SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 53012-0326
PO Box 326 (Zip Code)
Cedarburg, Wisconsin
(Address of principal executive offices)
Registrant's telephone number, including area code:
414-377-6565
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
Common stock, par value $.01 per share
(Title of class)
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. [x] Yes
[ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
Aggregate market value of Edison Control Corporation common stock,
held by non-affiliates as of March 31, 1998 was $7,792,170.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of March 31, 1998: 2,275,933 shares of common
stock, par value $.01 per share.
Documents Incorporated by Reference
1. Portions of Edison Control Corporation's 1997 Annual Report to
Shareholders are incorporated by reference into Parts I, II and IV of
this Form 10-K.
2. Portions of Edison Control Corporation's Notice of Annual Meeting and
Proxy Statement for the Registrant's 1998 Annual Meeting scheduled to
be held on June 9, 1998 are incorporated by reference into Part III
of this Form 10-K.
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PART I
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K are "forward-
looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of
1995. These forward-looking statements can generally be identified as
such because the context of the statement will include words such as the
Company "believes", "anticipates", "expects", or words of similar import.
Similarly, statements that describe the Company's future plans, objectives
or goals are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties which are
described in close proximity to such statements and which could cause
actual results to differ materially from those anticipated as of the date
of this report. Shareholders, potential investors and other readers are
urged to consider these factors in evaluating the forward-looking
statements and are cautioned not to place undue reliance on such forward-
looking statements. The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
Item 1. Business
Edison Control Corporation ( the "Company") was incorporated under the
laws of the State of New Jersey on June 18, 1986 to succeed a limited
partnership organized on October 31, 1979. Until June 21, 1996, the
principal operating business was involved in the design, development,
manufacture and sale of electronic fault indicators. On June 21, 1996, the
Company purchased, from unaffiliated persons, all of the issued and
outstanding stock of Construction Forms, Inc. ("ConForms"), CF Ultra Tech,
Inc. ("Ultra Tech") and CF Gilco, Inc. ("Gilco") and all of the issued
and outstanding units of another affiliate, JABCO, LLC. On October 31,
1996, the Company sold certain net assets of the electronic fault
indicators business to the manager of that operation. In order to conform
the Company's fiscal year to that of ConForms and its affiliates, the
Company changed its fiscal year from a calendar year to a year ended
January 31, resulting in a one-month transition period in 1996. On
February 1, 1998, Ultra Tech and Gilco were merged into ConForms.
The Company conducts its business through its subsidiaries. ConForms,
the Company's principal operating unit, designs, manufactures and
distributes concrete pumping systems and accessories. Ultra Tech is
engaged in the manufacturing and marketing of abrasion resistant piping
systems. Abrasion resistant hardened pipe is used extensively in mining,
pulp and paper mills, waste water treatment plants and coal-fired electric
utility plants, as well as in concrete pumping applications. Gilco is
engaged in the manufacturing and marketing of a broad line of concrete and
mortar/plaster mixers for a broad segment of industries.
ConForms
Most of ConForms' manufacturing operations and all of its administrative
functions are located at the Company's 53,000 square foot headquarters in
Cedarburg, Wisconsin, which is approximately 17 miles north of Milwaukee.
ConForms operates three branch warehouses for light manufacturing and
distribution of its products. The warehouses are located in Gardena,
California; Newport, Wales, United Kingdom; and Johor Bahru, Malaysia.
ConForms also owns a 50% interest in South Houston Hose Company, a
Houston, Texas based distributor of concrete pumping accessories,
industrial hoses and a variety of fittings for other markets.
ConForms produces a standardized line of concrete pumping components and
accessories compatible with many different types of concrete pumps in
order to be in a position to provide concrete pumpers and distributors
with a complete, high quality line of components and accessories priced
lower than if each component were purchased individually. ConForms
believes that a pumping system designed as a package helps improve the
reliability and output of the pump.
In the 1970s, as concrete pumps became more reliable, available and
acceptable in the United States as the most efficient method of placing
concrete, ConForms worked closely with pump manufacturers and contractors
to develop better engineered products for the rapidly changing industry.
The Company believes that industry standards were largely established
based on ConForms' designs. ConForms' objective was, and continues to be,
to provide high quality components and a superior level of service to stay
at the forefront of the concrete pumping market. As ConForms continued to
grow utilizing quality engineering, patent protection, tooling and
fixtures, manufacturing methods and distribution, it became difficult for
smaller manufacturers to match ConForms' total service level. The Company
believes this strategy has allowed ConForms to increase its market share
to over 50% of the North American market.
ConForms manufactures concrete pumping systems and accessories for many
applications, including use in high rise construction, airport and parking
structures, and bridge and tunnel construction. In addition, ConForms'
products are used extensively on mobile, truck-mounted concrete pumps
equipped with articulating booms. Because of the inherent abrasiveness of
concrete being conveyed under pressure, ConForms' products need to be
replaced periodically and the end-user usually contacts ConForms or a
distributor for high-quality, in-stock replacement components.
ConForms manufactures over 7,000 finished products, although approximately
500 products constitute approximately 80% of ConForms' sales. To its
knowledge, ConForms is the only complete source of system components and
accessories needed to pump and place concrete. ConForms' products include
straight pipe sections in a variety of lengths, diameters, wall
thicknesses, degrees of hardness, and fittings. In addition, ConForms'
products include couplings, reducers, bends, elbows and valves in various
sizes and styles. Specially-made rubber hose in a variety of sizes and
configurations is included in ConForms' product base. The line also
includes equipment which is tailor-made for particular applications, such
as bridge-deck spreaders, krete-placers, hydraulic diversion discharge
valves and customized equipment used in tunnel construction.
Marketing
ConForms' products, which account for approximately 75% of the Company's
sales, are marketed principally through its own sales personnel and
distributors. Besides contact from sales personnel, ConForms also attempts
to maintain a prominent level of market visibility through active
membership in the American Concrete Pumping Association, exhibits at
industry trade shows, direct mail publications to end users and conducting
industry safety seminars. Approximately 95% of all orders are received
over the telephone.
Export sales accounted for approximately 21.3% of ConForms' business for
the year ended January 31, 1998, compared to 22.0% in the prior year.
International markets are expected to be an increasing part of the
business in future years.
Customers
ConForms' customer base consists of concrete pump manufacturers (18%),
pumper/dealers (organizations which run a concrete pumping operation but
also act as dealers of concrete pumps and systems) (33%), dealers (27%),
pumping contractors (10%) and various other businesses such as rental
yards, general contractors, pool contractors, ready mix operations, mines,
fireproofers and precast companies (12%).
No customer exceeded 10% of the Company's consolidated net sales for the
year ended January 31, 1998.
Competition
ConForms competes with a number of manufacturers in the concrete pumping
components and accessories industry. However, the Company believes that
this competition is very fragmented, with most competitors offering a
limited selection of concrete pumping components and mainly selling
against ConForms on price. ConForms competes by providing a complete line
of products, quality, first class service and engineering assistance.
Moreover, the Company believes that ConForms' patents, manufacturing
methods and inventory stocking strategy provide it with a competitive
advantage. Pump manufacturers also compete by actively promoting their
internal wear parts and piping systems. Also, some customers develop their
own in-house capability to produce some of the products.
Miscellaneous Data
Principal manufacturing operations include machining, welding, burning,
bending, heat-treating, painting, sawing, hose coupling, assembly and
fixture and tool making.
Raw materials principally include steel pipe and tubing, rubber hose and
castings. ConForms has long-term relationships with a select group of
suppliers to control costs and ensure material quality and availability.
ConForms does not have any written contractual agreements with any of its
suppliers.
The business has marginally lower sales volume in the fourth quarter;
however working capital requirements are not significantly impacted. Terms
of sale are generally net 30 days.
ConForms has several patents and trademarks; only one, the method of heat-
treating pipe with a wall thickness of under .200 inches, is considered of
significant importance to the Company.
ConForms order backlog on March 31, 1998 and 1997 was approximately
$790,000 and $800,000, respectively; all of which should be completed
prior to the end of the current fiscal year.
Ultra Tech
Ultra Tech was formed in 1989 to help assure ConForms an in-house supply
of the highest quality, induction-hardened pipe for its concrete pumping
systems. The Company believes its induction-hardened pipe will typically
last 3 to 8 or more times longer than non-hardened pipe. Since its
formation, Ultra Tech has attempted to establish its own identity in many
other markets, primarily throughout the United States, including the
mining industry to carry phosphate and coal slurries, the pulp and paper
industry for various slurry mixes, the power industry to convey fly ash
and coal and the waste treatment industry to convey sludge.
Ultra Tech has developed a line of hardened pipe products available in
varying diameters, lengths and configurations which prolong the life of a
piping system, regardless of particular wear characteristics found in the
pumping system. The Company uses low alloy steel pipe, advanced heat-
treating technology and metallurgical principles to produce both UT600 and
UT500 induction-hardened pipe. Both of these products have a hard,
abrasion resistant inner wall and a more ductile outer layer. For pure
abrasion applications, UT600 provides outstanding wear resistance. UT600
induction-hardened pipe is made from a raw steel pipe of a proprietary
chemistry. The pipe is induction heated, then water quenched on the inner
wall. In applications involving impact or shock loading, UT500 offers
more ductility while maintaining a hard inner wear surface.
In August 1995, Ultra Tech began production at a new 43,000 square foot
modern induction-hardening plant owned by its affiliate, JABCO, LLC in
Port Washington, Wisconsin. Port Washington is approximately 25 miles
north of Milwaukee, and 10 miles from Cedarburg. Ultra Tech's new
building and equipment have allowed it to expand both the abrasion
resistant pipe market and its share in that market. Ultra Tech's new
equipment increases the size range of pipe it can process from 24 inches
to 40 inches in diameter and reduces processing time by approximately 50%.
Marketing
Ultra Tech products, which account for approximately 17% of the Company's
net sales, are marketed through Company sales and marketing personnel and
distributors. Regular advertising is placed in various trade journals.
Ultra Tech's export sales for the year ended January 31, 1998 and 1997
accounted for approximately 10.8% and 7.4% of net sales, respectively.
Customers
The market for Ultra Tech's products is primarily resource-based
industries such as mining, paper and energy. Secondary influence is felt
in the processing industries such as dredging, foundries, steel, cement,
sludge and grain handling. However, any pneumatic or hydraulic pipeline
transporting solids is a potential customer for Ultra Tech.
No customer exceeded 10% of the Company's consolidated net sales for the
year ended January 31, 1998.
Competition
There are a number of competitors in the piping industry, including mild
steel, duplex steel, plastic pipe, rubber lined pipe, basalt lined pipe,
ceramic lined pipe and cast alloy pipe. Ultra Tech is one of only three
North American competitors in the manufacturing of hardened pipe. Ultra
Tech relies on its efficient manufacturing processes, superior value,
quality and engineering assistance to compete.
Miscellaneous Data
Principal manufacturing operations include machining, welding, burning,
bending, heat-treating and sawing.
Raw materials principally include steel pipe in lengths up to 50 feet and
diameters from 2 1/2 to 40 inches. Ultra Tech does not have any written
contractual agreements with any of its suppliers. Raw materials are
readily available from various sources.
Ultra Tech's business is not seasonal. Working capital requirements may
be significant depending on the size of the order. Terms of sale are
generally net 30 days.
Ultra Tech does not depend on patents and trademarks.
Ultra Tech's order backlog on March 31, 1998 and 1997 was approximately
$1,025,000 and $190,000, respectively; all of which is to be completed
prior to the end of the current fiscal year.
Gilco
In 1989, ConForms acquired the assets of the mixer division of the Gilson
Brothers Company, a well-known manufacturer of construction and utility
mixers. This acquisition allowed ConForms to diversify and expand its
product line and market base in the concrete construction equipment
industry. Gilco is engaged in the design, manufacture and marketing of
concrete and mortar/plaster mixers. Gilco's product lines include
mortar/plaster mixers with capacities of six to sixteen cubic feet,
concrete mixers with capacities of one and one-half to nine cubic feet and
non-tilt mixers with capacities of six to sixteen cubic feet.
