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 September 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 November 10,
1995.
EDISON CONTROL CORPORATION
BALANCE SHEETS
September 30, 1995 and December 31, 1994
1995 1994
ASSETS --------- ---------
(Unaudited)
Current assets:
Cash and cash equivalents $ 1,027,453 $ 821,901
Investments 284,000 284,000
Trading securities 11,445,186 7,629,450
Accounts receivable-trade 101,109 226,146
Prepaid income taxes 130,762 0
Inventories 219,713 249,457
Prepaid expenses and other
current assets 58,405 47,281
---------- ----------
Total current assets 13,266,628 9,258,235
Equipment and leasehold improvements
at cost, net 74,480 65,618
---------- ----------
$13,341,108 $ 9,323,853
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,376 $ 69,451
Accrued liabilities 53,497 37,378
Income taxes payable 689,522 167,674
Deferred income taxes 1,822,060 873,020
---------- ----------
Total current liabilities 2,590,455 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 4,585,959 2,128,636
---------- ----------
Total stockholders' equity 10,750,653 8,176,330
---------- ----------
$13,341,108 $ 9,323,853
========== ==========
See Accompanying Notes.
EDISON CONTROL CORPORATION
STATEMENT OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
------------------ -----------------
Net sales $ 216,327 $ 346,604 $ 647,177 $1,160,980
Cost and expenses:
Cost of sales 186,519 249,256 542,096 799,829
Selling, general and
administrative 178,220 164,656 548,094 471,019
----------- ---------- ---------- -----------
364,739 413,912 1,090,190 1,270,848
----------- ---------- ---------- -----------
Operating loss ( 148,412) ( 67,308) ( 443,013)( 109,868)
Interest and dividends 19,143 24,878 83,003 153,719
Security fees and commission( 13,485) 0 ( 62,592) 0
Realized gains and (losses)
on trading securities ( 14,859) 156,869 2,145,885 149,600
Unrealized gains on
trading securities 1,883,984 1,664,685 2,372,601 662,627
----------- ---------- ---------- ----------
Income before cumulative
effect of change in accounting
principle and income tax 1,726,371 1,779,124 4,095,884 856,078
Provision for income taxes:
Deferred expense ( 753,593) ( 402,940) ( 949,040)( 10,000)
Current expense/benefit 62,836 ( 148,000) ( 689,522)(148,000)
--------- ----------- ---------- ----------
Income before cumulative
effect of change in accounting
principle 1,035,614 1,228,184 2,457,322 698,078
Cumulative effect of change
in accounting principle, less
taxes of $962,635 0 0 0 1,447,567
---------- ----------- ----------- -----------
Net income $ 1,035,614 $ 1,228,184 $ 2,457,322$ 2,145,645
=========== =========== =========== ===========
Earnings per common share:
Income (loss) before cumulative
effect of change in accounting
principle .46 .57 1.09 .99
Cumulative effect of change
in accounting principle $ .00 $ .00 $ .00 $ .67
---------- ----------- ----------- -----------
Net income $ .46 $ .57 $ 1.09 $ 1.66
=========== =========== =========== ===========
Average common shares and
common share equivalents 2,250,000 2,169,600 2,250,000 2,169,600
=========== =========== =========== ===========
See Accompanying Notes.
EDISON CONTROL CORPORATION
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
--------- ---------
Cash flows from operating activities:
Cash received from customers $ 790,625 $ 1,201,705
Cash paid to suppliers and employees ( 1,095,123) ( 1,408,861)
Income taxes paid ( 345,304) 0
Interest received 21,708 67,162
Dividends received 60,563 138,296
Interest and premium paid on
investments ( 6,762) 0
Purchases of trading securities (12,321,750) ( 4,642,766)
Proceeds from the sale of trading
securities 13,024,500 5,846,800
---------- ----------
Net cash provided by
operating activities 128,457 1,202,336
---------- ----------
Cash flows from investing activities:
Capital expenditures ( 39,905) ( 14,633)
Maturities of certificates of deposit 0 95,000
--------- ---------
Net cash provided by (used in)
investing activities ( 39,905) 80,367
--------- ---------
Cash flows from financing activities:
Stock options exercised 117,000 0
--------- ---------
Net cash provided by financing
activities 117,000 0
--------- ---------
Net increase in cash and
cash equivalents 205,552 1,282,703
Cash and cash equivalents, beginning of
period 821,901 151,658
--------- ---------
Cash and cash equivalents, end of period $ 1,027,453 $ 1,434,361
========== ==========
See Accompanying Notes.
