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FORM 10-Q
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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 March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-12808
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Cade Industries, Inc.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1371038
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5640 Enterprise Drive, Lansing, Michigan 48911
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(Address of principal executive offices)
(Zip Code)
(517) 394-1333
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(Registrant's telephone number, including area code)
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(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
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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 -- 21,736,341 shares as of
May 10, 1996
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INDEX
CADE INDUSTRIES, INC.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of
Operations for the three months ended
March 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1996
and 1995 4
Note to Condensed Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
PART II - OTHER INFORMATION
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
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PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
CADE INDUSTRIES, INC.
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<CAPTION>
March 31,
1996 December 31,
(Unaudited) 1995*
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 26,485 $ 187,485
Trade accounts receivable 4,709,464 4,670,698
Inventories:
Finished goods and
work in progress 5,452,933 5,176,320
Materials and supplies 2,927,160 2,741,815
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8,380,093 7,918,135
Refundable federal income taxes 294,500 362,000
Deferred income taxes 379,000 379,000
Prepaid expenses and other
current assets 271,730 136,105
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TOTAL CURRENT ASSETS 14,061,272 13,653,423
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 500,864 500,864
Buildings 4,335,066 4,330,657
Machinery and equipment 9,182,086 9,116,644
Tooling 10,846,545 10,512,553
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24,864,561 24,460,718
Less accumulated depreciation 9,241,031 8,701,719
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15,623,530 15,758,999
INTANGIBLE AND OTHER ASSETS
Goodwill 3,095,319 3,123,220
Other assets 140,179 148,863
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3,235,498 3,272,083
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$32,920,300 $32,684,505
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</TABLE>
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CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
CADE INDUSTRIES, INC.
<TABLE>
<CAPTION>
March 31,
1996 December 31,
(Unaudited) 1995*
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 1,800,000 $ 1,300,000
Trade accounts payable 1,787,699 1,685,313
Employee compensation and amounts
withheld 589,685 614,739
Accrued expenses 684,718 963,747
Accrued income taxes 303,553 262,800
Current portion of long-term debt 1,660,123 1,765,171
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TOTAL CURRENT LIABILITIES 6,825,778 6,591,770
LONG-TERM DEBT 5,771,385 5,955,935
DEFERRED INCOME TAXES 477,000 477,000
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 21,886
Additional paid-in capital 8,828,552 8,828,552
Retained earnings 11,250,141 11,063,804
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20,100,579 19,914,242
Less cost of Common Stock in treasury 254,442 254,442
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19,846,137 19,659,800
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$32,920,300 $32,684,505
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</TABLE>
* The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
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PART I ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
CADE INDUSTRIES, INC.
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<CAPTION>
Three Months Ended March 31,
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1996 1995
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Sales $ 7,164,278 $ 7,349,861
Operating expenses:
Cost of sales 5,263,243 5,775,640
Selling, general and
administrative expenses 1,502,403 1,236,296
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6,765,646 7,011,936
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INCOME FROM OPERATIONS 398,632 337,925
Interest expense - net 166,202 169,918
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INCOME BEFORE INCOME TAXES 232,430 168,007
Income taxes 46,000 42,761
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NET INCOME $ 186,430 $ 125,246
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NET INCOME PER SHARE $ 0.01 $ 0.01
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Weighted average number of
shares of common stock
outstanding 21,686,341 21,681,431
</TABLE>
See notes to condensed consolidated financial statements.
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PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CADE INDUSTRIES, INC.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
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NET CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES $ 36,378 $ 90,773
INVESTING ACTIVITIES
Additions to property, plant
and equipment (407,780) (412,285)
Increase in other assets (3,269)
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(407,780) (415,554)
FINANCING ACTIVITIES
Increase in note payable to bank 500,000 500,000
Payments of long-term debt (289,598) (234,762)
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210,402 265,238
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DECREASE IN CASH AND CASH
EQUIVALENTS (161,000) (59,543)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 187,485 71,537
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 26,485 $ 11,994
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</TABLE>
See notes to condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CADE INDUSTRIES, INC.
MARCH 31, 1996
NOTE A -- BASIS OF PRESENTATION
The condensed consolidated financial statements as of and for the three month
periods ended March 31, 1996 and 1995, 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, 1995.
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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 $7,164,000 in the first quarter of 1996 decreased
2.5% or $186,000 from the same quarter of 1995. The decrease in sales for the
1996 quarter primarily reflects a reduction in sales of military aircraft
components due mainly to the completion in late 1995 of a government order. This
reduction was partially offset by higher sales of gas turbine engine components,
primarily engine cases, and increased sales of repair and overhaul services.
Sales for 1996 are expected to increase over those of the prior year as a result
of higher gas turbine engine and airframe component sales as well as increased
test nacelle shipments and sales of repair and overhaul services.
