x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2013
|
o
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO ________.
|
Nevada
(State or other jurisdiction of
incorporation or organization)
|
80-0948413
(IRS Employer
Identification No.)
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Page No.
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|
PART I. FINANCIAL INFORMATION
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|
1
|
|
20
|
|
31
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|
PART II. OTHER INFORMATION
|
|
31
|
|
31
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32
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PART I
|
|
Item 1. Financial statements
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Page No.
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Condensed Consolidated Financial Statements:
|
2
|
Condensed Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012
|
2
|
Condensed Consolidated Statements of Income for the nine and three months ended September 30, 2013 and 2012 (unaudited)
|
3
|
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (unaudited)
|
4
|
Notes to Condensed Consolidated Financial Statements
|
5
|
September 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
ASSETS
|
(Unaudited)
|
|||||||
Current Assets
|
||||||||
Cash and Cash Equivalents
|
$ | 771,000 | $ | 490,000 | ||||
Accounts Receivable, Net of Allowance for Doubtful Accounts
of $987,000 and $705,000
|
10,548,000 | 11,631,000 | ||||||
Inventory
|
28,135,000 | 26,739,000 | ||||||
Prepaid Expenses and Other Current Assets
|
186,000 | 546,000 | ||||||
Deposits - Customers
|
8,000 | 133,000 | ||||||
Total Current Assets
|
39,648,000 | 39,539,000 | ||||||
Property and Equipment, net
|
5,652,000 | 5,883,000 | ||||||
Capitalized Engineering Costs - net of Accumulated Amortization
of $3,766,000 and $3,449,000
|
801,000 | 802,000 | ||||||
Deferred Financing Costs, net, deposit and other assets
|
591,000 | 590,000 | ||||||
Intangible Assets, net
|
5,017,000 | 5,889,000 | ||||||
Deferred Tax Asset
|
1,625,000 | - | ||||||
Goodwill
|
453,000 | 453,000 | ||||||
TOTAL ASSETS
|
$ | 53,787,000 | $ | 53,156,000 | ||||
|
||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities
|
||||||||
Notes Payable and Capitalized Lease Obligations - Current Portion
|
$ | 19,626,000 | $ | 19,211,000 | ||||
Accounts Payable and Accrued Expenses
|
7,222,000 | 7,077,000 | ||||||
Lease Impairment - Current
|
75,000 | 85,000 | ||||||
Deferred Gain on Sale - Current Portion
|
38,000 | 38,000 | ||||||
Dividends Payable
|
716,000 | - | ||||||
Income Taxes Payable
|
1,199,000 | 1,448,000 | ||||||
|
||||||||
Total Current Liabilities
|
28,876,000 | 27,859,000 | ||||||
Long term liabilities
|
||||||||
Notes Payable and Capitalized Lease Obligation - Net of Current Portion
|
2,661,000 | 4,640,000 | ||||||
Lease Impairment - Net of Current Portion
|
72,000 | 127,000 | ||||||
Deferred Gain on Sale - Net of Current Portion
|
456,000 | 485,000 | ||||||
Deferred Rent
|
1,113,000 | 1,057,000 | ||||||
|
||||||||
TOTAL LIABILITIES
|
33,178,000 | 34,168,000 | ||||||
|
||||||||
Contingencies
|
||||||||
Stockholders' Equity
|
||||||||
Preferred Stock Par Value $.001-Authorized 8,003,716 shares
|
||||||||
Designated as Series "A" Convertible Preferred - $.001 par Value,
1,000 Shares Authorized 0 Shares issued and outstanding as of
September 30, 2013 and December 31, 2012, respectively.
