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 April 30, 1997
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 (IRS Employer
incorporation or organization) Identification No.)
W60 N151 Cardinal Avenue
PO Box 326
Cedarburg, WI 53012-0326
(Address of principal executive offices)
(Zip Code)
(414) 377-6565
(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 period 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 practicable date.
Common Stock, $.01 par value: 2,275,933 as of May 31, 1997
<TABLE>
EDISON CONTROL CORPORATION AND SUBSIDIARIES
INDEX
<CAPTION>
Exhibit Reference
or Form 10-Q
Page Number
<S> <C>
Part I Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets 10-Q, Pages 2 & 3
April 30, 1997 (Unaudited) and
January 31, 1997
Consolidated Statements of Operations 10-Q, Page 4
Three months ended April 30,
1997 and 1996 (Unaudited)
Consolidated Statements of Cash Flows 10-Q, Pages 5 & 6
Three months ended April 30,
1997 and 1996 (Unaudited)
Notes to Consolidated Financial Statements 10-Q, Pages 7 & 8
(Unaudited)
Item 2 Management's Discussion and Analysis of 10-Q, Pages 8 & 9
Operations and Financial Condition
Part II Other Information
Item 6 Exhibits 10-Q, Page 9 and
Exhibit Index
</TABLE>
<TABLE>
PART I.
Item 1
Financial Statements
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 1997 and January 31, 1997
<CAPTION>
April 30, January 31,
1997 1997
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 769,242 $ 772,008
Investments 284,000 284,000
Trading securities 3,946,663 4,751,688
Trade accounts receivable, net 3,342,495 2,713,308
Receivable from affiliates 74,826 156,035
Inventories, net 5,153,612 5,316,948
Prepaid expenses and other assets 195,852 197,576
Deferred compensation 109,995 298,558
Deferred financing costs 983,333 983,333
Total current assets 14,860,018 15,473,454
Investment in and advances 340,054 340,054
to affiliate
Other Assets:
Prepaid pension 358,018 385,021
Deferred financing costs 1,126,735 1,372,570
Total other assets 1,484,753 1,757,591
Property, plant and equipment, net 7,008,868 7,077,228
Goodwill (net of amortization) 9,096,768 9,154,833
Organizational/finance costs (net of
amortization) 235,375 256,945
TOTAL ASSETS $33,025,836 $34,060,105
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 1,335,050 $ 868,088
Accrued compensation 399,797 606,010
Taxes other than income taxes 50,679 38,119
Other accrued expenses 577,381 529,896
Income taxes payable 61,342 9,077
Deferred income tax 0 245,000
Deferred compensation 754,250 754,250
Current maturities on long-term debt 868,844 868,844
Total current liabilities 4,047,343 3,919,284
Long-term debt, less current
maturities 15,259,362 16,038,580
Deferred income taxes 396,000 501,000
TOTAL LIABILITIES 19,702,705 20,458,864
Stockholders' Equity:
Preferred stock, $.01 par value:
1,000,000 shares authorized,
none issued 0 0
Common stock, $.01 par value:
10,000,000 shares authorized,
issued and outstanding 2,275,933
shares 22,759 22,759
Additional paid-in-capital 10,016,435 10,016,435
Retained earnings 3,139,566 3,453,331
Foreign currency translation
adjustments 144,371 108,716
TOTAL STOCKHOLDERS' EQUITY 13,323,131 13,601,241
TOTAL LIABILITIES AND EQUITY $33,025,836 $34,060,105
See Accompanying Notes.
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<TABLE>
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
NET SALES $5,707,231 $261,111
COST OF GOODS SOLD 3,634,752 193,340
GROSS PROFIT 2,072,479 67,771
OTHER OPERATING EXPENSES:
Selling, engineering and
and administrative expenses 1,130,771 186,011
Stock option amortization 188,563 0
Goodwill and organizational/
finance cost amortization 79,635 0
Total other operating expenses 1,398,969 186,011
OPERATING EARNINGS (LOSS) 673,510 (118,240)
OTHER EXPENSE (INCOME):
Interest expense 276,498 0
Realized losses(gains) on trading
securities 195,688 (982,050)
Unrealized losses on trading
securities 436,900 480,695
Stock warrant amortization 245,835 0
Miscellaneous 12,314 11,633
Total other expense (income) 1,167,235 (489,722)
(LOSS) EARNINGS BEFORE INCOME
TAXES (CREDIT) (493,725) 371,482
INCOME TAXES (CREDIT) (179,960) 149,000
NET (LOSS) EARNINGS $(313,765) $222,482
Net (loss) earnings per share $(.14) $.10
Average common shares and
common share equivalents 2,275,933 2,197,506
See Accompanying Notes.
