UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended October 31, 2001
OR
[ ] 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 0-14812
EDISON CONTROL CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2716367
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
777 Maritime Drive
PO Box 308
Port Washington, WI 53074-0308
(Address of principal executive offices)
(Zip Code)
(262) 268-6800
(Registrant's telephone number, including area code)
(Former name, former address and former
fiscal year, if changed since last report)
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 X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 par value: 2,365,223 as of October 31, 2001
EDISON CONTROL CORPORATION AND SUBSIDIARIES
INDEX
Form 10-Q
Page Number
-----------
Part I Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets Pages 2-3
October 31, 2001 and
January 31, 2001 (Unaudited)
Condensed Consolidated Statements of Income Pages 4-5
and Comprehensive Income
Three and Nine Months Ended October 31,
2001 and 2000 (Unaudited)
Condensed Consolidated Statements of Cash Flows Pages 6-7
Nine Months Ended October 31,
2001 and 2000 (Unaudited)
Notes to Condensed Consolidated Financial Pages 8-11
Statements (Unaudited)
Item 2 Management's Discussion and Analysis of Pages 11-13
Operations and Financial Condition
Item 3 Quantitative and Qualitative Disclosures Pages 13-14
About Market Risk
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K Page 14 and
Exhibit Index
PART I.
Item 1
Financial Statements
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
October 31, 2001 and January 31, 2001
(Unaudited)
October 31, January 31,
2001 2001
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 574,426 $ 305,337
Investments 0 95,000
Trading securities 39,897 420,797
Trade accounts receivable, net 4,784,753 4,233,754
Receivable from affiliate 87,372 136,657
Inventories, net 6,282,507 6,545,187
Prepaid expenses and other assets 221,701 261,025
Refundable income taxes 0 62,150
Note receivable 0 164,155
Deferred income taxes 195,000 240,000
----------- -----------
Total current assets 12,185,656 12,464,062
Investment in and advances to affiliate 602,333 524,919
Deferred income taxes 565,000 565,000
Property, plant and equipment, net 6,826,429 7,359,953
Goodwill, net 8,051,606 8,225,801
Finance costs, net 0 42,498
----------- -----------
TOTAL ASSETS $28,231,024 $29,182,233
=========== ===========
(Continued)
See Accompanying Notes.
2
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
October 31, 2001 and January 31, 2001
(Unaudited)
(Continued)
October 31, January 31,
2001 2001
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 881,577 $ 1,056,501
Accrued compensation 1,002,275 984,011
Taxes other than income taxes 16,308 23,061
Other accrued expenses 572,169 451,737
Income taxes payable 32,674 0
Deferred compensation 666,752 754,250
Current maturities on long-term debt 159,141 159,141
----------- -----------
Total current liabilities 3,330,896 3,428,701
Long-term debt, less current maturities 2,263,396 5,420,217
----------- -----------
Total Liabilities 5,594,292 8,848,918
Shareholders' Equity:
Preferred stock, $.01 par value:
1,000,000 shares authorized, none issued 0 0
Common stock, $.01 par value: 20,000,000
shares authorized, 2,365,223 and 2,351,308
shares issued and outstanding, respectively 23,652 23,513
Additional paid-in capital 10,444,217 10,344,868
Retained earnings 12,361,992 10,120,873
Accumulated other comprehensive loss (193,129) (155,939)
----------- -----------
Total Shareholders' Equity 22,636,732 20,333,315
----------- -----------
TOTAL LIABILITIES AND SHARHOLDERS' EQUITY $28,231,024 $29,182,233
=========== ===========
See Accompanying Notes.
