<PAGE> 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 October 31, 1995
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
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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.
<TABLE>
<S> <C>
Class Outstanding at October 31, 1995
- -------------------------------------- -------------------------------
Common Stock, par value $.10 per share 2,311,687 shares
</TABLE>
<PAGE> 2
- INDEX -
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C> <C>
PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - October 31, 1995 (Unaudited)
and January 31, 1995 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Nine and Three Months Ended October 31, 1995 and 1994 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Nine Months Ended October 31, 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 10.
SIGNATURES 11.
EXHIBITS. Exhibit 11 - Earnings Per Share 12.
Exhibit 27 - Financial Data Schedule 13.
</TABLE>
Page 2.
<PAGE> 3
PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- ASSETS -
OCTOBER 31, January 31,
1995 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 722,661 $ 988,507
Notes and accounts receivable - net of allowance for doubtful accounts
of $15,980 958,332 816,623
Inventories 400,143 518,320
Prepaid taxes and expenses 119,996 70,430
------------ ------------
TOTAL CURRENT ASSETS 2,201,132 2,393,880
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 565,954 499,885
------------ ------------
OTHER ASSETS:
Costs in excess of net assets acquired - net 295,791 317,800
Restrictive covenant - net 64,085 75,000
Deferred income taxes 510,000 510,000
Other assets 27,500 27,500
------------ ------------
897,376 930,300
------------ ------------
$ 3,664,462 $ 3,824,065
============ ============
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Short-term debt - bank $ - $ 150,000
Accounts payable and accrued expenses 1,001,058 1,147,140
Long-term debt - current portion 4,626 4,349
Deferred income 75,264 41,238
Income taxes payable 18,007 500
------------ ------------
TOTAL CURRENT LIABILITIES 1,098,955 1,343,227
------------ ------------
LONG-TERM DEBT - NET OF CURRENT PORTION (NOTE 4) 488,909 492,168
------------ ------------
DEFERRED INCOME 18,820 137,968
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES 3 AND 4)
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 (8,627,931) (8,835,007)
------------ ------------
2,108,378 1,901,302
Less: Common stock in treasury, 7,598 shares at cost (50,600) (50,600)
------------ ------------
2,057,778 1,850,702
------------ ------------
$ 3,664,462 $ 3,824,065
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
Page 3.
<PAGE> 4
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months For The Three Months
Ended October 31, Ended October 31,
-------------------------- ---------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $6,049,980 $4,787,344 $1,683,325 $1,541,653
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of products sold 4,289,699 3,211,361 1,235,864 1,055,128
Selling, general and administrative expenses 1,646,767 1,419,507 477,530 512,213
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 5,936,466 4,630,868 1,713,394 1,567,341
---------- ---------- ---------- ----------
OPERATING EARNINGS (LOSS) 113,514 156,476 (30,069) (25,688)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSES):
Interest expense (13,860) - (2,452) -
Interest and other income 125,428 197,598 25,991 163,994
---------- ---------- ---------- ----------
111,568 197,598 23,539 163,994
---------- ---------- ---------- ----------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 225,082 354,074 (6,530) 138,306
Income taxes, net of operating
loss carryforwards 18,006 36,000 (523) 14,000
---------- ---------- ---------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 207,076 318,074 (6,007) 124,306
Gain from discontinued operations - net
of income tax effect - 109,314 - 33,000
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 207,076 $ 427,388 $ (6,007) $ 157,306
========== ========== ========== ==========
INCOME (LOSS) PER SHARE (Note 2):
Continuing operations $.09 $.13 $ - $.05
Discontinued operations - .05 - .02
---- ---- ---- ----
$.09 $.18 $ - $.07
==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
Page 4.
