U.S. SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C., 20459
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________
COMMISSION FILE # 0-8027
------
EASTCO INDUSTRIAL SAFETY CORP.
------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 11-1874010
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
130 West 10th Street, Huntington Station, N.Y. 11746
-----------------------------------------------------
(Address of principal executive offices)
(516) 427-1802
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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_________
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 3,614,883 shares
of the Company's Common Stock, par value $.12 per share is outstanding
as of December 31, 1995.
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1995 1995
------------ --------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 37,233 $ 521,210
Accounts receivable - (less allowance
for doubtful accounts of $135,562 at
December 31, 1995 and $304,000 at
June 30, 1995) 4,310,070 3,898,173
Inventories - (note 2) 5,421,169 4,363,898
Other 444,983 481,868
---------- ----------
TOTAL CURRENT ASSETS 10,213,455 9,265,149
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost - 2,599,580 2,562,815
Less accumulated depreciation and
amortization 1,317,974 1,243,704
--------- ---------
1,281,606 1,319,111
OTHER ASSETS 184,287 131,788
--------- ---------
TOTAL ASSETS $11,679,348 $10,716,048
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1995 1995
------------ --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans Payable $5,793,384 $4,928,908
Current maturities of long-term debt 52,276 48,762
Accounts payable 3,032,089 2,891,043
Accrued expenses 223,666 331,907
--------- ---------
TOTAL CURRENT LIABILITIES 9,101,415 8,200,620
--------- ---------
LONG-TERM DEBT, less current maturities 462,734 489,782
--------- --------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.12 par value;
authorized - 20,000,000 shares,
issued 3,614,883 shares
in December 1995 and 3,477,383
shares in June 1995 433,786 417,286
Additional paid-in capital 5,953,227 5,848,952
Retained deficit (4,271,814) (4,240,592)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 2,115,199 2,025,646
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $11,679,348 $10,716,048
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Three Months Ended December 31,
1995 1994
------ ------
Net Sales $6,250,761 $5,566,994
Cost of Sales 4,862,058 4,397,248
--------- ---------
Gross Profit 1,388,703 1,169,746
--------- ---------
Selling, general & administrative expenses 1,156,733 1,055,876
Interest expense (NET) 192,351 132,551
Other income (NET) (23,917) (53,643)
-------- ---------
1,325,167 1,134,784
--------- ---------
Net income 63,536 34,962
Opening (deficit) (4,335,350) (4,429,994)
--------- ---------
Closing (deficit) $(4,271,814) $(4,395,032)
========= =========
Income per common share $ .02 $ .01
========= =========
Weighted average number of
common shares outstanding 3,614,883 3,477,383
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Six Months Ended December 31,
1995 1994
-------- --------
Net Sales $12,773,147 $11,396,239
Cost of Sales 10,133,822 9,216,744
---------- ----------
Gross Profit 2,639,325 2,179,495
---------- ----------
Selling, general & administrative expenses 2,242,615 2,071,994
Interest expense (NET) 386,767 258,913
Other income (NET) (36,835) (74,909)
Settlement with underwriter 78,000 ---
--------- ---------
2,670,547 2,255,998
--------- ---------
Net loss (31,222) (76,503)
Opening (deficit) (4,240,592) (4,318,529)
--------- ---------
Closing (deficit) $(4,271,814) $(4,395,032)
========= =========
Loss per common share $ (.01) $ (.02)
========= =========
Weighted average number of
common shares outstanding 3,614,883 3,477,383
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
EASTCO INDUSTRIAL SAFETY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended December 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES: -------- -------
Net (Loss) $(31,222) $(76,503)
-------- --------
Adjustment to reconcile results of
operations to net cash
effect of operating activities:
Depreciation and amortization 74,270 93,443
Settlement with underwriter 72,025
Net changes in assets and liabilities:
(Increase)/Decrease in accounts receivable (411,897) 125,590
(Increase) in inventories (1,057,271) (934,702)
Decrease in other current assets 36,885 81,207
(Increase) in other assets (52,499) (52,594)
Increase in accounts payable 141,046 565,782
(Decrease) in accrued expenses (108,241) (158,110)
--------- --------
Total Adjustments (305,682) (279,384)
Net cash (used for)/provided by --------- --------
operating activities (1,336,904) (355,887)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (36,765) (56,773)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants 48,750
Repayments of long-term debt (23,534) (20,475)
Borrowings under line of credit agreement 13,641,824 12,267,710
Repayments under line of credit agreement (12,777,348) (11,801,019)
(Decrease) in cash overdrafts (42,760)
---------- ----------
Net cash provided from financing activities 889,692 403,456
---------- ----------
NET (DECREASE) IN CASH (483,977) (9,204)
CASH, beginning of period 521,210 517,506
--------- ----------
CASH, end of period $ 37,233 $ 508,302
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 192,351 $ 272,398
========= =========
Income taxes $ 4,772 $ 488
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Issuance of common stock in connection with
settlement with underwriter $ 78,000
=========
See accompanying notes to consolidated financial statements.