3
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND NINE MONTHS ENDED OCTOBER 31, 2001 AND 2000
(Unaudited)
Three months ended Nine months ended
October 31, October 31,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
(In thousands except for per share data)
NET SALES $6,882,955 $5,907,515 $20,674,238 $19,565,588
COST OF GOODS SOLD 4,271,563 3,799,517 12,903,155 12,177,916
---------- ---------- ----------- -----------
GROSS PROFIT 2,611,392 2,107,998 7,771,083 7,387,672
OTHER OPERATING EXPENSES:
Selling, engineering and
administrative expenses 1,151,800 1,075,278 3,628,931 3,628,562
Amortization 98,463 59,103 216,693 177,309
---------- ---------- ----------- -----------
Total other operating
expenses 1,250,263 1,134,381 3,845,624 3,805,871
---------- ---------- ----------- -----------
OPERATING INCOME 1,361,129 973,617 3,925,459 3,581,801
OTHER (INCOME) EXPENSE:
Interest expense 26,828 120,037 158,131 438,055
Realized losses (gains)
on trading securities 104,925 (23,379) 169,919 (145,750)
Unrealized (gains) losses
on trading securities (128,546) 170,149 (25,545) 296,624
Miscellaneous income (12,504) (12,355) (77,125) (68,449)
---------- ---------- ----------- -----------
Total other (income)
expense (9,297) 254,452 225,380 520,840
---------- ---------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 1,370,426 719,165 3,700,079 3,061,321
PROVISION FOR INCOME TAXES 546,480 288,020 1,458,960 1,213,731
---------- ---------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS 823,946 431,145 2,241,119 1,847,590
(Continued)
See Accompanying Notes
4
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND NINE MONTHS ENDED OCTOBER 31, 2001 AND 2000
(Unaudited)
(Continued)
Three months ended Nine months ended
October 31, October 31,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
(In thousands except for per share data)
DISCONTINUED OPERATIONS (Note 4):
Loss from operations of
discontinued Gilco division
net of income taxes (credit)
of $0, $(46,000), $0 and
$(60,000), respectively $ 0 $ (71,141) $ 0 $ (92,698)
Loss on disposal of Gilco
division, net of income taxes
(credit) of $0, $(7,000), $0
and $(7,000), respectively 0 (12,379) 0 (12,379)
---------- ---------- ----------- -----------
NET INCOME 823,946 347,625 2,241,119 1,742,513
OTHER COMPREHENSIVE INCOME
(LOSS) -
Foreign currency translation
adjustment 21,393 (34,713) (37,190) (206,637)
---------- ---------- ----------- -----------
COMPREHENSIVE INCOME $ 845,339 $ 312,912 $ 2,203,929 $ 1,538,876
========== ========== =========== ===========
Income (loss) per share:
Basic:
Income from
continuing operations $ .35 $ .18 $ .95 $ .79
Loss from
discontinued operations .00 (.03) .00 (.05)
Loss on disposal of
discontinued operations .00 .00 .00 .00
---------- ---------- ----------- -----------
NET INCOME $ .35 $ .15 $ .95 $ .95
========== ========== =========== ===========
Diluted:
Income from
continuing operations $ .30 $ .15 $ .81 $ .63
Loss from
discontinued operations .00 (.03) .00 (.03)
Loss on disposal of
discontinued operations .00 .00 .00 .00
---------- ---------- ----------- -----------
NET INCOME $ .30 $ .12 $ .81 $ .60
========== ========== =========== ===========
See Accompanying Notes.
5
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 31, 2001 AND 2000
(Unaudited)
2001 2000
----------- -----------
Net income $ 2,241,119 $ 1,742,513
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 914,163 848,739
Provision for doubtful accounts 164,830 116,472
Loss on sale of Gilco division 0 19,378
Realized loss (gain) on sales of trading
securities 169,919 (145,750)
Unrealized (gain) loss on trading securities (25,545) 296,624
Purchases of trading securities 0 (80,782)
Proceeds from the sale of trading securities 236,526 585,491
Equity in earnings of affiliate (77,414) (45,000)
Changes in assets and liabilities:
Accounts receivable (715,829) 158,613
Receivable from affiliate 49,285 (93,906)
Inventories 262,680 221,517
Prepaid expenses and other assets 39,324 45,652
Trade accounts payable (174,924) 108,372
Accrued compensation 18,264 43,968
Taxes other than income taxes (6,753) (18,476)
Other accrued expenses 120,432 (50,281)
Deferred income taxes 10,876 (115,000)
Income taxes payable 110,938 (264,167)
----------- -----------
Total adjustments 1,096,772 1,631,464
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,337,891 3,373,977
----------- -----------
Cash flows from investing activities:
Additions to plant and equipment (163,946) (215,042)
Proceeds from sale of Gilco division 0 400,000
Payments received from note receivable 164,155 0
Maturity of certificate of deposit 95,000 0
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 95,209 184,958
----------- -----------
(Continued)
See Accompanying Notes.