Gilco's mixers are built to maintain high production with the densest
mixes in the toughest conditions. The mixers feature a square paddle
shaft, steel blades/adjustable wipers and a reinforced tubular steel
frame. They also feature a dual-belt drive and a completely enclosed
extra heavy duty gear drive with automotive style clutch or a fully-
automatic hydraulic transmission. Gilco's new polyurethane liners can be
ordered across several mixer lines. Mixers are driven by gas-powered
engines or electric motors.
Gilco occupies a 50,000 square foot factory owned by the Company in
Grafton, Wisconsin. Grafton is approximately 20 miles north of Milwaukee
and 5 miles from Cedarburg.
Marketing
Gilco markets its products, which account for approximately 8% of the
Company's sales, through two inside sales personnel, direct mail, trade
magazine advertisements and referrals. This is in addition to its
existing distributor and retail channels. Gilson mixers are positioned at
the high quality, high price end of the market.
Gilco's export sales accounted for approximately 2% and 5% of Gilco's net
sales volume during the years ended January 31, 1998 and 1997,
respectively.
Customers
Approximately 37% of Gilco's sales are to construction equipment dealers.
Another 27% is sold direct to masons, plasterers, general contractors and
other end users. Retail outlets account for about 29% of Gilco's
business. The remaining 7% is sold to government agencies, rental yards,
and other equipment manufacturers.
No customer exceeded 10% of the Company's consolidated net sales for the
year ended January 31, 1998.
Competition
Gilco has a few large competitors along with several competitors of
similar size. While a few are only involved with mixers, most have a line
of additional and some-what related construction equipment products.
Gilco competes on the basis of its high quality.
Miscellaneous Data
Principal manufacturing operations include metal fabricating, welding,
burning, bending, assembly and painting.
Raw materials principally include sheet metal, steel, castings, tires and
engines. Gilco does not have any written contractual agreements with any
of its suppliers. All raw materials are readily available.
The business is seasonal with slightly lower sales volume in the fourth
quarter; however, working capital requirements are not significantly
affected. Terms of sale are generally net 30 days.
Gilco's patents and trademarks are not material to Gilco's business.
Gilco's order backlog on March 31, 1998 and 1997 was approximately $80,000
and $95,000, respectively; all of which is to be shipped during the
current fiscal year.
Year 2000 Matters
As is the case with most other companies using computers in their
operations, the Company is in the process of addressing the Year 2000
problem. The Company is currently engaged in a comprehensive project to
select and implement a new enterprise resource planning ("ERP") system
that will properly recognize the Year 2000 problem. This project involves
replacing certain hardware and software maintained by the Company.
Management expects to complete this project in early 1999. The Company
estimates that the total cumulative cost of the project will be
approximately $500,000 and will be funded through operating cash flows or
the existing bank line of credit. Purchased ERP system hardware and
software, approximately $350,000 of the the total estimated cost, will be
capitalized in accordance with normal policy. Personnel and all other
costs related to the project are currently, and will continue to be,
expensed as incurred.
The cost of the project and the date on which the Company believes it will
complete the project are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the
continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated.
General Matters
Research and development expenditures are a part of the engineering
department's budget and are expensed as incurred. The estimated total
amount spent on research and development during the years ended January
31, 1998 and 1997, the one-month transition period ended January 31, 1996,
and the year ended December 31, 1995 totaled approximately $190,000,
$190,000, $6,000, and $43,000, respectively.
The Company believes that compliance with Federal, state and local
environmental regulation will not require significant capital expenditures
or materially affect future earnings in fiscal 1998.
No portion of the business is subject to renegotiation of profits or
termination of contracts at the election of the United States government.
Foreign Operations
Information on foreign operations is incorporated by reference to footnote
15 of the consolidated financial statements contained in the Company's
1997 Annual Report to Shareholders.
Employees
As of January 31, 1998, the Company had 110 active full-time employees.
Item 2. Properties
The following table sets forth certain information with respect to the
Company's principal facilities as of January 31, 1998:
Square
Feet of
Location Floor Space Description and Principal Use
Cedarburg, WI (1) 53,000 One-story, masonry and metal-clad,
steel frame office and manufacturing
facility on 6.5 acres used mainly for
ConForms' manufacturing and all office
personnel.
Grafton, WI (1) 42,000 One and part two-story, masonry and
metal clad, steel and wood framed
office and manufacturing facility on
2.2 acres used mainly for manufacturing
Gilco and Ultra Tech products.
Port Washington,
WI (1) 48,000 One-story and partial mezzanine,
masonry and metal clad, steel frame
office and manufacturing facility on 8
acres used mainly for manufacturing
Ultra Tech products.
Gardena, CA (2) 10,000 One-story office and manufacturing
facility used for the distribution and
light manufacturing of ConForms
products.
Newport, Wales,
United 10,000 One-story office and manufacturing
facility used for Kingdom (3) the
distribution and light manufacturing of
ConForms products.
Johor Bahru,
Malaysia(4) 10,000 One-story office and manufacturing
facility used for the distribution and
light manufacturing of ConForms
products.
_________
(1) The Company owns these facilities, all of which are mortgaged under
debt agreements.
(2) The Company leases this facility. The lease expires November 30,
1998.
(3) The Company leases this facility. The lease expires October 31, 2000.
(4) The Company leases this facility. The lease expires January 31,
2001.
The Company believes that all of its facilities are in good condition and
are adequate for their intended uses. During 1998, the Company plans to
construct a 43,000 square foot addition to its Port Washington plant and
sell the existing Cedarburg facility.
Item 3. Legal Proceedings
There are currently no material legal proceedings pending to which the
Company is a party nor were any material legal proceedings concluded
during the fourth quarter of fiscal 1997.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1997.
Part II
Item 5. Market for the Company's Stock and Related Stockholder Matters
The Company's Common Stock trades on The Nasdaq Stock Market under the
symbol EDCO. The following table sets forth the high and low bid quotation
for the fiscal quarter shown. The prices quoted represent prices between
dealers in securities without adjustments for mark-ups, mark-downs or
commissions and do not necessarily reflect actual transactions.
Fiscal 1996
Quarter High Low
1st 5 3 51/64
2nd 9 4 3/8
3rd 6 1/2 4
4th 5 3/4 3 1/2
Fiscal 1997
Quarter High Low
1st 5 1/4 4
2nd 5 3
3rd 5 1/2 4 1/8
4th 4 1/2 3 7/8
The approximate number of shareholders of record and beneficial
shareholders of the Company's $.01 par value common stock as of January
31, 1998 was 36 and 600, respectively.
The Company has not previously paid any dividends on its Common Stock. The
Company intends to follow a policy of retaining all of its earnings to
finance its business and any future acquisitions.
The following information for this Part II is incorporated by reference to
the Company's 1997 Annual Report to Shareholders, as follows:
Item Caption Information Incorporated by
Reference to:
6. Summary of Selected Financial Data Annual Report, page 8
7. Management's Discussion and Annual Report, pages 4 - 7
Analysis of Financial Condition
and Results of Operations
8. Audited Financial Statements and Annual Report, pages 9 - 31
Supplemental Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Company had no disagreements with its accountants during the last
year. The Company engaged Deloitte & Touche LLP, ConForms' auditors, on
November 15, 1996. All information relating to such change in accountants
is incorporated by reference to the Company's Form 8-K dated November 15,
1996.
Part III
Item 10. Directors and Executive Officers of the Registrant
At March 31, 1998, the names and ages of all executive officers and
directors of the Company and all positions and offices held with the
Company are listed below. There are no family relationships between such
persons. All officers are elected annually by the Board of Directors at
the first Board meeting following each annual meeting of the stockholders.
There are no agreements between any of the officers and any other person
pursuant to election as an officer.
First
Name Office Elected Age
William B. Finneran Chairman of the Board
and Director 1991 56
Jay J. Miller Director 1991 65
John J. Delucca Director 1991 54
Mary E. McCormack Director 1995 44
Alan J. Kastelic President and Chief
Executive Officer of
Construction Forms,
Inc. and Director 1996 54
Jay R. Hanamann Secretary, Treasurer
and Chief Financial
Officer 1996 38
Robert L. Cooney Director 1997 64
William C. Scott Director 1997 64
William B. Finneran is a Managing Director of CIBC Oppenheimer Corp., an
investment banking firm, and has been employed with them since 1972. Mr.
Finneran is a Director of National Planning Association, a non-profit
advisory board and Covenant House, a non-profit charitable institution.
Jay J. Miller has been a practicing attorney in the State of New York for
more than thirty years. Mr. Miller is Director of Total-Tel USA
Communication, Inc., a provider of long distance telephone service. He is
currently serving as Chairman of the Board of AmTrust Pacific Ltd., a New
Zealand property company.
John J. Delucca is Senior Vice President and Treasurer of RJR Nabisco.
Mr. Delucca was Chief Financial Officer of the Hascoe Association, a
private investment company from January 1991 to September 1993, President
and Chief Financial Officer for The Lexington Group from October 1990 to
January 1991, Senior Vice President of Finance and Managing Director of
the Trump Group from May 1988 to October 1990, and Senior Vice President
of Finance for International Controls Corporation from April 1986 to May
1988. Mr. Delucca is a director of Enzo Biochem, Inc., a genetic
research/testing company.
Mary E. McCormack was President and Chief Executive Officer of the Company
from February 1995 to February 1998. Prior to working with the Company,
Ms. McCormack was a Managing Director of Beechtree Capital Partners, Inc.,
a boutique merchant banking firm which she co-founded in 1989. From 1983
to 1989, she served in a variety of capacities for the investment banking
and brokerage firm of Advest, Inc., most recently as Vice President-
Corporate Finance. Ms. McCormack is Director of Star International
Holdings, Inc., a manufacturer of commercial cooking appliances.
Alan J. Kastelic was appointed President and Chief Executive Officer of
Construction Forms, Inc. on June 21, 1996 when Construction Forms, Inc.
was acquired by the Company. Mr. Kastelic had previously been Executive
Vice President and Chief Operating Officer of Construction Forms, Inc.
which he joined in 1977. Prior to joining Construction Forms, Mr.
Kastelic was Manufacturing Manager at Badger Dynamics and Chief Cost
Accountant, Material Control Manager and Manager of Manufacturing at the
PCM division of Koehring Corporation.
Jay R. Hanamann was appointed Treasurer and Chief Financial Officer on
July 1, 1996. Mr. Hanamann is the Chief Financial Officer of Construction
Forms, Inc. and subsidiaries. He has served in various financial and
management functions with ConForms since July 1990. From 1981 to 1990, he
was employed by the international accounting firm of Deloitte & Touche
LLP.
Robert L. Cooney is a Partner of Cooney, Schroeder & Co., a consulting
firm which he co-founded in February 1997. Mr. Cooney was a Managing
Director-Equity Capital Markets at Credit Suisse First Boston from 1977 to
January 1997. Prior to joining Credit Suisse First Boston, he was a
Senior Vice President, Director and Equity Sales Manger at Wertheim & Co.
from 1973 to 1977 and Vice President, Director and Equity Sales Manager at
Mitchell, Hutchins & Co. from 1967 to 1973. Mr. Cooney began his career
at The First Boston Corporation where he was an Assistant Vice President
in the government securities department from 1962 to 1967. He also served
as a Lieutenant in the United States Navy.
William C. Scott has been the Chairman and Chief Executive Officer of
Panavision Inc. since 1988. Panavision is a leading designer and
manufacturer of high-precision film camera systems, comprising of cameras,
lenses, and accessories for the motion picture and television industries.
