<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, 1996
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
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
incorporation or organization) Identification No.)
22 BLACKSTONE AVENUE, BRANFORD, CT 06405
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(Address of principal executive offices) (Zip Code)
(203) 315-8020
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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
----- -----
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 October 31, 1996
- -------------------------------------- -------------------------------
Common Stock, par value $.10 per share 2,311,687 shares
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- INDEX -
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C>
PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - October 31, 1996 (Unaudited)
and January 31, 1996 3.
Consolidated Condensed Statements of Operations (Unaudited) -
Nine and Three Months Ended October 31, 1996 and 1995 4.
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Nine and Three Months Ended October 31, 1996 and 1995 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.
EXHIBITS:
Exhibit 11 - Earnings Per Share 11.
Exhibit 27 - Financial Data Schedule 12.
</TABLE>
Page 2.
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PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- ASSETS -
OCTOBER 31, JANUARY 31,
1996 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 698,622 $ 628,380
Notes and accounts receivable - net of allowance for doubtful accounts
of $35,566 and $45,980 at October 31, and January 31, 1996, respectively 835,414 996,132
Inventories 244,059 302,840
Prepaid taxes and expenses 112,051 101,649
----------- -----------
TOTAL CURRENT ASSETS 1,890,146 2,029,001
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET 891,537 563,619
----------- -----------
OTHER ASSETS:
Costs in excess of net assets acquired - net 352,898 367,967
Deferred income taxes 510,000 510,000
Other assets 60,651 52,500
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923,549 930,467
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$ 3,705,232 $ 3,523,087
=========== ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 300,825 $ 246,897
Accrued expenses 458,446 571,960
Long-term liabilities - current portion (Note 4) 87,286 34,232
Acquisition note payable (Note 3) 175,000 -
Deferred income 18,817 75,268
Income taxes payable - 6,359
----------- -----------
TOTAL CURRENT LIABILITIES 1,040,374 934,716
----------- -----------
LONG-TERM LIABILITIES - NET OF CURRENT PORTION (NOTE 4) 750,271 608,474
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTES 3 AND 4)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value; 20,000,000 shares authorized,
2,319,285 shares issued 231,929 231,929
Capital in excess of par value 10,504,380 10,504,380
Accumulated deficit (8,771,122) (8,705,812)
----------- -----------
1,965,187 2,030,497
Less: Common stock in treasury, 7,598 shares at cost (50,600) (50,600)
----------- -----------
1,914,587 1,979,897
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$ 3,705,232 $ 3,523,087
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</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 3.
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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,
-------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $4,816,364 $6,049,980 $1,367,964 $1,683,325
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of products sold 3,535,113 4,289,699 959,367 1,235,864
Selling, general and administrative expenses 1,412,581 1,646,767 402,111 477,530
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 4,947,694 5,936,466 1,361,478 1,713,394
---------- ---------- ---------- ----------
OPERATING EARNINGS (LOSS) (131,330) 113,514 6,486 (30,069)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSES):
Interest expense (11,641) (13,860) (9,202) (2,452)
Interest and other income 77,661 125,428 28,715 25,991
---------- ---------- ---------- ----------
66,020 111,568 19,513 23,539
---------- ----------- ---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES (65,310) 225,082 25,999 (6,530)
Income taxes, net of operating loss carryforwards - 18,006 - (523)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (65,310) $ 207,076 $ 25,999 $ (6,007)
========== ========== ========== ==========
INCOME (LOSS) PER SHARE (NOTE 2) $(.03) $.09 $ .01 $ -
===== ==== ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 4.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months
Ended October 31,
-------------------------
1996 1995
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<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(65,310) $ 207,076
Adjustments to reconcile net income to cash provided from operating activities:
Depreciation and amortization 75,722 87,578
Amortization of deferred rental income (56,451) (85,122)
Gain on disposal of fixed assets - (21,277)
Change in assets and liabilities:
Decrease (increase) in accounts and notes receivable 160,717 (141,709)
Decrease in inventories 58,781 118,177
Decrease (increase) in prepaid expenses and other assets 24,186 (49,566)
Increase (decrease) in accounts payable, accrued expenses and accrued
income taxes (95,887) (128,575)
-------- ---------
NET CASH PROVIDED (UTILIZED) BY OPERATING ACTIVITIES 101,758 (13,418)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets - 47,112
Capital expenditures (294,721) (146,558)
-------- ---------
NET CASH (USED BY) INVESTING ACTIVITIES (294,721) (99,446)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in bank loan - (150,000)
Proceeds from short-term debt 314,297 -
Payments of long-term debt (51,092) (2,982)
-------- ---------
NET CASH (USED BY) PROVIDED FINANCING ACTIVITIES 263,205 (152,982)
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 70,242 (265,846)
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR 628,380 988,507
-------- ---------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 698,622 $ 722,661
========= =========
</TABLE>
OTHER:
During the current period the company leased certain new equipment which has
been reflected as a capitalized lease.
The accompanying notes are an integral part of these consolidated statements.
Page 5.
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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, 1996 and the results of its operations for the nine and
three month periods ended October 31, 1996 and 1995, and its cash
flows for the nine month periods ended October 31, 1996 and 1995.