</TABLE>
<TABLE>
EDISON CONTROL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
Net (loss) earnings $(313,765) $222,482
Adjustments to reconcile net (loss) earnings to net cash
provided by operating activities:
Depreciation and amortization 682,886 7,340
Provision for doubtful accounts 34,958 0
Realized loss (gain) on sales of
trading securities 195,688 (982,050)
Unrealized loss on trading securities 436,900 480,695
Purchases of trading securities (1,006,875) (4,270,181)
Proceeds from the sale of
trading securities 1,179,312 5,816,930
Changes in assets and liabilities:
Accounts receivable (664,145) (70,052)
Receivable from affiliate 81,209 0
Inventories 163,336 (23,477)
Prepaid expenses and other assets 28,727 (4,450)
Trade accounts payable 466,962 22,142
Accrued compensation (206,213) 1,083
Taxes other than income taxes 12,560 0
Accrued expenses 47,485 3,162
Deferred income taxes (297,000) (192,000)
Income taxes payable (735) (339,033)
Total adjustments 1,155,055 450,109
NET CASH PROVIDED BY
OPERATING ACTIVITIES 841,290 672,591
Cash flows from investing activities:
Additions to plant and equipment (100,493) (2,391)
Proceeds from sale of equipment 0 0
NET CASH (USED IN) INVESTING
ACTIVITIES (100,493) (2,391)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 0 0
Principal payments on long-term debt (779,217) 0
Proceeds from issuance of Common Stock 0 0
Stock options exercised 0 0
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (779,217) 0
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 35,655 0
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (2,765) 670,200
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 772,008 598,931
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 769,242 $1,269,131
Supplemental disclosure of cash flow information:
Cash paid during the period for
income taxes $117,775 $680,033
Cash paid during the period for interest 261,601 0
See Accompanying Notes.
</TABLE>
EDISON CONTROL CORPORATION AND SUBSIDIARIES
Notes to Consolidated 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 instruction
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 fair presentation have been
included. Operating results for the three month period ending
April 30, 1997 are not necessarily indicative of the results that
may be expected for the year ended January 31, 1998. For further
information, refer to the financial statements and footnotes
thereto included in the Registrant's annual report on Form 10-K
for the year ended January 31, 1997.
Note 2 - Nature of Business and Accounting Policies
Principles of Consolidation - The consolidated financial statements
include the accounts of Edison Control Corporation ("Edison") and
subsidiaries, all of which subsidiaries are wholly owned by Edison
(collectively, the "Company"). All material intercompany accounts
and transactions have been eliminated in consolidation.
Nature of Operations - The Company is currently comprised of four
operating units. Construction Forms ("ConForms") is a leading
manufacturer and distributor of systems of pipes, couplings and hoses
and other equipment used for the pumping of concrete. ConForms
manufactures a wide variety of finished products which are used to
create appropriate configurations of systems for various concrete
pumps. Ultra Tech manufactures abrasion resistant piping systems for
use in industries such as mining, pulp and papaer, power and waste
treatment. Gilco produces a line of concrete and plaster/mortar mixers.
JABCO primarily leases property and equipment to Ultra Tech.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
Translation of Foreign Currencies - Assets and liabilities of foreign
operations are translated into United States dollars at current exchange
rates. Income and expense accounts are translated into United States
dollars at average rates of exchange prevailing during the year.
Adjustments resulting from the translation of financial statements of
the foreign operations are included as foreign currency translation
adjustments in the equity section of the accompanying consolidated
balance sheets.
Net (Loss) Earnings Per Common Share and Common Share Equivalents - Net
(loss) earnings per common share and common share equivalents is computed
based upon the weighted average number of common shares and common share
equivalents (stock options and warrants) outstanding during the year.
Common share equivalents from dilutive stock options and warrants were
calculated using the treasury stock method. Common share equivalents
(stock options and warrants) are antidilutive for the period ended April
30, 1997.
Accounting Pronouncements - Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-based Compensation" was issued in
1995. The Company has elected to continue to account for stock-based
compensation under Accounting Principles Board Opinion No. 25 as allowed
by SFAS No. 123.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share". The Company is currently in the process
of evaluating the accounting and disclosure effects of the Statement,
which is required to be adopted in the fourth quarter of fiscal 1997.
Item 2.
