FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 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 0-12808
Cade Industries, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1371038
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5640 Enterprise Drive, Lansing, Michigan 48911
(Address of principal executive offices)
(Zip Code)
(517) 394-1333
(Registrant's telephone number, including area code)
_____________________________________________________
(Former name, former address and former fiscal
year, if changed since last report)
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 periods 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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common stock, $0.001 Par Value -- 21,686,341 shares as of
August 9, 1995
<PAGE>
INDEX
CADE INDUSTRIES, INC.
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of
Operations for the six months ended
June 30, 1995 and 1994
Condensed Consolidated Statements of
Operations for the three months ended
June 30, 1995 and 1994
Condensed Consolidated Statements of
Cash Flows for the six months
ended June 30, 1995 and 1994
Note to Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II - OTHER INFORMATION
Item 6(b). Exhibits & Reports on Form 8-K
<PAGE>
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
CADE INDUSTRIES, INC.
June 30,
1995 December 31,
(Unaudited) 1994*
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 52,372 $ 71,537
Trade accounts receivable 4,786,988 4,817,958
Inventories:
Finished goods and
work in progress 5,619,064 6,653,385
Materials and supplies 2,710,219 2,667,904
----------- ----------
8,329,283 9,321,289
Deferred income taxes 153,000 153,000
Prepaid expenses and other
current assets 281,650 170,375
----------- -----------
TOTAL CURRENT ASSETS 13,603,293 14,534,159
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 500,864 500,864
Buildings 4,300,910 4,290,599
Machinery and equipment 8,581,249 8,128,368
Tooling 9,824,220 9,256,142
----------- -----------
23,207,243 22,175,973
Less accumulated depreciation 7,756,132 6,624,101
----------- -----------
15,451,111 15,551,872
INTANGIBLE AND OTHER ASSETS
Goodwill 2,692,458 2,707,361
Other assets 172,606 143,491
----------- -----------
2,865,064 2,850,852
----------- -----------
$31,919,468 $32,936,883
=========== ===========
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
CADE INDUSTRIES, INC.
June 30,
1995 December 31,
(Unaudited) 1994*
----------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 3,700,000 $ 3,100,000
Trade accounts payable 2,282,216 2,552,679
Employee compensation and amounts
withheld 506,080 633,736
Accrued expenses 462,502 507,568
Accrued income taxes (128,745) 237,101
Current portion of long-term debt 930,672 937,648
------------ ------------
TOTAL CURRENT LIABILITIES 7,752,725 7,968,732
LONG-TERM DEBT 4,227,857 4,616,991
DEFERRED INCOME TAXES 313,000 313,000
SHAREHOLDERS' EQUITY
Preferred Stock, 10% cumulative,
non-voting, stated value $300
per share; authorized 500
shares, none issued
Common Stock, par value $.001 per
share; authorized 100,000,000
shares, issued 21,886,409
shares; outstanding
21,686,341 shares 21,886 21,881
Additional paid-in capital 8,828,552 8,824,874
Retained earnings 11,029,890 11,445,847
----------- -----------
19,880,328 20,292,602
Less cost of Common Stock
in treasury 254,442 254,442
----------- -----------
19,625,886 20,038,160
----------- -----------
$31,919,468 $32,936,883
=========== ===========
*The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date.
See notes to condensed consolidated financial statements.
<PAGE>
PART I ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
CADE INDUSTRIES, INC.
Three Months Ended June 30,
1995 1994
---------------------------
Sales $ 8,638,869 $ 4,448,324
Operating expenses:
Cost of sales 7,888,244 3,497,331
Selling, general and
administrative expenses 1,441,773 872,042
----------- ------------
9,330,017 4,369,373
----------- ------------
INCOME (LOSS) FROM OPERATIONS (691,148) 78,951
Interest expense - net 185,814 69,592
----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES (876,962) 9,359
Income taxes (credit) (335,761) 2,000
----------- ------------
NET INCOME (LOSS) $ (541,201) $ 7,359
=========== ============
NET INCOME (LOSS) PER SHARE $ (0.02) $ 0.00
=========== ============
Weighted average number of
shares of common stock
outstanding 21,681,593 16,947,512
See notes to condensed consolidated financial statements.