6
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 31, 2001 AND 2000
(Unaudited)
(Continued)
2001 2000
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt $ 0 $ 600,000
Principal payments on long-term debt (3,156,821) (3,382,295)
Stock options exercised 30,000 0
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (3,126,821) (3,082,295)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (37,190) (203,637)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 269,089 273,003
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 305,337 539,586
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 574,426 $ 812,589
=========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for income taxes $ 1,337,146 $ 1,525,898
Cash paid during the period for interest 172,790 441,101
Supplemental disclosure of non-cash
investing activities:
Note receivable received from sale of
Gilco division $ 164,155
See Accompanying Notes.
7
EDISON CONTROL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
- -------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these
statements do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal, recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three- and nine-month
periods ending October 31, 2001 are not necessarily indicative of the results
that may be expected for other interim periods or the year ending January 31,
2002. For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
January 31, 2001.
Note 2 - Nature of Business and Accounting Policies
- ----------------------------------------------------
Principles of Consolidation - The condensed consolidated financial statements
include the accounts of Edison Control Corporation ("Edison") and subsidiaries,
all of which subsidiaries are wholly owned by Edison (collectively, the
"Company"). All material intercompany accounts and transactions have been
eliminated in consolidation.
Trading Securities - Debt and equity securities purchased and held principally
for the purpose of sale in the near term are classified as "trading securities"
and reported at fair value with unrealized gains and losses included in
earnings. The cost of individual securities sold is based on the first-in,
first-out method.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Translation of Foreign Currencies - Assets and liabilities of foreign operations
are translated into United States dollars at current exchange rates. Income and
expense accounts are translated into United States dollars at average rates of
exchange prevailing during the period. Adjustments resulting from the
translation of financial statements of the foreign operations are included as
foreign currency translation adjustments in other comprehensive income.
8
Income From Continuing Operations Per Share - Reconciliation of the numerator
and denominator of the basic and diluted income from continuing operations per
share computations for the three and nine-month periods ended October 31, 2001
and 2000 are summarized below.
Three months ended Nine months ended
October 31, October 31,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Basic:
Income from continuing
operations (numerator) $ 823,946 $ 431,145 $ 2,241,119 $ 1,847,590
Weighted average shares
outstanding (denominator) 2,365,223 2,351,308 2,364,527 2,351,308
Income from continuing
operations per share-basic $ .35 $ .18 $ .95 $ .79
Diluted:
Income from continuing
operations (numerator) $ 823,946 $ 431,145 $ 2,241,119 $ 1,847,590
Weighted average shares
outstanding 2,365,223 2,351,308 2,364,527 2,351,308
Effect of dilutive securities:
Stock options 58,358 145,440 68,974 174,225
Stock warrants 313,650 373,384 321,650 391,349
Weighted average shares
outstanding (denominator) 2,737,231 2,870,132 2,755,151 2,916,882
Income from continuing
operations per share-diluted $ .30 $ .15 $ .81 $ .63
New Accounting Standards - In May 2000, the Emerging Issues Task Force ("EITF")
reached consensus on Issue No. 00-10, "Accounting for Shipping and Handling Fees
and Costs." EITF 00-10 provides guidance on the financial reporting of shipping
and handling fees and costs in the condensed consolidated statements of income
and comprehensive income. Effective February 1, 2000, the Company adopted EITF
00-10 and, as a result, amounts billed to a customer in a sale transaction
related to shipping costs are reported as net sales and the related costs
incurred for shipping are reported as cost of goods sold. The Company previously
reported shipping costs as a reduction of net sales. Prior period condensed
consolidated financial statements have been reclassified to conform to the new
requirements.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 is effective for the Company beginning February 1, 2002,
and applies to goodwill and other intangible assets recognized in the Company's
balance sheet as of that date, regardless of when those assets were initially
recognized. The Company is
9
currently evaluating the provisions of SFAS No. 142 and has not determined the
impact that SFAS No. 142 will have on its consolidated financial statements.
