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, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-4338
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EAC INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
New York 21-0702336
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
282 PROSPECT STREET, NEW HAVEN, CT 06511
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(Address of principal executive offices) (Zip Code)
(203) 865-1661
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(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
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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, 1995
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Common Stock, par value $.10 per share 2,319,285 shares
- INDEX -
PAGE(S)
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PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - April 30, 1995 (Unaudited)
and January 31, 1995 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Three Months Ended April 30, 1995 and 1994 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Three Months Ended April 30, 1995 and 1994 5.
Notes to Interim Consolidated Condensed Financial Statements
(Unaudited) 6.
ITEM 2. Management's Discussion and Analysis or Plan of Operation 8.
PART II. Other Information 9.
SIGNATURES 10.
Page 2.
PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
EAC INDUSTRIES, INC. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED BALANCE SHEETS
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- ASSETS -
APRIL 30, January 31,
1995 1995
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(unaudited)
CURRENT ASSETS:
Cash $ 914,656 $ 988,507
Notes and accounts receivable - net of allowance for doubtful accounts
of $15,980 1,122,001 816,623
Inventories 604,669 518,320
Prepaid taxes and expenses 70,173 70,430
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TOTAL CURRENT ASSETS 2,711,499 2,393,880
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PROPERTY, PLANT AND EQUIPMENT, NET 520,018 499,885
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OTHER ASSETS:
Costs in excess of net assets acquired - net 312,842 317,800
Restrictive covenant - net 68,750 75,000
Deferred income taxes 510,000 510,000
Other assets 27,500 27,500
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919,092 930,300
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$ 4,150,609 $ 3,824,065
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- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Short-term debt $ - $ 150,000
Accounts payable 497,611 211,378
Accrued expenses 1,062,859 935,762
Long-term debt - current portion 4,874 4,349
Deferred income 75,266 41,238
Income taxes payable - 500
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TOTAL CURRENT LIABILITIES 1,640,610 1,343,227
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LONG-TERM DEBT - NET OF CURRENT PORTION 490,668 492,168
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DEFERRED INCOME 56,450 137,968
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COMMITMENTS AND CONTINGENCIES (NOTE 4)
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $.10 par value; 20,000,000 shares
authorized,
2,319,285 shares issued 231,929 231,929
Capital in excess of par value 10,504,380 10,504,380
Accumulated deficit (8,722,828) (8,835,007)
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2,013,481 1,901,302
Less: Common stock in treasury, 7,598 shares at cost (50,600) (50,600)
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1,962,881 1,850,702
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$ 4,150,609 $ 3,824,065
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The accompanying notes are an integral part of these consolidated statements.
Page 3.
EAC INDUSTRIES, INC. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
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(UNAUDITED)
For The Three Months
Ended April 30,
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1995 1994
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NET SALES $1,914,475 $1,459,457
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COST AND EXPENSES:
Cost of products sold 1,316,205 955,660
Selling, general and administrative expenses 555,320 394,671
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TOTAL COST AND EXPENSES 1,871,525 1,350,331
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OPERATING EARNINGS 42,950 109,126
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OTHER INCOME (EXPENSES):
Interest expense (6,304) -
Interest and other income 76,666 16,505
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70,362 16,505
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EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES 113,312 125,631
Income taxes, net of operating loss carryforwards 1,133 18,000
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INCOME FROM CONTINUING OPERATIONS 112,179 107,631
Gain from discontinued operations - net of income tax effect - 38,314
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NET INCOME $ 112,179 $ 145,945
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INCOME PER SHARE (NOTE 2):
Continuing operations $ .05 $ .04
Discontinued operations - .02
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$ .05 $ .06
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The accompanying notes are an integral part of these consolidated statements.
Page 4.
EAC INDUSTRIES, INC. AND SUBSIDIARIES
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
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(UNAUDITED)
For The Three Months
Ended April 30,
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1995 1994
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 112,179 $ 145,945
Adjustments to reconcile net income to cash provided from (used by)
operating activities:
Depreciation and amortization 28,751 21,358
Amortization of deferred rental income (47,490) (10,310)
Gain on disposal of fixed assets (19,656) -
Net income from discontinued subsidiaries - (38,314)
Change in assets and liabilities:
(Increase) in accounts and notes receivable (305,378) (294,088)
(Increase) in inventories (86,349) (70,886)
Decrease in prepaid expenses 257 11,515
Increase (decrease) in accounts payable, accrued expenses and accrued
income taxes 412,830 (124,819)
Increase in other, net - 25,000
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NET CASH PROVIDED FROM (USED BY) OPERATING ACTIVITIES 95,144 (334,599)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 47,112 -
Capital expenditures (65,132) -
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NET CASH (USED BY) INVESTING ACTIVITIES (18,020) -
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term debt (150,000) -
Payments of long-term debt (975) -
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NET CASH (USED BY) FINANCING ACTIVITIES (150,975) -
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS (73,851) (334,599)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 988,507 1,024,232
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CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 914,656 $ 689,633
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The accompanying notes are an integral part of these consolidated statements.
