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 April 3, 1999
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 (IRS 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 April 3, 1999
Common Stock, Par Value $1.00 Per Share 5,063,535
<PAGE>
ACME ELECTRIC CORPORATION
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
BALANCE SHEET
Unaudited Audited
April 3, 1999 June 30, 1998
(000s) (000s)
------ ------
ASSETS
Current Assets:
Cash $ 160 $ 629
Accounts receivable, net 11,522 12,552
Inventories, net 9,815 11,961
Deferred income taxes 1,280 1,269
Other current assets 438 695
------ ------
Total current assets 23,215 27,106
------ ------
Property, plant and equipment, at cost 38,737 37,794
Less accumulated depreciation (24,261) (22,679)
------ ------
Total property, plant & equipment,
net 14,476 15,115
------ ------
Other Assets 4,176 3,274
------ ------
Total Assets $41,867 $45,495
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,702 $ 4,734
Accrued compensation and other 4,371 4,376
Current portion of long-term debt 2,672 2,754
------ ------
Total current liabilities 10,745 11,864
------ ------
Long-term debt 8,489 12,833
Other long-term liabilities 1,820 1,723
Total Liabilities $21,054 $26,420
------ ------
Shareholders' Equity:
Common stock, Par Value $1.00
Authorized 8,000,000 shares
Issued 5,063,535 and 5,051,444
shares 5,063 5,051
Capital in excess of par value 19,101 19,061
Accumulated deficit (3,343) (5,029)
Less: Treasury stock at cost
(699 Shares) (8) (8)
------ ------
Total Shareholders' Equity 20,813 19,075
------ ------
Total Liabilities and
Shareholders' Equity $41,867 $45,495
====== ======
See accompanying Notes to Financial Statements.
<PAGE>
ACME ELECTRIC CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
13 Weeks 13 Weeks 39 Weeks 39 Weeks
Ended Ended Ended Ended
04/03/99 03/28/98 04/03/99 03/28/98
(000s) (000s) (000s) (000s)
------ ------ ------ ------
NET SALES $19,100 $2,352 $60,281 $67,283
------ ------ ------ ------
COSTS AND EXPENSES:
Cost of Sales 13,241 15,895 43,671 49,320
Research and
Engineering Expenses 891 1,037 2,753 3,076
Selling and Adminis-
trative Expenses 3,534 4,066 10,449 11,588
Interest Expense 185 380 645 1,211
------ ------ ------ ------
TOTAL COSTS AND
EXPENSES 17,851 21,378 57,518 65,195
------ ------ ------ ------
INCOME BEFORE TAXES 1,249 974 2,763 2,088
INCOME TAX EXPENSE 487 389 1,077 835
------ ------ ------ ------
NET INCOME $ 762 $ 585 $ 1,686 $ 1,253
====== ====== ====== ======
Weighted Average Number of
Shares Outstanding Used
to Compute Net Income per
Common Share:
Basic 5,061 5,048 5,057 5,045
Incremental Shares from
assumed conversion of
stock options 36 13 27 14
------ ------ ------ ------
Diluted 5,097 5,060 5,084 5,059
===== ===== ===== =====
NET INCOME PER COMMON SHARE
(Basic & Diluted) $.15 $.12 $.33 $.25
=== === === ===
See accompanying Notes to Financial Statements
<PAGE>
ACME ELECTRIC CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
39 Weeks Ended 39 Weeks Ended
April 3, 1999 March 28, 1998
(000's) (000's)
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,686 $ 1,253
Adjustments to reconcile net income to net
cash flows from operating activities:
Loss on sale of fixed assets 35 --
Depreciation and amortization 1,651 1,783
Change in assets and liabilities:
Accounts receivable, net 1,030 1,906
Inventories, net 2,146 (404)
Deferred taxes and other assets (656) 350
Accounts payable (1,032) (1,454)
Accrued compensation and other 92 (212)
------ ------
Net cash provided from
operating activities 4,952 3,222
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition 4 16
Additions to property, plant
and equipment (1,051) (920)
------ ------
Net cash used in investing activities (1,047) (904)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease of borrowings, net (4,426) (2,667)
Proceeds from employee stock purchase
and stock options plans 52 49
------ ------
Net cash used in financing activities 4,374) (2,618)
------ ------
Net decrease in cash (469) (300)
Cash at beginning of period 629 398
------ ------
Cash at end of period $ 160 $ 98
======= =======
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 April
3, 1999, the Statement of Operations for the thirteen- and thirty-nine-
week periods ended April 3, 1999, and March 28, 1998, and the
Statement of Cash Flows for the thirty-nine-week periods ended April
3, 1999, and March 28, 1998, 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 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 this Statement on its effective date, which
is January 1, 2000. The financial statement impact from the adoption
is not expected to be material.