Edison Control Corporation holds in its investment portfolio 6,400 shares
of Panavision Inc. Common Stock. From 1972 until 1987, Mr. Scott was
President and Chief Operating Officer of Western Pacific Industries Inc.,
a manufacturer of industrial products. Prior to 1972 Mr. Scott was a
Group Vice President of Cordura Corporation for three years and Vice
President of Booz, Allen & Hamilton for five years.
Certain other information is incorporated by reference to "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
in the Company's Proxy Statement for its 1998 Annual Meeting of
Shareholders.
Item 11. Executive Compensation
All information is incorporated by reference to "Executive Compensation"
in the Company's Proxy Statement for its 1998 Annual Meeting of
Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
All information is incorporated by reference to "Share Ownership of
Directors, Officers and Certain Beneficial Owners" in the Company's Proxy
Statement for its 1998 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
There were no reportable transactions during the year.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements:
The consolidated financial statements of the Company, together with the
report thereon of Deloitte & Touche, LLP appear on pages 9 through 31 of
the Company's 1997 Annual Report to Shareholders, and are incorporated
herein by reference.
(a)(2) Financial Statement Schedules:
Schedules not included have been omitted because they are either not
applicable or the information is presented in the consolidated financial
statements or notes thereto.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the fourth quarter.
Exhibits:
The Exhibits filed or incorporated by reference herein are as specified in
the Exhibit Index.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
By: /s/ Alan J. Kastelic
Alan J. Kastelic
President and Chief Executive Officer of Construction Forms, Inc.
(Principal Executive Officer)
April 22, 1998
By: /s/ Jay R. Hanamann
Jay R. Hanamann
Secretary, Treasurer and Chief Financial Officer (Principal Financial
and Accounting Officer)
April 22, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of
Edison Control Corporation and in the capacities and on the dates
indicated:
/s/ William B. Finneran
William B. Finneran
Chairman of the Board and Director
April 22, 1998
/s/ Mary E. McCormack
Mary E. McCormack
Director
April 22, 1998
/s/ Jay J. Miller
Jay J. Miller
Director
April 22, 1998
/s/ John J. Delucca
John J. Delucca
Director
April 22, 1998
/s/ Alan J. Kastelic
Alan J. Kastelic
Director and President and Chief Executive Officer of
Construction Forms, Inc.
April 22, 1998
/s/ Robert L. Cooney
Robert L. Cooney
Director
April 22, 1998
/s/ William C. Scott
William C. Scott
Director
April 22, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3.1 Certificate of Incorporation filed June 18, 1986 (incorporated
by reference to the Company's Registration Statement on Form S-
18 (File No. 33-6736-NY) filed on June 24, 1986).
3.2 By-laws of the Company (incorporated by reference to the
Company's Registration Statements on Form S-18 (File No. 33-
6736-NY) filed on June 24, 1986).
4.1 Master Credit Agreement dated June 21, 1996 between Construction
Forms, Inc., CF Ultra Tech, Inc., CF Gilco, Inc., and LaSalle
National Bank (incorporated by reference to the Company's Form
8-K dated July 8, 1996).
4.2 Loan Agreement dated June 21, 1996 between Construction Forms,
Inc., CF Ultra Tech, Inc., CF Gilco, Inc., and Bank Audi USA
(incorporated by reference to the Company's Form 8-K dated July
8, 1996).
10.1 * 1986 Stock Option Plan of Company (incorporated by reference to
the Company's Registration Statement on Form S-18 (File No. 33-
6736-NY) filed June 24, 1986).
10.2 * Stock Warrant issued to William Finneran (incorporated by
reference to the Company's 1997 Proxy Statement Exhibit 2).
10.3 * Employment Agreement dated February 1, 1995 between the Company
and Mary E. McCormack (incorporated by reference to the
Company's Form 10-K dated March 27, 1996).
10.4 Stock and Unit Purchase Agreement dated June 21, 1996 by and
among Registrant, Construction Forms Acquisition Inc. and the
Shareholders of Construction Forms, Inc., CF Gilco, Inc., and
JABCO, LLC (incorporated by reference to Form 8-K dated July 8,
1996).
10.5 * Employment Agreement dated June 21, 1996 between the Company and
Alan J. Kastelic (incorporated by reference to the Company's
Form 10-K dated April 25, 1997).
10.6 * Employment Agreement dated June 21, 1996 between the Company and
Jay R. Hanamann (incorporated by reference to the Company's Form
10-K dated April 25, 1997).
10.7 * Stock Option Plan dated June 21, 1996 between the Company and
Alan J. Kastelic (incorporated by reference to the Company's
Form 10-K dated April 25, 1997).
10.8 * Stock Option Plan dated June 21, 1996 between the Company and
Jay R. Hanamann. (incorporated by reference to the Company's
Form 10-K dated April 25, 1997).
10.9 * Nonqualified Stock Option Agreement dated May 29, 1997, between
the Company and Robert Cooney (incorporated by reference to the
Company's Registration Statement on Form S-8 (File No. 333-
41483) filed December 4, 1997).
10.10 * Nonqualified Stock Option Agreement dated October 15, 1997,
between the Company and William Scott (incorporated by reference
to the Company's Registration Statement on Form S-8 (File No.
333-41483) filed December 4, 1997).
13. Pages from 1997 Annual Report to shareholders which are
incorporated by reference to Form 10-K.
16. Letter regarding change in certifying accountant (incorporated
by reference to the Company's Form 8-K dated November 15, 1996).
21. Subsidiaries of Edison Control Corporation.
23. Consent and Opinions of Independent Auditors.
27.1 Financial Data Schedule for the twelve month period ended
January 31, 1998.
27.2 Restated Financial Data Schedule for the nine month period ended
October 31, 1997.
27.3 Restated Financial Data Schedule for the six month period ended
July 31, 1997.
27.4 Restated Financial Data Schedule for the nine month period ended
September 30, 1996.
27.5 Restated Financial Data Schedule for the six month period ended
June 30, 1996.
27.6 Restated Financial Data Schedule for the twelve month period
ended December 31, 1995.
99. Definitive Proxy Statement for 1998 Annual Meeting of
Shareholders (to be filed
within 120 days of January 31, 1998).
* Represents a management compensation plan.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed in this Annual Report to Shareholders are
"forward-looking statements" intended to qualify for the safe harbors from
liability by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company
"believes", "anticipates", "expects", or words of similar import.
Similarly, statements that describe the Company's future plans, objectives
or goals are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties which are
described in close proximity to such statements and which could cause
actual results to differ materially from those anticipated as of the date
of this report. Shareholders, potential investors and other readers are
urged to consider these factors in evaluating the forward-looking
statements and are cautioned not to place undue reliance on such forward-
looking statements. The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no
obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.
Edison Control Corporation (the "Company") embarked on a new era in fiscal
1997. Fiscal 1997 was the first full year its newly acquired operation,
Construction Forms, Inc. and subsidiaries, contributed to the Company's
results of operations. Operating results were significantly improved with
$4,190,142 (17.6% of net sales) in operating income generated compared to
$531,702 (3.9% of net sales) in the prior year. Also, the Company paid
approximately $2,900,000 in debt principal payments in fiscal 1997.
Fiscal 1996 was the year of change for the Company. On June 21, 1996, the
Company acquired Construction Forms, Inc., a leading Wisconsin-based
manufacturer of concrete pumping systems, abrasion-resistant piping
systems, and concrete and plaster/mortar mixers. On October 31, 1996, the
Company sold its faulted circuit indicator business to its manager. On
November 15, 1996, the Company changed its fiscal year-end to January 31,
1997 to conform with the year-end of the acquired companies. Accordingly,
the financial statements reflect the change in year-end and a one-month
transition period.
RESULTS OF OPERATIONS
Fiscal 1997 versus Fiscal 1996
Net sales for the year ended January 31, 1998 ("fiscal 1997") increased
75.5% to $23,875,214 compared with $13,604,340 in the prior year. The
increase was mainly attributable to the inclusion of the results of
operations of the acquired companies for the full year in fiscal 1997. On
a pro-forma basis, Construction Forms, Inc. and subsidiaries' net sales
for fiscal 1997 increased $2,653,879 (12.5%) compared to fiscal 1996.
Strong domestic sales at ConForms and large project sales to power and
phosphate industry customers at Ultra Tech accounted for the increase.
As a percentage of net sales, gross profit margin increased to 38.4% for
fiscal 1997 as compared to 32.4% in the prior year. Gross margin for
Construction Forms, Inc. and subsidiaries for fiscal 1997 increased to
38.4% from 32.0% in the prior year. The increase was due to better
pricing on Ultra Tech sales, better fixed cost coverage from the increased
volume at ConForms and Ultra Tech, the inclusion of the acquired companies
for the full period, and the sale of the Company's electronic fault
indicator business in late 1996.
Selling, engineering and administrative expenses represented 18.2% and
23.8% of net sales for the years ended January 31, 1998 and 1997,
respectively. The percentage decrease for fiscal 1997 was primarily
attributable to the inclusion of the results of operations of the acquired
companies and decreases in general insurance and ConForms' sales and
marketing expenses. Selling, engineering and administrative expenses of
the acquired companies on a pro-forma basis decreased to $3,815,658 in
fiscal 1997 from $4,462,498 in fiscal 1996. This was mainly due to
decreased personnel wages and benefits, general insurance and ConForms'
sales and marketing expense.
Interest expense was $1,133,382 and $775,762 for fiscal 1997 and 1996,
respectively. Debt was incurred to finance the acquisition on June 21,
1996. The increase in interest expense was due to a full year of
outstanding debt. While rates are expected to remain stable, interest
expense is expected to decrease slightly in fiscal 1998 as further debt
reduction is anticipated.
Net investment loss, which includes interest, dividends and realized and
unrealized gains or losses on trading securities, was $173,366 for fiscal
1997 compared to last year's net gain of $33,279. A major reason for the
decrease was related to the decrease in the market value of the Company's
holdings in Glenayre Technologies, Inc. and VIVUS Inc. Although the
Company has no established formal investment policies or practices for its
trading securities portfolio, the Company generally pursues an aggressive
trading strategy, focusing primarily on generating near-term capital
appreciation from its investments in common equity securities. Securities
held in the Company's portfolio at the end of each period are reported at
fair value, with unrealized gains and losses included in earnings for that
period. These factors, combined with the relative size of the Company's
trading portfolio, has lead, and will likely continue to lead, to
significant period-to-period earnings volatility depending upon the
capital appreciation or depreciation of the Company's trading securities
portfolio as of the end of each reporting period. The Company does not use
or buy derivative securities.
The amortization of goodwill, financing costs, stock options and stock
warrants created a total non-cash charge of $1,600,421 for fiscal 1997
compared to $1,235,253 for the prior year. Goodwill from the June 1996
acquisition is being amortized over a 40-year period. The stock option
amortization was fully amortized as of June 21, 1997. The amortization of
financing costs and stock warrants will continue principally until June
21, 1999. Excluding these items, the Company would have reported net
income of approximately $2,065,000 or $.90 per share (basic). The total
amortization of all these non-cash charges for the years ended January 31,
1999 and 2000 is expected to approximate $1,300,000 and $660,000,
respectively.
The Company recorded tax expense of $850,000 for fiscal 1997, which
represented the estimated annual effective rate of 43.5% 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.
Net income of $1,105,162, or $.49 and $.41 per share, basic and diluted,
respectively, for fiscal 1997 represented an increase of $1,836,190 from a
net loss of $731,028, or $.33 per share, basic and diluted, for the prior
year. This change was principally due to the operating results of the
acquired companies.
Fiscal 1996 versus Fiscal 1995
Net sales for the year ended January 31, 1997 ("fiscal 1996") totaled
$13,604,340 compared to $791,502 for the year ended December 31, 1995
("fiscal 1995"). Net sales of the acquired companies from June 21, 1996
accounted for $12,717,228 of the total net sales. On a pro-forma basis,
net sales of the acquired companies increased 7.2% from $19,789,192 in
fiscal 1995 to $21,221,335 in fiscal 1996. The increase was due to
increased export and domestic volume of the concrete pumping systems
business.
