SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C., 20459
FORM 10Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period needed March 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 No. 0-8027
EASTCO INDUSTRIAL SAFETY CORP
(Exact name of registrant as specified in its charter)
NEW YORK 11-1874010
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization)
130 West 10th Street, Huntington Station, N.Y. 11746
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 427-1802
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 and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
As of March 31, 1995 the Issuer had 3,477,383 shares outstanding of its
$.12 par value common stock.
Index Schedule found on Page No. 11
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1995 1994
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 527,630 $ 517,506
Accounts receivable - (less allowance
for doubtful accounts of $385,671 at
March 31, 1995 and $466,213 at
June 30, 1994) 3,363,753 3,429,515
Inventories - (note 2 ) 4,145,388 3,166,038
Other 272,574 444,260
TOTAL CURRENT ASSETS 8,309,345 7,557,319
PROPERTY, PLANT AND EQUIPMENT, at cost - 2,507,864 2,371,573
Less accumulated depreciation and
amortization 1,219,694 1,079,171
1,288,170 1,292,402
OTHER ASSETS 150,965 152,035
TOTAL ASSETS $9,748,480 $9,001,756
See accompanying notes to consolidated financial statements.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft $ - $ 365,277
Loans Payable 4,082,971 3,183,860
Current maturities of long-term debt 42,426 42,426
Accounts payable 2,904,040 2,489,897
Accrued expenses 278,190 434,043
TOTAL CURRENT LIABILITIES 7,307,627 6,515,503
LONG-TERM DEBT, less current maturities 507,284 538,544
SHAREHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.12 par value;
authorized - 20,000,000 shares
issued 3,477,383 shares 417,286 417,286
Additional paid-in capital 5,848,952 5,848,952
Retained deficit (4,332,669) (4,318,529)
TOTAL SHAREHOLDERS' EQUITY 1,933,569 1,947,709
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $9,748,480 $9,001,756
See accompanying notes to consolidated financial statements.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Three Months Ended March 31,
1995 1994
Net Sales $5,968,852 $5,231,211
Cost of Sales 4,670,976 4,450,207
Gross Profit 1,297,876 781,004
Selling, general &
administrative expenses 1,111,103 1,117,727
Interest expense (net) 146,168 149,526
Other (income) (net) (21,758) (16,335)
1,235,513 1,250,918
Net income (loss) 62,363 (469,914)
Opening deficit (4,395,032) (2,706,624)
Closing deficit $(4,332,669) $(3,176,538)
Income (loss) per common share $ .02 $ (.59)
Weighted average number of
common shares outstanding 3,477,383 800,143
See accompanying notes to consolidated financial statements.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Nine Months Ended March 31,
1995 1994
Net Sales $17,365,091 $15,231,526
Cost of Sales 13,887,720 12,940,728
Gross Profit 3,477,371 2,290,798
Selling, general &
administrative expenses 3,183,097 3,402,532
Interest expense (net) 405,081 464,857
Other (income) (net) (96,654) ( 7,204)
3,491,524 3,860,185
Net loss (14,153) (1,569,387)
Opening (deficit) (4,318,516) (1,607,151)
Closing (deficit) $(4,332,669) $(3,176,538)
Earnings/(Loss) per common share $ - 0 - $ (1.96)
Weighted average number of
common shares outstanding 3,477,383 800,143
See accompanying notes to consolidated financial statements.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended March 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(14,153) $(1,569,387)
Adjustment to reconcile
results of operations to net
cash effect of operating activities:
Depreciation and amortization 140,523 148,392
Reversal of previously accrued
deferred compensation - 0 - (65,000)
Net changes in assets and liabilities:
Decrease in accounts receivable 65,762 1,302,272
(Increase)/Decrease in inventories (979,350) 1,061,714
Decrease/(Increase) in other
current assets 171,686 (167,577)
Decrease in other assets 1,070 16,268
Increase/(Decrease) in accounts payable 414,156 (660,348)
(Decrease) in accrued expenses (155,853) (38,673)
Total Adjustments (342,006) 1,597,048
Net cash (used for)/provided by
operating activities (356,159) 27,661
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (136,291) ( 2,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bridge loan - 0 - 1,125,000
Net (repayments) of long-term debt (31,260) (28,769)
Borrowings under line of credit 18,709,316 14,986,957
Repayments under line of credit (17,810,205) (16,059,310)
Deferred registration costs - 0 - ( 188,744)
(Decrease)/Increase in cash overdrafts (365,277) 139,205
Net cash (used for)/provided by
financing activities 502,574 (25,661)
NET INCREASE IN CASH 10,124 - 0 -
CASH, beginning of period 517,506 - 0 -
CASH, end of period $ 527,630 $ - 0 -
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 428,219 $ 297,587
Income Taxes $ 2,572 $ - 0 -
See accompanying notes to consolidated financial statements.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Company's Opinion on Unaudited Financial Statements
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
accruals) necessary to present fairly the consolidated balance sheets as of
March 31, 1995 and June 30, 1994 (audited) and the related statements of
operations and deficit for each of the three and nine month periods ended
March 31, 1995 and 1994 and cash flows for the nine month period ending
March 31, 1995 and 1994.
