<PAGE>
FORM 10-QSB QUARTERLY REPORT
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, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0 - 24012
ALLIED DEVICES CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
13-3087510
(I.R.S. Employer Identification No.)
325 DUFFY AVENUE, HICKSVILLE, N.Y. 11801
(Address of principal executive offices - Zip code)
Issuer's telephone number, including area code: (516) 935 - 1300
Former address and telephone number
2365 Milburn Avenue, Baldwin, NY 11510
(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 4,847,592
- ----------------------------- --------------------------------------
(CLASS) (Shares Outstanding at April 25, 2000)
<PAGE>
PART I
ALLIED DEVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
ALLIED DEVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
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MARCH 31, September 30,
2000 1999
- ---------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (Audited)
<S> <C> <C>
ASSETS
CURRENT:
Cash $ 130,692 $ 443,039
Accounts receivable 3,833,376 3,050,884
Inventories 10,070,976 9,731,773
Prepaid and other 341,751 126,902
Deferred income taxes 165,000 165,000
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT 14,541,795 13,517,598
PROPERTY, PLANT AND EQUIPMENT, NET 7,930,473 7,335,000
GOODWILL 3,444,826 3,584,512
OTHER 531,626 420,916
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 26,448,720 $ 24,858,026
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable $ 1,713,994 $ 1,867,578
Taxes payable 510,481 280,778
Accrued expenses 564,228 392,772
Current portion of long term debt and capital lease obligations 1,869,539 1,577,539
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT 4,658,242 4,118,667
LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS 11,293,876 10,931,435
DEFERRED TAXES 326,000 326,000
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 16,278,118 15,376,102
STOCKHOLDERS' EQUITY:
Capital stock 4,948 4,948
Paid-in capital 3,624,721 3,624,721
Retained earnings 6,670,104 5,981,426
- ---------------------------------------------------------------------------------------------------------------------
SUBTOTAL 10,299,773 9,611,095
LESS TREASURY STOCK, AT COST (129,171) (129,171)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 10,170,602 9,481,924
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,448,720 $ 24,858,026
====================================================================================================================
</TABLE>
3
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ALLIED DEVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
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Quarter Ended Six Months Ended
March 31, March 31,
- --------------------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $7,734,983 $5,630,480 $14,428,470 $11,000,934
Cost of sales 5,018,272 3,834,284 9,396,670 7,427,554
- --------------------------------------------------------------------------------------------------------------------------------
Gross profit 2,716,711 1,796,196 5,031,800 3,573,380
Selling, general and
administrative expenses 1,762,169 1,340,469 3,358,171 2,706,318
- --------------------------------------------------------------------------------------------------------------------------------
Income from operations 954,542 455,727 1,673,629 867,062
- --------------------------------------------------------------------------------------------------------------------------------
Other expense (income) (9,659) -- 37,440 --
Interest expense (net) 286,405 256,112 558,493 509,455
- --------------------------------------------------------------------------------------------------------------------------------
Income before provision for
taxes on income 677,796 199,615 1,077,696 357,607
Taxes on income 244,653 72,040 389,018 129,096
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 433,143 $ 127,575 $ 688,678 $ 228,511
================================================================================================================================
Basic earnings per share $ 0.09 $ 0.03 $ 0.14 $ 0.05
================================================================================================================================
Basic weighted average number of
shares of common stock
outstanding 4,847,592 4,947,942 4,847,592 4,947,942
================================================================================================================================
Diluted earnings per share $ 0.08 $ 0.03 $ 0.13 $ 0.05
================================================================================================================================
Diluted weighted average number of
shares of common stock
outstanding 5,636,681 4,961,504 5,353,854 4,961,504
================================================================================================================================
</TABLE>
4
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ALLIED DEVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE SIX MONTHS ENDED MARCH 31, 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 688,678 $ 228,511
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 781,015 738,683
Loss on sale of equipment 45,949 --
Decrease (increase) in:
Accounts receivable (782,492) (26,473)
Inventories (339,203) (451,501)
Prepaid expenses and other current assets (214,849) 157,909
Other assets (144,341) (97,976)
Increase (decrease) in:
Accounts payable (153,584) (121,745)
Taxes payable 229,703 88,244
Accrued expenses 171,456 (145,985)
- -----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 282,332 369,667
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (167,115) (126,118)
Proceeds from sale of equipment 57,050 --
- -----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (110,065) (126,118)
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in bank borrowings 300,000 150,000
Deferred financing costs (25,000) (55,350)
Payments of long-term debt and capital lease obligations (759,614) (424,953)
- -----------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (484,614) (330,303)
- -----------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH (312,347) (86,754)
CASH, AT BEGINNING OF PERIOD 443,039 275,238
- -----------------------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD $ 130,692 $ 188,484
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</TABLE>
5
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ALLIED DEVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR MARCH 31, 2000 AND 1999 IS UNAUDITED)
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1. BUSINESS Allied Devices Corporation and subsidiaries (the "Company") are engaged primarily in the
manufacture and distribution of standard and custom precision mechanical assemblies and
components and a line of screw machine products throughout the United States.
