<PAGE>
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 September 30, 1999
-------------------------------
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.)
2365 Woodlake Drive, Suite 120, Okemos, Michigan 48864
-------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(517) 347-1333
-----------------------------------
(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 (including Common Stock Purchase Rights), $0.001 Par Value -
21,606,207 shares as of November 11, 1999
<PAGE>
INDEX
CADE INDUSTRIES, INC.
---------------------
PAGE
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of
Income for the three months ended
September 30, 1999 and 1998 3
Condensed Consolidated Statements of Income
for the nine months ended September 30, 1999
and 1998 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1999
and 1998 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 12
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
CADE INDUSTRIES, INC.
<TABLE>
<CAPTION>
September 30,
1999 December 31,
(Unaudited) 1998*
---------------------- ----------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 975,551 $ 580,489
Trade accounts receivable - net 14,829,171 13,172,191
Costs and estimated earnings in excess
of billings on uncompleted contracts 3,535,436 3,923,693
Inventories:
Finished goods and work in progress 8,567,909 8,416,597
Materials and supplies 9,344,834 8,671,324
---------------------- ----------------------
17,912,743 17,087,921
Deferred income taxes 2,184,000 2,184,000
Prepaid expenses and other current assets 955,453 780,685
---------------------- ----------------------
TOTAL CURRENT ASSETS 40,392,354 37,728,979
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 803,365 803,365
Buildings 8,081,229 7,766,606
Machinery and equipment 16,818,143 13,489,504
Tooling 13,330,904 13,336,445
---------------------- ----------------------
39,033,641 35,395,920
Less accumulated depreciation and amortization 18,159,906 16,199,252
---------------------- ----------------------
20,873,735 19,196,668
INTANGIBLE AND OTHER ASSETS
Goodwill - net 4,980,738 5,130,957
Other assets 142,358 218,227
---------------------- ----------------------
5,123,096 5,349,184
---------------------- ----------------------
$66,389,185 $62,274,831
====================== ======================
</TABLE>
* The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
1
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
CADE INDUSTRIES, INC.
<TABLE>
<CAPTION>
September 30,
1999 December 31,
(Unaudited) 1998*
------------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 7,767,606 $ 150,000
Current portion of long-term debt 3,457,370 3,467,066
Trade accounts payable 5,351,700 7,034,214
Employee compensation and amounts withheld 2,671,579 2,446,571
Billings in excess of costs and estimated
earnings on uncompleted contracts 4,823,854 9,600,327
Accrued expenses 2,070,790 3,543,335
------------- ------------
TOTAL CURRENT LIABILITIES 26,142,999 26,241,513
LONG-TERM DEBT 8,723,676 8,313,322
DEFERRED INCOME TAXES 666,000 666,000
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
22,348,859 shares in 1999 and 1998 22,349 22,349
Additional paid-in capital 9,482,361 9,491,975
Retained earnings 22,982,626 18,717,424
------------- ------------
32,487,336 28,231,748
Less cost of Common Stock in treasury
(742,652 and 550,232 shares in 1999 and
1998, respectively) 1,630,826 1,177,752
------------- ------------
30,856,510 27,053,996
------------- ------------
$ 66,389,185 $ 62,274,831
============= ============
</TABLE>
* The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
2
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
CADE INDUSTRIES, INC.
