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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 4, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period _____________ to _______________
Commission file number: 0-14275
Edac Technologies Corporation
(Exact name of registrant as specified in its charter)
Wisconsin 39-1515599
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
1806 New Britain Avenue, Farmington, CT 06032
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(Address of principal executive offices)
(860) 677-2603
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(Registrant's telephone number, including area code)
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:
On April 28, 1998 there were outstanding 3,834,550 shares of the
Registrant's Common Stock, $0.0025 par value per share.
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PART 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EDAC TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the quarter ended
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April 4, March 31,
1998 1997
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Sales $ 12,706,125 $ 9,554,326
Cost of sales 10,395,937 8,449,046
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2,310,188 1,105,280
Selling, general and
administrative expenses 1,115,361 663,474
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INCOME FROM OPERATIONS 1,194,827 441,806
Non-operating income
(expense):
Interest expense (227,045) (205,775)
Other 9,904 19,930
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(217,141) (185,845)
INCOME BEFORE INCOME TAXES 977,686 255,961
Provision for income taxes 312,000 -
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NET INCOME $ 665,686 $ 255,961
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Basic earnings per common share $ 0.17 $ 0.07
Diluted earnings per common share $ 0.16 $ 0.07
The accompanying notes are an integral part of these financial statements.
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EDAC TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
April 4 December 31
1998 1997
(Unaudited) (Note)
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ASSETS
CURRENT ASSETS:
Cash $ 98,161 $ 137,620
Trade accounts receivable 5,095,819 3,903,329
Inventories 9,654,678 10,186,211
Prepaid expenses and other 106,193 44,138
Deferred income taxes 924,469 924,469
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TOTAL CURRENT ASSETS 15,879,320 15,195,767
PROPERTY, PLANT, AND EQUIPMENT 18,474,051 15,229,285
less-accumulated depreciation 7,911,359 7,644,959
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10,562,692 7,584,326
OTHER ASSETS 794,275 1,069,483
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$27,236,287 $23,849,576
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Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
The accompanying notes are an integral part of these financial statements.
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EDAC TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
April 4 December 31
1998 1997
(Unaudited) (Note)
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 4,476,014 $ 4,107,482
Current portion of long-term debt 1,170,437 1,018,928
Trade accounts payable 3,796,699 3,342,721
Employee compensation and
amounts withheld 1,017,182 1,380,272
Accrued expenses 1,050,260 845,528
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TOTAL CURRENT LIABILITIES 11,510,592 10,694,931
LONG-TERM DEBT,
less current portion 7,254,801 5,368,882
OTHER LIABILITIES 9,000 9,000
DEFERRED INCOME TAXES 891,000 891,000
SHAREHOLDERS' EQUITY:
Common stock, par value $.0025 per
share; 10,000,000 shares authorized;
issued and outstanding--3,834,550
in 1998 and 1997 9,586 9,586
Additional paid-in-capital 8,768,504 8,768,504
Accumulated deficit (629,524) (1,295,210)
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8,148,566 7,482,880
Less deferred ESOP compensation
expense (97,222) (116,667)
Less unfunded accrued pension
costs (480,450) (480,450)
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7,570,894 6,885,763
$ 27,236,287 $ 23,849,576
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Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
The accompanying notes are an integral part of these financial statements.
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EDAC TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the quarter ended
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April 4, March 31,
1998 1997
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Operating Activities:
Net income $ 665,686 $ 255,961
Depreciation and amortization 322,068 242,568
Changes in working capital items (427,392) 606,484
Other (6,905) -
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Net cash provided by
operating activities 553,457 1,105,013
Investing Activities:
Additions to property, plant
and equipment (3,294,461) (209,376)
Proceeds from sales of property
plant and equipment 23,000 -
Other 272,585 (8,392)
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Net cash used in investing
activities (2,998,876) (217,768)
Financing Activities:
Increase (decrease) in revolving
line of credit 368,532 (949,682)
Payment of equipment lines - (541,153)
Issuance of long term debt 2,587,530 541,153
Payments of long term debt (550,102) (103,304)
Proceeds from exercise of options
for common stock - 14,062
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Net cash provided by (used in)
financing activities 2,405,960 (1,038,924)
Decrease in cash (39,459) (151,679)
Cash at the beginning of year 137,620 195,382
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Cash at end of period $ 98,161 $ 43,703
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The accompanying notes are an integral part of these financial statements.
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EDAC TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 4, 1998
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals and adjustments to previously established loss
provisions) considered necessary for a fair presentation have been included.
Operating results for the quarter ending April 4, 1998 are not necessarily
indicative of the results that may be expected for the year ending January 2,
1999. 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
December 31, 1997.
The Company has changed its quarter end dates beginning with the first quarter
of 1998. Quarter end dates for 1998 are April 4, 1998, July 4, 1998, October 3,
1998 and January 2, 1999. This change did not result in a material difference
for the first quarter of 1998.
New Accounting Standard: In June 1997, the Financial Accounting Standards Board
issued SFAS No. 130, "Reporting Comprehensive Income". This statement
established standards for separately reporting comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. Components of comprehensive income represent
changes in equity resulting from transactions and other events and circumstances
from nonowner sources. The Company adopted the standard on January 1, 1998. The
adoption of this standard did not require any additional disclosure for the
first quarter of 1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Sales. The Company's sales in the first quarter of 1998 increased $3,151,799 or
33% compared to the first quarter of 1997. This increase is due mainly to
increased sales in the Large Machining and Precision Engineered Solutions areas.
The Company has made significant progress in adding new customers and
diversifying its business. The Company's increase in sales was led by the Large
Machining Division which had an increase of 159% in sales compared to the first
quarter of 1997. The Company's backlog as of April 4, 1998 was approximately
$46,000,000 compared to $45,000,000 as of December 31, 1997.
Cost of Sales. Cost of sales as a percentage of sales decreased by 6.6% of sales
compared to the first quarter of 1997. This was achieved by increased sales in
the higher margin divisions and the spreading of fixed overhead over higher
production levels. Margins in all divisions were enhanced by continuous
improvement techniques such as Kaizen, Lean Thinking, pull systems and Just in
Time.
Selling, General & Administrative. Selling, general and administrative costs
increased by $451,887 or 68.1% compared to the first quarter of 1997. This is
due to increased personnel related expenses, professional expenses and
advertising and promotional expenses.
Interest. Interest expense increased by $21,270 or 10.3% for the first quarter
of 1998 compared to the first quarter of 1997. This was due to higher
outstanding bank debt used to acquire new machinery.
Liquidity and Capital Expenditures. Working capital as of April 4, 1998 has
decreased by $132,108 since December 31, 1997. Capital expenditures of
$3,294,461 have been funded by the Company's main bank and an equipment
financing company.
Management believes that the funds generated from operations and its credit
facilities will be sufficient to meet the Company's cash requirements for 1998.
Certain matters described in this report are forward-looking statements and are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected.
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PART 11 -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re: computation of earnings per share
(b) Reports on Form 8-K
None
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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.
EDAC TECHNOLOGIES CORPORATION
April 28, 1998 By /s/ Ronald G. Popolizio
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Ronald G. Popolizio, Chief Financial
Officer and duly authorized officer
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PART 11 -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITIS
11 Statement re: Computation of earnings per share
27 Financial Data Schedule
(b) Reports on Form 8-K
None