Gross margin was 32.4% for fiscal 1996 compared to 16.5% for fiscal 1995.
The gross margin of the acquired companies was 32.0% for fiscal 1996.
Selling, engineering and administrative expenses for fiscal 1996 increased
to $3,238,168 compared to $729,267 in 1995. As a percent of sales, the
amount decreased from 92.1% in 1995 to 23.8% in fiscal 1996. The acquired
companies selling, engineering and administrative expenses for fiscal 1996
were $2,406,711 or 18.9% of net sales of the acquired companies.
Stock option amortization of $455,691 related to options for 167,611
shares of the Company's common stock granted to the acquired companies'
management in June 1996. The difference between the $3.00 option price
and the $7.50 market price at time of grant is being amortized over the
one-year vesting period.
Intangible amortization of $187,536 relates principally to the goodwill
and organizational/finance costs associated with the acquisition.
Operating income for fiscal 1996 was $531,702, or 3.9% of net sales,
compared to an operating loss of $598,622 in 1995. The acquired companies
accounted for $1,596,362 of operating income for fiscal 1996.
Net investment income, which includes interest, dividends, and realized
and unrealized gains or losses on trading securities, decreased from
$4,096,645 in 1995 to $33,279 for fiscal 1996. A majority of this
decrease was related to the decline in value of Glenayre Technologies,
Inc. stock held by the Company. The Company realized significant gains on
sales of this stock during the year, but also incurred significant
unrealized losses on the stock during the year.
Interest expense increased to $775,762 for fiscal 1996 from $0 in fiscal
1995. This change related to the debt incurred on the acquisition.
The loss on sale of net assets for $434,166 related to the sale, on
October 31, 1996 of certain net assets of the electronic fault indicator
business. The Company anticipated continued operating losses in the
future from this business and, accordingly, decided to dispose of its
assets.
Stock warrant amortization of $594,097 related to a Warrant issued to the
principal shareholder in connection with this stockholder's personal
guaranty of subordinated debt incurred in connection with the Company's
acquisition of Construction Forms and its affiliates. The Warrant is
exercisable for 500,000 shares of the Company's Common Stock at $1.60 per
share. At the time the transaction was negotiated in April 1996, the
Company's Common Stock was $4.00 per share and on the date the acquisition
was consummated on June 21, 1996, the closing price in said market for the
Company's Common Stock was $7.50 per share. In approving the transaction,
the Board of Directors received an opinion of Commonwealth Associates, an
independent investment banking firm, that the Warrant issued for the
limited guarantee and collateral was fair, from a financial point of view,
to the holders of the Company's Common Stock. The difference between the
Warrant price and the fair market value at the time of grant is being
amortized over the three-year term of the subordinated debt.
The net loss for the year was principally due to the loss on sale of net
assets and the amortization of goodwill, financing costs, stock options
and stock warrants. Excluding these items, the Company would have
reported net income of approximately $270,000, or $.12 per share (basic).
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $3,671,674 for fiscal 1997,
compared to $7,234,818 for fiscal 1996. In fiscal 1996, the net sale of
trading securities to finance the acquisition of Construction Forms, Inc.
and its affiliates accounted for approximately $6,405,000 of the operating
cash flow. Excluding the net trading securities activity from operating
cash flow, the significant increase in operating cash flow was due to the
profitable results generated from the Company's core business in fiscal
1997.
Net working capital of $10,873,332 at January 31, 1998 decreased $680,838,
or 5.9%, from the fiscal 1996 year-end level of $11,554,170. The current
ratio at January 31, 1998 was 3.5:1 compared to 3.9:1 at prior year-end.
The change was mainly due to decreases in trading securities and
investments and the increase in inventories and accounts payable due to
large year-end backlogs at ConForms and Ultra Tech.
Cash used in investing activities for fiscal 1997 was $470,364 compared to
$19,274,791 in fiscal 1996. This change was the result of the acquisition
of Construction Forms, Inc. and its affiliates in fiscal 1996. The
purchase price of approximately $20,550,000, including acquisition costs,
was funded by $4,800,000 of the Company's available resources, with the
remaining amount funded from available bank borrowings. Capital
expenditures increased by $138,583 principally due to the acquired
companies' activities for a full year.
The Company reduced its debt by $2,884,082 in fiscal 1997, which accounts
for all the cash used in financing activities. Cash provided by financing
activities in fiscal 1996 of $12,166,288 was primarily due to the issuance
of debt related to the acquisition and subsequent payments of debt. The
Company has reduced its debt by $5,571,018 since the June 21, 1996
acquisition date. The Company's debt to capitalization ratio at January
31, 1998 and 1997 was 49.0% and 55.4%, respectively. The Company
maintains various debt agreements, which are described in more detail in
the footnotes to the financial statements. Required principal payments in
fiscal 1998 are expected to be approximately $842,000. The Company
entered into a two year $10,000,000 interest rate cap/floor agreement to
reduce the impact of changes in interest rate borrowings under its
variable rate debt. The agreement, which expires December 10, 1998,
maintains a cap rate of 7% (90 day LIBOR) and a floor rate of 4.5%.
The Company believes that it can fund proposed capital expenditures and
operational requirements from operations and currently available cash and
cash equivalents, investments, trading securities and existing bank credit
lines. Proposed capital expenditures for the fiscal year ending January
31, 1999 are expected to total approximately $2,500,000, compared to
$554,923 for fiscal 1997. The significant increase is due principally to
the construction of an addition at the Company's Port Washington facility
and the implementation of a new enterprise resource planning system. The
Company also intends to sell its Cedarburg facility. The Company's asking
price for the facility is $1,350,000, although there can be no assurance
as to when or if this facility may be resold.
The Company intends to continue to expand its businesses, both internally
and through potential acquisitions. The Company currently anticipates
that any potential acquisitions would be financed primarily by internally
generated funds or additional borrowings or the issuance of the Company's
stock.
As is the case with most other companies using computers in their
operations, the Company is in the process of addressing the Year 2000
problem. The Company is currently engaged in a comprehensive project to
select and implement a new enterprise resource planning ("ERP") system
that will properly recognize the Year 2000 problem. This project involves
replacing certain hardware and software maintained by the Company.
Management expects to complete this project in early 1999. The Company
estimates that the total cumulative cost of the project will be
approximately $500,000 and will be funded through operating cash flows or
the existing bank line of credit. Purchased ERP system hardware and
software, approximately $350,000 of the total estimated cost, will be
capitalized in accordance with normal policy. Personnel and all other
costs related to the project are currently, and will continue to be,
expensed as incurred.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SELECTED FINANCIAL DATA
EDISON CONTROL CORPORATION
Year Ended January 31, Year Ended December 31,
Statement of Operations 1998 1997 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales $23,875,214 $13,604,340 $791,502 $1,444,004 $1,195,807
Cost of sales $14,717,711 $9,191,243 $660,857 $1,005,326 $851,701
Gross profit $9,157,503 $4,413,097 $130,645 $438,678 $344,106
Selling, engineering &
administrative $4,350,273 $3,238,168 $729,267 $676,857 $651,267
Operating income (loss) $4,190,142 $531,702 $(598,622) $(238,179) $(307,161)
Realized (losses) gains on
trading securities $(54,837) $2,802,490 $2,214,145 $712,530 $545,742
Unrealized (losses) gains
on trading securities $(205,618) $(2,854,059) $1,842,902 $(193,830) $ -
Interest, dividends and
other income $63,276 $84,848 $39,598 $187,818 $305,390
Income (loss) from
continuing operations $1,105,162 $(731,028) $2,082,582 $382,780 $543,971
Cumulative effect of
change in accounting
principle, net of income
taxes $ - $ - $ - $1,447,567 $ -
Net income (loss) $1,105,162 $(731,028) $2,082,582 $1,830,347 $543,971
Per Share Information
Net income (loss) per
share - basic $ 0.49 $ (0.33) $ 0.98 $ 0.87 $ 0.26
Net income (loss) per
share - diluted $ 0.41 $ (0.33) $ 0.94 $ 0.84 $ 0.26
Book value at year end $ 6.41 $ 5.98 $ 4.86 $ 3.89 $ 3.02
At Year End
Working capital $10,873,332 $11,554,170 $10,299,875 $8,101,993 $6,256,984
Property, plant and
equipment-net $6,945,103 $7,077,228 $65,687 $65,618 $88,999
Total assets $32,355,957 $34,060,105 $12,553,486 $9,332,572 $6,444,468
Long-term debt $14,023,342 $16,907,424 $ - $ - $ -
Shareholders' equity $14,590,525 $13,601,241 $10,375,912 $8,176,330 $6,345,983
Weighted average shares
outstanding-assuming
dilution 2,686,951 2,558,232 2,209,117 2,174,918 2,131,661
Common stock outstanding 2,275,933 2,275,933 2,136,000 2,100,000 2,100,000
</TABLE>
Note: As discussed in the Management's Discussion and Analysis of
Financial Condition and Results of Operations, significant changes
were made to the Company's core business in fiscal 1996.
Note: The Company adopted the provisions of FASB 115, "Accounting for
Certain Investments in Debt and Equity Securities." The Company
adopted the provisions of the new standard for securities held as
of or acquired after January 1, 1994. The cumulative effect as of
January 1, 1994 of adopting Statement No. 115 increased net income
by $1,447,567 (net of $962,635 in deferred income taxes), or $.69
per share-basic and $.67 per share-diluted.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Edison Control Corporation:
We have audited the accompanying consolidated balance sheets of Edison
Control Corporation and subsidiaries (the "Company") as of January 31,
1998 and 1997, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the years then ended and the one-
month transition period ended January 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits. The financial statements of the Company for the year
ended December 31, 1995 were audited by other auditors whose report, dated
February 14, 1996, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of January
31, 1998 and 1997, and the results of their operations and their cash
flows for the years then ended and the one-month transition period ended
January 31, 1996, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Milwaukee, Wisconsin
April 2, 1998
<PAGE>
EDISON CONTROL CORPORATION
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1998 AND 1997
ASSETS (Note 9) 1998 1997
CURRENT ASSETS:
Cash and cash
equivalents (Note 1) $1,037,288 $ 772,008
Investments (Note 1) 190,000 284,000
Trading securities
(Notes 1 and 4) 3,653,763 4,751,688
Accounts receivable,
less allowance of
$320,000 and $292,000,
respectively (Note 1) 2,995,637 2,713,308
Receivable from
affiliate (Note 6) 103,482 156,035
Inventories (Notes 1
and 5) 5,974,302 5,316,948
Prepaid expenses and
other current assets 193,099 197,576
Refundable income taxes
(Note 8) 81,182 -
Deferred compensation
(Note 11) - 298,558
Deferred financing
costs (Note 11) 983,333 983,333
---------- ----------
Total current assets 15,212,086 15,473,454
INVESTMENT IN AND
ADVANCES TO AFFILIATE
(Note 6) 433,150 340,054
OTHER ASSETS:
Prepaid pension (Note
10) 283,134 385,021
Deferred financing
costs (Note 11) 389,236 1,372,570
---------- ----------
Total other assets 672,370 1,757,591
PROPERY, PLANT AND
EQUIPMENT (Note 1):
Cost:
Land 343,059 343,059
Buildings and
improvements 2,788,014 2,672,111
Machinery and
equipment 4,729,916 4,383,674
Construction in
progress 47,014 7,322
----------- ----------
7,908,003 7,406,166
Less - accumulated
depreciation (962,900) (328,938)
---------- ----------
6,945,103 7,077,228
GOODWILL (net of
amortization of
$367,741 and $135,484,
respectively) (Note 1) 8,922,576 9,154,833
ORGANIZATIONAL/FINANCE
COSTS (net of
amortization of
$140,398 and $54,125,
respectively) (Note 1) 170,672 256,945
---------- ----------
TOTAL $32,255,957 $34,060,105
========== ==========
See notes to consolidated financial statements.