<PAGE>
PART I ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
CADE INDUSTRIES, INC.
Six Months Ended June 30,
1995 1994
---------------------------
Sales $15,988,730 $ 9,651,580
Operating expenses:
Cost of sales 13,663,884 7,509,743
Selling, general and
administrative expenses 2,678,069 1,967,750
----------- ------------
16,341,953 9,477,493
----------- ------------
INCOME (LOSS) FROM OPERATIONS (353,223) 174,087
Interest expense - net 355,732 160,569
----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES (708,955) 13,518
Income taxes (credit) (293,000) 5,000
----------- ------------
NET INCOME (LOSS) $ (415,955) $ 8,518
=========== ============
NET INCOME (LOSS) PER SHARE $ (0.02) $ 0.00
=========== ============
Weighted average number of
shares of common stock
outstanding 21,681,512 16,927,487
See notes to condensed consolidated financial statements.
<PAGE>
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CADE INDUSTRIES, INC.
Six Months Ended
June 30,
1995 1994
---------- ---------
NET CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES $700,175 $2,640,511
INVESTING ACTIVITIES
Additions to property, plant
and equipment (837,230) (76,394)
Increase in other assets (89,683) (188,700)
-------- ---------
(926,913) (265,094)
FINANCING ACTIVITIES
Increase (decrease) in note
payable to bank 600,000 (1,900,000)
Payments of long-term debt (396,110) (447,857)
Exercise of stock options 52,350
Purchase of common stock for treasury (16,250)
Other 3,683
-------- ----------
207,573 (2,311,757)
-------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (19,165) 63,660
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 71,537 31,534
-------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 52,372 $ 95,194
======== ==========
See notes to condensed consolidated financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CADE INDUSTRIES, INC.
JUNE 30, 1995
NOTE A -- BASIS OF PRESENTATION
The condensed consolidated financial statements as of and for the
three and six month periods ended June 30, 1995 and 1994, have been
prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the
opinion of management, such condensed consolidated financial
statements reflect all adjustments necessary (consisting only of
normal recurring accruals) for a fair presentation. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1994.
NOTE B -- SPECIAL CHARGE TO OPERATIONS
Second quarter operations includes a special pre-tax charge of
$1,130,000 to write-off certain costs at the Company's Cade
Composites, Inc. subsidiary associated with work in process, non-
recurring engineering charges, contract termination costs, tooling
investments, prototype development costs and accounts receivable
charges. The provision was based on the Company's review of
development costs and related project investments and its best
estimate of matching such costs against future revenue.
<PAGE>
PART I, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CADE INDUSTRIES, INC.
RESULTS OF OPERATIONS
SALES
The Company's net sales of $8,639,000 in the second quarter of 1995
increased 94.2% or $4,191,000 from the same quarter of 1994, while
net sales of $15,989,000 for the six months ended June 30, 1995
increased $6,337,000 or 65.7% compared to the same six month period
of the prior year. Net sales for the three and six months ended
June 30, 1995 included $2,866,000 and $5,777,000 of net sales,
respectively, by the Company's H.A.C. subsidiary which was acquired
November 30, 1994. Sales for the quarter and the six-month period
ended June 30, 1995 (excluding the effect of H.A.C.'s sales)
increased $1,325,000 (29.8%) and $560,000 (5.8%), respectively,
from the comparable periods of the prior year. The significant
improvement for the quarter primarily reflects increased shipments
of test nacelles and other ground support equipment whereas the
increase in net sales for the year-to-date period mainly reflect
higher sales of gas turbine engine and airframe components. In
addition, inclusion of H.A.C. resulted in higher sales of military
aircraft components and repair and overhaul services in both 1995
periods.
Sales for 1995 are expected to increase slightly over those of the
prior year before consideration of a full year's sales from the
Company's H.A.C. subsidiary. This sales increase is expected to
result from higher gas turbine engine and airframe component sales
as well as increased repair and overhaul services.