(A) BASIS OF PRESENTATION/PRINCIPLES OF CONSOLIDATION
2. SUMMARY OF SIGNIFICANT The accompanying consolidated financial statements include the accounts of Allied Devices
ACCOUNTING POLICIES Corporation and its wholly-owned subsidiaries, Empire - Tyler Corporation ("Empire") and APPI,
Inc. ("APPI") (collectively, the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
The consolidated financial statements and related notes thereto as of March 31, 2000 and 1999,
and for the three and six month periods 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 six months ended March
31, 2000 are not necessarily indicative of the results that may be expected for the entire year
ending September 30, 2000.
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, 1999.
</TABLE>
6
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ALLIED DEVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR MARCH 31, 2000 AND 1999 IS UNAUDITED)
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(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, 2000 and 1999, inventory was determined by applying a gross
profit method, as opposed to the year ended September 30, 1999, when inventory was determined by
a physical count.
(C) DEPRECIATION AND AMORTIZATION
Property, plant and equipment are 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:
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Buildings and improvements 30 years
Machinery and equipment 8-10 years
Furniture, fixtures and office equipment 5-7 years
Tools, molds and dies 8 years
Leasehold improvements Lease term
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(D) INCOME TAXES
The Company and its subsidiaries file a consolidated federal income tax return and separate state
income tax returns. The Company follows the liability method of accounting for income taxes.
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7
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ALLIED DEVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR MARCH 31, 2000 AND 1999 IS UNAUDITED)
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(E) EARNINGS PER SHARE
Basic earnings per share are computed by dividing income available to common shareholders by the
weighted average shares outstanding for the period and reflect no dilution for the potential
exercise of stock options and warrants. Diluted earnings per share reflect, in periods in which
they would have a dilutive effect, the dilution that would occur upon the exercise of stock
options and warrants. A reconciliation of the shares used in calculating basic and diluted
earnings per share follows:
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Weighted average
shares outstanding -
basic 4,847,592 4,947,942 4,847,592 4,947,942
Dilutive effect of
options and warrants 789,089 13,562 506,262 13,562
---------------------------------------------------------------------------------
Weighted average
shares outstanding-
diluted 5,636,681 4,961,504 5,353,854 4,961,504
=================================================================================
</TABLE>
<TABLE>
<S> <C>
(F) INTANGIBLE ASSETS
The excess of cost over fair value of net assets acquired is being amortized over periods of 15
years (for fiscal 1998 acquisitions) and 20 years (for prior acquisitions).
(G) REVENUE RECOGNITION
Sales are recognized upon shipment of products.
</TABLE>
8
<PAGE>
ALLIED DEVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR MARCH 31, 2000 AND 1999 IS UNAUDITED)
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<S> <C>
(H) STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash equivalents.
3. INVENTORIES Inventories are summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
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<S> <C> <C>
Raw materials $1,395,412 $1,312,565
Work-in-process 1,058,542 1,041,542
Finished goods 9,262,322 8,990,642
--------------------------------------------------------------------------------
11,716,276 11,344,749
Less: adjustment to LIFO (1,645,300) (1,612,976)
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$10,070,976 $9,731,773
================================================================================
</TABLE>
<TABLE>
<S> <C>
4. NEW In November, 1999, the Company entered into a lease for a new manufacturing facility to
MANUFACTURING consolidate its four locations on Long Island into one building and allow for growth of more
FACILITY than 50% in throughput. This consolidation effort is scheduled for completion during May, 2000.
