FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended October 3, 1998
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 1-8277
ACME ELECTRIC CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 16-0324980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Quaker Road, East Aurora, New York 14052
(Address of principal executive offices)
716/655-3800
(Telephone Number)
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.
(1) YES x NO ____
(2) YES x NO ____
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 3, 1998
Common Stock, Par Value $1.00 Per Share 5,056,674
<PAGE>
ACME ELECTRIC CORPORATION
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
BALANCE SHEET
Unaudited Audited
Oct 3, 1998 June 30, 1998
(000's) (000's)
------- -------
ASSETS
Current Assets:
Cash $ 370 $ 629
Accounts receivable, net 11,434 12,552
Inventories, net 10,898 11,961
Deferred income taxes 1,248 1,269
Other current assets 613 695
------- -------
Total current assets 24,563 27,106
------ ------
Property, plant and equipment, at cost 38,021 37,794
Less accumulated depreciation (23,219) (22,679)
------ ------
Total property, plant
& equipment, net 14,802 15,115
------ ------
Other Assets 3,401 3,274
------- -------
Total Assets $42,766 $45,495
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,918 $ 4,734
Accrued compensation and other 3,414 4,376
Current portion of long-term debt 2,785 2,754
------- -------
Total current liabilities 11,117 11,864
------ ------
Long-term debt 10,258 12,833
Other long-term liabilities 1,770 1,723
------- -------
Total Liabilities $23,145 $26,420
------ ------
Shareholders' Equity:
Common stock, Par Value $1.00
Authorized 8,000,000 shares
Issued 5,056,674 and 5,051,444 shares 5,057 5,051
Capital in excess of par value 19,079 19,061
Accumulated deficit (4,507) (5,029)
Less: Treasury stock at cost
(699 Shares) (8) (8)
--------- ---------
Total Shareholders' Equity 19,621 19,075
------ ------
Total Liabilities and Shareholders' Equity $42,766 $45,495
====== ======
See accompanying Notes to Financial Statements.
<PAGE>
ACME ELECTRIC CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
13 Weeks Ended 13 Weeks Ended
Oct 3, 1998 Sep 27, 1997
(000's) (000's)
------- -------
NET SALES $22,378 $22,179
------ ------
COSTS AND EXPENSES:
Cost of Sales 16,736 16,855
Research and Engineering Expenses 967 1,009
Selling and Administrative Expenses 3,567 3,631
Interest Expense 252 405
------ -------
TOTAL COSTS AND EXPENSES 21,522 21,900
------ ------
INCOME BEFORE TAXES 856 279
INCOME TAX EXPENSE 334 109
------- -------
NET INCOME $ 522 $ 170
======= =======
Weighted Average Number of
Shares Outstanding Used
to Compute Net Income per
Common Share:
Basic 5,054 5,042
Incremental Shares from
assumed conversion of
stock options 14 10
------- -------
Diluted 5,068 5,052
===== =====
NET INCOME PER COMMON SHARE
(Basic & Diluted) $.10 $.03
=== ===
See accompanying Notes to Financial Statements
<PAGE>
ACME ELECTRIC CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
13 Weeks Ended 13 Weeks Ended
Oct 3, 1998 Sep 27, 1997
(000's) (000's)
------- -------
Cash flows from operating activities:
Net Income $ 522 $ 170
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 593 610
Loss on sale of fixed assets 35 --
Change in assets and liabilities:
Accounts receivable, net 1,117 67
Inventories, net 1,064 382
Deferred taxes and other assets (24) (117)
Accounts payable 183 (733)
Accrued compensation and other (914) (608)
----- ------
Net cash provided from (used in)
operating activities 2,576 (229)
----- ------
Cash flows from investing activities:
Proceeds from disposition 4 --
Additions to property, plant and equipment (319) (397)
------ -------
Net cash used in investing activities (315) (397)
------ ------
Cash flows from financing activities:
Increase (decrease) of borrowings, net (2,544) 377
Proceeds from employee stock purchase
and stock options plans 24 16
------ ------
Net cash (used in) provided from
financing activities (2,520) 393
------ -------
Net decrease in cash (259) (233)
Cash at beginning of period 629 398
------- -------
Cash at end of period $ 370 $ 165
======= =======
See accompanying Notes to Financial Statements.