<PAGE> 5
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months
Ended October 31,
----------------------------
1995 1994
----------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 207,076 $ 427,388
Adjustments to reconcile net income to cash (used by) provided from
operating activities:
Depreciation and amortization 87,578 66,593
Amortization of deferred rental income (85,122) (175,930)
Gain on disposal of fixed assets (21,277) -
Net income from discontinued subsidiaries - (109,314)
Change in assets and liabilities:
(Increase) in accounts and notes receivable (141,709) (134,818)
Decrease in inventories 118,177 138,612
(Increase) in prepaid expenses (49,566) (28,004)
(Decrease) increase in accounts payable, accrued expenses and accrued
income taxes (128,575) 110,560
Increase in other, net - 13,000
----------- ----------
NET CASH (USED BY) PROVIDED FROM OPERATING ACTIVITIES (13,418) 308,087
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 47,112 -
Capital expenditures (146,558) (45,410)
----------- ----------
NET CASH (USED BY) INVESTING ACTIVITIES (99,446) (45,410)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term debt (150,000) -
Payments of long-term debt (2,982) -
----------- ----------
NET CASH (UTILIZED) BY FINANCING ACTIVITIES (152,982) -
----------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (265,846) 262,677
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 988,507 1,024,232
----------- ----------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 722,661 $1,286,909
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
Page 5.
<PAGE> 6
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
October 31, 1995 and the results of its operations for the nine
and three month periods ended October 31, 1995 and 1994, and cash
flows for the nine month periods ended October 31, 1995 and 1994.
The accounting policies followed by the Company are set forth in
Note 2 to the Company's consoli- dated 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 nine and three month periods
ended October 31, 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.
Page 6.
<PAGE> 7
EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - ACQUISITION (Continued):
The Company's consolidated statements of operations include the
revenues and expenses of Flexible for the nine and three month
periods ended October 31, 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).
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
October 31, 1994 October 31, 1994
----------------- ------------------
(unaudited) (unaudited)
<S> <C> <C>
Net sales $5,748,363 $1,893,049
Net earnings 631,025 227,585
Earnings per share $.27 $.10
</TABLE>
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.
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 a 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.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
RESULTS OF OPERATIONS:
Consolidated sales for the three months ended October 31, 1995 as
compared to the three months ended October 31, 1994 increased to $1,683,325 from
$1,541,653, an increase of $141,672 or 9%. For the nine months ended October
31, 1995 as compared to October 31, 1994, sales increased by $1,262,636 or 26%
to $6,049,980 from $4,787,344. For the three and nine month periods ended
October 31, 1995 Goodren's sales decreased by $225,000 and increased by
$203,000, respectively, when compared to the same periods of the prior year. The
decrease results from Goodren's general slow-down in business. The Company's
new subsidiary, Flexible, generated net sales of $366,000 and $1,059,000 for the
three and nine months ended October 31, 1995, respectively. This subsidiary was
acquired in November 1994 and was not part of the consolidated group for the
prior year.
For the three and nine month periods ended October 31, 1995, the Company
generated gross profits of 26.6% and 29.1%, respectively. For the comparative
periods of the prior year, the gross profit percentages were 31.6% and 32.9%,
respectively. Management attributes the decrease in overall gross margins to
higher material costs and to the Company having to be more competitive in its
marketplace. It should be noted that the Company's new Flexible subsidiary
reflected a gross profit of approximately 40% on its sales of $1,059,000 for
the nine month period ended October 31, 1995, which helped reduce the overall
decline in gross profit. Without Flexible the Company's gross margin was
26.8% as compared to the 32.9% mentioned above, for the nine months ended
October 31, 1995.
Selling, general and administrative costs were $477,530 and $1,646,767
for the three and nine months ended October 31, 1995 as compared to $512,213 and
$1,419,507 for the comparable periods of the prior year. The decrease in costs
when comparing the three month periods was $34,000 and is reflective of cost
cutting measures implemented by Goodren. The primary reason for the increase in
operating costs of $227,000 when comparing the nine month periods was the
overhead of the new Flexible subsidiary which had not yet been acquired in the
prior period. Flexible's selling, general and administrative expenses for the
nine months ended October 31, 1995 aggregated approximately $255,000.