Reclassifications - Certain amounts previously reported have been reclassified
to conform with the current presentation.
Note 3 - Acquisitions
- ---------------------
On November 1, 2001, the Company purchased the remaining 50% of the outstanding
common stock of South Houston Hose Company, Inc. ("South Houston Hose") from the
seller for $800,000, which consisted of a cash payment of $300,000 and a note
payable in the principal amount of $500,000. As of October 31, 2001, the Company
owned 50% of the outstanding common stock of South Houston Hose and accounted
for the investment by the equity method. South Houston Hose is a distributor of
concrete pumping systems and accessories and industrial hose and fittings. Net
sales of South Houston Hose for the nine-month period ended October 31, 2001
were approximately $2,975,000.
Note 4 - Discontinued Operations
- --------------------------------
On September 29, 2000, the Company sold the inventory, tooling and intangible
assets of its Gilco division to a third party for $400,000 cash and a
non-interest bearing note receivable for $164,155 which was collected in March,
2001. Gilco had supplied portable concrete and mortar/plaster mixers to various
customers. The sale resulted in a loss of $12,379, net of income taxes.
The results of operations of the Gilco division have been presented as
discontinued operations. Net sales of the Gilco division for the three and
nine-month periods ended October 31, 2000 were $253,580 and $1,227,760,
respectively.
Note 5 - Segment Information
- ----------------------------
The Company's operating segments are organized based on the nature of products
and services provided. The Company is currently comprised of two operating
segments. Construction Forms ("ConForms") is a leading manufacturer and
distributor of systems of pipes, couplings and hoses and other equipment used
for the pumping of concrete. ConForms manufactures a wide variety of finished
products which are used to create appropriate configurations of systems for
various concrete pumps. Ultra Tech manufactures abrasion resistant piping
systems for use in industries such as mining, pulp and paper, power and waste
treatment. Segment information for the three and nine-month periods ended
October 31, 2001 and 2000 follows:
Three Months Ended October 31,
------------------------------
2001 2000
------------------------------ ------------------------------
Operating Operating
Net Income Net Income
Sales (Loss) Sales (Loss)
------------ ------------- ------------ -------------
ConForms $ 5,433,977 $ 1,184,409 $ 5,280,748 $ 1,035,352
Ultra Tech 1,448,978 251,608 626,767 33,073
Edison (74,888) (94,808)
------------ ------------ ------------ ------------
Total $ 6,882,955 $ 1,361,129 $ 5,907,515 $ 973,617
============ ============ ============ ============
10
Nine Months Ended October 31,
-----------------------------
2001 2000
------------------------------ ------------------------------
Operating Operating
Net Income Net Income
Sales (Loss) Sales (Loss)
------------ ------------- ------------ -------------
ConForms $ 17,504,074 $ 3,753,350 $ 17,705,408 $ 4,065,395
Ultra Tech 3,170,164 474,660 1,860,180 28,282
Edison (302,551) (511,876)
------------ ------------ ------------ ------------
Total $ 20,674,238 $ 3,925,459 $ 19,565,588 $ 3,581,801
============ ============ ============ ============
Note 6 - Inventories
Inventories consisted of the following:
October 31, January 31,
2001 2001
----------- -----------
Raw Materials $ 3,119,347 $ 3,455,928
Work-in-process 1,189,192 1,271,956
Finished Goods 2,202,968 2,001,303
----------- -----------
6,511,507 6,729,187
Less-reserve to reduce carrying
value to LIFO cost (229,000) (184,000)
------------ ------------
Net inventories $ 6,282,507 $ 6,545,187
============ ============
Item 2.