Management's Discussion and Analysis of Operations and Financial Condition
On June 21, 1996, the Company purchased all of the issued and outstanding
stock of Construction Forms, Inc. and subsidiaries for an aggregate cash
consideration of approximately $20,550,000. The acquisition was accounted
for as a purchase transaction with the purchase price allocated to the fair
value of specific assets acquired and liabilities assumed. Accordingly,
the results of operations have been included since the date of the
acquisition. Resultant goodwill is being amortized over 40 years.
Net sales for the quarter ended April 30, 1997 increased $5,446,120
to $5,707,231 when compared with the same period of the prior year.
The increase is attributable to the inclusion of the results of operations
of the acquired companies. Construction Forms, Inc. and subsidiaries net
sales for the quarter ended increased 6.3% from $5,368,988 to $5,707,231
due to increased domestic volume at ConForms and Ultra Tech.
As a percentage of net sales, gross profit margin for the quarter
increased to 36.3% from 26.0%. Selling, general and administrative
expenses for the quarter were $1,130,771 compared to $186,011 for the
prior year. These increases are primarily attributable to the inclusion
of the results of operations of the acquired companies. Gross profit
percent of Construction Forms, Inc. and subsidiaries increased to 36.3%
from 30.1% due to better pricing on Ultra Tech sales. Selling, engineering
and administrative expenses of the acquired companies decreased to $990,502
compared to $1,216,802 for the same period last year. This was mainly due
to the decrease in personnel wages and benefits from the quarter ended
April 30, 1996.
Interest expense increased to $276,498 for the quarter ended April 30, 1997
compared to $0 for the quarter ended April 30, 1996. This change related
to the debt incurred on the acquisition.
The net loss on trading securities of $632,588 compared to last year's net
gain of $501,355 accounts for the major change in pre-tax income. A major
reason for the decrease was related to the decline in the market value of
Glenayre Technologies, Inc.
The amortization of goodwill, financing costs, stock options and stock
warrants created a total non-cash charge of $514,033 for the quarter
compared to $0 for the prior quarter.
The Company recorded a tax benefit of $179,960 for the three months ended
April 30, 1997, which represents the estimated annual effective rate of
36.5% 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.
The net loss of $313,765, or $.14 per share, for the first quarter of 1997
was a decrease of $536,247, compared to net income of $222,482, or $.10
per share, for the comparable period of the prior year. This change is
principally due to the net loss on trading securities and the amortization
of the non-cash charges described above.
Liquidity and Capital Resources
The Company generated $841,290 in cash from operations during the first
three months of 1997. The Company used $100,493 in cash to acquire capital
equipment and $779,217 in cash to pay back long-term debt. The result was
a net decrease in cash and cash equivalents of $2,765 for the first quarter
compared to a net increase of $670,200 in last year's quarter. The
difference is attributable to the change in the balance sheet composition
as a result of the acquisition.
The Company believes that it can fund proposed capital expenditures and
operational requirements from operations and currently available cash,
cash equivalents, investments and existing bank credit lines. Proposed
capital expenditures for the remainder of the fiscal year 1997 are expected
to total approximately $400,000.
Additionally, at April 30, 1997, the Company's current ratio was 3.7:1.
At January 31, 1997, the current ratio was 3.9:1. Required minimum
principal payments for the year are approximately $869,000.
PART II.
Item 6.
Exhibits
The Exhibits filed or incorporated by reference herein are as specified
in the Exhibit Index.
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
(Registrant)
Date: June 6, 1997 /s/ Jay R. Hanamann
Jay R. Hanamann
(Chief Financial Officer)
<TABLE>
Edison Control Corporation
Exhibit Index
<CAPTION>
Exhibit No. Description
<S> <C>
27. Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-30-1997
<CASH> 769,242
<SECURITIES> 3,946,663
<RECEIVABLES> 3,669,721
<ALLOWANCES> 327,226
<INVENTORY> 5,153,612
<CURRENT-ASSETS> 14,860,018
<PP&E> 7,506,659
<DEPRECIATION> 497,791
<TOTAL-ASSETS> 33,025,836
<CURRENT-LIABILITIES> 4,047,343
<BONDS> 15,259,362
0
0
<COMMON> 22,759
<OTHER-SE> 13,300,372
<TOTAL-LIABILITY-AND-EQUITY> 33,025,836
<SALES> 5,707,231
<TOTAL-REVENUES> 5,707,231
<CGS> 3,634,752
<TOTAL-COSTS> 3,634,752
<OTHER-EXPENSES> 1,398,969
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276,498
<INCOME-PRETAX> (493,725)
<INCOME-TAX> (179,960)
<INCOME-CONTINUING> (313,765)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (313,765)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