<PAGE>
ACME ELECTRIC CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The Balance Sheet of Acme Electric Corporation ("Registrant") at
October 3, 1998, the Statement of Operations for the thirteen-week
periods ended October 3, 1998, and September 27, 1997, and the
Statement of Cash Flows for the thirteen-week periods ended October 3,
1998, and September 27, 1997, include all adjustments necessary for a
fair representation of the results for such periods.
The unaudited financial data included herein was compiled in
accordance with the "Summary of Significant Accounting Principles and
Practices" (Note 1 of Notes to Financial Statements) contained in the
Registrant's 1998 Annual Report filed on Form 10-K.
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." The Statement establishes standards for
reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. The Statement is
effective for fiscal years beginning after December 15, 1997. The
Company had no other components of comprehensive income other than net
income for all periods presented.
Recently issued accounting standards not yet adopted.
The provisions of Statement of Financial Accounting Standards (SFAS)
No. 131, "Disclosures about Segments of an Enterprise and Related
Information," will become effective for the Company's fiscal year-end
1999. SFAS No. 131 requires that public companies report a measure of
segment profit or loss, certain specific revenue and expense items,
and segment assets. Generally, financial information is required to
be reported on that basis that is used internally for evaluating
segment performance and resource allocation. The Company will adopt
SFAS No. 131 for the fiscal year-end 1999 financial statements and is
expected to have expanded segment disclosures as a result of the
adoption.
In February 1998, the Financial Accounting Standards Board (FASB)
issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." The Statement revises the employers'
disclosures about pension and other postretirement benefit plans. The
Company plans to make the revised disclosures for the fiscal year-end
1999 financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards for derivative instruments. The
Company intends to adopt the Statement during the first quarter of
fiscal year 2000. The financial statement impact from the adoption is
not expected to be material.
2. Accounts receivables included in the Balance Sheet are as follows:
Oct 3, 1998 June 30, 1998
($000's) ($000's)
-------- --------
Billed $11,867 $12,921
Unbilled 65 97
------- -------
Subtotal 11,932 13,018
Less allowance for
doubtful accounts 498 466
------- -------
$11,434 $12,552
====== ======
Unbilled receivables are comprised of revenue amounts on long-term
contracts, which have been earned but not yet billed. Management
anticipates that all unbilled receivables will be substantially
invoiced and collected within a twelve-month period.
3. Inventories included in the Balance Sheet are as follows:
Oct 3, 1998 June 30, 1998
($000's) ($000's)
-------- --------
Raw Material $5,750 $5,875
Work-In-Process 1,645 1,685
Finished Goods 3,503 4,401
------ ------
$10,898 $11,961
====== ======
Inventories are reported net of reserves for obsolescence of
$1,062,000 and $782,000 at October 3 and June 30, respectively.
<PAGE>
ACME ELECTRIC CORPORATION
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is Management's discussion and analysis of certain
significant factors which have affected the Registrant's financial
condition and results of operations during the periods included in the
accompanying financial statements.
A summary of the period-to-period change in the principal items
included in the balance sheets and which affect financial condition
follows:
Comparison of Balance Sheets at
October 3, 1998
and
June 30, 1998
Increase (Decrease)
---------------------
(000's)
Current Assets $(2,543)
Property, Plant & Equipment Net (313)
Other Assets 127
-------
$(2,729)
======
Current Liabilities $ (747)
Long-Term Debt and
Other Liabilities (2,528)
Shareholders' Equity 546
------
$(2,729)
======
Current assets at October 3, 1998, decreased $2,543,000, or 9.4%, from
June 30, 1998, levels due primarily to the decrease in accounts receivable
of $1,117,000 and inventories of $1,064,000. The decrease in receivables
is reflective of a lower volume of product shipments incurred in August and
September, compared with May and June. This is due, in part, to cyclical
business elements, combined with the winding down of the Cisco Systems
program in the Company's electronics business. Inventory reduction is,
again, primarily the result of the wind down of the Cisco program, with
target curtailment scheduled for January 1999.
