<PAGE>
Form 10-QSB Quarterly Reports
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10--QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 02--24012
ALLIED DEVICES CORPORATION
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada
---------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
13-3087510
---------------------------------------------------------------
(I.R.S. Employer Identification No.)
2365 Milburn Avenue, Baldwin,N.Y. 11510
---------------------------------------------------------------
(Address of principal executive offices-- Zip code)
Registrant's telephone number, including area code: 516--223--9100
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
Common Stock, Par Value $.001 4,499,842
(CLASS) (Shares Outstanding at May 3, 1997)
----------------------------- -----------------------------------
<PAGE>
PART I
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Allied Devices Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
- --------------------------------------------------------------- ------------- -------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current:
Cash........................................................ $ 203,920 $ 54,919
Accounts receivable......................................... 2,375,874 2,193,606
Inventories................................................. 5,897,511 5,882,556
Prepaid and other........................................... 130,593 41,619
------------- -------------
Total current............................................ 8,607,898 8,172,700
Property, plant and equipment, net............................. 1,949,428 1,965,746
Goodwill....................................................... 99,621 110,577
Other.......................................................... 70,687 88,817
------------- -------------
Total assets............................................. $ 10,727,634 $ 10,337,840
------------- -------------
------------- -------------
Liabilities and Stockholders' Equity
Current:
Accounts payable............................................ $ 943,239 $ 1,092,758
Taxes payable............................................... 35,809 55,693
Accrued expenses............................................ 298,296 438,035
Current portion of long term debt and capital lease
obligations............................................... 122,284 119,401
------------- -------------
Total current............................................ 1,399,628 1,705,887
Long term debt and capital lease obligations................... 2,864,903 2,642,401
Deferred taxes................................................. 182,188 182,188
------------- -------------
Total liabilities............................................ 4,446,719 4,530,476
Stockholders' Equity:
Capital stock............................................... 4,500 4,402
Paid-in capital............................................. 2,477,720 2,409,086
Retained earnings........................................... 3,798,695 3,393,876
------------- -------------
Total stockholders' equity.................................. 6,280,915 5,807,364
------------- -------------
Total liabilities and stockholders' equity.................. $ 10,727,634 $ 10,337,840
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Allied Devices Corporation
and Subsidiaries
Consolidated Statements
of Income and Retained Earnings
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales................................................ $ 4,105,444 $ 4,831,880 $ 7,631,798 $ 9,126,006
Cost of sales............................................ 2,534,732 3,176,220 4,921,082 6,119,408
------------ ------------ ------------ ------------
Gross profit.......................................... 1,570,712 1,655,660 2,710,716 3,006,598
Selling, general and administrative expenses............. 1,079,299 1,086,960 1,961,758 2,090,478
------------ ------------ ------------ ------------
Income from operations................................... 491,413 568,700 748,958 916,120
Interest expense (net)................................... 57,983 83,851 104,341 150,004
------------ ------------ ------------ ------------
Income before taxes on income............................ 433,430 484,849 644,616 766,116
Taxes on income.......................................... 161,236 179,404 239,797 280,661
------------ ------------ ------------ ------------
Net income............................................... $ 272,194 $ 305,445 $ 404,819 $ 485,455
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per share....................................... $ 0.05 $ 0.06 $ 0.08 $ 0.09
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of shares of common stock
outstanding............................................ 5,689,488 5,659,838 5,689,488 5,659,838
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Allied Devices Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH
31,
------------------------
1997 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 404,819 $ 485,455
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization.................................... 237,201 189,685
Provision for bad debts.......................................... 247 52,773
Decrease (increase) in:
Accounts receivable............................................. (182,516) (531,213)
Inventories..................................................... (14,955) (332,263)
Prepaid expenses and other current assets....................... (88,974) 31,767
Other assets.................................................... 11,145 (158,562)
Increase (decrease) in:
Accounts payable................................................ (149,519) 144,121
Taxes payable................................................... (19,884) (266,505)
Accrued expenses and other current liabilities.................. (139,739) 86,819
----------- -----------
Net cash provided by (used in) operating activities............. 57,825 (297,923)
----------- -----------
Cash flows from investing activities:
Capital expenditures.............................................. (202,941) (153,850)
----------- -----------
Net cash used in investing activities........................... (202,941) (153,850)
----------- -----------
Cash flows from financing activities:
Increase (decrease) in revolving loan............................. 283,662 357,889
