1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
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: 1-4338
EAC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New York 21-0702336
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
282 PROSPECT STREET, NEW HAVEN, CT 06511
(Address of principal executive offices) (Zip Code)
(203) 865-1661
(Issuer's telephone number, including area code)
Check whether the Issuer (1) 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1996
- -------------------------------------- -----------------------------
Common Stock, par value $.10 per share 2,311,687 shares
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- INDEX -
PAGE(S)
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PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - April 30, 1996 (Unaudited)
and January 31, 1996 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three Months Ended April 30, 1996 and 1995 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended April 30, 1996 and 1995 5.
Notes to Interim Consolidated Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis or Plan of Operation 7.
PART II. Other Information 8.
SIGNATURES 9.
EXHIBITS:
Exhibit 11 - Earnings Per Share 10.
Exhibit 27 - Financial Data Schedule 11.
Page 2.
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PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
- ASSETS -
APRIL 30, January 31,
1996 1996
------------ ------------
(UNAUDITED)
CURRENT ASSETS:
Cash $ 694,012 $ 628,380
Notes and accounts receivable - net of allowance for doubtful accounts
of $38,578 and $45,980 at April 30, and January 31, 1996, respectively 950,352 996,132
Inventories 231,673 302,840
Prepaid taxes and expenses 124,796 101,649
------------ ------------
TOTAL CURRENT ASSETS 2,000,833 2,029,001
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 597,795 563,619
------------ ------------
OTHER ASSETS:
Costs in excess of net assets acquired - net 365,342 367,967
Deferred income taxes 510,000 510,000
Other assets 52,800 52,500
------------ ------------
928,142 930,467
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$ 3,526,770 $ 3,523,087
============ ============
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 278,755 $ 246,897
Accrued expenses 586,192 571,960
Long-term liabilities - current portion 34,680 34,232
Deferred income 56,451 75,268
Income taxes payable 6,359 6,359
------------ ------------
TOTAL CURRENT LIABILITIES 962,437 934,716
------------ ------------
LONG-TERM LIABILITIES - NET OF CURRENT PORTION 599,768 608,474
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value; 20,000,000 shares authorized,
2,319,285 shares issued 231,929 231,929
Capital in excess of par value 10,504,380 10,504,380
Accumulated deficit (8,721,144) (8,705,812)
------------ ------------
2,015,165 2,030,497
Less: Common stock in treasury, 7,598 shares at cost (50,600) (50,600)
------------ ------------
1,964,565 1,979,897
------------ ------------
$ 3,526,770 $ 3,523,087
============ ============
The accompanying notes are an integral part of these consolidated statements.
Page 3.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For The Three Months
Ended April 30,
-----------------------------
1996 1995
----------- -----------
NET SALES $ 1,705,804 $ 1,914,475
----------- -----------
COSTS AND EXPENSES:
Cost of products sold 1,194,225 1,316,205
Selling, general and administrative expenses 549,253 555,320
----------- -----------
TOTAL COSTS AND EXPENSES 1,743,478 1,871,525
----------- -----------
OPERATING EARNINGS (LOSS) (37,674) 42,950
----------- -----------
OTHER INCOME (EXPENSES):
Interest expense (143) (6,304)
Interest and other income 22,485 76,666
----------- -----------
22,342 70,362
----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES (15,332) 113,312
Income taxes, net of operating loss carryforwards -- 1,133
----------- -----------
NET INCOME (LOSS) $ (15,332) $ 112,179
=========== ===========
INCOME (LOSS) PER SHARE (NOTE 2) $ (.01) $ .05
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
Page 4.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Three Months
Ended April 30,
-------------------------
1996 1995
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (15,332) $ 112,179
Adjustments to reconcile net income to cash provided from operating activities:
Depreciation and amortization 43,686 28,751
Amortization of deferred rental income (18,817) (47,490)
Gain on disposal of fixed assets -- (19,656)
Change in assets and liabilities:
Decrease (increase) in accounts and notes receivable 45,780 (305,378)
Decrease (increase) in inventories 71,167 (86,349)
(Increase) decrease in prepaid expenses and other assets (23,447) 257
Increase in accounts payable, accrued expenses and accrued income taxes 46,090 412,830
--------- ---------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 149,127 95,144
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets -- 47,112
Capital expenditures (75,237) (65,132)
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NET CASH (USED BY) INVESTING ACTIVITIES (75,237) (18,020)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term debt -- (150,000)
Payments of long-term debt (8,258) (975)
--------- ---------
NET CASH (USED BY) FINANCING ACTIVITIES (8,258) (150,975)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 65,632 (73,851)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 628,380 988,507
--------- ---------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 694,012 $ 914,656
========= =========
The accompanying notes are an integral part of these consolidated statements.