Page 5.
EAC INDUSTRIES, INC. AND SUBSIDIARIES
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NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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(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, 1995 and the results of its operations and cash flows for
the three month periods ended April 30, 1995 and 1994.
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,
1995, 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, 1995 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 - ACQUISITION:
On December 12, 1994, the Company through a newly formed
subsidiary, FPP Acquisition Corp. ("Flexible") acquired certain of
the assets of Flexible Printed Products, Inc. The cost of this
acquisition, $340,000, exceeded the fair market value of the assets
acquired by $140,000 which amount was assigned to goodwill and is
being amortized on a straight line basis over 15 years. In
connection with this acquisition, the Company also entered into an
employment agreement with the President of Flexible which includes
a non-compete agreement during the period of employment. Pursuant
to such agreement, the Company paid $75,000 which amount is being
amortized on a straight line basis over three years. The
acquisition was accounted for using the purchase method of
accounting.
The Company's consolidated statements of operations include the
revenues and expenses of Flexible for the three month period ended
April 30, 1995. The following pro forma results for the Company
were developed assuming the acquisition had occurred at the
beginning of the earliest period presented (February 1, 1994).
Three Months Ended
April 30, 1994
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(unaudited)
Net sales $1,768,274
Net earnings 228,165
Earnings per share $ .10
This unaudited pro forma sales and earnings information is not
necessarily indicative of the combined results that would have
occurred had the acquisition actually taken place on February
1,1994, nor are they necessarily indicative of the results that may
occur in the future.
Page 6.
EAC INDUSTRIES, INC. AND SUBSIDIARIES
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NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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(UNAUDITED)
NOTE 4 - CONTINGENCY:
Goodren has withdrawn from participating in the District 65 Union
Pension Plan (the "Plan"). The withdrawal has resulted in the
assessment of withdrawal liability owed to the Plan by Goodren. The
exact amount of the withdrawal liability is unknown at this time,
however, in February 1994, the Plan, based on a 1993 plan year
valuation, estimated the potential withdrawal liability to be
approximately $480,000. Accordingly, the Company has accrued the
$480,000 liability which counsel to the Company believes would be
payable over a period of approximately 22 years beginning
approximately one year from the withdrawal date. The Company has
reflected this liability as long-term debt.
Additionally, Goodren is potentially liable for its proportionate
share (approximately $138,000) 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 believes that
any such liability will be satisfied through legal remedies against
the plan as well as the Plan's insurance coverage and therefore has
not provided for this potential liability.
Page 7.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
RESULTS OF OPERATIONS:
Sales for the three month period ended April 30, 1995 were $1,914,000 as
compared to $1,459,000 for the comparable period of the prior year, reflecting
an increase of $455,000 or 31%. Management attributes this increase to the
sales of its' new Flexible subsidiary and to increases in sales to existing
customers.
Cost of sales for the three month period ended April 30, 1995 were $1,316,000
(69% of sales) as compared to $956,000 (66% 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 due to the loss of higher gross profit margin
sales to one significant customer and to the Company having to be more
competitive in its marketplace.
Selling, general and administrative expenses increased from $395,000 (27% of
sales) for the three month period ended April 30, 1994 to $555,000 (29% of
sales) for the three month period ended April 30, 1995, an increase of $160,000
or 40%. The primary reason for the increase was the operating costs of the
Company's new Flexible subsidiary which had not yet been acquired in the prior
period.
Net income for the three month period ended April 30, 1995 was $112,000 or $.05
per share as compared to $146,000 or $.06 per share for the comparable period of
the prior year. The Company reflected higher net income for the period ended
April 30, 1994 as a result of the recognition of a gain from discontinued
operations.
LIQUIDITY AND CAPITAL RESOURCES:
At April 30, 1995, the Company's working capital was $1,070,000 compared to a
working capital of $1,051,000 at its year ended January 31, 1995. Cash amounted
to $915,000 at April 30, 1995 compared to $989,000 at January 31, 1995.
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 8.
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 See Exhibit 11
Page 9.
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.
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Registrant
/s/ Peter B. Fritzsche
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Date: June 12, 1995 Peter B. Fritzsche
Chief Executive Officer and Principal
Accounting Officer
Page 10.