Sales backlog (representing orders for delivery through 1996) was
approximately $12,200,000, including $2,200,000 related to H.A.C.,
at June 30, 1995, compared to $13,000,000 at the same date in 1994.
The Company's backlog includes only "firm" orders supported by
customer purchase orders with fixed delivery dates and excludes
"blanket" purchase orders against which customers issue production
releases covering relatively short time periods. The decrease
(excluding H.A.C.) in order backlog from the second quarter of 1994
primarily reflects the continued efforts by customers to reduce
both inventory levels and production leadtimes.
COST OF SALES
Cost of sales for the second quarter of 1995 increased $4,391,000
or 125.6% ($3,431,000 or 98.1% excluding the special charge) from
the same quarter of 1994 and for the six months ended June 30, 1995
increased $6,154,000 or 81.9% ($5,194,000 or 69.2% excluding the
special charge) from the comparable period in 1994. The increases
for both the three and six month periods were due in large part to
the increase in sales levels in such 1995 periods of 94.2% and
65.7%, respectively. In addition, approximately $960,000 of the
increase in cost of sales in the 1995 periods related to the write
off in the second quarter of certain costs at the Company's Cade
Composites, Inc. subsidiary associated with work in process, non-
recurring engineering charges, contract termination costs, tooling
investments and prototype development costs. This provision came
as a result of the Company's review of development costs and
related project investments and the Company's best estimate of
matching such costs against future revenue. Without regard to
H.A.C. and the special charge, cost of sales for the 1995 quarter
increased 32.1% or $1,121,000 and for the 1995 year-to-date period
increased 6.3% or $474,000 from the comparable 1994 periods.
Cost of sales as a percentage of sales was 91.3% (78.6% excluding
the special charge) and 78.6% for the 1995 and 1994 second
quarters, respectively, and for the six months ended June 30, 1995
and 1994 was 85.6% (78.6% excluding the special charge) and 77.8%,
respectively. Excluding the effect of H.A.C.'s operations and the
special charge, cost of sales as a percentage of sales was 77.7%
and 76.9% for the 1995 three and six month periods, respectively.
The product mix of sales in the 1995 second quarter included a
larger portion of test nacelle and other ground support equipment
having higher material and lower labor contents than the mix of
sales in the comparable 1994 quarter, while the product mix of
sales for the 1995 six month period included a larger portion of
gas turbine engine and airframe components having lower material
and slightly higher labor contents than that of the 1994 comparable
period. The material cost percentage was negatively impacted for
both 1995 periods presented due to cost increases on several of the
Company's primary raw material components. In addition, the H.A.C.
subsidiary has higher material and overhead costs as a percentage
of sales than the Company's historical cost relationships.
Overhead cost of sales as a percent of sales increased due
primarily to the higher overhead percentage at H.A.C.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("administrative
expenses") as a percent of net sales were 16.7% (18.7% excluding
H.A.C.) and 19.6% for the second quarter of 1995 and 1994,
respectively, and 16.6% (19.4% excluding H.A.C.) and 20.4% for the
six month periods ended June 30, 1995 and 1994, respectively.
Actual amounts expended increased by $570,000 from the second
quarter of 1994 to the same quarter of 1995 and by $710,000 from
the six month period ended June 30, 1994 to the same period in
1995. The increased expenditures for the periods primarily reflect
the inclusion of H.A.C. in the 1995 periods with some offset due to
decreased commission expense as a result of changes in the customer
mix of test nacelle and ground support equipment sales. The
decreased percentages primarily resulted from the positive effect
of H.A.C.'s administrative expenses as a percent of sales which is
lower than the Company's historical cost relationship and the
higher sales base over which to spread fixed costs at the Company's
other subsidiaries.
NET INTEREST EXPENSE
Net interest expense as a percent of sales was 2.2% and 1.6% for
the second quarters of 1995 and 1994, respectively, and was 2.2%
and 1.7% of sales for the six month periods ended June 30, 1995 and
1994, respectively. These increases resulted primarily from higher
borrowing (due in large part to the acquisition of H.A.C.) and
higher interest rates.