<PAGE>
LIABILITIES AND
SHAREHOLDERS' EQUITY 1998 1997
CURRENT LIABILITIES:
Trade accounts payable $1,261,244 $868,088
Accrued compensation 781,566 606,010
Taxes other than income
taxes 29,985 38,119
Other accrued expenses
(Note 7) 555,045 529,896
Income taxes payable
(Note 8) - 9,077
Deferred income taxes
(Note 8) 115,000 245,000
Deferred compensation
(Notes 1 and 11) 754,250 754,250
Current maturities on
long-term debt (Note
9) 841,664 868,844
---------- ----------
Total current
liabilities 4,338,754 3,919,284
LONG-TERM DEBT, LESS
CURRENT MATURITIES
(Note 9) 13,181,678 16,038,580
DEFERRED INCOME TAXES
(Note 8) 245,000 501,000
---------- ----------
Total liabilities 17,765,432 20,458,864
SHAREHOLDERS' EQUITY
(Note 11):
Preferred Stock, $.01
par value; 1,000,000
shares authorized,
none issued - -
Common Stock, $.01 par
value; 10,000,000
shares authorized,
2,275,933 shares
issued and
outstanding 22,759 22,759
Additional paid-in
capital 10,016,435 10,016,435
Retained earnings 4,558,493 3,453,331
Foreign currency
translation
adjustments (7,162) 108,716
---------- ----------
Total shareholders'
equity 14,590,525 13,601,241
---------- ----------
TOTAL $32,355,957 $34,060,105
========== ==========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
EDISON CONTROL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 31, 1998, 1997, DECEMBER 31, 1995 AND
ONE-MONTH TRANSITION PERIOD ENDED JANUARY 31, 1996
Year Ended One-Month Ended Year Ended
January 31, January 31, January 31, December 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
NET SALES $23,875,214 $13,604,340 $63,564 $791,502
COST OF GOODS SOLD 14,717,711 9,191,243 54,046 660,857
---------- ---------- -------- ---------
GROSS PROFIT 9,157,503 4,413,097 9,518 130,645
OTHER OPERATING EXPENSES:
Selling, engineering and
administrative expenses 4,350,273 3,238,168 83,009 729,267
Stock option amortization
(Note 11) 298,558 455,691 - -
Goodwill and
organizational/finance
cost amortization (Note
1) 318,530 187,536 - -
---------- ---------- --------- ---------
Total other operating
expenses 4,967,361 3,881,395 83,009 729,267
---------- ---------- --------- ---------
OPERATING INCOME (LOSS) 4,190,142 531,702 (73,491) (598,622)
OTHER EXENSE (INCOME):
Interest expense 1,133,382 775,762 - -
Realized losses (gains) on
trading securities 54,837 (2,802,490) (600,496) (2,214,145)
Unrealized losses (gains)
on trading securities 205,618 2,854,059 583,345 (1,842,902)
Interest and miscellaneous
income (63,276) (84,848) (10,481) (39,598)
Loss on sale of assets, net
(Note 2) - 434,166 - -
Stock warrant amortization
(Note 11) 983,333 594,097 - -
Equity in earnings of
affiliate (Note 6) (78,914) (18,016) - -
---------- ---------- --------- ----------
Total other expense
(income) 2,234,980 1,752,730 (27,632) (4,096,645)
---------- ---------- --------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES 1,955,162 (1,221,028) (45,859) 3,498,023
INCOME TAXES (CREDIT) (Note
8) 850,000 (490,000) (19,000) 1,415,441
---------- ---------- --------- ----------
NET INCOME (LOSS) $1,105,162 $(731,028) $(26,859) $2,082,582
========== ========== ========= ==========
NET INCOME (LOSS) PER SHARE
(Note 1):
Net Income (Loss) Per Share -
Basic $ 0.49 $ (0.33) $ (0.01) $ 0.98
======== ========= ========= =========
Net Income (Loss) Per Share -
Diluted $ 0.41 $ (0.33) $ (0.01) $ 0.94
======== ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
EDISON CONTROL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1998, 1997, DECEMBER 31, 1995
AND ONE-MONTH TRANSITION PERIOD ENDED JANUARY 31, 1996
Foreign
Common Stock Additional Currency
Paid-in Retained Translation
Share Amount Capital Earnings Adjustments Total
<S> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1995 2,100,000 $21,000 $6,026,694 $2,128,636 - $8,176,330
Stock options exercised 36,000 360 116,640 - - 117,000
Net income - - - 2,082,582 - 2,082,582
--------- --------- --------- --------- --------- ----------
BALANCES, DECEMBER 31, 1995 2,136,000 21,360 6,143,334 4,211,218 - 10,375,912
Net (loss) - - - (26,859) - (26,859)
--------- --------- --------- --------- --------- ----------
BALANCES, JANUARY 31, 1996 2,136,000 21,360 6,143,334 4,184,359 - 10,349,053
Stock issued at acquisition
(Note 11) 114,933 1,149 860,851 - - 862,000
Stock warrants issued (Note
11) - - 2,950,000 - - 2,950,000
Stock options exercised
(Note 11) 25,000 250 62,250 - - 62,500
Foreign currency
translation adjustment - - - - $108,716 108,716
Net (loss) - - - (731,028) - (731,028)
----------- --------- ---------- --------- ---------- ----------
BALANCES, JANUARY 31, 1997 2,275,933 22,759 10,016,435 3,453,331 108,716 13,601,241
Foreign currency
translation adjustment - - - - (115,878) (115,878)
Net income - - - 1,105,162 - 1,105,162
----------- --------- ---------- --------- ---------- ----------
BALANCES, JANUARY 31, 1998 2,275,933 $22,759 $10,016,435 $4,558,493 $(7,162) $14,590,525
========== ======== ========== ========= ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
EDISON CONTROL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1998, 1997, DECEMBER 31, 1995
AND ONE-MONTH TRANSITION PERIOD ENDED JANUARY 31, 1996
YEAR ENDED One-Month Year Ended
January 31, January 31, Ended January 31, December 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 1,105,162 $ (731,028) $ (26,859) $ 2,082,582
Adjustments to reconcile
net income (loss) to net
cash provided by
(used in) operating
activities:
Depreciation of plant and
equipment 653,089 328,421 2,389 39,836
Amortization 1,600,421 1,235,253
Provision for doubtful
accounts 76,780 10,127
Realized loss (gain) on
trading securities sales 54,837 (2,802,490) (600,496) (2,214,145)
Unrealized loss (gain) on
trading securities 205,618 2,845,059 583,345 (1,842,902)
Purchases of trading
securities (3,768,475) (9,003,912) (3,436,325) (16,653,501)
Proceeds from the sale of
trading securities 4,605,945 15,409,029 2,084,100 18,501,000
Loss on sale of assets 19,973 396,318
Equity in earnings of
affiliate (78,914) (18,016)
Changes in assets and
liabilities, net of
acquired companies:
Accounts receivable (377,314) (140,961) (40,958) 170,748
Receivable from affiliate 52,553 44,973
Inventories (679,253) 1,417,211 4,493 19,139
Prepaid expenses and
other assets 1,395 23,928 7,500 (458)
Prepaid pension 101,887 57,577
Trade accounts payable 388,713 (71,315) 20,876 (68,527)
Accrued compensation 175,254 78,084 8,283
Taxes, other than income
taxes (2,223) (44,774)
Accrued expenses 19,550 101,490 (9,413) 14,323
Income taxes (97,324) (538,285) 216,000 351,054
Deferred income taxes (386,000) (1,370,871) (235,000) 722,851
---------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities 3,671,674 7,234,818 1,422,065 1,122,000
---------- ---------- ---------- ----------
INVESTING ACTIVITIES:
Additions to plant and
equipment (554,923) (416,340) (39,905)
Maturity of certificate
of deposit 94,000
(Advances to) payments
received from affiliate (14,182) 45,823
Proceeds from sale of
assets 4,741 9,819
Payment for the purchase
of acquired companies,
net of cash acquired (18,914,093)
--------- --------- --------- -----------
Net cash used in
investing activities (470,364) (19,274,791) (39,905)
--------- --------- --------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of
long-term debt 600,000 16,540,000
Payments of long-term debt (3,484,082) (4,531,936)
Proceeds from issuance of
common stock 95,724
Stock options exercised 62,500 117,000
--------- --------- --------- -----------
Net cash (used in)
provided by financing
activities (2,884,082) 12,166,288 117,000
--------- --------- --------- -----------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH $ 51,948 $ 46,762
--------- --------- --------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 265,280 173,077 (1,422,065) 1,199,095
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 772,008 598,931 2,020,996 821,901
--------- --------- --------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,037,288 $ 772,008 $ 598,931 $ 2,020,996
========== ========= ========= ==========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the
year for:
Interest $ 1,111,901 $ 773,954 $ - -
Income taxes, net of
refunds $ 1,336,130 $ 1,419,070 $ - $ 341,536
SUPPLEMENTAL SCHEDULE OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Stock issued as part of
purchase price of
acquired companies $ 766,274
Notes receivable
canceled as part of
purchase price of
acquired companies $ 332,400
Fair value of warrants
issued in connection
with financing of
acquisition $ 2,950,000
</TABLE>
See notes to consolidated financial statements
<PAGE>
EDISON CONTROL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1998, 1997, DECEMBER 31, 1995
AND ONE-MONTH TRANSITION PERIOD ENDED JANUARY 31, 1996
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of Edison Control Corporation ("Edison") and
subsidiaries, all of which are wholly owned (collectively, the
"Company"). All material intercompany accounts and transactions have
been eliminated in consolidation.
Nature of Operations - The Company is currently comprised of the
following operations. 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 paper, power and waste
treatment. Gilco produces a line of concrete and plaster/mortar
mixers. JABCO primarily leases property and equipment to Ultra Tech.
The Company's principal market is in North America with limited sales
activity in Europe and Asia.
Cash Equivalents - The Company considers all temporary investments
with maturities of three months or less when acquired to be cash
equivalents.
Investments - Investments consist of certificates of deposit with
maturities in excess of three months and are recorded at cost which
approximates market. The Company intends to hold the certificates
until maturity.
Trading Securities - Debt and equity securities purchased 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.
Accounts Receivable - Accounts receivable are stated net of an
allowance for doubtful accounts and finance charges.
Inventories - Inventories are stated at the lower of cost (principally
last-in, first-out method) or market.
Property, Plant and Equipment - Property, plant and equipment is
stated at cost. Expenditures for major renewals and improvements are
capitalized, while maintenance and repairs, which do not significantly
improve the related asset or extend its useful life, are charged to
expense as incurred.
For financial reporting purposes, plant and equipment is depreciated
primarily by the straight-line method over the estimated useful lives
of the assets. Depreciation claimed for income tax purposes is
computed by accelerated methods.
Goodwill and Intangible Assets - Goodwill represents the excess of the
purchase price over the fair value of identifiable net assets of
acquired companies and is amortized on a straight-line basis over 40
years. The Company assesses the carrying value of goodwill at each
balance sheet date. Consistent with Statement of Financial Accounting
Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of", such
assessments include, as appropriate, a comparison of the estimated
future nondiscounted cash flows anticipated to be generated during the
remaining amortization period of the goodwill to the net carrying
value of goodwill. The Company recognizes diminution in value of
goodwill, if any, on a current basis. Organizational/finance costs
are amortized over their economic useful lives ranging from three to
twenty years.
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 reporting period. Actual results
could differ from those estimates.
Fair Value of Financial Instruments - Management believes the carrying
amount of financial instruments is a reasonable estimate of the fair
value of these instruments.
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 exchange rates for the periods and
capital accounts have been translated using historical rates. The
resulting translation adjustments are recorded as an adjustment to
shareholders' equity.