Proceeds from notes payable....................................... -- 700,000
Payments of principal and accrued interest on long-term debt and
capital lease obligations........................................ (58,277) (598,355)
Proceeds from sale of common stock................................ 68,731 (12,897)
----------- -----------
Net cash provided by (used in) financing activities............. 294,116 446,637
----------- -----------
Net increase (decrease) in cash................................... 149,001 (5,136)
Cash, at beginning of period...................................... 54,919 198,486
----------- -----------
Cash, at end of period............................................. $ 203,920 $ 193,350
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR MARCH 31, 1997 AND 1996 IS UNAUDITED)
1. BUSINESS
Allied Devices Corporation and subsidiaries (the "Company") are engaged
primarily in the manufacture and distribution of standard precision mechanical
components and a line of screw machine products throughout the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation/principles and consolidation
The accompanying consolidated financial statements include the accounts of
Allied Devices Corporation and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements and related notes thereto as of March
31, 1997 and 1996, and for the three and six months then ended, are unaudited
and have been prepared on a basis consistent with the Company's annual financial
statements. Such unaudited financial statements include all adjustments
(consisting of normal recurring adjustments) that the Company considers
necessary for a fair presentation of such data. Results for the three and six
months ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the entire year ending September 30, 1997.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB
for the year ended September 30, 1996.
(b) Inventories
Inventories are valued at the lower of cost (last-in, first-out (LIFO)
method) or market. For the three and six months ended March 31, 1997 and 1996,
inventory was determined by applying a gross profit method, as opposed to the
year ended September 30, 1996, when inventory was determined by a physical
count. The Company has estimated that the change in the excess of the FIFO
valuation over the LIFO cost of its inventories will not be significant during
fiscal 1997.
<PAGE>
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR MARCH 31, 1997 AND 1996 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Depreciation and amortization
Property, plant and equipment is stated at cost. Depreciation and
amortization of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives are as follows:
Buildings and improvements 30 years
Machinery and equipment 10 years
Furniture, fixtures and office equipment 5--7 years
Tools, molds and dies 8 years
Leasehold improvements Lease term
(d) Earnings per share
Earnings per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during each period.
Earnings per share is computed using the treasury stock method, modified for
options and warrants outstanding in excess of 20% of the outstanding shares of
the Company's common stock. Under the treasury stock method the number of shares
outstanding reflects an assumed use of the proceeds from the assumed exercise of
stock options and warrants to repurchase shares of the Company's common stock at
the average market value during the period. The proceeds generated from the
assumed exercise of options and warrants in excess of 20% of the outstanding
shares are applied to the assumed repayment of debt with the assumed related
interest expense savings being included in the Company's results from operations
for earnings per share computations.
<PAGE>
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR MARCH 31, 1997 AND 1996 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Intangible assets
The excess of cost over fair value of net assets acquired is being amortized
over a period of 20 years.
(f) Revenue recognition
Sales are recognized upon shipment of products.
(g) New accounting pronouncement
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is effective for fiscal years ending after
December 15, 1997. The Company will adopt Statement No. 128 for the year ending
September 30, 1998. The effect on the consolidated financial statements of
Statement No. 128 will not be material on a fully diluted basis.
3. INVENTORIES
INVENTORIES ARE SUMMARIZED AS FOLLOWS:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
----------- -------------
<S> <C> <C>
Raw materials.................................................... $ 243,349 $ 238,325
Work-in-process.................................................. 504,278 512,527
Finished goods................................................... 6,423,901 6,404,976
----------- -------------
7,171,528 7,155,828
Less: adjustment to LIFO......................................... (1,274,017) (1,273,272)
----------- -------------
$ 5,897,511 $ 5,882,556
----------- -------------
----------- -------------
</TABLE>
4
<PAGE>
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1997
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1996
ITEM 2--RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1997
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1996:
All statements contained herein that are not historical facts, including,
but not limited to, statements regarding the Company's current business
strategy, the Company's projected sources and uses of cash, and the Company's
plans for future development and operations, are based upon current
expectations. These statements are forward-looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause actual results to differ materially are the
following: the availability of sufficient capital to finance the Company's
business plans on terms satisfactory to the Company; competitive factors;
changes in labor, equipment and capital costs; changes in regulations affecting
the Company's business; future acquisitions or strategic partnerships; general
business and economic conditions; and factors described from time to time in the
Company's reports filed with the Securities and Exchange Commission. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which statements are made pursuant to the Private
Litigation Reform Act of 1995 and, as a result, are pertinent only as of the
date made.