<PAGE>
2. Accounts receivables included in the Balance Sheet are as follows:
April 3, 1999 June 30, 1998
($000's) ($000's)
-------- --------
Billed $11,943 $12,921
Unbilled 13 97
------ ------
Subtotal 11,956 13,018
Less allowance for
doubtful accounts 434 466
------ ------
$11,522 $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:
April 3, 1999 June 30, 1998
($000's) ($000's)
-------- --------
Raw Material $5,035 $5,875
Work-In-Process 1,536 1,685
Finished Goods 3,244 4,401
----- -----
$9,815 $11,961
===== ======
Inventories are reported net of reserves for obsolescence of
$1,184,000 and $781,000 at April 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
April 3, 1999
and
June 30, 1998
--------------
Increase (Decrease)
---------------------
(000's)
Current Assets $(3,891)
Property, Plant & Equipment Net (639)
Other Assets 902
------
$(3,628)
======
Current Liabilities $ (1,119)
Long-Term Debt and Other Liabilities (4,247)
Shareholders' Equity 1,738
$(3,628)
Current assets at April 3, 1999, decreased $3,891,000, or 14.4%, from
June 30, 1998, levels due primarily to the decrease in accounts receivable
of $1,030,000 and inventories of $2,146,000. The decrease in receivables
is reflective of a lower volume of product shipments incurred in February
and March compared with May and June. This is primarily due to the loss of
the Cisco Systems program in the Company's electronics business, coupled
with some softening experienced in the electrical transformer market. The
inventory reduction correlates to the loss of the Cisco program, as well as
improved inventory management.
The net decrease in property, plant and equipment of $639,000, or
4.2%, represents year-to-date capital expenditures in the amount of
$1,051,000, offset by depreciation of approximately $1,651,000 and net
fixed asset retirements of $42,000.
Current liabilities decreased $1,119,000, or 9.4%, primarily the
result of a decrease in accounts payable associated with lower inventories.
Long-term debt and other liabilities decreased approximately
$4,247,000, or 29.2%. Debt reduction resulted from both positive cash flow
from operations, as well as reduced working capital (receivable and
inventory) requirements associated with the loss of the Cisco program.
<PAGE>
The increase in shareholders' equity of $1,738,000 is primarily due
the profit year-to-date of $1,686,000.
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 additional $700,000 of capital
expenditures through June 30.
The Company has in place a credit agreement which provides for two
secured term loans, with current principal balances of $1,012,000 and
$900,000, 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
$4,696,000 at April 3, 1999. 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 April 3,
1999, the Company's eligible (formula-based) unborrowed funds available on
the line of credit were approximately $9,726,000. 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, Form 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 purchasers, 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 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 implemented the mission critical upgrades to its AIX
operating system and Oracle database and application software. Continued
use and testing in the "live" environment will be performed through early
fall.
The Company continues 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 have been substantially
completed, including responses, with follow-up contact being 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 critical
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.
<PAGE>
Results of Operations:
- ---------------------
THIRTEEN- AND THIRTY-NINE-WEEK PERIODS ENDED APRIL 3, 1999,
COMPARED WITH THE COMPARABLE THIRTEEN- AND THIRTY-NINE-WEEK PERIODS
ENDED MARCH 28, 1998
Consolidated sales for the thirteen- and thirty-nine-week periods
ended April 3, 1999, were $19,100,000 and $60,281,000, respectively,
compared with $22,352,000 and $67,283,000 for the comparable periods of a
year earlier. This is a decrease from the prior year quarter and year-to-
date of 14.5% and 10.4%, respectively. This decrease is primarily due to
the wind down of the Cisco Systems program, where the Company's Electronics
Division experienced a quarter and year-to-date decline in sales of $2.6
million and $6.2 million, respectively. In addition, a softening in
certain segments of the capital goods market resulted in slightly lower
sales of transformer products sold through distribution for the quarter and
year-to-date. As a result of the void created by the loss of the Cisco
business, the Company has realigned the labor and overhead costs in its
electronics business, while continuing efforts to fill the void with new
programs.
Cost of sales as a percentage of sales for the thirteen- and thirty-
nine-week periods ended April 3, 1999, were 69.3% and 72.4%, respectively,
compared to 71.1% and 73.3% for the comparable periods of the prior year.
