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 March 31,
1996.
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 0-14812
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 May 08, 1996.
EDISON CONTROL CORPORATION
BALANCE SHEETS
March 31, 1996 and December 31, 1995
1996 1995
ASSETS ---------- ----------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 2,738,315 $ 2,020,996
Investments 284,000 284,000
Trading securities 8,126,343 9,838,998
Accounts receivable-trade 145,113 55,398
Inventories 244,742 230,318
Prepaid expenses and deposits 35,888 47,739
---------- ----------
Total current assets 11,574,401 12,477,449
Equipment and leasehold improvements
at cost, net 58,297 65,687
Deferred tax asset 10,350 10,350
---------- ----------
$11,643,048 $12,553,486
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 52,793 $ 924
Accrued liabilities 43,607 51,701
Income taxes payable 594,099 518,728
Deferred income taxes 840,450 1,606,221
---------- ----------
Total current liabilities 1,530,949 2,177,574
Stockholders' equity:
Preferred Stock, $.01 par value: 1,000,000
authorized, none issued
Common Stock, $.01 par value: 10,000,000 shares
authorized, 2,136,000 shares issued and
outstanding 21,360 21,360
Additional paid-in capital 6,143,334 6,143,334
Retained earnings 3,947,405 4,211,218
---------- ----------
Total stockholders' equity 10,112,099 10,375,912
---------- ----------
$11,643,048 $12,553,486
========== ==========
See Accompanying Notes.
EDISON CONTROL CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Three months ended
March 31,
1996 1995
--------- ---------
Net sales $ 237,850 $ 270,188
Cost and expenses:
Cost of sales 179,367 201,919
Selling, general and administrative 208,322 194,084
--------- ---------
387,689 396,003
--------- ---------
Operating loss ( 149,839) ( 125,815)
Interest and dividends 28,601 26,153
Security fees and commissions ( 45,319) ( 23,113)
Realized gains on trading securities 1,641,296 1,008,597
Unrealized gains (losses) on trading
securities (1,914,427) 187,228
--------- ---------
Income (loss) before income tax ( 439,688) 1,073,050
Provision for income taxes:
Deferred benefit 765,771 0
Current expense ( 589,896) ( 429,220)
--------- ---------
Net income (loss) $( 263,813) $ 643,830
========= =========
Earnings per common share:
Net Income (loss) $( .12) $ .30
========= =========
Average common shares and common
shares equivalents 2,136,000 2,165,368
========= =========
See Accompanying Notes.
EDISON CONTROL CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
--------- ---------
Cash flows from operating activities:
Cash received from customers $ 154,543 $ 257,380
Cash paid to suppliers and
employees ( 444,424) ( 392,746)
Income taxes paid ( 514,525) ( 214,543)
Interest received ( 1,007) 4,395
Dividends received 23,330 20,485
Interest and premium paid on
investments 59,878 ( 4,556)
Purchases of trading securities (6,305,256) (3,931,625)
Proceeds from the sale of
trading securities 7,744,780 4,540,350
--------- ---------
Net cash provided by operating
activities 717,319 279,140
--------- ---------
Cash flows (used in) investing activities:
Capital expenditures 0 ( 15,411)
--------- ---------
Net cash (used in) investing
activities 0 ( 15,411)
--------- ---------
Net increase in cash and cash
equivalents 717,319 263,729
Cash and cash equivalents, beginning
of period 2,020,996 821,901
--------- ---------
Cash and cash equivalents, end of
period $ 2,738,315 $ 1,085,630
========= =========
See Accompanying Notes.
EDISON CONTROL CORPORATION
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
--------- ---------
Net income (loss) $( 263,813) $ 643,830
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 7,390 10,189
Realized (gain) on sales of
trading securities (1,641,296) (1,008,597)
Unrealized (gain) loss on
trading securities 1,914,427 ( 187,228)
Purchases of trading securities (6,305,256) (3,931,625)
Proceeds from the sale of trading
securities 7,744,780 4,540,350
Changes in assets and liabilities:
Accounts receivable ( 89,715) 5,126
Prepaid income tax 0 ( 46,868)
Inventories ( 14,424) ( 21,622)
Prepaid expenses and deposits 11,851 1,472
Accounts payable 51,869 11,626
Accrued liabilities ( 8,094) 941
Deferred income taxes ( 765,771) 0
Income taxes payable 75,371 261,546
--------- ---------
Total adjustments 981,132 ( 364,690)
--------- ---------
Net cash provided by operating
activities $ 717,319 $ 279,140
========= =========
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 three month period ending March 31, 1996 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1996.
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, 1995.
