United States
Securities and Exchange Commission
Washington, D.C 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the period ended June 30, 1995.
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange of 1934 for the Transition Period from to
Commission file number 0-14812
EDISON CONTROL CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2716367
(State or other jurisdiction of
(I.R.S.Employer
incorporation or organization)
Identification No.)
140 Ethel Road West
Piscataway, N.J. 08854
(Address of principal offices) (Zip Code)
(908) 819-8800
(Registrant's telephone number, including area code)
Not applicable
(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
Indicate the number of shares outstanding of each of
the
issuer's classes of common stock, as of the latest
practical
date.
Common Stock, $.01 par value: 2,136,000 as of July 31,
1995.
EDISON CONTROL CORPORATION
BALANCE SHEETS
June 30, 1995 and December 31, 1994
1995 1994
ASSETS --------- ---------
(Unaudited)
Current assets:
Cash and cash equivalents $ 186,868 $ 831,901
Investments 284,000 284,000
Trading securities 10,538,961 7,629,450
Accounts receivable-trade 105,965 226,146
Prepaid income tax 90,662
0
Inventories 234,757 249,457
Prepaid expenses and other
current assets 71,613 47,281
---------- ----------
Total current assets 11,512,826 9,258,235
Equipment and leasehold improvements
at cost, net 68,468 65,618
---------- ----------
$11,581,294 $ 9,323,853
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,270 $ 69,451
Accrued liabilities 37,160 37,378
Income taxes payable 752,358 167,674
Deferred income tax 1,068,467 873,020
---------- ----------
Total current liabilities 1,866,255 1,147,523
Stockholders' equity:
Preferred Stock, $.01 par value: 1,000,000 shares
authorized, none issued
Common Stock, $.01 par value: 10,000,000 shares
authorized, 2,136,000 shares issued and
outstanding in 1995, 2,100,000 in 1994 21,360
21,000
Additional paid-in capital 6,143,334
6,026,694
Retained earnings 3,550,345
2,128,636
----------
----------
Total stockholders' equity 9,715,039
8,176,330
-----------
----------
$11,581,294 $
9,323,853
==========
==========
See Accompanying Notes.
EDISON CONTROL CORPORATION
STATEMENT OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
Three months ended Six months
ended
June 30, June
30,
1995 1994 1995
1994
---------------------------
-----------------------
Net sales $ 160,662 $ 510,989 $ 430,850
$ 814,376
Cost and expenses:
Cost of sales 153,658 329,295 355,577
550,573
Selling, general and
administrative 175,790 167,770 369,874
306,363
----------- ---------- ----------
-----------
329,448 497,065 725,451
856,936
----------- ---------- ----------
-----------
Operating income (loss) ( 168,786) 13,924 ( 294,601)
( 42,560)
Interest and dividends 37,707 59,147 63,860
130,254
Security fees and
commission ( 25,994) ( 1,413) ( 49,107)
( 1,413)
Realized gains and (losses)
on trading securities 1,152,147 6,043 2,160,744
( 6,262)
Unrealized gains and (losses)
on trading securities 301,389 ( 62,989) 488,617
(1,003,065)
----------- ----------- ----------
-----------
Income (loss) before cumulative
effect of change in accounting
principle and income tax 1,296,463 14,712 2,369,513
( 923,046)
Provision for income taxes:
Deferred expense ( 195,447) 0 ( 195,447)
392,940
Current expense ( 323,138) 0 ( 752,358)
0
----------- ----------- -----------
----------
Income (loss) before cumulative
effect of change in accounting
principle 777,878 14,712 1,421,708
( 530,106)
Cumulative effect of change
in accounting principle, less
taxes of $962,635 0 0 0
1,447,567
----------- ----------- -----------
-----------
Net income $ 777,878 $ 14,712 $ 1,421,708
$ 917,461
=========== =========== ===========
===========
Earnings per common share:
Income (loss) before cumulative
effect of change in accounting
principle .36 .01 .65
( .24)
Cumulative effect of change
in accounting principle $ .00 $ .00 $ .00
$ .66
----------- ----------- ----------
------------
Net income $ .36 $ .01 $ .65
$ .42
=========== ============ ==========
============
Average common shares and
common share equivalents 2,172,800 2,175,831 2,171,200
2,175,831
=========== =========== ===========
===========
See Accompanying Notes.
EDISON CONTROL CORPORATION
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
1995
1994
---------
---------
Cash flows from operating activities:
Cash received from customers $ 562,493 $
803,796
Cash paid to suppliers and
employees ( 791,797) (
931,551)
Income taxes paid ( 305,204) (
5,000)
Interest received 13,281
37,707
Dividends received 51,850
93,907
Interest and premium paid on
investments 545
0
Purchases of trading securities (10,652,250) (
1,686,870)
Proceeds from the sale of trading
securities 10,392,100
1,774,532
----------
----------
Net cash provided by (used in)
operating activities ( 728,982)
86,521
----------
----------
Cash flows from investing activities:
Capital expenditures ( 23,051) (
12,100)
---------
---------
Net cash used in investing
activities ( 23,051) (
12,100)
---------
---------
Cash flows from financing activities:
Stock options exercised 117,000
0
---------
---------
Net cash provided by financing
activities 117,000
0
---------
---------
Net increase (decrease) in cash
and cash equivalents ( 635,033)
74,421
Cash and cash equivalents, beginning of
period 821,901
151,658
---------
---------
Cash and cash equivalents, end of period$ 186,868 $
226,079
==========
==========
See Accompanying Notes.