<PAGE>
<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 December 31, 1995 and June 30, 1995 (audited) and the related
statements of operations and deficit for each of the three month and six
month periods ended December 31, 1995 and 1994 and cash flows for the six
month periods ending December 31, 1995 and 1994.
The results of operations for the three and six month periods ended
December 31, 1995 and 1994 are not necessarily indicative of the results
for the entire year.
2. Inventories
Inventories consist of the following:
December 31, June 30,
1995 1995
----------- --------
Raw materials $ 1,609,985 $ 1,688,881
Work-in-process 365,140 440,164
Finished goods 3,446,044 2,234,853
---------- ----------
Total $ 5,421,169 $ 4,363,898
========== ==========
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 10-QSB as well as
the Company's form 10-QSB of September 30, 1995 and its form 10-KSB for June
30, 1995 and Note 11 to June 30, 1995 Notes to Audited Consolidated Financial
Statements regarding the asbestos litigation.
<PAGE>
<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 December 31, 1995 of approximately
$1,112,000 as compared to approximately $1,065,000 as of June 30, 1995.
A substantial portion of the Company's working capital consists of
inventory, which was approximately $5,421,000 and $4,364,000 as of
December 31, 1995 and June 30, 1995, 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.
With respect to the line of credit with Congress Financial Corporation,
the Company has $43,000 available for borrowing at December 31, 1995,
after adjusting for its liability for outstanding checks.
The Company's restructuring efforts continue to bear results,
particularly in the manufacturing segment, where market share is
increasing. This segment continues to show an increased gross profit
percentage as a result of efficiencies in production as well as economies
of scale in its operations. The distribution segment showed higher sales
in the second quarter, due to the Company's efforts in telemarketing and
new customers.
Presently the Company, together with a variety of defendants, is 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. To date, the Company's insurance coverage has been adequate
and the Company's cost relative to asbestos litigation against it has not
been material.
The Company, at the present time, is searching for sources of capital to
ensure its future growth.
Results of Operations
Net sales for the three months ended December 31, 1995 were $6,251,000 as
compared to $5,567,000 for the three months ended December 31, 1994, an
increase of $684,000 or 12.3%. Sales in the distribution segment
increased 6.3% to $2,269,000 from $2,134,000 for the same quarter last
year, while sales in the manufacturing segment increased 16.0% to
$3,982,000 from $3,433,000 compared to the comparable quarter last year.
Net sales for the six months ended December 31, 1995 were $12,773,000, an
increase of 12.1% from the comparable sales for the period ending
December 31, 1994 of $11,396,000. In the six months ended December 31,
<PAGE>
<PAGE>
1995 distribution sales were $4,710,000, a decrease of $65,000 or 1.4%
compared to the same six months in the prior year, while the
manufacturing sales increased 21.8% to $8,063,000 from $6,620,000 for the
same period in the prior year. The overall increase in sales is due to
the improvement in the Company's inventory position, as well as the
continued improvement in overall industry conditions.
The Company's gross profit margin increased to 22.2% of sales for the
second quarter of fiscal 1996 as compared to 21.0% for the second quarter
fiscal 1995, and the gross profit margin for the six months ended
December 31, 1995 rose to 20.7% from 19.1% for the similar period in the
prior year. The Company believes that the continued increase in gross
profit is primarily the result of efficiencies in production, improved
purchasing and the improved industry conditions.