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Sales $ 26,112,549 $ 25,501,933
Operating expenses:
Cost of sales 20,430,434 20,057,461
Selling, general and administrative expenses 2,807,880 3,602,117
------------ ------------
23,238,314 23,659,578
------------ ------------
INCOME FROM OPERATIONS 2,874,235 1,842,355
Interest expense - net 341,690 294,389
------------ ------------
INCOME BEFORE INCOME TAXES 2,532,545 1,547,966
Income taxes 1,034,000 435,000
------------ ------------
NET INCOME $ 1,498,545 $ 1,112,966
============ ============
NET INCOME PER SHARE
Basic $ 0.07 $ 0.05
Diluted 0.07 0.05
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
CADE INDUSTRIES, INC.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Sales $ 78,594,877 $ 71,513,689
Operating expenses:
Cost of Sales 60,835,829 55,447,508
Selling, general and administrative expenses 10,400,153 10,731,573
------------ ------------
71,235,982 66,179,081
------------ ------------
INCOME FROM OPERATIONS 7,358,895 5,334,608
Interest expense - net 927,858 948,518
------------ ------------
INCOME BEFORE INCOME TAXES 6,431,037 4,386,090
Income taxes 2,229,000 1,275,000
------------ ------------
NET INCOME $ 4,202,037 $ 3,111,090
============ ============
NET INCOME PER SHARE
Basic $ 0.19 $ 0.14
Diluted 0.19 0.14
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
CADE INDUSTRIES, INC.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------------
1999 1998
---------- ----------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES $(2,935,638) $ 2,809,300
INVESTING ACTIVITIES
Additions to property, plant and equipment (4,249,721) (3,286,847)
Other 54,845
----------- ------------
(4,194,876) (3,286,847)
FINANCING ACTIVITIES
Increase in note payable to bank 7,617,606 1,360,000
Net proceeds from (payments on) long-term debt 400,658 (1,148,254)
Exercise of stock options 93,125
Purchase of common stock for treasury (551,940) (312,218)
Other 59,252 86,994
----------- ------------
7,525,576 79,647
----------- ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 395,062 (397,900)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 580,489 1,093,176
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 975,551 $ 695,276
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CADE INDUSTRIES, INC.
SEPTEMBER 30, 1999
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The condensed consolidated financial statements as of and for the three and nine
month periods ended September 30, 1999 and 1998, 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, 1998. These results may not necessarily reflect the results of the
entire year.
NOTE B - EARNINGS PER SHARE
- ---------------------------
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings
per share - income available to
common shareholders $ 1,498,545 $ 1,112,966 $ 4,202,037 $ 3,111,090
=========== =========== =========== ===========
Denominator:
Denominator for basic earnings per share -
weighted average shares 21,606,207 21,977,921 21,653,103 21,997,532
Effect of dilutive stock options - potential
common shares 594,294 594,294 508,715 620,287
=========== =========== =========== ===========
Denominator for diluted earnings per share -
adjusted weighted-average shares 22,200,501 22,572,215 22,161,818 22,617,819
=========== =========== =========== ===========
Basic Earnings Per Share $ 0.07 $ 0.05 $ 0.19 $ 0.14
=========== =========== =========== ===========
Diluted Earnings Per Share $ 0.07 $ 0.05 $ 0.19 $ 0.14
=========== =========== =========== ===========
</TABLE>
6
<PAGE>
NOTE C - BUSINESS SEGMENTS
- --------------------------
Financial information segregated by reportable product segments for the three
and nine month periods ended September 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sales
- -----
Engine and airframe products and services $14,997,000 $13,675,400 $49,009,900 $37,742,200
Test facilities and equipment 11,115,600 11,826,500 29,585,000 33,771,500
----------- ----------- ----------- -----------
Consolidated sales $26,112,600 $25,501,900 $78,594,900 $71,513,700
=========== =========== =========== ===========
Operating Income
- ----------------
Engine and airframe products and services $ 2,234,100 $ 1,709,700 $ 6,980,500 $ 4,591,400
Test facilities and equipment 1,108,400 606,300 2,076,500 2,376,900
Other (468,300) (473,600) (1,698,100) (1,633,700)
----------- ----------- ----------- -----------
Consolidated operating income $ 2,874,200 $ 1,842,400 $ 7,358,900 $ 5,334,600
=========== =========== =========== ===========
</TABLE>
NOTE D - NEW ACCOUNTING PRONOUNCEMENT
- -------------------------------------
In June 1998 the Financial Accounting Standards Board issued Statement No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities",
which is effective for years beginning after June 15, 2000. The Company has not
completed its evaluation of the effect of adopting SFAS 133, however, it
believes there will be no significant impact on its financial position and
results of operations from such statement adoption.
NOTE E - SUBSEQUENT EVENT
- -------------------------
In October 1999 pursuant to a merger agreement, a wholly owned subsidiary of
United Technologies Corporation ("UTC") initiated a tender offer to purchase all
of the outstanding shares of the Company's common stock, including the
associated common stock purchase rights, at $5.05 per share, net to the seller
in cash. The offer is conditioned upon, among other things, expiration or
termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (for which early termination has been
received), and upon at least 75 percent of the issued and outstanding shares on
a fully diluted basis being validly tendered and not withdrawn prior to the time
of expiration of the offer. The offer will expire at end of day, November 19,
1999 unless extended. Upon successful completion of the tender offer, the
Company will be merged with a wholly owned subsidiary of UTC.