The net improvement of the year-to-date comparison reflects productivity
improvements made in the Company's aerospace business, as well as the
avoidance of one-time overhead costs like those incurred in the prior year
associated with the introduction of demand flow processes in the Company's
Power Distribution Products business.
Research and engineering expenses as a percent of net sales for the
thirteen- and thirty-nine-week periods ended April 3, 1999, were 4.7% and
4.6%, respectively, compared to 4.7% for the comparable periods of the
prior year. Actual costs were reduced by $146,000 and $323,000, quarter
and year-to-date, respectively, associated with the electronics business
overhead realignment.
Selling and administrative costs as a percent of net sales were 18.5%
and 17.3% to the thirteen- and thirty-nine-week periods ended April 3,
1999, compared to 18.2% and 17.2% for the comparable periods of the prior
year. While the comparisons on a percentage basis are relatively
consistent, actual selling and administrative costs, quarter and year-to-
date, were down $532,000 and $1,139,000, respectively. Selling costs
declined as a result of lower commissions, warehouse expenses, and freight,
as the transformer business mix shifted slightly more toward direct sell
accounts (original equipment manufacturer) and less sales through
distribution. General and administrative expenses were down, compared with
the prior year-to-date, as a result of the Company completing its system
conversion (mainframe to client server) in the prior fiscal year, thus
avoiding the overlapping "mainframe system" costs that were experienced in
fiscal 1998.
In fiscal 1999 year-to-date, the Company has recorded $630,000 more
income (throughout the various expense categories, combined) associated
with its overfunded pension plans than in the prior year similar period.
This reflects the favorable returns earned in the pension plans, which
surpassed the actuarial assumptions.
Interest expense as a percent of net sales for the thirteen- and
thirty-nine-week periods ended April 3, 1999, decreased to 1.0% from 1.7%
for the comparable periods of the prior year. Interest expense for the
thirteen- and thirty-nine-week periods compared to the prior year same
periods decreased $195,000 and $566,000, respectively. The decrease in
interest expense is a result of lower debt levels as the Company reduced
its outstanding debt $7,900,00 from March 1998.
<PAGE>
Income taxes as a percent of income before taxes for the thirteen- and
thirty-nine-week periods ended April 3, 1999, were 39.0%, compared with
40.0% for the comparable periods of the prior year.
Backlog at April 3, 1999, was $15,738,000, compared with $17,350,000
at the end of the comparable period of the prior year. The lower backlog
at April 3, 1999, reflects both the reduced orders in the electronics
business due to the loss of the Cisco program and a smaller backlog in the
aerospace business as production throughput gains have brought customer
programs back on schedule.
PART II
OTHER INFORMATION
Item 5. Other Information
a. Exhibits
Interim Report dated
May 7, 1999, for the
quarter ended April 3,
1999. Exhibit 13.
Financial Data Schedule. Exhibit 27.
News Release of April 20,
1999, announcing the third
quarter results for fiscal
year 1999. Exhibit 99.
b. There were no reports filed on Form 8-K during the thirteen-
week period ended April 3, 1999.
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: May 18, 1999 /s/
Robert J. McKenna
Chairman, President and
Chief Executive Officer
Date: May 18, 1999 /s/
Michael A. Simon
Corporate Controller and
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> APR-03-1999
<CASH> 160
<SECURITIES> 0
<RECEIVABLES> 11,956
<ALLOWANCES> 434
<INVENTORY> 9,815
<CURRENT-ASSETS> 23,215
<PP&E> 38,737
<DEPRECIATION> 24,261
<TOTAL-ASSETS> 41,867
<CURRENT-LIABILITIES> 10,745
<BONDS> 8,489
0
0
<COMMON> 24,164
<OTHER-SE> (3,351)
<TOTAL-LIABILITY-AND-EQUITY> 41,867
<SALES> 19,100
<TOTAL-REVENUES> 19,100
<CGS> 13,241
<TOTAL-COSTS> 17,666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185
<INCOME-PRETAX> 1,249
<INCOME-TAX> 487
<INCOME-CONTINUING> 762
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 762
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
EXHIBIT 13
THIRD QUARTER INTERIM REPORT
To Our Shareholders:
Third quarter net income increased to $762,000 from $585,000 in the same
quarter last year. And, year-to-date, earnings through three quarters are
$1,686,000, compared to $1,253,000 in F/Y 1998.