The lease on this new facility expires in June, 2010, and requires total minimum rental payments
of $4,999,000. The leases on the four locations being vacated will expire or terminate in
May, 2000.
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9
<PAGE>
ALLIED DEVICES CORPORATION
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 2000
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1999
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
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 reports filed
by the Company with the Securities and Exchange Commission. The Company cautions 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, 2000 were $7,735,000 and $14,428,000,
respectively, as compared to $5,630,000 and $11,001,000 in the comparable periods of the prior
year, increases of approximately 37.39% and 31.15%, respectively. These increases were
principally the result of improved conditions in the various sectors of the US economy served by
the Company. The semiconductor equipment sector's severe slowdown in 1998 and 1999 had impacted
the Company's shipping volume, and its current strength is having a positive effect. In
particular, fourteen (14) customers in this sector have accounted for approximately 60% of the
growth in sales from year to year. Other sectors, most notably medical equipment and robotics,
had remained stable but exhibited low growth through 1998 and 1999, and they are now
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10
<PAGE>
ALLIED DEVICES CORPORATION
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 2000
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1999
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<S> <C>
showing moderate but consistent strength. The Company remains dedicated to providing top quality
and superior service to its customers, particularly those in the semiconductor equipment,
aerospace instrument, medical equipment, robotics and scientific instrumentation sectors. While
it is not possible to forecast with any accuracy how long the current recovery may last,
customers in these sectors are predicting two or three years of strong activity.
Reported gross profit for the second quarter and first six months of fiscal 2000 was 35.12% and
34.87% of net sales, respectively, as compared to 31.90% and 32.48% for the comparable periods of
fiscal 1999. Higher operating rates had, in general, a positive effect on margins, with the
following factors accounting for the improvement: (1) higher throughput in manufacturing resulted
in solid gains in labor productivity, improving margins by 3.22%; (2) the Company shipped a
higher volume of product on relatively fixed costs of factory operations, increasing gross
margins by 2.89% and (3) net materials expense increased as a percentage of sales, decreasing
gross margins by 3.72%, as purchasing efficiencies suffered in favor of timeliness of deliveries.
In the third quarter of fiscal 2000, the Company will complete the consolidation of its four
plants on Long Island into one new facility, allowing for improved control and coordination of
manufacturing activities and for expansion of manufacturing capacity. This will entail an
increase in occupancy expense that, at current operating rates, would reduce gross margin by
approximately 0.43%. Management expects this cost increase to be more than offset by additional
increases in sales volume. The Company did not increase prices in the first six months of fiscal
2000. LIFO reserves increased by $32,000 during the period.
Selling, general and administrative expenses as a percentage of net sales were 22.7% and 23.2% in
the second quarter and first six months of fiscal 2000, respectively, as compared to 23.8% and
24.6% in the comparable periods of fiscal 1999. The following
</TABLE>
11
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ALLIED DEVICES CORPORATION
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 2000
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1999
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<S> <C>
factors account for this change: (1) selling and shipping expenses and commissions increased as a
percentage of net sales by approximately 0.2% as management increased spending on certain aspects
of the Company's marketing plan; (2) administrative payroll, benefits, and related expenses
decreased as a percentage of net sales by 1.4%; and (3) other administrative expenses
(collectively) decreased as a percentage of net sales by approximately 0.2%.
Other expense is attributable to non-cash losses on the trade-in of certain pieces of equipment
for more highly productive manufacturing equipment.
Interest expense of $286,000 and $558,000 in the second quarter and first six months of fiscal
2000, respectively, was $30,000 and $49,000 higher than in the comparable periods of fiscal 1999,
a result of higher debt taken on by the Company to finance new equipment.
Provision for income taxes is estimated at 36.1% of pre-tax income for the fiscal 2000 period,
the same as in fiscal 1999, as a combination of federal and state taxes.