7
<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 $26,113,000 in the third quarter of 1999 represented
an increase of 2.4% or $611,000 from the same quarter of 1998, while net sales
of $78,595,000 for the nine months ended September 30, 1999, represented an
increase of $7,081,000 or 9.9% compared to the same nine-month period of the
prior year. The higher sales for both the third quarter and nine-month periods
primarily reflect the Company's continued product diversification and increased
sales of gas turbine engine components and overhaul and repair services.
At September 30, 1999, the Company's backlog was $90.0 million ($81.0 million at
September 30, 1998) which includes both firm orders supported by customer
purchase orders with fixed delivery dates, and blanket purchase orders against
which customers issue production releases covering relatively short time
periods. The increase in order backlog at 1999 quarter end compared to 1998
primarily reflects the continued increase in sales of gas turbine engine
components and certain airframe components. Overhaul and repair orders,
representing approximately 25% of 1999 third quarter and 27% of year-to-date
sales, are not included in the order backlog due to their very short lead times.
COST OF SALES
- -------------
Cost of sales for the third quarter of 1999 increased $373,000 or 1.9% from the
same quarter of 1998 and for the nine-months ended September 30, 1999 increased
$5,388,000 or 9.7% from the comparable period in 1998. The increases for both
the quarter and nine-month periods were primarily due to the higher sales in
1999. Cost of sales as a percent of sales in the third quarter of 1999 decreased
slightly to 78.2% from 78.7% in the prior year's quarter and for the nine-months
ended September 30, 1999 was relatively unchanged at 77.4% compared to 77.5% in
the comparable period of 1998. The largest percentage change in cost of sales
components was a decrease in subcontract costs in both the 1999 third quarter
and year-to-date period. A portion of the Company's revenues are derived from
contracts to manufacture engine test facilities that involve building
construction by subcontractors. These subcontract costs, which are expensed as
material costs, are passed on to customers at margins substantially below
historical manufacturing results. Partially offsetting the decreased percent of
subcontract expense was an increase in material cost of sales as a percent of
sales for both the 1999 third quarter and nine-month period primarily as a
result of higher sales of flight hardware components which have material content
greater than historical cost relationships and due to the change from customer-
provided to vendor-procured materials on certain gas turbine engine components.
The labor, overhead and tooling amortization components of cost of sales as a
percent of sales reflected only moderate changes for both the 1999 third quarter
and year-to-date period from the comparable 1998 periods.
8
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses ("administrative expenses") as a
percent of sales were 10.8% and 14.1% for the third quarters of 1999 and 1998,
respectively, and 13.2% and 15.0% for the nine months ended September 30, 1999
and 1998, respectively. The decreased percentages of administrative expenses to
sales for both the 1999 third quarter and year-to-date period primarily reflect
higher 1998 costs related to management information systems, product warranty
and commission and royalty expenses. Sales commissions and royalties are
directly related to the sales mix of products and/or customers. Also, the
decrease in administrative expenses as a percent of sales for both 1999 periods
further resulted from the increases in sales as a base and the corresponding
spreading of the administrative costs over a larger sales base.
Actual amounts expended in the three and nine month periods of 1999 decreased by
$794,000 and $331,000, respectively, from the same periods in 1998. Factors
contributing to the decreased level of administrative expenditures were
decreased costs related to the development and implementation of enterprise
resource planning systems, product warranty, and sales commissions.
NET INTEREST EXPENSE
- --------------------
Net interest expense as a percent of sales was relatively unchanged at
approximately 1.2% for both the third quarters and the nine-month periods ended
September 30, 1999 and 1998. Actual interest expense for the third quarter of
1999 increased by $47,000 to $342,000 due primarily to higher average short-term
borrowings, with partial offset from lower interest rates on the variable rate
debt. For the nine months ended September 30, 1999 interest expense decreased by
$21,000 to $928,000 due to lower interest rates on variable rate debt with
partial offset from slightly higher average short and long-term borrowings.
INCOME TAX EXPENSE
- ------------------
Income taxes were $1,034,000 or 4.0% of sales in the 1999 third quarter,
compared to $435,000 or 1.7% of sales for the same quarter of 1998 and were
$2,229,000 or 2.8% of sales for the nine-month period ended September 30, 1999,
compared to 1.8% of sales for the same period in 1998. Tax savings arising from
the Company's foreign sales corporation were lower in the 1999 periods as a
result of differences in the mix of product sales to international customers in
the respective periods and the relative profitability of such sales.