The net decrease in property, plant and equipment of $313,000, or
2.0%, represents year-to-date expenditures in the amount of $319,000 offset
by depreciation of approximately $593,000 and net fixed asset retirements
of $33,000.
Current liabilities decreased $747,000, or 6.3%, as a result of
performance incentive payouts made against the June 30, 1998, accruals.
Long-term debt and other liabilities decreased approximately
$2,528,000, or approximately 17.4%. Debt reduction resulted from both
positive cash flow from operations, as well as reduced working capital
(receivables and inventory) requirements associated with the Cisco program
curtailment.
The increase in shareholders' equity of $546,000 is primarily due to
the profit year-to-date of $522,000.
The Company has financed its working capital requirements, as well as
year-to-date capital expenditures, through operations. The Company expects
that operating activities for the remainder of fiscal year 1999 will
provide adequate cash flow to support any working capital requirements, as
well as support, in part, the anticipated $2 million of capital
expenditures.
The Company has in place a credit agreement which provides for two
secured term loans, with current principal balances of $1,687,000 and
$1,100,000, and a secured revolving credit line, with a $21,000,000 limit
and a maturity date of December 31, 2000, against which the Company has
combined outstanding borrowings and letters of credit of approximately
$5,854,000 at October 3, 1998. Outstanding borrowings against the
revolving credit facility are limited by formula to specified amounts of
accounts receivable and inventory, reduced by outstanding term debt. As of
October 3, 1998, the Company's eligible (formula-based) unborrowed funds
available on the line of credit were approximately $8,909,000. Management
believes that this will provide adequate liquidity for the foreseeable
future.
Expectation for Year 2000 Compliance
- - ------------------------------------
As noted in the Company's June 30, 1998, 10-K filing, the business is
reliant on systems which utilize time-based mechanisms for asset and
information management, and management recognizes that such systems may
encounter problems affecting the capability thereof due to the year 2000
(Y2K) date change. The Company also has business relationships with
vendors, product purchases, and financial institutions, among others, who
are reliant on such systems. It is possible that, given problems
encountered by the Company or these parties, the Company could send or
receive improper billings, produce products which are unaccounted for,
experience production shortages or delays, encounter collection delays, or
report inaccurate data, among other things.
The Company's Year 2000 Task Group, with member participation from all
operating units, as well as the corporate office, has essentially completed
its assessment program, which included an inventory and identification of
the Company's mission critical information technology (IT) system, as well
as non-IT systems (i.e., equipment microcontrollers).
The Company has commenced, in a test environment, testing and
implementation of the AIX operating system and purchased Oracle software
upgrades. Management anticipates that testing will be completed by spring
of 1999, with full implementation accomplished by the Fall of 1999. The
primary risk factor will be the continuity of the Company's internal IS
staffing and outside IS resource support.
The Company is in the process of assessing the year 2000 readiness on
the part of its supply base, as well as customers utilizing EDI avenues of
commerce. Both vendor and customer letters requesting responses and/or
certifications to their year 2000 readiness are substantially complete,
with scheduled follow-up contact to be pursued with those identified to be
mission critical.
The Company currently is in the process of developing a contingency
plan should aspects of the year 2000 project not be completed or vendors
and customers fail to insure their Y2K readiness. This process is
anticipated to be completed by early fall 1999.
Management anticipates that additional costs associated with the year
2000 project, aside from normal IT annual budget, should not exceed
$300,000.
Results of Operations:
- - ---------------------
Thirteen-week period ended October 3, 1998, compared with the
comparable thirteen-week period ended September 27, 1997
--------------------------------------------------------
Consolidated sales for the thirteen-week period ended October 3, 1998,
were $22,378,000, compared with $22,179,000 for the comparable period of a
year earlier, or an increase of .9%. Net sales increased slightly from the
same period of the prior year, as increases in transformer sales sold
through distribution offset decreasing sales in the custom electronics
business, as the Cisco Systems program began to wind down. Orders on this
program are scheduled to end January 1999.