Net sales for the quarter and six months ended March 31, 1997 were
$4,105,000 and $7,632,000, respectively, 15% and 16% lower than in the
comparable periods of the prior year. Management attributes this decrease to the
following factors:
- Towards the end of the Company's fiscal 1996, customers in the
semiconductor equipment industry had experienced a slowdown and had, as of
August 1996, begun to defer shipments originally scheduled for delivery in
the period September, 1996 to February, 1997 until after March, 1997.
Management estimates that approximately $750,000 in shipments were
deferred during the first quarter (October--December 1996) and
approximately $500,000 during the second quarter (January--March, 1997).
Recently, as the third quarter of fiscal 1997 has begun, the pace of
shipments has improved, giving signs that the industry's slowdown is
ending.
<PAGE>
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1997
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1996
- A number of other prominent customers suspended or curtailed buying during
the Company's first fiscal quarter (October to December, 1996) in order to
minimize inventories for calendar year-end. Management estimates that at
least $245,000 in shipments were deferred as a result of this factor.
The Company's on-going advertising campaign in certain trade magazines is
focused on the advantages of having Allied Devices as a source, and it appears
to be expanding awareness of the Company's products and services in the markets
it has targeted. The rate at which the Company is adding new customers remains
healthy and steady. Customer retention appears to be excellent, which management
attributes to the success of various innovative approaches to customer service.
Reported gross margins for the second quarter and six months of fiscal 1997
were 38.26% and 35.52%, respectively, as compared to 34.27% and 32.79% for the
comparable periods in the prior year. Improved procurement practices and
favorable market conditions lowered material expense to approximately 32% of
net sales during the first six months of fiscal 1997, from approximately 38% in
the first six months of fiscal 1996. While the Company lowered spending on
factory payroll and overhead during the six month period, it did not completely
offset the reduction in volume, thus partially mitigating the savings in
materials expense. The Company did institute certain modest price increases
during the second quarter of fiscal 1997, affecting specific product groupings
in the Company's catalog. Management estimates the effect on revenues to be less
than 1%. The LIFO reserve increased by approximately $1,000 during the six
months ended March 31, 1997.
Selling, general and administrative expenses as a percentage of net sales
were 26.29% and 25.71% in the second quarter and six months of fiscal 1997, as
compared to 22.50% and 22.75% in the comparable periods of fiscal 1996. Such
expenditures were cut back more than 6% during the six months, yet expressed as
a percentage of sales they increased due to the reduction in volume.
<PAGE>
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1997
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1996
Interest expense for the second quarter and six months of fiscal 1997
amounted to $58,000 and $104,000, respectively, approximately 30% lower than
in the comparable periods of fiscal 1996.
Provision for income taxes is estimated at 37.2% of pre-tax income for both
the second quarter and six months of fiscal 1997, as a combination of federal
and state taxes.
LIQUIDITY AND FINANCIAL RESOURCES
During the first six months of fiscal 1997, the Company's financial
condition remained healthy. Operations generated cash of $58,000, and additional
financing generated cash of $294,000. Capital expenditures used $203,000 of this
cash, with the remainder increasing cash on hand by $149,000. Working capital
increased by $741,000 to $7,208,000 during the period, principally as a result
of the following changes in current assets and liabilities.
(a) Accounts receivable increased by $183,000 as a function of the time
required to collect receivables. The average collection period increased to
about 53 days at the end of the second quarter of fiscal 1997 from about 45 days
at the end of fiscal 1996.
(b) Inventories increased by 1/4 of 1% during the six months, or $15,000.
Turns on inventory were 1.7 times during the six months as compared to 2.0 times
during fiscal 1996. This change in turnover rate is attributable to the decrease
in shipping volume during the six month period.
(c) Prepaid and other current assets increased by $89,000 as the Company
booked certain annual expenses in full and is recognizing them by quarter.
(d) Current liabilities, exclusive of current portions of long-term debt and
capital lease obligations, decreased $309,000 as accounts payable and accrued
expenses decreased $289,000 and taxes payable decreased by $20,000.