Revenue Recognition - The Company recognizes revenue upon shipment of
products.
Research and Development - Amounts expended for research and
development for the years ended January 31, 1998 and 1997, the one-
month transition period ended January 31, 1996, and the year ended
December 31, 1995 totaled approximately $190,000, $190,000, $6,000 and
$43,000, respectively, and are expensed as incurred.
Net income (loss) per share - Effective for 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128
"Earnings Per Share," which established new standards for the
calculation of net income per share effective for interim and annual
periods ending after December 1997. Income per share for the years
ended January 31, 1997 and December 31, 1995 and the one-month period
ended January 31, 1996 has been restated to comply with SFAS No. 128.
Reconciliation of the numerator and denominator of the basic and
diluted per share computations are summarized as follows:
One-Month
Year Ended January 31, Ended Year Ended
January 31, December 31,
1998 1997 1996 1995
Net Income (Loss)
Per Share - Basic:
Net income (loss)
(numerator) $1,105,162 $(731,028) $(26,859) $2,082,582
Weighted average
shares
outstanding
(denominator) 2,275,933 2,210,848 2,136,000 2,119,440
Net income (loss)
per share - basic $0.49 $(0.33) $(0.01) $0.98
Net Income (Loss)
Per Share-Diluted:
Net income (loss)
(numerator) $1,105,162 $(731,028) $(26,859) $2,082,582
Weighted average
shares
outstanding 2,275,933 2,210,848 2,136,000 2,119,440
Effect of dilutive
securities:
Stock options 99,224 - - 89,677
Stock warrants 311,794 - - -
--------- --------- --------- ---------
Weighted average
shares
outstanding
(denominator) 2,686,951 2,210,848 2,136,000 2,209,117
Net income (loss)
per share -
diluted $0.41 $(0.33) $(0.01) $0.94
Stock options and warrants were antidilutive for the year ended
January 31, 1997 and the one-month ended January 31, 1996 under the
treasury stock method.
Accounting Pronouncements In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130 "Reporting Comprehensive Income."
The Statement is effective for fiscal 1998. The Company is in the
process of evaluating the reporting requirements and does not believe
the adoption of SFAS No. 130 will have a material impact on the
Company's consolidated financial statements.
In June 1997, the Financial Accounting Standards Board also issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Statement is effective for fiscal 1998. The Company
is in the process of evaluating the disclosure requirements. The
adoption of SFAS No. 131 will not have an impact on the Company's
consolidated financial statements.
Reclassifications - Certain reclassifications have been made to the
prior years' financial statements to conform with the current year
presentation.
2. ACQUISITIONS AND DISPOSITIONS
On June 21, 1996, the Company purchased all of the issued and
outstanding stock of Construction Forms, Inc. and subsidiaries and
JABCO, LLC 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.
The purchase price was allocated as follows:
Receivables $2,810,237
Inventory 6,699,256
Property, plant and equipment 6,990,408
Goodwill 9,290,317
Prepaid pension 442,598
Cash and other assets 1,714,648
Liabilities assumed (7,397,464)
----------
$20,550,000
==========
On October 31, 1996, the Company sold certain net assets of its
electronic fault indicator operation. In return, the Company received
cash of $10,000, a $275,000 promissory note bearing interest at an
annual rate of 8 1/4%, and a five year warrant to purchase 20% of the
capital stock of the new company. It is management's opinion that the
possibility of collection of any future principal or interest on the
note receivable is remote and, accordingly, has reserved the total
balance of the note and will not record any interest income until
received. The total loss on the sale of these net assets was
$434,166, including the note receivable reserve.
3. CHANGE IN FISCAL YEAR
In fiscal 1996, the Company changed its fiscal year-end from December
31 to January 31 in order to correspond with the fiscal year of the
acquired companies.
4. TRADING AND MARKETABLE SECURITIES
Trading securities at January 31, 1998 consisted of the following:
Number of
Name of Issuer/ Shares or
Title of Issue Units Cost Market Value
Common Stocks:
General Motors Corp. 5,000 $ 147,325 $ 173,125
Glenayre Technologies, Inc. 40,000 1,029,352 527,500
NCR Corp. 10,000 278,750 300,625
Oxford Health Plans, Inc. 10,000 160,000 175,000
Panavision Inc. 6,400 139,750 166,800
Raytheon 2,812 118,925 143,763
Sun International Hotels 10,100 330,100 386,325
US Trust Corporation 25,000 411,953 1,484,375
VIVUS, Inc. 20,000 621,350 296,250
--------- ---------
Total $3,237,505 $3,653,763
========= =========
Trading securities at January 31, 1997 consisted of the following:
Number of
Name of Issuer/ Shares or
Title of Issue Units Cost Market Value
Common Stocks:
Computer Associates
International, Inc. 10,000 $ 630,000 $ 453,750
Designer Holdings, Inc. 10,000 165,000 141,250
Electronic Data Systems Corp. 10,000 441,250 460,000
General Motors Corp. 10,000 532,500 610,000
Glenayre Technologies, Inc. 50,000 1,163,961 962,500
Healthsource 10,000 138,750 132,500
Panavision, Inc. 6,400 139,750 120,000
Sun International Hotels 5,100 259,475 181,688
US Trust Corporation 20,000 659,125 1,690,000
--------- ---------
Total $4,129,811 $4,751,688
========= =========
5. INVENTORIES
Inventories consisted of the following:
January 31, January 31,
1998 1997
Raw materials $2,945,598 $2,737,369
Work-in-process 818,003 617,615
Finished goods 2,325,701 2,016,964
--------- ---------
6,089,302 5,371,948
Less-reserve to reduce carrying value
to LIFO cost (115,000) (55,000)
--------- ---------
Net inventories $5,974,302 $5,316,948
========= =========
6. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company owns 50% of the outstanding common stock of South Houston
Hose Company and accounts for the investment by the equity method.
The Company had sales of approximately $798,000 and $685,000 to the
affiliate during 1997 and 1996, respectively. Summary unaudited
financial information as of January 31, 1998 and 1997, and for the
years then ended is as follows:
1998 1997
Current assets $1,130,349 $ 934,399
Noncurrent assets 45,878 49,930
Current liabilities 388,727 306,198
Noncurrent liabilities - 41,555
Shareholders' equity 787,500 633,364
Net sales 2,749,253 2,239,949
Net income 154,136 90,858
7. ACCRUED EXPENSES
Accrued expenses consisted of the following:
Year Ended
January 31, January 31,
1998 1997
Group Benefits $ 130,000 $ 190,680
Warranty 240,000 151,000
Legal and professional 47,468 78,500
Interest 58,510 57,268
Selling commissions 28,519 17,475
Other 50,548 34,973
--------- ----------
Total $ 555,045 $ 529,896
========= ==========
8. INCOME TAXES
Deferred income taxes are provided on temporary differences relating
to reporting expenses in different periods for financial statement
and income tax purposes and differences in bases of assets and
liabilities. Such differences relate primarily to unrealized gain
(losses) on investments, depreciation expense, inventory costs, bad
debt expense, warranty costs, insurance, compensation and pension
expense.
The provision for income taxes (credit) is as follows:
One-Month
Year Ended Ended Year Ended
January 31, January 31, January 31, December 31,
1998 1997 1996 1995
Currently payable:
Federal $ 1,066,000 $ 718,871 $ 184,000 $ 506,616
State 170,000 162,000 32,000 185,974
--------- --------- --------- ----------
1,236,000 880,871 216,000 692,590
Deferred:
Federal (332,000) (1,120,871) (200,000) 556,595
State (54,000) (250,000) (35,000) 166,256
---------- ---------- ---------- ----------
(386,000) (1,370,871) (235,000) 722,851
Total $ 850,000 $ (490,000) $ (19,000) $ 1,415,441
========== ========== ========== ==========
Temporary differences which gave rise to the deferred tax assets
(liabilities) included the following items at January 31, 1998 and
1997:
1998 1997
Deferred tax assets:
Compensation and other employee benefits $ 312,000 $ 290,000
Book reserves and other items 97,000 6,000
Net operating loss carryforwards 3,000 140,000
Deferred financing 615,000 207,000
67,000 63,000
-------- --------
Vacation pay 1,094,000 706,000
-------- --------
Deferred tax liabilities:
Inventory items (638,000) (543,000)
Unrealized gains (162,000) (243,000)
Fixed assets (544,000) (516,000)
Pension benefit (110,000) (150,000)
--------- ---------
(1,454,000) (1,452,000)
--------- ---------
Net deferred tax liability $ (360,000) $ (746,000)
========= =========
The reconciliation of income tax computed at the U.S. federal
statutory rates to income tax expense is:
One-Month
Year Ended Ended Year Ended
January 31, January 31, January 31, December 31,
1998 1997 1996 1995
Statutory tax rate 34.0% 34.0% 34.0% 34.0%
State taxes, net
of federal tax
benefit 6.0 4.8 5.7 7.0
Goodwill 4.0 (3.8) 0.0 0.0
Dividends received
deduction (0.3) 1.3 2.9 (0.5)
Reversal of
provision for
taxes not
necessary in the
future 0.0 4.5 0.0 0.0
Other, net (0.2) (0.7) (1.2) 0.0
---- ---- ---- ----
Effective tax rate 43.5% 40.1% 41.4% 40.5%
==== ==== ==== ====
9. LONG-TERM DEBT
Long-term debt, less current maturities, consisted of the following at
January 31, 1998 and 1997:
1998 1997
Industrial revenue bonds $ 2,875,000 $ 3,000,000
Bank revolving credit loan 3,225,000 3,800,000
Bank overadvance term loan 1,125,278 3,281,944
Subordinated bank loan 6,798,064 6,798,300
Obligation to former officer 27,180
---------- ----------
Total debt 14,023,342 16,907,424
Less current portion (841,664) (868,844)
---------- ----------
Total long-term debt $ 13,181,678 $ 16,038,580
========== ==========
The Industrial Revenue Bonds ("IRB") were issued to finance
construction of a new production facility in Port Washington,
Wisconsin. A total of $3,000,000 was issued for the facility and is
due in annual installments of $125,000 from February 1997 through
February 2000, $150,000 from February 2001 through February 2005, and
$175,000 from February 2006 through February 2015. The interest rate
at January 31, 1998 was 3.75%.
The master credit agreement, which expires June 21, 1999, allows for
revolving credit borrowings not to exceed $6,000,000. Borrowings
which are based on qualified assets bear interest at either the prime
rate plus .50% or the LIBOR rate plus 1.25% on the first $1,800,000 of
debt (7.00% at January 31, 1998) and the LIBOR rate plus 2.00% on
amounts in excess of $1,800,000 (7.75% at January 31, 1998).
Also under the master credit agreement, the Company maintains an
overadvance term loan. Monthly principal payments of $59,722 are
required by the agreement. Borrowings bear interest at either the
prime rate plus .375% or the LIBOR rate plus 3.1%. The interest rate
at January 31, 1998 was 8.875%. The agreement calls for additional
principal payments based on excess cash flow as defined in the
agreement.
The terms under the master credit agreement, among other provisions,
require the Company to maintain a minimum current ratio, tangible net
worth, and fixed charge ratio, and restricts the Company to a maximum
debt to worth ratio. Substantially all of the Company's assets are
collateralized under the above debt agreements.
The Company has a loan agreement with a bank which provides for
subordinated borrowings up to $6,800,000 through June 22, 1999.
Borrowings bear interest at the bank's LIBOR rate plus 1.25%. On
January 31, 1998, the interest rate was 7.16%. The loan is secured by
substantially all of the assets of the Company and is guaranteed by
the principal stockholder of Edison.