Quarter-to-quarter comparisons can be significantly impacted by the timing of
shipments of test equipment and other ground support equipment. At March 31,
1996, the Company's backlog of orders was $25.6 million which included $11.2
million of scheduled orders under long-term agreements.
COST OF SALES
Cost of sales for the first quarter of 1996 decreased $512,000 or 8.9% from the
same quarter of 1995. Cost of sales decreased as a percent of sales to 73.5% in
the first quarter of 1996 from 78.6% in the 1995 first quarter.
The decrease in cost of sales percent was primarily due to an increase in sales
of product with a favorable cost structure. The increase in sales of gas turbine
engine components, and commercial overhaul and repair services resulted in lower
labor and material costs. These positive cost improvements were partially offset
by manufacturing overhead increases in premium labor costs and other indirect
costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("administrative expenses") as a
percent of net sales were 21.0% and 16.8% for the first quarter of 1996 and
1995, respectively. Actual amounts expended increased by $266,000 from the first
quarter of 1995 to the same quarter of 1996. The higher expenditures for the
current period primarily reflect
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increased sales commissions of $106,000 from the first quarter of 1995 to the
1996 first quarter, (3.3% of net sales in 1996 compared to 1.7% in 1995) as a
result of greater repair and overhaul sales subject to commission payments. Also
affecting the higher administrative expenditures in the first quarter were
increased marketing costs, administrative staff, and travel related costs
incurred to support the expected sales increases for the balance of 1996.
NET INTEREST EXPENSE
Net interest expense as a percent of sales was 2.3% and 2.4% for the first
quarters of 1996 and 1995, respectively. Actual net interest expense decreased
slightly to $166,000.
INCOME TAX EXPENSE
Income taxes were $46,000 or 0.6% of sales in the 1996 first quarter, compared
to $43,000 or 0.6% of sales for the same quarter of 1995.
NET INCOME
Net income of $186,000 in the first quarter of 1996 represents an increase in
after-tax earnings of $61,000 from the 1995 first quarter due to the factors
discussed above.
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 inventory, accounts
receivable, business development and capital expenditure programs. Management
presently expects to continue to invest, at reduced levels, in production
technology, tooling and equipment for improved manufacturing efficiency and
quality enhancement. The Company will also continue to seek acquisition
opportunities to expand and/or diversify its markets.
The Company maintains a $4,000,000 unsecured credit line with a bank, $2,200,000
of which was available at March 31, 1996. The Company also has outstanding
approximately $4,070,000 of secured term debt, $500,000 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 current operations and capital
expenditure requirements at present and forecasted levels.
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ITEM 5. OTHER INFORMATION
The Company's officers may, when appropriate make public statements that contain
forward looking information as to the Company's sales and earnings. Forward
looking information is subject to risks and uncertainties that may significantly
impact expected results. The Company's outlook is based largely on its
interpretation of current order levels and trends and assumption as to trends in
the air transport and aircraft industries. Certain of the Company's backlog of
orders are subject to cancellation, reduction or extended delivery. The air
transport and aircraft industries have historically been subject to significant
cyclical fluctuations and are influenced by factors such as the general state of
the economy, fuel prices, governmental regulation, competition, and the level of
military spending. In addition, the Company's results are subject to pricing
competition, the willingness of the airlines and aircraft manufacturers to out
source work for their composite components and repairs, foreign currency
fluctuations with respect of international sales, and the Company's success in
the development, manufacture and marketing of composites products for other
industries and uses.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) The following exhibit is filed herewith:
Exhibit 27. Financial Data Schedule
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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.
May 13, 1996
By /s/ EDWARD B. STEPHENS
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Edward B. Stephens
Vice President, Treasurer and
Chief Financial Officer
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CADE INDUSTRIES, INC.
* * *
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED
MARCH 31, 1996
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EXHIBIT INCORPORATED HEREIN FILED
NUMBER DESCRIPTION BY REFERENCE TO: HEREWITH
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<S> <C> <C> <C>
27 Financial Data
Schedule X
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<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 MARCH
31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 26,485
<SECURITIES> 0
<RECEIVABLES> 4,709,464
<ALLOWANCES> 0
<INVENTORY> 8,380,093
<CURRENT-ASSETS> 14,061,272
<PP&E> 24,864,561
<DEPRECIATION> 9,241,031
<TOTAL-ASSETS> 32,920,300
<CURRENT-LIABILITIES> 6,825,778
<BONDS> 5,771,385
0
0
<COMMON> 21,886
<OTHER-SE> 19,824,251
<TOTAL-LIABILITY-AND-EQUITY> 32,920,300
<SALES> 7,164,278
<TOTAL-REVENUES> 7,164,278
<CGS> 5,263,243
<TOTAL-COSTS> 5,263,243
<OTHER-EXPENSES> 1,502,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,202
<INCOME-PRETAX> 232,430
<INCOME-TAX> 46,000
<INCOME-CONTINUING> 186,430
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,430
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