Management's Discussion and Analysis of Operations and Financial Condition
- --------------------------------------------------------------------------
Certain matters discussed in this Quarterly Report on Form 10-Q are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes",
"anticipates", "expects", or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties, including, but not limited to, new product
advancements by competition, significant changes in industry technology,
economic or political conditions in the countries in which the Company does
business, the continued availability of sources of supply, the availability and
consummation of favorable acquisition opportunities, increasing competitive
pressures on pricing and other contract terms, economic factors affecting the
Company's customers and stock price variations affecting the Company's
securities trading portfolio. These factors could cause actual results to differ
materially from those anticipated as of the date of this report. Shareholders,
potential investors and other readers are urged to consider these factors in
evaluating the forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements
included herein are only made as of the date of this report and the Company
undertakes no obligation to publicly update such forward-looking statements to
reflect subsequent events or circumstances.
11
Net sales for the three months ended October 31, 2001 increased $975,440 (16.5%)
to $6,882,955 compared with net sales for the same period of the prior year. For
the first nine months of this fiscal year, net sales increased $1,108,650 (5.7%)
to $20,674,238. The increase was due largely to increases in Ultra Tech project
sales for the three months ended October 31, 2001. Ultra Tech's sales volume
will continue to fluctuate based on its ability to attain large project sales in
the industries it serves.
Gross margin for the three months ended October 31, 2001 increased to 37.9% from
35.7%. The higher margins were due largely to improved coverage of fixed
overhead costs by the increased Ultra Tech project sales. Gross margin for the
nine months ended October 31, 2001 was 37.6% compared to 37.8% for the nine
months ended October 31, 2000. Higher group insurance costs related to increased
claim payments were offset by the improved coverage of fixed overhead costs by
the increased Ultra Tech project sales. Selling, engineering and administrative
expenses for the three and nine-month periods ended October 31, 2001 increased
$76,522 (7.1%) and $369, respectively. The increase for the three month period
ended October 31, 2001 was due largely to increased sales and marketing
expenses. Increased sales and marketing expenses for nine-month period were
offset by legal and professional expenses during the three months ended April
30, 2000 which related to discussions held with various parties interested in
acquiring all of Edison's common stock.
Interest expense decreased to $26,828 and $158,131 for the three and nine-month
periods ended October 31, 2001 compared to $120,037 and $438,055 for the same
periods ended October 31, 2000. The decrease was due to lower debt balances.
The Company had a net gain on trading securities of $23,621 and a net loss on
trading securities of $144,374 for the three and nine-month periods ended
October 31, 2001, respectively compared to a $146,770 and $150,874 net loss for
the same periods of the prior year.
The amortization of goodwill and financing costs resulted in a total non-cash
charge of $216,693 for the nine months ended October 31, 2001 compared to
$177,309 for the prior year nine-month period.
The Company recorded tax expense from continuing operations of $1,458,960 for
the nine months ended October 31, 2001, which represented an estimated annual
effective tax rate of 39.4% applied to pre-tax income. Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amount
of assets and liabilities for financial statement reporting purposes and the
amounts used for income tax purposes.
Income from continuing operations of $823,946, or $.35 and $.30 per share, basic
and diluted, respectively, for the three months ended October 31, 2001 was
$392,801 (91.1%) higher than income from continuing operations of $431,145, or
$.18 and $.15 per share, basic and diluted, for the comparable period of the
prior year. The change was principally due to the increase in net sales of
$975,440 for the three months ended October 31, 2001 compared to the same period
of the prior year. For the nine months ended October 31, 2001, income from
continuing operations of $2,241,119, or $.95 and $.81 per basic and diluted
share, respectively, was $393,529(21.3%) higher than income from continuing
operations of $1,847,590 or $.79 and $.63 per basic and diluted share,
respectively, in the comparable period of the prior year. The change was
principally
12
due to the increase in net sales of $1,108,650 for the nine months ended October
31, 2001 compared to the same period of the prior year.