EDISON CONTROL CORPORATION
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
1995 1994
-------- --------
Net income $ 2,457,322 2,145,645
Adjustments to reconcile net income to
net cash (used in) operating activities:
Depreciation and amortization 31,044 28,538
Realized (gain) on sales of
trading securities ( 2,145,885) ( 149,600)
Unrealized (gain) on
trading securities ( 2,372,601) ( 662,627)
Purchases of trading securities (12,321,750) ( 4,642,766)
Proceeds from the sale of
trading securities 13,024,500 5,846,800
Cumulative effect of a change in
accounting principle 0 ( 2,410,202)
Changes in assets and liabilities:
Accounts receivable 125,037 ( 28,939)
Prepaid income taxes ( 130,762) 0
Inventories 29,744 ( 5,000)
Prepaid expenses and other
current assets ( 11,124) 935
Accounts payable ( 44,075) ( 22,534)
Accrued liabilities 16,119 ( 13,549)
Deferred income taxes 949,040 967,635
Income taxes payable 521,848 148,000
--------- ----------
Total adjustments ( 2,328,865) ( 943,309)
---------- ----------
Net cash provided by operating
activities $ 128,457 $ 1,202,336
========== ===========
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 nine month period ending September 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 as of that date.
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 third quarter of fiscal year 1995 decreased $130,277, or
37.6%, compared with the comparable period of the prior year. For the first
nine months of 1995, net sales decreased $513,803, or 44.3%, compared to the
comparable period of 1994. The decrease for both periods in 1995 is
attributable to the pending deregulation of the electric utilities industry
and the continuing unstable economy in Mexico. In June of 1995, it appeared
that bookings were beginning to increase, but it did not continue through
this quarter. The Company now anticipates that sales of conventional faulted
circuit indicators will remain flat well into next year. Unit production is
down 54%; while the number of orders have more than doubled. This is an
indication that the utilities are ordering for specific needs and are not
putting Company product in inventory.
As a percentage of net sales, gross profit margin for the 1995 third quarter
decreased to 13.8% from 28.1%. The nine month period gross profit margin
decreased to 16.2% from 31.1% 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 third quarter and first
nine months ended September 30, 1995 were $178,220 and $548,094,
respectively, compared to $164,656 and $471,019, 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 $443,013 for the first nine months compared to an
operating loss of $109,868 for the comparable period of 1994. The Company
recorded an operating loss in the three months ended September 30, 1995 of
$148,412 compared to a loss of $67,308 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 46% for the nine
months ended September 30, primarily as a result of the shifting of the
Company's investments into trading securities which resulted in increases in
both realized and unrealized gains.
In the three months ended September 30, 1995, the Company recorded a $14,859
realized loss in trading securities as compared to a gain of $156,869 in the
comparable period of the prior year. This loss in mainly attributable to
market fluctuation. The Company achieved a $2,145,885 realized gain in
trading securities for the nine months ended September 30, 1995. Compared to
the prior period gain of $149,600, the difference of $1,996,285 is primarily
due to an increase in sales of securities. Unrealized gains were $2,372,601
for the first nine months compared to $662,627 for the comparable period of
1994. The increase of $1,709,974 can be attributed to a general upward
market trend.
The Company recorded a current and deferred tax expense of $1,638,562 and
$690,757 for the nine months and quarter ended September 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 $1,035,614 or $.46 per share for the third quarter of 1995
decreased $192,570 compared to net income of $1,228,184 or $.57 per share for
the comparable period of the prior year. Net income of $2,457,322 or $1.09
per share for the first nine months of 1995 increased $311,677 compared to
net income of $2,145,645 or $1.66 per share for the comparable period of the
prior year.
The Company generated $128,457 in cash from operations during the first nine
months of 1995 compared to $1,202,336 during the first nine months of 1994,
a difference of $1,073,879 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 $39,905 during
the first nine months of 1995 compared to cash generated of $80,367 during
the first nine months of 1994. The Company's financing activities provided
$117,000 during the first nine months of 1995 compared to $0 in the first
nine months of 1994. There was a net increase in cash and cash equivalents
of $205,552 in 1995 compared to $1,282,703 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 September 30, 1995 the working capital ratio (i.e., the
ratio of total current assets to total current liabilities) was 5.1:1. At
December 31, 1994, the working capital ratio was 8.1:1.
Part 11
Other Information
Item 5: Other Information
The Annual Shareholder's Meeting was held on October 17, 1995. The
following people were elected to the Board of Directors:
Gerald B. Cramer
John J. Delucca
William B. Finneran
Mary E. McCormack
Jay J. Miller
The Amendment to the 1986 Stock Option Plan was approved.
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
Mary E. McCormack
November 10, 1995 By:
President and Chief
Executive Officer
Jack V. Miller
November 10, 1995 By:
Treasurer and Chief
Financial Officer
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<ARTICLE> 5
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,311,453
<SECURITIES> 11,445,186
<RECEIVABLES> 101,109
<ALLOWANCES> 0
<INVENTORY> 219,713
<CURRENT-ASSETS> 13,266,628
<PP&E> 439,981
<DEPRECIATION> 365,501
<TOTAL-ASSETS> 13,341,108
<CURRENT-LIABILITIES> 2,590,455
<BONDS> 0
<COMMON> 21,360
0
0
<OTHER-SE> 10,729,293
<TOTAL-LIABILITY-AND-EQUITY> 13,341,108
<SALES> 647,177
<TOTAL-REVENUES> 647,177
<CGS> 542,096
<TOTAL-COSTS> 542,096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,095,884
<INCOME-TAX> 1,638,562
<INCOME-CONTINUING> 2,457,322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,457,322
<EPS-PRIMARY> 1.09
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