The Company has entered into a two year $10,000,000 interest rate
cap/floor agreement to reduce the impact of changes in interest rate
borrowings under its variable rate debt. The agreement maintains a
cap rate of 7% (90 day LIBOR) and a floor rate of 4.5%. The Company
paid a fee of $32,500 related to the cap/floor agreement and is
amortizing the fee over the life of the agreement. The interest rate
cap/floor agreement expires December 10, 1998.
Annual principal payments for the next five years on long-term debt
are as follows:
<TABLE>
<CAPTION>
Year Ending Revolving Overadvance Subordinated
January 31, IRB Credit Loan Term Loan Bank Loan Total
<S> <C> <C> <C> <C> <C>
1999 $125,000 $ 716,664 $ 841,664
2000 125,000 $3,225,000 408,614 $6,798,064 10,556,678
2001 125,000 125,000
2002 150,000 150,000
2003 150,000 150,000
Thereafter 2,200,000 2,200,000
--------- --------- --------- --------- ----------
$2,875,000 $3,225,000 $1,125,278 $6,798,064 $14,023,342
========= ========= ========= ========= ==========
</TABLE>
10. EMPLOYEE RETIREMENT PLANS
The Company has a noncontributory defined benefit pension plan, which
relates to the acquired companies, covering substantially all full-
time employees. The plan provides for benefits based on years of
service and compensation.
The following table sets forth the plan's funded status and amounts
recognized in the Company's financial statements at January 31, 1998
and 1997:
1998 1997
Actuarial present values of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$2,085,834 and $1,992,192,
respectively $ 2,123,699 $ 2,024,083
========= =========
Projected benefit obligation for
service rendered to date $ 2,884,024 $ 2,843,888
Plan assets at fair value, primarily
pooled common stock and bond funds,
stocks and bonds 3,998,045 3,521,295
--------- ---------
Plan assets in excess of projected
benefit obligation 1,114,021 677,407
Unrecognized net gain from past
experience different from that
assumed (830,887) (292,386)
--------- ----------
Prepaid pension expense recognized
in the consolidated balance sheet $ 283,134 $ 385,021
========= ==========
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected
benefit obligation were 7.5% and 6%, respectively for the years ended
January 31, 1998 and 1997. The expected rate of return on plan assets
was 8.0% for the years ended January 31, 1998 and 1997. The Company's
funding policy is to contribute annually amounts within the limits
which can be deducted for Federal income tax purposes. No
contributions were made to the Plan during the years ended January 31,
1998 and 1997.
Pension expense consisted of the following components for the years
ended January 31:
1998 1997
Service cost-benefits earned
during the year $ 135,824 $ 65,707
Interest cost on projected
benefit obligation 186,853 119,475
Actual return on plan assets
(gain) loss (606,938) (369,579)
Net amortization and deferral 386,148 241,974
--------- ---------
Net periodic pension expense $ 101,887 $ 57,577
========= =========
The Company also has a retirement savings and thrift plan (401(k)
plan), which relates to the acquired companies, covering substantially
all of its employees. Under the 401(k) plan, the Company contributes
amounts based on employee contributions. Amounts charged to earnings
for the plan for the years ended January 31, 1998 and 1997 were
$80,943 and $42,831, respectively.
11. EMPLOYEE STOCK OPTION PLANS
The Company adopted a 1986 Stock Option Plan (the "Plan") for the
benefit of directors, officers and key employees of the Company.
Pursuant to the Plan, as amended, these persons may be granted options
to purchase up to an aggregate of 150,000 shares of Common Stock. The
Board of Directors may authorize the granting of options under the
Plan, and may determine to whom the options may be granted, the number
thereof, the option price and the exercise period. The price for
incentive stock options, which may be granted under the Plan and which
meet the requirements of Section 422A of the Internal Revenue Code, as
amended, will not be less than the fair market value of the Common
Stock on the date the option is granted (100% of such fair market
value for an optionee who holds more than 10% of the outstanding
shares of the capital stock of the Company). The price for non-
statutory options shall be fixed in the discretion of the Board of
Directors and in no event will the option price for any non-statutory
option granted be less than 85% of the fair market value of the Common
Stock on the date of grant. The maximum exercise period for any
option under the Plan is ten years from the date the option is granted
(five years for an optionee who holds more than 10% of the outstanding
shares of the capital stock of the Company). In November 1987, the
Board of Directors issued non-statutory options to purchase an
aggregate of 90,000 shares at an exercise price of $2.50 per share
("2.50 options"). In 1989, the Company issued non-statutory options
to purchase an additional 60,000 shares at an exercise price of $1.22
per share. In November 1996, William Finneran purchased 25,000 shares
of his options.
In June 1993, the Board of Directors granted five-year non-statutory
options to purchase 18,000 shares each to Clark H. Bailey, Gerald B.
Cramer, John J. Delucca and Jay J. Miller, and 35,000 shares to
William B. Finneran, Directors of the Company, at an exercise price of
$2.50 per share, vesting 50% at June 5, 1994 and 50% at June 4, 1995
("vesting $2.50 options"). In June 1995, Clarke H. Bailey exercised
his option and purchased 18,000 shares. In September 1997, the
options for Gerald B. Cramer expired.
In July 1993, the Board of Directors granted non-statutory options to
purchase 18,000 shares to John M. Sanzo, a Director of the Company, at
an exercise price of $4.00 per share, vesting 50% at July 15, 1994 and
50% at July 15, 1995 ("vesting $4.00 options"). In October 1994, the
Board of Directors resolved that the stock option, heretofore, granted
to Mr. John M. Sanzo to be fully vested notwithstanding any term of
said option to the contrary and that said option would expire 120 days
following the effectiveness of a Registration Statement on Form S-8
under the Securities Act of 1993, as amended. In June 1995, John M.
Sanzo exercised his option and purchased 18,000 shares.
In October 1995, the 1986 Stock Option Plan was amended to increase by
200,000 the number of shares of common stock authorized for issuance,
thereunder to a total of 350,000 shares.
In February 1995, the Board of Directors authorized and on October 17,
1995, the stockholders approved a grant to the Company's President and
Chief Executive Officer of a ten-year option to purchase up to 200,000
shares of common stock pursuant to the 1986 Option Plan at an exercise
price of $4.00 per share, vesting 33% each at date of grant, on
February 1, 1996, and on February 1, 1997, respectively.
In February 1996, non-qualified options for 17,500 shares were granted
to three individuals for services rendered at an exercise price of
$4.50 per share. The options are exercisable up to the close of
business on December 31, 1999.
In May 1997, five-year non-qualified options for 25,000 shares were
granted to Robert Cooney, a member of the Board of Directors, at an
exercise price of $3.50 per share, vesting 50% at November 29, 1997
and 50% on May 29, 1998.
In October 1997, five-year non-qualified options for 25,000 shares
were granted to William Scott, a member of the Board of Directors, at
an exercise price of $3.50 per share, vesting 50% at April 15, 1998
and 50% on October 15, 1998.
In connection with the issuance of the subordinated debt, the
principal shareholder of the Company provided collateral to a bank to
support a guaranty of repayment by the Company of the principal and
interest on the loan. The arrangement was made to reduce the cost of
borrowed funds from that which would have been otherwise obtainable by
the Company from unaffiliated "mezzanine" lenders. In consideration
of his providing such collateral, the Company issued a ten-year
Warrant to purchase 500,000 shares of Common Stock exercisable at a
price of $1.60 per share. At the time the transaction was negotiated,
Common Stock was quoted at approximately $4.00 per share. On the date
the ConForms acquisition was consummated, which was the grant date,
the closing sale price for the Common Stock in the over-the-counter
market was $7.50 per share. The difference between the Warrant price
and the fair market value at the grant date is being amortized over
the three-year term of the subordinated debt.
In connection with the ConForms acquisition, the Company entered into
agreements for the sale for investment of an aggregate of 114,933
shares of Common Stock for a total purchase price of $862,000 to key
management personnel of ConForms and its affiliates. In addition, the
Company granted ten-year nonqualified options to purchase an aggregate
of 167,611 shares of Common Stock exercisable at $3.00 per share to
key personnel. Such options vest fully on the first anniversary of
the closing of the acquisition. On the date of the grant of the
options, the closing sale price for the Common Stock was $7.50 per
share. The difference between the option price and the fair market
value at the time of grant was amortized over the one-year vesting
period.
The Company has adopted the disclosure-only provisions of SFAS No.123,
"Accounting for Stock-Based Compensation," but continues to apply
Accounting Principles Board Opinion No. 25 and related interpretations
in accounting for all of its plans. Compensation expense was
$1,281,891, $1,049,788, $0, and $0 for the years ended January 31,
1998, 1997, the one-month transition period ended January 31, 1996,
and the year ended December 31, 1995, respectively. If the Company
had elected to recognize compensation costs for the options/warrants
issued after December 15, 1994 in accordance with SFAS No. 123, net
income (loss) and net income (loss) per share would have changed to
the pro-forma amounts as follows:
<TABLE>
<CAPTION>
Year Ended January 31, One-Month Ended Year Ended
1998 1997 January 31, 1996 December 31, 1995
<S> <C> <C> <C> <C> <C>
Net income (loss) As reported: $ 1,105,162 $ (731,028) (26,859) $ 2,082,582
Pro-forma: 1,240,831 (2,128,210) (26,859) 2,000,075
Net income (loss)
per share-basic As reported: 0.49 (0.33) (0.01) 0.98
Pro-forma: 0.55 (0.96) (0.01) 0.94
Net income (loss)
per share-diluted As reported: 0.41 (0.33) (0.01) 0.94
Pro-forma: 0.46 (0.96) (0.01) 0.91
</TABLE>
The fair value of stock options/warrants used to compute and disclose
pro-forma net income (loss) and pro-forma net income (loss) per share
is the estimated present value at grant date using the Black Scholes
option pricing model with the following weighted average assumptions:
One-Month
Year Ended Ended Year Ended
January 31 January 31, December 31,
1998 1997 1996 1995
Dividend yield 0% 0% 0% 0%
Expected volatility 55% 53% 46% 46%
Risk-free interest
rate:
6 year - - 5.35% 5.35%
5 year - 6.65% - -
4 year 5.41% - - -
3 year - - 5.07% 5.07%
2 year - 6.29% - -
1 year 5.35% - - -
Stock option/warrant activity is summarized as follows:
Weighted Weighted
Year Ended Average Year Ended Average
January 31, Exercise January Exercise
1998 Price 31, 1997 Price
Options/warrants
outstanding,
beginning of period 974,111 $2.47 314,000 $3.46
Options/warrants
granted 50,000 3.50 685,111 2.02
Options/warrants
exercised - - (25,000) 2.50
Options/warrants
expired (18,000) 2.50 - -
--------- ------- ---------- -------
Options/warrants
outstanding, end of
period 1,006,111 2.52 974,111 2.47
========= ======= ========== =======
Options/warrants
exercisable,
end of period 968,611 2.48 739,833 2.21
========= ======= ========== =======
Price range per share $1.60-$4.50 $1.60-$4.50
========== ===========
One-Month
Period Weighted Weighted
Ended Average Year Ended Average
January 31, Exercise December 31, Exercise
1996 Price 1995 Price
Options/warrants
outstanding, beginning
of period 314,000 $3.46 150,000 $2.68
Options/warrants granted - - 200,000 4.00
Options/warrants
exercised - - (36,000) 3.25
--------- ------ --------- -------
Options/warrants
outstanding, end of
period 314,000 3.46 314,000 3.46
--------- ------ --------- -------
Options/warrants
exercisable, end of
period 180,666 3.05 180,666 3.05
--------- ------ --------- -------
Price range per share $2.50-$4.00 $2.50-$4.00
=========== ===========
The weighted average remaining contractual life of stock options and
warrants outstanding at January 31, 1998 is 7.5 years.
The weighted average fair value of options granted and warrants
issued during the years ended January 31, 1998, 1997 and December 31,
1995 was $1.98, $6.11 and $2.08, respectively.