Note 2 - Trading Securities
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", debt and
equity securities that are bought and held principally for the purpose of
selling them in the near term are classified as "trading securities" and
reported at fair value, with unrealized gains and losses included in
earnings. 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 first quarter of fiscal year 1996 decreased $32,338, or
12.0%, compared with the comparable period of the prior year as a result of
a decrease in unit volume. Unit volume sales are moderately seasonal in
nature with sales traditionally stronger in the second and third quarters.
Current booking levels indicate that this should pertain to fiscal year 1996.
The business climate in the electric utility industry is unfavorable
generally with some of the utilities cutting both personnel and operating
budgets. However, the Company's outlook for the second quarter indicates at
least a 25% increase in sales versus second quarter of 1995. This
anticipated increase is due in part to a large order received from Mexico.
Testing on the new Fast Fault Finder appears to be progressing satisfactorily
to the final stage.
The gross profit margin for the first quarter ended March 31, 1996 decreased
to 24.6% from 25.3% for the comparable period of the prior year. The
decrease is primarily attributable to a decline in operating efficiency, due
in part to higher absorption of manufacturing overhead caused by lower unit
volume.
Selling, general and administrative expenses for the first quarter were
$208,322 compared to $194,084 for the comparable period of the prior year.
The increase is primarily due to the hiring of the new President and Chief
Executive Officer and the opening of an executive office in New York City
during February 1995. Based on current operations, management believes
selling, general and administrative expenses can be maintained at or near the
present level.
The operating loss was $149,839 for the first quarter of 1996 compared to an
operating loss of $125,815 for the comparable period of 1995. This increase
in loss is due primarily to increased selling, general and administrative
expenses as well as a reduction of the Company's margins.
The Company achieved a $1,641,296 realized gain in trading securities for the
quarter ended March 31, 1996. Compared to the prior period gain of
$1,008,597, the difference of $632,699 is primarily due to an increase in
sales of securities. Unrealized losses for the quarter ended March 31, 1996
were $1,914,427 compared to an unrealized gain of $187,228 in the comparable
period of the prior year. The unrealized loss for the quarter ended March
31, 1996 is primarily attributable to a decrease in the market value of
Glenayre Technologies, Inc. stock.
The Company recorded a current tax expense and a deferred tax benefit for the
quarter ended March 31, 1996 of $589,896 and $765,771, respectively, which
was determined based upon the estimated effective tax rate of 40% for 1996.
Net loss of $263,813, or $.12 per share, for the first quarter of 1996
reflecting a decrease of $907,643 from the prior year's first quarter net
income of $643,830, or $.30 per share.
The Company generated cash from operating activities of $717,319 during the
first three months of 1996 compared to $279,140 during the first three months
of 1995 a difference of $438,179 which is primarily attributable to increased
proceeds from sales of trading securities. The Company's cash usage from
investing activities was $0 during the first three months of 1996 compared to
$15,411 during the first three months of 1995, for a net increase in cash and
cash equivalents of $717,319 in 1996 compared to $263,729 in 1995.
Management continues to analyze the possible discontinuance of the
manufacture and sale of electronic fault indicators in light of the Company's
operating losses. However, development activities are continuing on a new
line of fault indicators. 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
principally of cash and cash equivalents, investments and trading securities.
Management is actively seeking 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 its currently available cash, cash
equivalents and investments. Proposed capital expenditures for the remainder
of fiscal year 1996 are expected to total approximately $35,000.
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
additional long-term capital to fund an acquisition in the event such
acquisition required 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 and terms of such funding, if any, is
unknown at this time.
At March 31, 1996, the working capital ratio (i.e., the ratio of total
current assets to total current liabilities) was 7.6:1. At December 31,
1995, the working capital ratio was 5.7:1.
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
/s/ Mary E. McCormack
May 8, 1996 By:
President and Chief
Executive Officer
/s/ Jack V. Miller
May 8, 1996 By:
Treasurer and Chief
Financial Officer
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<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,022,315
<SECURITIES> 8,126,343
<RECEIVABLES> 145,113
<ALLOWANCES> 0
<INVENTORY> 244,742
<CURRENT-ASSETS> 11,574,401
<PP&E> 439,981
<DEPRECIATION> 381,684
<TOTAL-ASSETS> 11,643,048
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<COMMON> 21,360
0
0
<OTHER-SE> 10,090,739
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<SALES> 237,850
<TOTAL-REVENUES> 237,850
<CGS> 179,367
<TOTAL-COSTS> 179,367
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (439,688)
<INCOME-TAX> 175,875
<INCOME-CONTINUING> (263,813)
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<EXTRAORDINARY> 0
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<NET-INCOME> (263,813)
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