EDISON CONTROL CORPORATION
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995
1994
--------
--------
Net income $ 1,421,708 $
917,461
Adjustments to reconcile net income to
net cash (used in) operating activities:
Depreciation and amortization 20,202
18,789
Realized (gain) loss on sales of
trading securities ( 2,160,744)
6,262
Unrealized (gain) loss on
trading securities ( 488,617)
1,003,065
Purchases of trading securities (10,652,250)
( 1,686,870)
Proceeds from the sale of
trading securities 10,392,100
1,774,532
Cumulative effect of a change in
accounting principle 0
( 2,410,202)
Changes in assets and liabilities:
Accounts receivable 120,181
( 64,532)
Prepaid income taxes ( 90,662)
0
Inventories 14,700
( 19,259)
Prepaid expenses and other
current assets ( 24,332)
( 33,933)
Accounts payable ( 61,181)
37,935
Accrued liabilities ( 218)
( 21,422)
Deferred income taxes 195,447
564,695
Income taxes payable 584,684
0
---------
----------
Total adjustments ( 2,150,690)
( 830,940)
----------
----------
Net cash provided by (used in)
operating activities $( 728,982)
$ 86,521
==========
==========
See Accompanying Notes.
EDISON CONTROL CORPORATION
Notes to Financial Statements
(unaudited)
Note 1- Basis of Presentation
The accompanying unaudited consolidated financial statements have
been
prepared in accordance with generally accepted accounting
principles for
interim financial information and with the instructions to Form
10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all
of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management,
all adjustments (consisting of normal recurring accruals)
considered
necessary for a fair presentation have been included. Operating
results for
the six month period ending June 30, 1995 are not necessarily
indicative of
the results that may be expected for the year ended December 31,
1995. For
further information, refer to the consolidated financial statements
and
footnotes thereto included in the Registrant Company's annual
report on Form
10-K for the year ended December 31, 1994.
Note 2- Trading Securities
The Financial Accounting Standards Board has issued Statement of
Financial
Accounting Standards No. 115 ("Statement 115"), "Accounting for
Certain
Investments in Debt and Equity Securities," to record at market
value
securities held for investment. Statement 115 addresses the
accounting and
reporting for investments in equity securities that have readily
determinable
fair values and for all investments in debt securities. Debt and
equity
securities that are bought and held principally for the purpose of
selling
them in the near term would be classified as "trading securities"
and
reported at fair value, with unrealized gains and losses included
in
earnings. The impact of adopting Statement 115 as of January 1,
1994 was to
increase income by approximately $1,448,000, net of taxes.
The cost of securities sold is based on the first in, first out
method.
Item 2.
Management's Discussion and Analysis of Operations and Financial
Condition.
Results of Operations.
Net sales for the second quarter of fiscal year 1995 decreased
$350,327, or
68.6%, compared with the comparable period of the prior year. For
the first
six months of 1995, net sales decreased $383,526, or 47.1%,
compared to the
comparable period of 1994. The decrease for both periods in 1995
is
attributable to a combination of two factors: a) The pending
deregulation of
the electric utilities industry has created an unstable environment
in which
the utilities will have to compete to sell power to big customers.
This is
causing massive cutbacks in both personnel and the purchasing of
materials
used by the power producers. Sale of the Company's product is
being impacted
because they are not an essential material required in the
distribution of
electricity, a condition which management believes is temporary.
As
personnel continues to be reduced, the faulted circuit indicator
should be
a tool to expedite the restoration of service after an outage, b)
The
unstable financial problems incurred by Mexico; 16% of 1994 sales
were
exported to Mexico. There were no shipments to Mexico in the first
six
months of 1995, however, the Company is quoting a major project for
Mexico
Electric at this time. Quoting activity is generally picking up at
this
time. As a result, sales for the next quarter could return to more
normal
levels.
As a percentage of net sales, gross profit margin for the 1995
second quarter
decreased to 4.4% from 35.6%. The six month period gross profit
margin
decreased to 17.5% from 32.4% for the comparable period in 1994.
These
decreases are primarily attributable to reduced unit volume and the
allocation of overhead costs over the lower unit volume.