Our Electronics Division completed final shipments to Cisco Systems in
January. We are taking the necessary steps to minimize the earnings impact
to the Division as a result of losing this major customer. Several new
programs under development will move into production this summer, but it
will take some time to fully replace the void created by the Cisco loss.
Our strategic focus for this business has been redirected towards a more
regionally-based electronics systems integration market and products for
the rapidly emerging cable industry.
Sales and earnings in our Aerospace Division continue to improve. We
have two new battery products in the early stages of development that look
promising and may give us the opportunity to pursue new market niches.
Although some distribution segments of our Power Distribution Products
Division remain soft, we have had some early success in the push to expand
our OEM base. Strong new relationships are developing with Exide
Electronics and Coca Cola. We are providing an assortment of magnetic
devices to Exide, and Coca Cola will be using our transformers on
dispensing equipment designed for a new soft drink product offering.
Overall, our business remains strong, and we have many new programs and
products under development that we expect will yield new sales in the years
ahead.
Robert J. McKenna
Chairman and CEO
May 7, 1999
<PAGE>
ACME ELECTRIC CORPORATION
East Aurora, New York
The following tables set forth certain unaudited financial information
for thirty-nine-week periods ended April 3, 1999, and March 28, 1998 (in
thousands, except for per share data):
BALANCE SHEET
-------------
04/03/99 03/28/98 06/30/98
-------- -------- --------
Current Assets $23,215 $27,401 $27,106
Fixed Assets and Other - Net 18,652 19,712 18,389
------ ------ ------
Total $41,867 $47,113 $45,495
====== ====== ======
Current Liabilities $10,745 $11,370 $11,864
Long-Term Debt 10,309 17,953 14,556
Shareholders' Equity 20,813 17,790 19,075
------ ------ ------
Total $41,867 $47,113 $45,495
====== ====== ======
INCOME STATEMENT
13 Weeks 13 Weeks 39 Weeks 39 Weeks Fiscal Year
Ended Ended Ended Ended Ended
04/03/99 03/28/98 04/03/99 03/28/98 06/30/98
-------- -------- -------- -------- --------
Net Sales $19,100 $22,352 $60,281 $67,283 $90,916
Net Income 762 $585 $1,686 $1,253 $2,529
Net Income Per
Common Share
(Basic and Diluted) $.15 $.12 $.33 $.25 $.50
Weighted Average
Number of Shares
Outstanding Used
to Compute
Income Per
Common Share:
Basic 5,061 5,048 5,057 5,045 5,046
Diluted 5,097 5,060 5,084 5,059 5,060
EXHIBIT 99
PRESS RELEASE - THIRD QUARTER RESULTS
CONTACT:
Richard Becht
(716) 655-3800
FOR IMMEDIATE RELEASE
ACME ELECTRIC CORPORATION REPORTS THIRD QUARTER RESULTS
EAST AURORA, N.Y., April 20, 1999 -- Acme Electric Corporation (NYSE:
ACE) announced today that, for the third quarter ended April 3, 1999, net
sales were $19,100,000 with net income of $762,000, or $.15 per share,
compared with sales of $22,352,000 and net income of $585,000, or $.12 per
share, for the comparable period last year.
Sales for the thirty-nine-week period ending April 3, 1999, were
$60,281,000, resulting in net income of $1,686,000, or $.33 per share,
compared with sales of $67,283,000 with net income of $1,253,000, or $.25
per share for the comparable period of the previous year.
Robert J. McKenna, Chairman and CEO, stated that, "The loss of Cisco,
a major customer in our electronics business, continues to depress sales.
We are taking all of the necessary actions to minimize the earnings impact
of this change. New programs under development should begin to produce
improved sales near the end of the calendar year."
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.
# # # #
<PAGE>
ACME ELECTRIC CORPORATION
Comparative Analysis
(in thousands, except per share data)
13 Weeks Ended 39 Weeks Ended
-------------- --------------
04/03/99 03/28/98 04/03/99 03/28/98
-------- -------- -------- --------
Net Sales $19,100 $22,352 $60,281 $67,283
Net Income $762 $585 $1,686 $1,253
Net Income Per Common Share
(Basic and Diluted) $.15 $.12 $.33 $.25
Weighted Average Number of Shares
Outstanding Used to Compute
Income Per Common Share:
Basic 5,061 5,048 5,057 5,045
Diluted 5,097 5,060 5,084 5,059
Company news is available by FAX: dial 1-800-758-5804, and input
extension 006675; or visit our web site at acmeelec.com