Cost of sales as a percentage of sales for the thirteen-week periods
ended October 3, 1998, and September 27, 1997, were 74.8% and 76.0%,
respectively. This improvement was achieved as a result of continued cost
reduction efforts (labor and overhead) initiated in the Company's
electronics business, as well as continued productivity improvements within
the Company's aerospace manufacturing operation.
Research and engineering expenses as a percent of net sales for the
thirteen-week period ended October 3, 1998, decreased slightly (from 4.5%
to 4.3%) compared to the same period of the prior year. This decrease
reflects a portion of the cost reduction measures implemented in the
Electronics Division.
Selling and administrative costs as a percent of net sales decreased
to 15.9% for the thirteen-week period ended October 3, 1998, from 16.4% for
the comparable period of the prior year. This net decrease ($64,000)
primarily reflects the additional customer program incentives earned in the
Company's aerospace business (and recorded as offset in the general and
administrative expense line) associated with on-time delivery schedules.
Interest expense as a percent of net sales for the thirteen-week
period ended October 3, 1998, decreased to 1.12% from 1.83% for the
comparable period of the prior year. Interest expense in the quarter to
prior-year-quarter comparison decreased $154,000, as a result of lower debt
levels, as the Company continued to reduce its outstanding debt by nearly
$2,500,000 from September 1997 to September 1998.
Income taxes as a percent of income before taxes for the thirteen-week
period ended October 3, 1998, was 39.0%, unchanged from 39.0% reported for
the same period of the prior year.
Backlog at October 3, 1998, was $13,267,000, compared with $19,908,000
at the end of the comparable period of the prior year. The lower backlog
at October 3, 1998, primarily reflects the decline in orders associated
with the Cisco Systems program within the Company's Electronics Division.
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information
a. Exhibits
Interim Report dated
November 6, 1998, for the
quarter ended October 3,
1998. See Exhibit 13 attached.
Financial Data Schedule. See Exhibit 27 attached.
News Release of October 26,
1998, announcing first-quarter
results for fiscal year 1999. See Exhibit 99 attached.
b. There were no reports filed on Form 8-K during the thirteen-
week period ended October 3, 1998.
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.
ACME ELECTRIC CORPORATION
(Registrant)
Date: November 17, 1998 /s/
--------------------------
Robert J. McKenna
Chairman, President and
Chief Executive Officer
Date: November 17, 1998 /s/
--------------------------
Michael A. Simon
Corporate Controller and
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> OCT-03-1998
<CASH> 370
<SECURITIES> 0
<RECEIVABLES> 11,932
<ALLOWANCES> 498
<INVENTORY> 10,898
<CURRENT-ASSETS> 24,563
<PP&E> 38,021
<DEPRECIATION> 23,219
<TOTAL-ASSETS> 42,766
<CURRENT-LIABILITIES> 11,117
<BONDS> 10,258
0
0
<COMMON> 24,136
<OTHER-SE> (4,515)
<TOTAL-LIABILITY-AND-EQUITY> 42,766
<SALES> 22,378
<TOTAL-REVENUES> 22,378
<CGS> 16,736
<TOTAL-COSTS> 21,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 252
<INCOME-PRETAX> 856
<INCOME-TAX> 334
<INCOME-CONTINUING> 522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 522
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
To Our Shareholders:
Although sales for the quarter were only 1% greater than the
same quarter last year, net income increased from $170,000 to
$522,000. This represents an increase of more than 200%.
Working capital declined 23%, as we continue to lower inventory
levels through our DFT initiative.
Sales and earnings remain strong in our Power Distribution
Products Division. The Division has been actively involved with
a major OEM, developing a variety of new products. We hope to be
able to report more on this next quarter.
Our Electronics Division was informed by Cisco Systems that we
were being replaced by another supplier as a result of their
major vendor reduction program. This program favored large
multinational suppliers and resulted in Cisco reducing their
number of electronic power supply resources from 15 to 5. The
irony of this action is that we were told by Cisco that we had
achieved their highest power supply vendor rating for quality and
service. This business will begin to decline very rapidly in
January.