(e) Current portions of debt and capital lease obligations increased by
$3,000.
(f) Cash balances increased by $149,000.
<PAGE>
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 1997
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1996
Outlays for capital expenditures in the six month period were $203,000 as
management continued to carry out its capital spending plans, adding to capacity
and modernizing and automating its manufacturing processes. Capital spending
plans for the remainder of fiscal 1997 call for expenditures of approximately
$125,000. The Company is completing installation of a computer and management
information system, which will involve the expenditure of an additional $50,000
during fiscal 1997. This is scheduled for completion during the fourth quarter
of this fiscal year. Other expenditures will be for production machinery and
tooling.
Management believes that the Company's working capital as now constituted
will be adequate for the needs of the on-going core business. Management further
believes that the Company's current financial resources will not be adequate to
fund its acquisition program. It is management's intention to complete at least
one acquisition during fiscal 1997, and to do so will, in all likelihood,
require raising additional debt and/or equity capital. Management believes that
it has several sources for such capital and expects that the combination of
capital raised and acquisitions completed will produce anti-dilutive results for
the Company's existing stockholders. While this is management's intention, there
is no guarantee that they will be able to achieve this objective.
The Company is not relying on the receipt of any new capital for its
existing operations, but it is important to note that some of the most promising
elements of management's expansion plans may not be possible without raising
additional capital. In the event that such additional equity funds are raised,
management intends to implement its plans and will do so in keeping with its
judgment at that time as to how best to deploy such added capital.
<PAGE>
PART II. OTHER INFORMATION
Item 4--Submission of Matters to a Vote of Security Holders.
On March 26, 1997, the Company held its 1997 Annual Meeting of Stockholders.
At the Annual Meeting, the following matters were submitted to a vote of
stockholders.
1. The following seven individuals, constituting the full Board of Directors
of the Company, were nominated and elected to serve as directors of the Company.
Mark Hopkinson FOR: 3,950,518
WITHHOLD
AUTHORITY: 1,000
P.K. Bartow FOR: 3,950,518
WITHHOLD
AUTHORITY: 1,000
Salvator Baldi FOR: 3,950,518
WITHHOLD
AUTHORITY: 1,000
Gail F. Lieberman FOR: 3,950,418
WITHHOLD
AUTHORITY: 1,100
Christopher T. Linen FOR: 3,950,518
WITHHOLD
AUTHORITY: 1,000
Michael Michaelson FOR: 3,950,518
WITHHOLD
AUTHORITY: 1,000
Robert J. Smallacombe FOR:
WITHHOLD 3,950,518
AUTHORITY: 1,000
<PAGE>
PART II. OTHER INFORMATION (Continued)
2. The holders of 3,944,458 shares of common stock voted in favor, the
holders of 2,110 shares of common stock voted against, and the holders of 4,950
shares of common stock abstained with respect to the ratification of the
selection of BDO Seidman, LLP, independent certified public accountants, to
serve as independent accountants of the Company for the fiscal year ending
September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May , 1997 ALLIED DEVICES CORPORATION
(Registrant)
By: ___________________________________
M. Hopkinson
Chairman
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from March
1997 10-Q
</LEGEND>
<CIK> 0000869495
<NAME> ALLIED DEVICES CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<CASH> 203,920
<SECURITIES> 0
<RECEIVABLES> 2,432,439
<ALLOWANCES> 56,565
<INVENTORY> 5,897,511
<CURRENT-ASSETS> 8,607,898
<PP&E> 6,956,307
<DEPRECIATION> 4,976,879
<TOTAL-ASSETS> 10,727,634
<CURRENT-LIABILITIES> 1,399,628
<BONDS> 0
0
0
<COMMON> 4,500
<OTHER-SE> 6,276,415
<TOTAL-LIABILITY-AND-EQUITY> 10,727,634
<SALES> 4,105,444
<TOTAL-REVENUES> 4,105,444
<CGS> 2,534,732
<TOTAL-COSTS> 2,534,732
<OTHER-EXPENSES> 1,079,299
<LOSS-PROVISION> 56,565
<INTEREST-EXPENSE> 57,983
<INCOME-PRETAX> 433,430
<INCOME-TAX> 161,236
<INCOME-CONTINUING> 272,194
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,194
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
