed dated as of January 3, 2005 by and between EDAC and Banknorth, N.A. | | | (10 | ) |
| | | | | | | |
| 10.20 | | Open-End Mortgage Deed dated as of January 3, 2005 by and between Apex and Banknorth, N.A. | | | (10 | ) |
| | | | | | | |
| 10.21 | | Borrower’s Environmental Indemnification dated as of January 3, 2005 by and among EDAC, Gros-Ite, Apex and Banknorth, N.A. | | | (10 | ) |
| | | | | | | |
| 10.22 | | Revolving Credit Note dated as of January 3, 2005 by and among EDAC, Gros-Ite, Apex and Banknorth, N.A. | | | (10 | ) |
| | | | | | | |
| 10.23 | | Term Loan Note dated as of January 3, 2005 by and among EDAC, Gros-Ite, Apex and Banknorth, N.A. | | | (10 | ) |
| | | | | | | |
| 10.24 | | Equipment Loan Note dated as of January 3, 2005 by and among EDAC, Gros-Ite, Apex and Banknorth, N.A. | | | (10 | ) |
| | | | | | | |
| 10.25 | | Change in Terms Agreement dated August 23, 2005, changing the Revolving Credit note and the Credit Agreement by and between EDAC and Banknorth, N.A. | | | (11 | ) |
| | | | | | | |
| 10.26 | | Change in Terms Agreement dated August 23, 2005, changing the Equipment Loan Note and Credit Agreement by and between EDAC and Banknorth, N.A. | | | (11 | ) |
| | | | | | | |
| 10.27 | | Promissory Note dated as of December 28, 2005 by and among EDAC, Apex Machine Tool Company, Inc., Gros-Ite Industries, Inc. and Banknorth, N.A. | | | (12 | ) |
| | | | | | | |
| 10.28 | | Commercial Security Agreement dated as of December 28, 2005 by and among EDAC, Apex Machine Tool Company, Inc., Gros-Ite Industries, Inc. and TD Banknorth, N.A. | | | (12 | ) |
17
| | | | | | | |
| Exhibit | | | | Sequential |
| Number | | | | Page Number |
| | | | | | | |
| 10.29 | | Promissory Note dated as of April 4, 2006 by and among EDAC, Apex Machine Tool Company, Inc., Gros-Ite Industries, Inc. and TD Banknorth, N.A. | | | (13 | ) |
| | | | | | | |
| 10.30 | | Amended and Restated Employment Agreement dated as of February 12, 2007 between EDAC and Dominick Pagano | | | (14 | ) |
| | | | | | | |
| 10.31 | | Employment Agreement dated as of February 12, 2007 between EDAC and Luciano M. Melluzzo | | | (14 | ) |
| | | | | | | |
| 10.32 | | Employment Agreement dated as of February 12, 2007 between EDAC and Glenn L. Purple | | | (14 | ) |
| | | | | | | |
| 10.33 | | Change in Terms Agreement dated July 26, 2006, changing the Equipment Loan Note by and between EDAC and TD Banknorth, N.A. | | | (16 | ) |
| | | | | | | |
| 10.34 | | Term Note dated as of October 27, 2006 by and among EDAC, Apex Machine Tool Company, Inc., Gros-Ite Industries, Inc. and TD Banknorth, N.A. | | | (15 | ) |
| | | | | | | |
| 10.35 | | Term Note dated as of July 18, 2007 by and among EDAC, Apex Machine Tool Company, Inc. Gros-Ite Industries, Inc. and TD Banknorth, N.A. | | | (16 | ) |
| | | | | | | |
| 11 | | Earnings per share information has been incorporated by reference to EDAC’s 2007 Annual Report to Shareholders | | | | |
| | | | | | | |
| 13* | | EDAC’s 2007 Annual Report to Shareholders | | | | |
| | | | | | | |
| 14 | | EDAC Technologies Corporation Code of Ethics | | | (8 | ) |
| | | | | | | |
| 21* | | Subsidiaries | | | | |
| | | | | | | |
| 23.1* | | Consent of Carlin, Charron & Rosen, LLP | | | | |
| | | | | | | |
| 31.1* | | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. | | | | |
| | | | | | | |
| 31.2* | | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. | | | | |
| | | | | | | |
| 32.1* | | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. | | | | |
| | |
| (1) | | Exhibit incorporated by reference to the Company’s registration statement on Form S-1 dated August 6, 1985, |
18
| | |
| | | commission File No. 2-99491, Amendment No. 1. |
| |
| (2) | | Exhibit incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 1996. |
| |
| (3) | | Exhibit incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended January 2, 1999. |
| |
| (4) | | Exhibit incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 30, 2000. |
| |
| (5) | | Exhibit incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. |
| |
| (6) | | Exhibit incorporated by reference to the Company’s Current Report on Form 8-K dated February 19, 2002. |
| |
| (7) | | Exhibit incorporated by reference to the Company’s Quarterly Report on Form 10-Q dated June 30, 2002. |
| |
| (8) | | Exhibit incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended January 3, 2004. |
| |
| (9) | | Exhibit incorporated by reference to the Company’s Quarterly Report on Form 10-Q dated April 3, 2004. |
| |
| (10) | | Exhibit incorporated by reference to the Company’s Current Report on Form 8-K dated January 3, 2005. |
| |
| (11) | | Exhibit incorporated by reference to the Company’s Quarterly Report on Form 10-Q dated October 1, 2005. |
| |
| (12) | | Exhibit incorporated by reference to the Company’s Current Report on Form 8-K dated December 29, 2005. |
| |
| (13) | | Exhibit incorporated by reference to the Company’s Current Report on Form 8-K dated April 5, 2006. |
| |
| (14) | | Exhibit incorporated by reference to the Company’s Current Report on Form 8-K dated February 16, 2007. |
| |
| (15) | | Exhibit incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 30, 2006. |
| |
| (16) | | Exhibit incorporated by reference to the Company’s Quarterly Report on Form 10-Q dated September 29, 2007. |
| |
| * | | Filed herewith |
19