NET INCOME
- ----------
Net income of $1,499,000 in the 1999 third quarter represents an increase in
after-tax earnings of $386,000 or 34.6%, from the 1998 third quarter. Net income
of $4,202,000 for the first nine months of 1999 represents an increase in after-
tax earnings of $1,091,000 or 35.1%, from the comparable 1998 period. Factors
contributing to these changes are discussed above.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company has historically met its working capital and longer term capital
needs through operating cash flow, short and long-term bank debt and leasing
arrangements on certain items of capital equipment. During the first nine months
of 1999, capital was used principally to fund the Company's inventory and
accounts receivable, its plant, equipment and tooling expenditures, remediation
costs related to a GEAES project and to meet its debt repayment obligations.
The Company acquired shares of its stock on an ongoing basis when market
conditions and cash position warranted. For 1999 management is authorized to
purchase up to one million shares under specified conditions. During 1999, the
Company acquired 230,000 shares of its common stock for approximately $552,000
(no shares were repurchased in the third quarter) and it does not anticipate
repurchasing any shares until the merger with UTC is completed.
At the end of the quarter, the Company maintained a $10,000,000 unsecured credit
line with a bank, $2,163,000 of which was available at September 30, 1999, after
consideration of actual line of credit usage and credit line commitments to
support foreign exchange contracts and letters of credit. The Company also had
outstanding approximately $11,520,000 of secured term debt, and $661,000 of
subordinated notes.
In connection with the October 1999 United Technologies Corporation tender offer
for the purchase of all of the issued and outstanding common shares of the
Company, as described in Note E to the September 30, 1999 condensed consolidated
financial statements, the Company expects to incur transactional costs of
approximately $500,000 for financial advisory, legal and other professional
advisory services.
Management believes that expected increased revenues and continued emphasis on
working capital management will provide adequate cash flow from operations. As a
result, the Company's cash flow from operations, its current credit facilities
and available financing opportunities are felt to be adequate to finance its
operations and capital expenditure requirements at present and anticipated
levels.
Year 2000 Update
- ----------------
The Company has developed a Year 2000 Action Plan ("Action Plan") to address the
issue of computer programs, information technology and embedded computer chips
being unable to distinguish between the year 1900 and the year 2000. During
1998, as discussed in the Company's annual report on Form 10-K for the year
ended December 31, 1998, management undertook a company-wide project for the
improvement of its business and manufacturing information systems through the
purchase of enterprise resource planning software ("ERP"). The ERP software will
serve as the common base platform for the integration of the manufacturing,
financial, sales and procurement systems of each of the Company's operations,
replacing primarily dissimilar manually-driven systems. Full implementation of
this new system combined with upgrades to the Company's other business software
programs is expected to make the Company's business computer systems Year 2000
compliant in the fourth quarter of 1999. The Company has developed a
10
<PAGE>
contingency plan, including upgrades to existing programs, to make the programs
that are scheduled to be replaced by the ERP system Year 2000 compliant, if
necessary.
The Action Plan consists of three major sections: 1) information technology
("IT") systems; 2) non-IT systems; and 3) third-party communications. Phases
common to each of the three major sections are: inventory of all equipment and
software; assessment of Year 2000 compliance of inventoried equipment and
software with prioritization of non compliant items determined to be material to
the Company; repair or replacement of material, non compliant items; testing of
material items; and development and implementation of contingency plans in the
event of material system failures.
At September 30, 1999, the inventory, assessment and contingency planning phases
of the IT system section of the Action Plan were complete. The IT systems
section includes both hardware and systems software as well as applications
software. Non compliance in this section is being corrected through full
replacements or supplemental corrective solutions to the extent they are
available from vendors and are reliable. The testing phase of this section is
expected to be completed in the fourth quarter of 1999 upon full implementation
of the ERP system.
The non IT systems section includes the hardware, software and related embedded
computer chips that are used in the operation of all Company facilities and
associated systems. At September 30, 1999, all phases of the non-IT system
section were complete.