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,
1996, 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, 1996 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:
In September 1996, the Company acquired all of the issued and
outstanding stock of Athena Packaging Inc., a manufacturer and
marketer of sheet fed graphics. Of the $350,000 purchase price,
$175,000 was paid at closing with the balance due in March 1997.
This acquisition has been accounted for using the purchase method of
accounting.
NOTE 4 -LONG-TERM LIABILITIES:
Goodren, in early 1995, withdrew 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. In September 1996, based upon a settlement agreement
between Goodren and the Plan, the Company reduced its reserve, for
this liability, of $560,000 by $100,000. As per this settlement
agreement, Goodren is obligated to take quarterly payments of $8,303
over a twenty-year (20) period.
Page 6.
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EAC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 -LONG-TERM LIABILITIES (CONTINUED):
Additionally, Goodren is potentially liable for its proportionate
share (approximately $154,000) 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 has provided a
reserve for this potential liability, which is included in long-term
liabilities.
Page 7.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
RESULTS OF OPERATIONS:
Sales for the nine month period ended October 31, 1996 were
$4,816,000 as compared to $6,050,000 for the same period of the
prior year, reflecting a decrease of $1,234,000 or 20%.
Sales for the three month period ended October 31, 1996 were
$1,368,000 as compared to $1,683,000 for the comparable period of
the prior year, reflecting a decrease of $315,000 or 19%.
Management attributes these decreases primarily to a decline in
sales to certain of Goodren's customers.
Costs of sales for the nine month period ended October 31, 1996
was $3,535,000 (73% of sales) as compared to $4,290,000 (71% of
sales) for the same period of the prior year. Cost of sales for
the three month period ended October 31, 1996 was $959,000 (70% of
sales) as compared to $1,236,000 (73% of sales) for the same
period of the prior year. This increase in cost of sales as a
percent of sales for the current nine month period is primarily
due to higher raw material costs and the effect that lower sales
have on certain fixed costs.
Selling, general and administrative expenses decreased from
$1,647,000 to $1,413,000 ($234,000 or 14%) for the nine month
period ended October 31, 1996 when compared to the same period of
the prior year. The Company believes that the nine month decrease
is due to cost reduction programs which were instituted earlier
this year, as well as a $100,000 reduction in a reserve for a
pension withdrawal liability incurred by Goodren. For the three
months ended October 31, 1996, selling, general and administrative
expenses decreased from $478,000 to $402,000 ($76,000 or 16%) when
compared to the same period of the prior year. This decrease is
primarily attributable to the reduction in Goodren's reseve for a
pension withdrawal liability net of expenses incurred by Athena
Packaging Inc., a new subsidiary (discussed below).
For the nine and three months ended October 31, 1996 the Company
reflected a net loss of $65,310 ($.03 per share) and net income
of $25,999 ($.01 per share), respectively. For the nine and
three months ended October 31, 1995 the Company reflected net
income of $207,076 ($.09 per share) and a loss of $6,007 ($.00
per share), respectively. These variances in earnings were
primarily due to the reduction in sales and lower gross profit
margins mentioned above.
LIQUIDITY AND CAPITAL RESOURCES:
At October 31, 1996, the Company's working capital was $850,000
compared to a working capital of $1,094,000 at its year ended
January 31, 1996. Cash amounted to $699,000 at October 31, 1996
compared to $628,000 at January 31, 1996.
In September 1996, the Company acquired all of the issued and
outstanding stock of Athena Packaging Inc., a manufacturer and
marketer of sheet fed graphics. Of the $350,000 purchase price,
$175,000 was paid at closing with the balance due in March 1997.
This acquisition has been accounted for using the purchase method
of accounting.
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.
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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
(27) Financial Data Schedule
Page 9.
<PAGE> 10
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
/s/ Peter B. Fritzsche
---------------------------------------
Date: December 9, 1996 Peter B. Fritzsche
Chief Executive Officer and Principal
Accounting Officer
Page 10.
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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,
----------------------------- -----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ (65,310) $ 207,076 $ 25,999 $ (6,007)
========== ========== ========== ==========
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 PER SHARE $(.03) $.09 $ .01 $ -
===== ==== ===== =====
</TABLE>
- Exhibit 11 -
Page 11.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED OCTOBER 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 698,622
<SECURITIES> 0
<RECEIVABLES> 870,980
<ALLOWANCES> 35,566
<INVENTORY> 244,059
<CURRENT-ASSETS> 1,890,146
<PP&E> 2,161,424
<DEPRECIATION> 1,269,887
<TOTAL-ASSETS> 3,705,232
<CURRENT-LIABILITIES> 1,040,374
<BONDS> 0
0
0
<COMMON> 231,929
<OTHER-SE> 1,682,658
<TOTAL-LIABILITY-AND-EQUITY> 3,705,232
<SALES> 4,816,364
<TOTAL-REVENUES> 4,816,364
<CGS> 3,535,113
<TOTAL-COSTS> 5,535,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,641
<INCOME-PRETAX> (65,310)
<INCOME-TAX> 0
<INCOME-CONTINUING> (635,310)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (65,310)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