The results of operations for the three and nine month periods ended
March 31, 1995 and 1994 are not necessarily indicative of the results for
the entire year.
2. Inventories
Inventories consist of the following:
March 31, June 30,
1995 1994
Raw materials $ 1,654,082 $ 1,137,075
Work-in-process 310,486 221,388
Finished goods 2,180,820 1,807,575
Total $ 4,145,388 $ 3,166,038
3. Litigation
The Company is a party to various asbestos lawsuits alleging damages
from exposure to asbestos products sold by the Company. Refer to Part II,
Other Information, Item I "Legal Proceedings" in this Form 10Q and Note 12
to June 30,1994 Notes to Audited Consolidated Financial Statements regarding
the asbestos litigation.
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND CONSOLIDATED RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company had working capital as of March 31, 1995 of approximately
$1,002,000 as compared to approximately $1,042,000 as of June 30, 1994. A
substantial portion of the Company's working capital consists of inventory,
which was approximately $4,145,000 and $3,166,000 as of March 31, 1995 and
June 30, 1994, respectively. The Company is required to maintain substantial
inventories of its numerous products in order to meet the immediate shipping
requirements of its customers who require products on short notice and who
do not maintain an inventory of such products. In addition, with the
Company's available working capital and its ability to obtain and maintain
sufficient inventories, there can be no assurance that the additional
inventory will be sufficient to meet sales demands, or that the Company will
be able to achieve or maintain sufficient inventories in the future. The
Company believes that its current working capital position will be sufficient
to satisfy its needs for the current fiscal year.
Effective October 1, 1994, the Company and Congress Financial Corporation
extended its October 1991 line of credit agreement for two years
whereby the Company may borrow up to $5,000,000, under the same terms except
that interest on the used portion of the line will be reduced by 1/2% and
the unused line fee will be reduced by 1/4%. The amounts outstanding at
March 31, 1995 and June 30, 1994 were approximately $4,083,000 and
$3,184,000, respectively. The Company has $87,000 available for borrowing
at March 31, 1995, after adjusting for its liability for outstanding checks.
The Company has no material commitments for capital expenditures.
At the present time, the Company, together with a variety of defendants, is
a party to various asbestos-related lawsuits involving a number of plaintiffs
alleging damages from exposure to asbestos products sold by the Company.
The Company may become a party to additional asbestos-related actions in the
future. The Company is also party to other non-asbestos-related litigation.
The Company cannot, at this time, determine the outcome of this uncertainty
which may have an adverse effect upon the liquidity of the Company in the
future.
Results of Operations
Net sales for the three months ended March 31, 1995 were $5,969,000 as
compared to $5,231,000 for the three months ended March 31, 1994,
an increase of $738,000 or 14.1%. Sales in the distribution segment
decreased 1.0% to $1,896,000 from $1,916,000 for the same quarter last
year. This decrease is due to the Company's continued efforts to reduce
its dependency on abatement industry sales. Sales in the manufacturing
segment increased 22.9% to $4,073,000 from $3,315,000 compared to the same
quarter last year.
<PAGE>
Net sales for the nine months ended March 31, 1995 were $17,365,000, an
increase of 14.0% from the comparable sales for the period ending
March 31, 1994 of $15,232,000. In the nine months ended March 31, 1995
distribution sales were $6,672,000, an increase of $165,000 or
2.5% compared to the same nine months in the prior year, while the
manufacturing sales increased 22.6% to $10,693,000 from $8,725,000
for the same period in the prior year. The increase in sales is mainly due
to the continued improvement in the Company's working capital
position, management's efforts to achieve profitable operations and
improvement in overall industry conditions.
The Company's gross profit margin increased to 21.7% of sales for the third
quarter of fiscal 1995 as compared to 14.9% for the third quarter
fiscal 1994. The Company believes that the continued increase in gross
profit is primarily the result of efficiencies in production, improved
purchasing due to the availability of working capital, as well as improved
industry conditions. The Company's gross profit margin for the nine
months ended March 31, 1995 rose to 20.0% from 15.0% for the similar period
in the prior year.
Selling, general and administrative expenses for the quarter ended March 31,
1995 were approximately $1,111,000 or 18.6% of sales compared
to approximately $1,118,000 or 21.4% of sales for the same period last year.