For the three months ended October 31, 1995 the Company generated a loss
from continuing operations of $6,000 as compared to income of $124,000 generated
during the same period of the prior year. Income from continuing operations
decreased from $318,000 to $207,000 when comparing the nine months ended October
31, 1994 and 1995, respectively. These decreases for the quarter were a direct
result of the decreased sales suffered by Goodren, and higher material costs as
discussed earlier.
Net loss for the three months ended October 31, 1995 was $6,007 ($.00
per share) as compared to net income for the three months ended October 31, 1994
of $157,306 ($.07 per share). For the nine months ended October 31, 1995 as
compared to the nine months ended October 31, 1994, net income was $207,076
($.09 per share) and $427,388 ($.18 per share), respectively. The decreases in
net income and income per share were due to the fact that the 1994 periods
benefitted from a gain from discontinued operations. This gain aggregated
$33,000 and $109,000 for the three and nine months ended October 31, 1994,
respectively.
Page 8.
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES:
At October 31, 1995 the Company had working capital of $1,102,177, cash
of $722,661, a current ratio of 2:1 and a total liability to net worth ratio of
.78:1. At its year ended January 31, 1995, working capital was $1,051,000,
cash was $989,000 and there was a debt to net worth ratio of 1.07:1. The
Company has no additional 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 operations, will be sufficient for at least
the ensuing twelve month period.
Page 9.
<PAGE> 10
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
(27) Financial Data Schedule
Page 10.
<PAGE> 11
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
Date: December 11, 1995 /s/ Peter B. Fritzsche
-------------------------------------
Peter B. Fritzsche
Chief Executive Officer and Principal
Accounting Officer
Page 11.
<PAGE> 12
EXHIBIT INDEX
(11) Computation of Earnings per Common Share - See Exhibit 11
(27) Financial Data Schedule
<PAGE> 1
EAC INDUSTRIES, INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months For The Three Months
Ended October 31, Ended October 31,
--------------------------- --------------------------
1995 1994 1995 1994
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
INCOME (LOSS) FROM CONTINUING
OPERATIONS $207,076 $318,074 $(6,007) $124,306
Income from discontinued operations - 109,314 - 33,000
-------- -------- ------- --------
NET INCOME (LOSS) $207,076 $427,388 $(6,007) $157,306
======== ======== ======= ========
SHARES:
Weighted average shares outstanding 2,311,687 2,311,687 2,311,687 2,311,687
Other - options, warrants etc. - - - -
--------- --------- --------- ---------
2,311,687 2,311,687 2,311,687 2,311,687
========= ========= ========= =========
PRIMARY EARNINGS (LOSS) PER SHARE:
Continuing operations $.09 $.13 $ - $.05
Discontinued operations - .05 - .02
---- ---- ---- ----
$.09 $.18 $ - $.07
==== ==== ==== ====
</TABLE>
Page 12.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated condensed financial statements for the third quarter ended October
31, 1995 and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 722,661
<SECURITIES> 0
<RECEIVABLES> 974,312
<ALLOWANCES> 15,980
<INVENTORY> 400,143
<CURRENT-ASSETS> 2,201,132
<PP&E> 1,735,350
<DEPRECIATION> 1,169,396
<TOTAL-ASSETS> 3,664,462
<CURRENT-LIABILITIES> 1,098,955
<BONDS> 0
<COMMON> 231,929
0
0
<OTHER-SE> 1,825,849
<TOTAL-LIABILITY-AND-EQUITY> 3,664,462
<SALES> 6,049,980
<TOTAL-REVENUES> 6,049,980
<CGS> 4,289,699
<TOTAL-COSTS> 5,936,466
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,860
<INCOME-PRETAX> 225,082
<INCOME-TAX> 18,006
<INCOME-CONTINUING> 207,076
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,076
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