Selling, general and administrative expenses for the quarter ended
December 31, 1995 were approximately $1,157,000 or 18.5% of sales
compared to approximately $1,056,000 or 19.0% for the same period last
year. These expenses for the six months ended December 31, 1995 were
approximately $2,243,000 (or 17.6% of sales) as compared to approximately
$2,072,000 (or 18.2% of sales) for the same period in the prior year.
These decreases in selling, general and administrative expenses as a
percentage of sales were due to the increase in sales volume experienced
in the quarter, as well as the effect of the Company's continuing cost
reductions.
Interest expense was approximately $192,000 for the second quarter of
fiscal 1996, an increase of approximately $60,000 when compared to the
same quarter of fiscal 1995. For the six months ended December 31, 1995
the interest expense was approximately $387,000, against approximately
$259,000 in the same period in the prior year. These increases were due
to increased borrowings during these periods.
The Company earned $.02 per share for the quarter ended December 31, 1995
against earnings of $.01 per share in the quarter ended December 31,
1994. For the six months ended December 31, 1995 the Company showed a
cumulative decrease in per share losses at $.01 against $.02 per share
loss for the same period in the prior year. The increase in the average
weighted shares was due to shares issued in connection with the
settlement with the Company's underwriter as well as the exercise in
warrants which occurred during the first quarter of fiscal June 1996.
<PAGE>
<PAGE>
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No new asbestos actions have been instituted against the Company.
Item 2. CHANGES IN SECURITIES
NONE
Item 3. DEFAULTS UPON SENIOR SECURITIES
NONE
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following propositions were submitted to the shareholders
for approval at the annual meeting held on December 12, 1995 at
3:30 p.m. at the offices of the Company and were approved as
indicated:
No. 1: ELECTION OF DIRECTORS
To serve for the term continuing through the 1997 annual
meeting and until the election and qualification of their
respective successors.
FOR AGAINST
Martin Fleisher 3,235,345 56,663
James Favia 3,235,307 56,701
Herbert Schneiderman 3,235,345 56,663
No. 2: Proposal to approve the adoption of the 1995 Non-
Qualified Stock Option Plan in the form attached to the proxy
statement.*
FOR AGAINST ABSTAIN NOT VOTED
No. 3: Proposal to amend the 1994 Incentive Stock Option Plan
in the form attached to the proxy statement.*
FOR AGAINST ABSTAIN NOT VOTED
______________
*Proposals #2 and #3 submitted at the Annual Meeting were withdrawn
inasmuch as there were insufficient votes.
<PAGE>
No. 4: Proposal to ratify the appointment of Cornick, Garber
& Sandler, Certified Public Accountants, as the independent
auditors to examine the financial statements of the Company for
fiscal year 1996.
FOR 3,228,822 AGAINST 9,834 ABSTAIN 53,343 NOT VOTED
Item 5. OTHER INFORMATION
NONE
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
NONE
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: February 5, 1996
EASTCO INDUSTRIAL SAFETY CORP.
By: /s/ Anthony P. Towell
---------------------------------
ANTHONY P. TOWELL, Chief Financial
Officer, Vice President of Finance,
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 37,233
<SECURITIES> 0
<RECEIVABLES> 4,445,632
<ALLOWANCES> (135,562)
<INVENTORY> 5,421,169
<CURRENT-ASSETS> 10,213,455
<PP&E> 2,599,580
<DEPRECIATION> (1,317,974)
<TOTAL-ASSETS> 11,679,348
<CURRENT-LIABILITIES> 9,101,415
<BONDS> 0
0
0
<COMMON> 433,786
<OTHER-SE> 1,681,413
<TOTAL-LIABILITY-AND-EQUITY> 11,679,348
<SALES> 12,773,147
<TOTAL-REVENUES> 12,773,147
<CGS> 10,133,822
<TOTAL-COSTS> 10,133,822
<OTHER-EXPENSES> 2,283,780
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 386,767
<INCOME-PRETAX> (31,222)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,222)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,222)
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