The decrease in these expenses as a percentage of sales was due
to the increase in sales volume experienced in the quarter, as well as the
effect of the Company's continuing efforts to reduce costs. These
expenses for the nine months ended March 31, 1995 were approximately
$3,183,000 (or 18.3% of sales) as compared to approximately
$3,402,000 (or 22.3% of sales) for the same period in the prior year.
Interest expense (net) was approximately $146,000 for the third quarter of
fiscal 1995, a decrease of approximately $3,000 when compared
to the same quarter of fiscal 1994, and was principally due to the reduction
in the interest rate charged by Congress on its loan. For the nine
months ended March 31, 1995 the interest expense (net) was approximately
$405,000, a decrease of approximately $50,000 from the same
period in the prior year.
The Company earned $.02 per share for the quarter ended March, 31, 1995 as
compared to a loss of $.59 in the quarter ended March 31, 1994.
For the nine months ended March 31, 1995, the Company showed a cumulative
break-even against $1.96 per share loss for the same period
in the prior year. This decrease is due to the Company's loss reductions.
The increase in shares outstanding was due to shares issued in
connection with the Company's public stock offering and stock issued in
connection with certain loans, which occurred during the fourth quarter
of the fiscal year ended June 30, 1994.
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company has been advised that the action entitled David P.
Baker and Mary Lee Baker v. Owen Corp., Eastco Industrial Safety
Corp. a/k/a Charkate Glove and Specialty Company, et al has been
settled for which the Company's share of liability was $5,000
which was paid by the Company's insurance carrier.
As of December 31, 1994 the Company was a defendant in
approximately 275 actions involving approximately 711 plaintiffs
to which Puerto Rico Safety Equipment Corporation is named in
approximately 12 of these actions involving approximately 196
first party plaintiffs.
During the fiscal quarter ended March 31, 1995 5 new actions
involving asbestos were instituted against the Company involving
approximately 61 first party plaintiffs. Puerto Rico Safety
Equipment Corporation ("Puerto Rico Safety") is a party in 4 of
these actions involving approximately 54 first party plaintiffs.
1. Fleischman, et al v A.C. & S., Inc., Eastco Industrial Safety
Corp., a/k/a Charkate Glove and Specialty Company, Puerto Rico
Safety Equipment Corporation, et al was instituted in the
Supreme Court of the State of New York, County of New York.
There are 3 plaintiffs and 65 defendants in this action.
2. Carpino, et al v ABB Lummus Crest, Inc., Eastco Industrial
Safety Corp., a/k/a Charkate Glove and Specialty Company,
Puerto Rico Safety Equipment Corporation, et al was
instituted in the Supreme Court of the State of New York,
County of New York. There are 29 plaintiffs and 97
defendants in this action.
3. Elstob, et al v ABB Lummus Crest, Inc., Eastco Industrial
Safety Corp., a/k/a Charkate Glove and Specialty Company,
Puerto Rico Safety Equipment Corporation, et al was
instituted in the Supreme Court of the State of New York,
County of New York. There are 13 plaintiffs and 56
defendants in this action.
4. Tortorici, et al v ABB Lummus Crest, Inc., Eastco Industrial
Safety Corp., a/k/a Charkate Glove and Specialty Company,
Puerto Rico Safety Equipment Corporation, et al was
instituted in the Supreme Court of the State of New York,
County of New York. There are 29 plaintiffs and 97
defendants in this action.
5. Navitski, et al v A.C. & S., Inc., Eastco Industrial Safety
Corp., a/k/a Charkate Glove and Specialty Company, et al was
instituted in the Supreme Court of the State of New York,
County of New York. There are 7 plaintiffs and 60 defendants
in this action.
The Company has been advised by its insurance carrier that the
Miller, Zupko, Possert, Ellefsen, Toth and Sautner cases involving
approximately 46 plaintiffs were settled for which the Company's
share is $2,760. $1,014.58 of this sum is to be reimbursed by
Mount Vernon Insurance
Company.
Accordingly, as of March 31, 1995 the Company was a party to
approximately 273 actions involving approximately 732 first party
plaintiffs to which Puerto Rico Safety was named in approximately
16 of these actions involving approximately 250 first party
plaintiffs.
<PAGE>
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 ON FORM 8-K
NONE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 9, 1995
EASTCO INDUSTRIAL SAFETY CORP.
By:/s/ ANTHONY P. TOWELL
Chief Financial Officer,
Vice President of Finance
and Treasurer
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<NAME> EASTCO INDUSTRIAL SAFETY CORP
<S> <C>
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<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 527,630
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<OTHER-SE> 1,516,283
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<OTHER-EXPENSES> 3,086,443
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