INCOME TAX EXPENSE
Income taxes were a negative expense of ($336,000) or (3.9%) of
sales (positive expense of $48,000 or 0.6% of sales excluding the
special charge) in the 1995 second quarter compared to $2,000 or
0.0% of sales for the same quarter of 1994. Income taxes were a
negative expense of ($293,000) or (1.8%) of sales (positive expense
of $91,000 or 0.5% of sales excluding the special charge) for the
six months ended June 30, 1995 compared to $5,000 or 0.0% of sales
for the comparable period of 1994.
NET INCOME (LOSS)
The net loss of ($541,000) in the second quarter of 1995 ($206,000
net income excluding the special charge) represents a decrease in
after-tax earnings of $548,000 from the 1994 second quarter, while
the net loss of ($416,000) for the six months ended June 30, 1995
($332,000 net income excluding the special charge) reflects a
$424,000 decrease in after-tax earnings from the comparable period
of 1994. The primary reason for the net loss in the quarter and
six-month period ended June 30, 1995 is the special charge
discussed above.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has met its working capital and longer term capital
needs through short and long-term bank debt, a tax-exempt bond
issue and leasing arrangements on certain items of capital
equipment.
Capital has principally been used to fund the Company's business
development and capital expenditure programs. Management presently
expects to invest at reduced levels in 1995 in production
technology and equipment for improved manufacturing efficiency,
quality enhancement, and joint development efforts with customers.
The Company will also continue to seek acquisition opportunities to
expand and/or diversify its markets.
The Company maintains a $5,000,000 unsecured credit line with a
bank, $1,300,000 of which was available at June 30, 1995. The
Company also has outstanding approximately $1,340,000 of secured
term debt, $958,000 of tax-exempt bonds and $2,861,000 of
subordinated notes.
Management believes that expected increased revenues and continued
emphasis on working capital management will lead to improved cash
flow from operations. As a result, the Company's cash flow from
operations and its current credit facilities are felt to be
adequate to finance its operations and capital expenditure
requirements at present and forecasted levels.
<PAGE>
ITEM 6
(a) The following exhibits are filed herewith:
Exhibit 27. Financial Data Schedule
(b) During the quarter ended June 30, 1995, the Registrant filed
a report on Form 8-K dated May 1, 1995, in which the Registrant
reported under Item 4 thereof a change in its certifying accountant
effective May 1, 1995. No financial statements were filed in
connection therewith.
<PAGE>
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.
CADE INDUSTRIES, INC.
August 11, 1995
By: /s/ Edward B. Stephens
------------------------------
Edward B. Stephens
Vice President, Treasurer and
Chief Financial Officer
114213.02
Cade Industries, Inc.
* * *
Exhibit Index
to
Quarterly Report on Form 10-Q for the period ended June 30, 1995
Exhibit Incorporated Herein Filed
Number Description by Reference To: Herewith
3.1 Articles of Exhibit 4.1 to the
Incorporation Registrant's Form
S-8 Registration
Statement dated
November 10, 1990
3.2 Bylaws Exhibit 3.2 to
Registrant's 1992
10-K
27 Financial Data X
Schedule
114238.01
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CADE
INDUSTRIES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED JUNE 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 52,372
<SECURITIES> 0
<RECEIVABLES> 4,786,988
<ALLOWANCES> 0
<INVENTORY> 8,329,283
<CURRENT-ASSETS> 13,603,293
<PP&E> 23,207,243
<DEPRECIATION> 7,756,132
<TOTAL-ASSETS> 31,919,468
<CURRENT-LIABILITIES> 7,752,725
<BONDS> 4,227,857
<COMMON> 21,886
0
0
<OTHER-SE> 19,604,000
<TOTAL-LIABILITY-AND-EQUITY> 31,919,468
<SALES> 15,988,730
<TOTAL-REVENUES> 15,988,730
<CGS> 13,663,884
<TOTAL-COSTS> 13,663,884
<OTHER-EXPENSES> 2,678,069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 355,732
<INCOME-PRETAX> (708,955)
<INCOME-TAX> (293,000)
<INCOME-CONTINUING> (415,955)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (415,955)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