Page 5.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of EAC Industries, Inc.
(the "Company") and its subsidiaries, contain all adjustments necessary
(consisting of normal recurring accruals or adjustments only) to
present fairly the Company's financial position as of April 30, 1996
and the results of its operations and cash flows for the three month
periods ended April 30, 1996 and 1995.
The accounting policies followed by the Company are set forth in Note 2
to the Company's consolidated financial statements included in its
Annual Report on Form 10-KSB for the year ended January 31, 1996, which
is incorporated herein by reference. Specific reference is made to this
report for a description of the Company's securities and the notes to
consolidated financial statements.
The results of operations for the three month period ended April 30,
1996 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2 - EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share has been computed on the basis of the
weighted average number of common shares and common equivalent shares
outstanding during each period presented.
NOTE 3 - CONTINGENCY:
Goodren, in early 1995, withdrew from participating in the District 65
Union Pension Plan (the "Plan"). The withdrawal has resulted in the
assessment of a withdrawal liability owed to the Plan by Goodren. The
exact amount of the withdrawal liability is unknown at this time,
however, the Plan, based on a 1994 plan year valuation, estimated the
potential withdrawal liability to be approximately $560,000.
Accordingly, the Company accrued a reserve for the $560,000 liability
which counsel to the Company believed would be payable over a period of
approximately 22 years beginning approximately one year from the
withdrawal date. In March of 1996, the Company signed an agreement with
the Plan whereby they will make quarterly payments of $7,548. These
payments shall terminate on the date the Plan issues a final assessment
to the Company of either a withdrawal or a minimum funding
contribution.
Additionally, Goodren is potentially liable for its proportionate share
(approximately $154,000) of the shortfall between the District 65 Union
Pension Plan's contributions and the federal minimum funding standards
which the Plan's actuary estimates to be an aggregate of $34 million.
Goodren is also potentially liable to the Internal Revenue Service
("IRS") for excise taxes under paragraph 4971 of the Internal Revenue
Code. The Plan is requesting a waiver from the IRS for both the
shortfall and the excise taxes. It will be several months before the
IRS will issue its decision. If a waiver is denied, Goodren must pay
its proportionate share of the shortfall, and possibly a 5% excise tax
on the amount of the deficiency for each plan year in violation. To the
extent the deficiencies are not timely corrected, the excise tax
becomes 100% of the accumulated funding deficiency. The Company has
provided a reserve for this potential liability, which is included in
long-term liabilities.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
RESULTS OF OPERATIONS:
Sales for the three month period ended April 30, 1996 were $1,706,000
as compared to $1,914,000 for the comparable period of the prior year,
reflecting a decrease of $208,000 or 10.9%. Management attributes this
decrease primarily to a decline in sales to certain customers.
Management does not believe this is a permanent trend.
Cost of sales for the three month period ended April 30, 1996 were
$1,194,000 (70% of sales) as compared to $1,316,000 (69% of sales) for
the comparable period of the prior year. This increase in cost of sales
as a percent of sales for the current three month period is primarily
due to higher raw material costs.
Selling, general and administrative expenses decreased from $555,000
(29% of sales) for the three month period ended April 30, 1995 to
$549,000 (32% of sales) for the three month period ended April 30,
1996. The Company believes that this minor decrease is due to the
monitoring of costs more effectively.
For the three months ended April 30, 1996 the Company reflected a net
loss of $15,332. For the three months ended April 30, 1995 the Company
reflected net income of $112,179. This decrease in earnings was
primarily due to the reduction in sales and lower gross profit margin
mentioned above.
LIQUIDITY AND CAPITAL RESOURCES:
At April 30, 1996, the Company's working capital was $1,039,000
compared to a working capital of $1,094,000 at its year ended January
31, 1996. Cash amounted to $694,000 at April 30, 1996 compared to
$628,000 at January 31, 1996.
The Company has no material capital commitments at the present time and
none are contemplated.
Management of the Company believes that its present resources and the
resources it hopes to generate from future profitable operations, will
be sufficient for at least the ensuing twelve month period.
Page 7.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports
(a) Exhibits:
(11) Computation of Earnings per Common Share
(27) Financial Data Schedule
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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.
EAC INDUSTRIES, INC.
--------------------
Registrant
/s/ Peter B. Fritzsche
Date: June 10, 1996 ------------------------------------
Peter B. Fritzsche
Chief Executive Officer and Principal
Accounting Officer
Page 9.
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EXHIBIT INDEX
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Exhibit 11 Computation of Earnings per Common Share
Exhibit 27 Financial Data Schedule