The third party communications section includes: the identification and
prioritization of suppliers and customers where material relationships exist,
including direct interface; and communications with them regarding their plans
and progress in addressing the Year 2000 issue. Communications and detailed
evaluations of the most critical suppliers and customers was completed in the
third quarter of 1999. The development of contingency plans for this section is
complete.
The Company believes that the cost, including the ERP-related hardware and
software, of its Year 2000 identification, assessment, remediation and testing
efforts, as well as currently anticipated costs to be incurred by the Company
with respect to Year 2000 issues of third parties, will not exceed $1,425,000,
which expenditures will be funded from operating cash flows and debt financing.
As of September 30, 1999, the Company had expended approximately $1,360,000,
including $425,000 in 1998, on Year 2000 issues.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could have a material, adverse affect on the Company's
results of operations, liquidity and financial condition. The Company is
currently unable to determine whether the effects of Year 2000 failures will
have a material impact on the Company's results of operations, liquidity or
financial condition due to the overall uncertainty inherent in the Year 2000
problem, particularly the uncertainty about the Year 2000 readiness of material
customers and suppliers. The Year 2000 Action Plan is expected to significantly
reduce the Company's level of uncertainty about the Year 2000 issue, especially
about the Year 2000 compliance and readiness of its material third party agents.
The Company believes that, with the implementation of the new business system
and completion of the Action Plan as scheduled, the likelihood of major
interruptions of normal operations should be reduced.
11
<PAGE>
Certain of the information contained in Item 2 is of a forward looking nature
and is subject to various uncertainties. See Part II, Item 5.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------
Not applicable.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------
Other than as described below in Item 5, the Company is not involved in any
material pending legal proceedings other than ordinary routine litigation
incidental to its business.
ITEM 5. OTHER INFORMATION
- -------
In its prior filings, the Company has discussed the circumstances surrounding an
acoustic emissions problem at an engine test facility sold by its Cade Cenco
("Cenco") subsidiary. The Company has completed the remedial work on the test
facility within the original cost estimates of $7 million to $8 million, has
been issued an unrestricted use permit by local authorities, and is fully
operational at this time.
The Company believes that the costs of remedial work and engine test are for the
most part covered by up to $13 million of potential insurance recoveries that
may be available under a combination of a policy of insurance guaranteeing the
design work of the subcontractor and an errors and omissions insurance policy
covering damages resulting from Cenco design and engineering deficiencies, by
warranty and other reserves established by the Company and other sources. The
Company has initiated litigation seeking recovery under the insurance policies.
The Company's officers may, when appropriate, make public statements that
contain forward looking information as to industry conditions and the Company's
sales and earnings. Statements in this Form 10-Q as to future sales, earnings,
cash flow, operating margins, potential insurance recoveries, and economic and
industry conditions are forward looking information. Forward looking information
is subject to risks and uncertainties that may significantly impact expected
results. Among the factors that could cause actual results to differ materially
from those which are anticipated are the following: business conditions
generally and conditions specifically in the aircraft and aerospace industries;
timing of receipt and delivery of orders; the timing and satisfactory completion
of engine test facilities; price fluctuations for raw materials and labor;
competitive factors, including price competition from other suppliers of similar
products and overhaul and repair services; risk of obsolescence of tooling
inventory before full amortization on project costs; cancellation of orders;
foreign currency exchange rates, the ability to obtain effective hedges against
fluctuations in currency exchange rates; foreign trade and fiscal policies;
insurance recoveries; and unexpected developments while implementing the
modifications necessary to mitigate Year 2000 compliance issues, including the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, the indirect impacts of third parties
with whom we do business and who do not mitigate their Year 2000 compliance
problems and similar unforeseen consequences of the Year 2000 issue.
13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -------
(a) The following exhibit is filed herewith:
Exhibit 27. Financial Data Schedule
(b) The Company has not filed any Reports on Form 8-K during the quarter for
which this report is filed.
14
<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.
---------------------
November 12, 1999
By /s/ Edward B. Stephens
-------------------------------
Edward B. Stephens
Vice President, Treasurer and
Chief Financial Officer
<PAGE>
CADE INDUSTRIES, INC.
* * *
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED
SEPTEMBER 30, 1999
EXHIBIT INCORPORATED HEREIN FILED
NUMBER DESCRIPTION BY REFERENCE TO: HEREWITH
- ------ ----------- ------------------- --------
27 Financial Data
Schedule X
<TABLE> <S> <C>
<PAGE>
<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
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
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