All efforts in the Division are focused on developing new
business where design and manufacturing are at an even higher
level of complexity. One new program that has emerged from these
efforts is with Picker International. In September, the Division
received an order for the power system used in their Magnetic
Resonance Imaging (MRI) equipment. Deliveries are expected to
begin next March.
The Aerospace Division recently passed a quality audit by Boeing
to Level 6 of their quality standard D1-9000 Rev A. Level 6
approval indicates that Boeing has strong confidence in our
quality system, needing little oversight by them. By way of
comparison, there are 25 other major Boeing commercial suppliers
in this region of the country, and we are one of only three
having attained Level 6 status.
Operationally, we had a good quarter and expect progress to
continue. Our focus in all three business units is on new sales
growth.
Robert J. McKenna
Chairman and CEO
November 6, 1998
_________________________________________________________________
ACME ELECTRIC CORPORATION
East Aurora, New York
The following tables set forth certain unaudited financial
information for the thirteen-week periods ended October 3, 1998,
and September 27, 1997 (in thousands, except for per share data):
BALANCE SHEET
10/03/98 09/27/97 06/30/98
-------- -------- --------
Current Assets $24,563 $29,087 $27,106
Fixed Assets and Other - Net 18,203 20,279 18,389
------ ------ ------
Total $42,766 $49,366 $45,495
====== ====== ======
Current Liabilities $11,117 $11,607 $11,864
Long-Term Debt 12,028 21,085 14,556
Shareholders' Equity 19,621 16,674 19,075
------ ------ ------
Total $42,766 $49,366 $45,495
====== ====== ======
INCOME STATEMENT
13 Weeks 13 Weeks F/Y
Ended Ended Ended
10/03/98 09/27/97 06/30/98
-------- -------- --------
Net Sales $22,378 $22,179 $90,916
Net Income $522 $170 $2,529
Net Income Per Common Share:
(Basic and Diluted) $.10 $.03 $.50
Weighted Average Number of Shares
Outstanding Used to Compute
Income Per Common Share:
Basic 5,054 5,042 5,046
Diluted 5,068 5,052 5,060
Company news is available by FAX: dial 1-800-758-5804 and input
extension 006675; or visit our web site at acmeelec.com
CONTACT:
Richard Becht
(716) 655-3800
FOR IMMEDIATE RELEASE
ACME ELECTRIC CORPORATION REPORTS FIRST QUARTER RESULTS
EAST AURORA, N.Y., October 26, 1998 -- Acme Electric Corporation
(NYSE:ACE) announced today that for the first quarter ended October 3,
1998, consolidated net sales were $22,378,000 with net income of $522,000,
compared with net sales of $22,179,000 and net income of $170,000, for the
comparable period in the prior year.
Robert J. McKenna, Chairman and CEO, stated that, "Operationally, we
continue to make good progress. Our main focus is on the development of
new business, as we attempt to fill the pending void being created by the
loss of Cisco's' business in January. We are particularly encouraged by
new programs with two new customers that should begin producing positive
results in late spring."
Founded in 1917, Acme Electric Corporation is a leader in the design
and manufacture of power conversion equipment for electronic and electrical
systems for industrial, commercial, residential, and military and aerospace
applications. Corporate headquarters are in East Aurora, N.Y., with
operations in Cuba, N.Y., Lumberton, N.C., and Tempe, Ariz.
# # # #
ACME ELECTRIC CORPORATION
Comparative Analysis
(in thousands, except per share data)
For the 13 Weeks Ended
10/03/98 09/27/97
-------- --------
Net Sales $22,378 $22,179
Net Income 522 170
Net Income Per Common Share
(Basic and Diluted) $.10 $.03
Weighted Average Number of Shares
Outstanding Used to Compute
Income Per Common Share:
Basic 5,054 5,042
Diluted 5,068 5,052
Company news is available by FAX: dial 1-800-758-5804, and input extension
006675; or visit our web site at acmeelec.com