LIQUIDITY AND FINANCIAL RESOURCES
During the first six months of fiscal 2000, the Company's financial condition remained healthy.
Operations generated cash of $282,000. Capital expenditures (net) used $110,000, and financing
activities used $484,000, resulting in a decrease in cash on hand of $312,000. Working capital
increased by $485,000 to $9,884,000 during the six month period, principally as a result of the
following changes in current assets and current liabilities:
o Accounts receivable increased by $783,000 as a function of rising sales volume. The average
collection period remained at about 45 days.
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12
<PAGE>
ALLIED DEVICES CORPORATION
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 2000
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1999
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<S> <C>
o Inventories increased by 3.5%, or $339,000, during the six-month period. Turns on inventory
improved to 1.9 times during the six months, as compared to 1.6 times at the end of fiscal
1999. This change is attributable to the increase in shipping volume experienced in the first
six months of fiscal 2000.
o Prepaid and other current assets increased by $215,000 as the Company recorded (and accrued
for) certain annual administrative expenses ($178,000) and incurred costs related to its new
manufacturing facility ($37,000).
o Current liabilities, exclusive of current portions of long-term debt and capital lease
obligations, increased $248,000 as accounts payable and accrued expenses increased $18,000, and
taxes payable increased by $230,000.
o Current portions of long-term debt and capital lease obligations increased by $292,000.
o Cash balances decreased by $312,000.
Net capital expenditures in the six month period were $110,000 ($1,224,000 including capital
lease acquisitions) as management continued to add to capacity and to streamline its
manufacturing processes. Management's capital spending plans for the remaining half of fiscal
2000 include additional expenditures of approximately $1,900,000 for productive equipment and
approximately $400,000 for expansion and consolidation of New York operations into a new facility
on Long Island. Management expects to fund such spending out of its working capital and lease
lines.
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, in light of the
Company's expansion objectives, the Company's current financial resources will not be adequate to
provide for all of the on-going cash needs of the business. In particular, management expects to
require additional financing to carry out its acquisition objectives. It is management's
intention to complete at least one significant
</TABLE>
13
<PAGE>
ALLIED DEVICES CORPORATION
RESULTS OF OPERATIONS: SIX MONTHS ENDED MARCH 31, 2000
COMPARED WITH SIX MONTHS ENDED MARCH 31, 1999
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acquisition during fiscal 2000. Success in this part of the Company's growth plan may rely, in
large measure, upon success in 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. It is important to note that, absent new capital, the Company will not be in
a position to undertake some of the most promising elements of management's plans for expansion.
In the event that new capital is 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.
To date, the Company has not experienced any Year 2000 related issues or problems.
</TABLE>
14
<PAGE>
PART II. OTHER INFORMATION
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: APRIL 26, 2000 ALLIED DEVICES CORPORATION
-------------------- --------------------------
(Registrant)
By: /s/ M. Hopkinson
M. Hopkinson
Chairman
15
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 2000
10-Q AND IS QUALIFIED IN ITS ENTIERTY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000869495
<NAME> ALLIED DEVICES CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 130,692
<SECURITIES> 0
<RECEIVABLES> 3,889,561
<ALLOWANCES> 56,185
<INVENTORY> 10,070,976
<CURRENT-ASSETS> 0
<PP&E> 14,971,769
<DEPRECIATION> 7,041,296
<TOTAL-ASSETS> 26,448,720
<CURRENT-LIABILITIES> 4,658,242
<BONDS> 0
0
0
<COMMON> 4,948
<OTHER-SE> 10,165,654
<TOTAL-LIABILITY-AND-EQUITY> 26,448,720
<SALES> 7,734,983
<TOTAL-REVENUES> 7,734,983
<CGS> 5,018,272
<TOTAL-COSTS> 5,018,272
<OTHER-EXPENSES> 1,752,510
<LOSS-PROVISION> 56,185
<INTEREST-EXPENSE> 286,405
<INCOME-PRETAX> 677,796
<INCOME-TAX> 244,653
<INCOME-CONTINUING> 433,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 433,143
<EPS-BASIC> .09
<EPS-DILUTED> .08
</TABLE>