Selling, general and administrative expenses for the second quarter
and first
six months ended June 30, 1995 were $175,790 and $369,874,
respectively,
compared to $167,770 and $306,363, respectively, for the comparable
periods
of the prior year. Management believes selling, general and
administrative
expenses should be maintained at or near their present levels for
the balance
of fiscal 1995. The increase in general and administrative
expenses is due
to the opening of a New York City office for the Company's new
President.
The operating loss was $294,601 for the first six months compared
to an
operating loss of $42,560 for the comparable period of 1994. The
Company
recorded operating loss in the three months ended June 30, 1995 of
$168,786
compared to income of $13,924 in 1994. The increase in operating
losses is
due primarily to decreased level of sales in 1995 and the increase
in general
and administrative expenses.
Interest and dividend income decreased by approximately 51% for the
six
months ended June 30, as a result of the shifting of the Company's
investments into trading securities which resulted in increases in
both
realized and unrealized gains.
The Company achieved a $2,160,744 realized gain in trading
securities for the
six months ended June 30, 1995. Compared to the prior period loss
of
($6,262), the difference of $2,167,0006 is primarily due to an
increase in
sales of securities. Unrealized gains were $488,617 for the first
six months
compared to unrealized losses of ($1,003,065) for the comparable
period of
1994. The increase of $1,491,682 can be attributed to a general
upward
market trend.
The Company recorded a current and deferred tax expense of $518,585
and
$947,805 for the quarter and six months ended June 30, 1995
respectively,
which represents the estimated annual effective rate of 40% applied
to pre-
tax book income. Deferred income taxes reflect the net tax effects
of
temporary differences between the carrying amount of assets and
liabilities
for financial statement reporting purposes and the amounts used for
income
tax purposes.
Net income of $777,878 or $.36 per share for the second quarter of
1995
increased $763,166 compared to net income of $14,712 or $.01 per
share for
the comparable period of the prior year. Net income of $1,421,708
or $.65
per share for the first six months of 1995 increased $504,247
compared to net
income of $917,461 or $.42 per share for the comparable period of
the prior
year.
The Company used $728,982 in cash from operations during the first
six months
of 1995 compared to a cash generation of $86,521 during the first
six months
of 1994, a difference of $815,503 which is attributable to the
reduction in
sales, an increase in purchases over sales of trading securities
and income
taxes paid. The Company's cash usage from investing activities was
$23,051
during the first six months of 1995 compared to $12,100 during the
first six
months of 1994. The Company's financing activities provided
$117,000 during
the first six months of 1995 compared to $0 in the first six months
of 1994.
There was a net decrease in cash and cash equivalents of $635,033
in 1995
compared to an increase of $74,421 in 1994.
Management continues to analyze the discontinuance of the
manufacture and
sale of electronic fault indicators in light of the Company's
operating
losses. No decision regarding said discontinuance has been made.
If the
Company discontinued the manufacture and sale of electronic fault
indicators,
the Company would be left with assets consisting of cash and cash
equivalents, investments and trading securities. Management
continues to
actively seek opportunities for the investment of its cash,
investments and
securities in areas which may not be related to its present
operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it can fund its proposed capital
expenditures and
its operational requirements from operations and its currently
available
cash, cash equivalents and investments. Proposed capital
expenditures for
the remainder of fiscal year 1995 are expected to total
approximately
$20,000.
The Company has no long-term debt and does not anticipate a
long-term need
for capital to fund its present business. The Company may,
however, need
long-term capital to fund an acquisition in the event such
acquisition
requires funding greater than the Company's cash, cash equivalents,
investments and trading securities. The Company has not sought to
obtain
such capital and will do so only in the event it is required to
fund an
acquisition. The source of such funding, if any, is unknown at
this time.
Additionally, at June 30, 1995 the working capital ratio (i.e., the
ratio of
total current assets to total current liabilities) was 6.2:1. At
December
31, 1994, the working capital ratio was 8.1:1.
Part 11
Other Information
Item 5: Other Information
None.
Item 6: Exhibits and Reports on Form 8K
None.
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.
EDISON CONTROL CORPORATION
July 31, 1995 By:Mary E. McCormack
President and Chief
Executive Officer
July 31, 1995 By:Jack V. Miller
Treasurer and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 470,868
<SECURITIES> 10,538,961
<RECEIVABLES> 105,965
<ALLOWANCES> 0
<INVENTORY> 234,757
<CURRENT-ASSETS> 11,512,826
<PP&E> 423,127
<DEPRECIATION> 354,659
<TOTAL-ASSETS> 11,581,294
<CURRENT-LIABILITIES> 1,866,255
<BONDS> 0
<COMMON> 21,360
0
0
<OTHER-SE> 9,693,679
<TOTAL-LIABILITY-AND-EQUITY> 11,581,294
<SALES> 430,850
<TOTAL-REVENUES> 430,850
<CGS> 355,577
<TOTAL-COSTS> 355,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,369,513
<INCOME-TAX> 947,805
<INCOME-CONTINUING> 1,421,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,421,708
<EPS-PRIMARY> .65
<EPS-DILUTED> .00
</TABLE>