Liquidity and Capital Resources
- -------------------------------
The Company generated $3,337,891 in cash from operations during the first nine
months of fiscal 2001, compared to cash flow generated by operations of
$3,373,977 for the same period last year. The Company received $164,155 in
March, 2001 from a note receivable relating to the sale of the Gilco division
and $95,000 in May, 2001 from the maturity of a certificate of deposit. The
Company used $163,946 in cash to acquire capital equipment during the nine
months ended October 31 and $3,156,821 for payments on long-term debt. The
result was a net increase in cash and cash equivalents of $269,089 for the first
nine months of fiscal 2001 compared to a net increase of $273,003 in the prior
year's first nine months.
The Company believes that it can fund proposed capital expenditures and
operational requirements from operations and currently available cash and cash
equivalents, investments, trading securities and existing bank credit lines.
Proposed capital expenditures for the fiscal year ending January 31, 2002 are
expected to total approximately $500,000, compared to $478,872 for the fiscal
year ended January 31, 2001.
The Company plans to repurchase up to 750,000 shares of its outstanding common
stock and intends to fund its repurchases from its available cash resources,
together with any potential liquidation of some or all of its securities
investment portfolio and necessary borrowings under the Company's existing or
new bank credit facilities. As of November 30, 2001, there were commitments to
repurchase in excess of 500,000 shares.
The Company intends to continue to pursue plans to expand its businesses, both
internally and through potential acquisitions. The Company currently anticipates
that any potential acquisitions would be financed primarily by internally
generated funds, additional borrowings or the issuance of the Company's stock.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
The Company is exposed to interest rate risk, foreign currency risk and equity
price risk. These risks include changes in U.S interest rates, changes in
foreign currency exchange rates as measured against the U.S. dollar and changes
in the prices of stocks traded on the U.S. markets.
Interest Rate Risk
- ------------------
The Company's debt obligations, which totaled $2,422,537 as of October 31, 2001,
are subject to interest rate risk. Most of the borrowings are based on a
floating rate. Based on the October 31, 2001 balance, an increase of one percent
in the interest rate on the Company's loans would cause an increase in interest
expense of approximately $25,000, or $.01 per diluted share, net of taxes, on an
annual basis. The Company currently does not use derivatives to fix variable
rate interest obligations.
13
Foreign Currency Risk
- ---------------------
The Company has foreign operations in the United Kingdom and Malaysia. Sales and
purchases are typically denominated in the British pound, Malaysian ringgit,
German mark, Singapore dollar or U.S. dollar, thereby creating exposures to
changes in exchange rates. The changes in exchange rates may positively or
negatively affect the Company's sales, gross margins and retained earnings. The
Company does not enter into foreign exchange contracts but attempts to minimize
currency exposure risk through working capital management. There can be no
assurance that such an approach will be successful, especially in the event of a
significant and sudden decline in the value of a currency.
Equity Price Risk
- -----------------
As of October 31, 2001, the Company held $39,897 in trading securities of
various domestic companies. The market value of these investments is subject to
fluctuation.
PART II.
Item 6.
Exhibits
- --------
There are no exhibits filed or incorporated by reference herin.
Reports on Form 8-K
- -------------------
The Company filed a current report on Form 8-K on November 7, 2001 relating to
the Board of Directors' authorization to repurchase up to 750,000 shares of its
outstanding common stock. The repurchases are to be effected from time to time
in the open market, pursuant to privately negotiated transactions or otherwise.
The repurchased shares will be held in the Company's treasury pending potential
future issuance in connection with employee stock option plans, potential future
acquisitions or other general corporate purchases. The Company intends to fund
its repurchases from its available cash resources, together with any potential
liquidation of some or all of its securities investment portfolio and necessary
borrowings under the Company's existing or new bank credit facilities. As of
November 7, 2001, the Company had 2,365,223 shares outstanding.
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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.
EDISON CONTROL CORPORATION
(Registrant)
Date: November 30, 2001 /s/ Jay R. Hanamann
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Jay R. Hanamann
(Chief Financial Officer)
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Edison Control Corporation
Exhibit Index
Exhibit No. Description
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None
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