12. VALUATION ACCOUNTS
Activity related to valuation accounts for the years ended January
31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Additions Deductions for
charged to bad debts written
Balance, (deductions off, inventory
Beginning Acquired from) costs disposed of or Balance,
Valuation Accounts of Year Companies and expenses warranty claims End of Year
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts and finance
charges: 1/31/98 $292,000 $ - $ 76,780 $(48,780) $320,000
1/31/97 - 304,026 10,127 (22,153) 292,000
Excess and obsolete
inventory reserve: 1/31/98 772,500 - (215,500) - 557,000
1/31/97 - 770,000 2,500 - 772,500
Notes receivable reserve: 1/31/98 275,000 - - - 275,000
1/31/97 - - 275,000 - 275,000
Warranty reserve: 1/31/98 151,000 - 164,000 (75,000) 240,000
1/31/97 - 174,466 42,360 (65,826) 151,000
</TABLE>
13. COMMITMENTS
The Company has employment agreements with two of its executives.
Minimum salaries to be paid to these individuals for the years ended
January 31, 1999 and 2000 are $270,000 and $112,500, respectively.
The Company has various warehouse and auto leases expiring at various
dates through January 2001. Future minimum lease payments required
under these noncancelable operating lease agreements are
approximately as follows:
Year Ending
January 31,
1999 $ 149,000
2000 101,000
2001 81,000
--------
$331,000
========
Total rent expense for the years ended January 31, 1998 and 1997, the
one-month transition period ended January 31, 1996 and the year ended
December 31, 1995 was approximately $145,000, $137,000, $6,000, and
$49,000, respectively.
14. RELATED PARTY TRANSACTIONS
At January 31, 1998 Edison held in its investment portfolio 6,400
shares of Panavision Inc., which were purchased in 1996 at a cost of
$139,750 and have a market value at January 31, 1998 of $166,800. The
Chairman of the Board and Chief Executive Officer of Panavision Inc.
is a member of the Board of Directors of the Company.
15. FOREIGN OPERATIONS
Foreign operations information for the year ended January 31, 1998
follows:
United United
States Kingdom Malaysia Total
Net sales to
unaffiliated
customers $21,852,948 $1,827,477 $194,789 $23,875,214
Operating income (loss) 4,328,227 (51,859) (86,226) 4,190,142
Identifiable assets 30,050,025 1,852,144 453,788 32,355,957
Depreciation and
amortization 2,196,795 49,737 6,978 2,253,510
Capital expenditures 412,097 54,919 87,907 554,923
Foreign operations information for the year ended January 31, 1997
follows:
United United
States Kingdom Total
Net sales to unaffiliated
customers $12,158,482 $1,445,858 $13,604,340
Operating income 498,279 33,423 531,702
Identifiable assets 31,936,230 2,123,875 34,060,105
Depreciation and amortization 1,548,701 14,973 1,563,674
Capital expenditures 355,401 60,939 416,340
16. CONTINGENCIES AND LITIGATION
The Company is involved in various legal proceedings which have arisen
in the normal course of business. Reserves are recorded when the
occurrence of loss is probable and can be reasonably estimated. In
the opinion of management, the resolution of these contingencies will
not have a materially adverse effect on the Company's financial
condition or results of operations.
EXHIBIT 21
SUBSIDIARIES OF EDISON CONTROL CORPORATION
STATE OR COUNTRY
NAME OF INCORPORATION TRADE NAMES
Construction Forms, Inc. Wisconsin CF, ConForms, Construction
Forms, CF Pipejoint, ConForms
Europe, CF Europe, UTI, UT,
Ultra Tech, GC, Gilco, Gilson
CF Gilco, Inc. Wisconsin GC, Gilco, Gilson
CF Ultra Tech, Inc. Wisconsin UTI, UT, Ultra Tech
JABCO, LLC Wisconsin JABCO
ConForms Asia Sdn. Bhd. Malaysia CF Asia
EXHIBIT 23
CONSENT AND OPINIONS OF INDEPENDENT AUDITORS
REPORT OF INDEPENDENT AUDITORS
The Stockholders and The Board of Directors of Edison Control Corporation
We have audited the statements of operations, stockholders' equity and
cash flows of Edison Control Corporation for the year ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Edison Control Corporation for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
MetroPark, New Jersey
February 14, 1996
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Edison Control Corporation of our report dated February 14, 1996,
with respect to the 1995 financial statements of Edison Control
Corporation, included in the 1997 Annual Report to Shareholders of Edison
Control Corporation.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 333-41483) pertaining to Various Individual
Employment and Stock Option Agreements of Edison Control Corporation of
our report dated February 14, 1996, with respect to the 1995 financial
statements of Edison Control Corporation included in the 1997 Annual
Report to Shareholders of Edison Control Corporation.
/s/Ernst & Young LLP
MetroPark, New Jersey
April 15, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Edison Control Corporation:
We have audited the accompanying consolidated balance sheets of Edison
Control Corporation and subsidiaries (the "Company") as of January 31,
1998 and 1997, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the years then ended and the one-
month transition period ended January 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits. The financial statements of the Company for the year
ended December 31, 1995 were audited by other auditors whose report, dated
February 14, 1996, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of January
31, 1998 and 1997, and the results of their operations and their cash
flows for the years then ended and the one-month transition period ended
January 31, 1996, in conformity with generally accepted accounting
principles.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
April 2, 1998
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference on Form S-8 of Edison Control
Corporation 1986 Stock Option Plan of our report dated April 2, 1998,
incorporated by reference in the Annual Report on Form 10-K of Edison
Control Corporation for the year ended January 31, 1998.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Milwaukee, Wisconsin
April 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EDISON CONTROL CORPORATION AS OF AND FOR
THE FISCAL YEAR ENDED JANUARY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 1037288
<SECURITIES> 3843763
<RECEIVABLES> 3419119
<ALLOWANCES> 320000
<INVENTORY> 5974302
<CURRENT-ASSETS> 15212086
<PP&E> 7908003
<DEPRECIATION> 962900
<TOTAL-ASSETS> 32355957
<CURRENT-LIABILITIES> 4338754
<BONDS> 13181678
0
0
<COMMON> 22759
<OTHER-SE> 14567766
<TOTAL-LIABILITY-AND-EQUITY> 32355957
<SALES> 23875214
<TOTAL-REVENUES> 23875214
<CGS> 14717711
<TOTAL-COSTS> 4967361
<OTHER-EXPENSES> 2234980
<LOSS-PROVISION> 76780
<INTEREST-EXPENSE> 1133382
<INCOME-PRETAX> 1955162
<INCOME-TAX> 850000
<INCOME-CONTINUING> 1105162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1105162
<EPS-PRIMARY> .49
<EPS-DILUTED> .41
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF EDISONN CONTROL CORPORATION AS OF AND FOR THE NINE
MONTHS ENDED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 968,958
<SECURITIES> 4,629,762
<RECEIVABLES> 4,072,913
<ALLOWANCES> 372,621
<INVENTORY> 5,790,634
<CURRENT-ASSETS> 16,826,817
<PP&E> 7,753,672
<DEPRECIATION> 836,002
<TOTAL-ASSETS> 34,250,496
<CURRENT-LIABILITIES> 4,683,217
<BONDS> 14,700,929
0
0
<COMMON> 22,759
<OTHER-SE> 14,667,591
<TOTAL-LIABILITY-AND-EQUITY> 34,250,496
<SALES> 18,126,002
<TOTAL-REVENUES> 18,126,002
<CGS> 11,320,989
<TOTAL-COSTS> 11,320,989
<OTHER-EXPENSES> 4,106,115
<LOSS-PROVISION> 80,353
<INTEREST-EXPENSE> 867,738
<INCOME-PRETAX> 1,831,160
<INCOME-TAX> 785,225
<INCOME-CONTINUING> 1,045,935
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,045,935
<EPS-PRIMARY> .46
<EPS-DILUTED> .39
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EDISON CONTROL CORPORATION AS OF AND FOR
THE SIX MONTHS ENDED JULY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-31-1997
<CASH> 664,554
<SECURITIES> 4,880,013
<RECEIVABLES> 3,188,821
<ALLOWANCES> 349,814
<INVENTORY> 5,467,042
<CURRENT-ASSETS> 15,287,822
<PP&E> 7,662,804
<DEPRECIATION> 666,339
<TOTAL-ASSETS> 33,068,769
<CURRENT-LIABILITIES> 4,117,236
<BONDS> 14,480,143
0
0
<COMMON> 22,759
<OTHER-SE> 14,176,631
<TOTAL-LIABILITY-AND-EQUITY> 33,068,769
<SALES> 11,077,993
<TOTAL-REVENUES> 11,077,993
<CGS> 6,960,400
<TOTAL-COSTS> 6,960,400
<OTHER-EXPENSES> 2,596,167
<LOSS-PROVISION> 57,546
<INTEREST-EXPENSE> 592,879
<INCOME-PRETAX> 928,547
<INCOME-TAX> 392,828
<INCOME-CONTINUING> 535,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 535,719
<EPS-PRIMARY> .24
<EPS-DILUTED> .20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EDISON CONTROL CORPORATION AS OF AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 962,451
<SECURITIES> 5,359,443
<RECEIVABLES> 3,272,739
<ALLOWANCES> 301,113
<INVENTORY> 6,075,555
<CURRENT-ASSETS> 17,392,759
<PP&E> 6,975,138
<DEPRECIATION> 870,499
<TOTAL-ASSETS> 35,142,066
<CURRENT-LIABILITIES> 4,182,600
<BONDS> 17,650,169
0
0
<COMMON> 22,509
<OTHER-SE> 12,830,788
<TOTAL-LIABILITY-AND-EQUITY> 35,142,066
<SALES> 6,842,402
<TOTAL-REVENUES> 6,842,402
<CGS> 5,109,958
<TOTAL-COSTS> 6,923,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,833
<INTEREST-EXPENSE> 541,898
<INCOME-PRETAX> (696,722)
<INCOME-TAX> (286,635)
<INCOME-CONTINUING> (410,087)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (410,087)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EDISON CONTROL CORPORATION AS OF AND FOR
THE SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,666,331
<SECURITIES> 5,590,680
<RECEIVABLES> 3,071,627
<ALLOWANCES> 0
<INVENTORY> 6,793,616
<CURRENT-ASSETS> 18,987,009
<PP&E> 6,617,051
<DEPRECIATION> 388,781
<TOTAL-ASSETS> 37,051,432
<CURRENT-LIABILITIES> 4,744,248
<BONDS> 18,731,516
0
0
<COMMON> 22,509
<OTHER-SE> 13,097,159
<TOTAL-LIABILITY-AND-EQUITY> 37,051,432
<SALES> 1,000,813
<TOTAL-REVENUES> 1,000,813
<CGS> 726,180
<TOTAL-COSTS> 726,180
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,333
<INCOME-PRETAX> (135,051)
<INCOME-TAX> 55,000
<INCOME-CONTINUING> (80,051)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (80,051)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF EDISON CONTROL CORPORATION AS OF AND FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,304,996
<SECURITIES> 9,838,998
<RECEIVABLES> 55,398
<ALLOWANCES> 0
<INVENTORY> 230,318
<CURRENT-ASSETS> 12,477,449
<PP&E> 439,981
<DEPRECIATION> 374,294
<TOTAL-ASSETS> 12,553,486
<CURRENT-LIABILITIES> 2,177,574
<BONDS> 0
0
0
<COMMON> 21,360
<OTHER-SE> 10,354,552
<TOTAL-LIABILITY-AND-EQUITY> 12,553,486
<SALES> 791,502
<TOTAL-REVENUES> 791,502
<CGS> 660,857
<TOTAL-COSTS> 660,857
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,498,023
<INCOME-TAX> 1,415,441
<INCOME-CONTINUING> 2,082,582
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,082,582
<EPS-PRIMARY> .98
<EPS-DILUTED> .94
</TABLE>