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- | - | ||||||
Designated as Series "B" Convertible Preferred -$.001 Par Value,
4,000,000 Shares Authorized, 0 shares issued
and outstanding as of September 30, 2013 and December 31, 2012,
respectively; Liquidation Value, $ 0
|
- | - | ||||||
Common Stock - $.001 Par, 20,000,000 Shares Authorized,
5,711,093 and 5,711,093 Shares Issued and Outstanding as of
September 30, 2013 and December 31, 2012, respectively
|
6,000 | 6,000 | ||||||
Additional Paid-In Capital
|
36,495,000 | 37,913,000 | ||||||
Accumulated Deficit
|
(15,892,000 | ) | (18,931,000 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY
|
20,609,000 | 18,988,000 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 53,787,000 | $ | 53,156,000 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Net Sales
|
$ | 16,052,000 | $ | 15,558,000 | $ | 45,016,000 | $ | 46,835,000 | ||||||||
Cost of Sales
|
12,309,000 | 11,724,000 | 33,996,000 | 36,295,000 | ||||||||||||
Gross Profit
|
3,743,000 | 3,834,000 | 11,020,000 | 10,540,000 | ||||||||||||
Operating Expenses
|
2,712,000 | 2,379,000 | 7,733,000 | 6,190,000 | ||||||||||||
Income from operations
|
1,031,000 | 1,455,000 | 3,287,000 | 4,350,000 | ||||||||||||
Interest and financing costs
|
(281,000 | ) | (452,000 | ) | (1,027,000 | ) | (1,422,000 | ) | ||||||||
Other (expense) income, net
|
(11,000 | ) | (2,000 | ) | (97,000 | ) | (137,000 | ) | ||||||||
Income before provision for income taxes
|
739,000 | 1,001,000 | 2,163,000 | 2,791,000 | ||||||||||||
(Benefit from) Provision for income taxes
|
(1,795,000 | ) | 387,000 | (876,000 | ) | 1,036,000 | ||||||||||
Net income
|
$ | 2,534,000 | $ | 614,000 | $ | 3,039,000 | $ | 1,755,000 | ||||||||
Income per share - basic
|
$ | 0.44 | $ | 0.11 | $ | 0.53 | $ | 0.40 | ||||||||
Income per share - diluted
|
$ | 0.43 | $ | 0.11 | $ | 0.52 | $ | 0.40 | ||||||||
Weighted average shares outstanding - basic
|
5,711,093 | 5,706,510 | 5,711,093 | 4,334,570 | ||||||||||||
Weighted average shares outstanding - diluted
|
5,854,015 | 5,790,555 | 5,828,037 | 4,407,356 |
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net Income
|
$ | 3,039,000 | $ | 1,755,000 | ||||
Adjustments to Reconcile Net Income to Net
|
||||||||
Cash provided by Operating Activities
|
||||||||
Depreciation of property and equipment
|
1,242,000 | 1,128,000 | ||||||
Amortization of intangible assets
|
872,000 | 402,000 | ||||||
Amortization of capitalized engineering costs
|
316,000 | 340,000 | ||||||
Bad debt expense
|
275,000 | 64,000 | ||||||
Non-cash compensation expense
|
15,000 | 88,000 | ||||||
Amortization of deferred financing costs
|
46,000 | 42,000 | ||||||
Gain on sale of real estate
|
(28,000 | ) | (28,000 | ) | ||||
Deferred Income Taxes
|
(1,625,000 | ) | - | |||||
Adjustments to Lease Impairment
|
- | 53,000 | ||||||
Changes in Assets and Liabilities
|
||||||||
(Increase) Decrease in Operating Assets:
|
||||||||
Accounts Receivable
|
807,000 | (1,307,000 | ) | |||||
Inventory
|
(1,295,000 | ) | 454,000 | |||||
Prepaid Expenses and Other Current Assets
|
359,000 | 83,000 | ||||||
Deposits
|
125,000 | (11,000 | ) | |||||
Other Assets
|
(37,000 | ) | (3,000 | ) | ||||
Increase (Decrease) in Operating Liabilities
|
||||||||
Accounts payable and accrued expenses
|
(362,000 | ) | (1,219,000 | ) | ||||
Deferred Rent
|
56,000 | 71,000 | ||||||
Income Taxes payable
|
(249,000 | ) | 973,000 | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
3,556,000 | 2,885,000 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Cash paid for acquisition
|
(468,000 | ) | (11,600,000 | ) | ||||
Capitalized engineering costs
|
(316,000 | ) | (209,000 | ) | ||||
Purchase of property and equipment
|
(136,000 | ) | (471,000 | ) | ||||
Deposit for new property and equipment
|
- | (81,000 | ) | |||||
NET CASH USED IN INVESTING ACTIVITIES
|
(920,000 | ) | (12,361,000 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from Private Placement
|
- | 7,115,000 | ||||||
Payment of Issuance costs for Private Placement
|
- | (587,000 | ) | |||||
Notes payable - Sellers
|
(479,000 | ) | (447,000 | ) | ||||
Capital lease obligations
|
(899,000 | ) | (426,000 | ) | ||||
Notes payable-Jr. Subordinated Debt
|
- | (115,000 | ) | |||||
Note payable - Revolver
|
1,164,000 | 2,950,000 | ||||||
Proceeds from note payable - Term Loan
|
- | 3,900,000 | ||||||
Payments of note payable - Term Loan
|
(1,350,000 | ) | (2,273,000 | ) | ||||
Cash paid for deferred financing costs
|
(10,000 | ) | (20,000 | ) | ||||
Payments related to Lease Impairment
|
(65,000 | ) | (78,000 | ) | ||||
Dividends Paid
|
(716,000 | ) | - | |||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
|
(2,355,000 | ) | 10,019,000 | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
281,000 | 543,000 | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
490,000 | 577,000 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 771,000 | $ | 1,120,000 | ||||
Supplemental cash flow information
|
||||||||
Cash paid during the period for interest
|
$ | 935,000 | $ | 1,225,000 | ||||
Supplemental cash flow information
|
||||||||
Cash paid during the period for income taxes
|
$ | 1,061,000 | $ | 64,000 | ||||
Supplemental schedule of non-cash investing and financing activities
|
||||||||
Junior Subordinated Note Converted to Common Stock
|
$ | - | $ | 5,204,000 | ||||
Dividends payable
|
$ | 716,000 | $ | - | ||||
Purchase of substantially all assets of Nassau Tool Works, Inc and assumption
|
||||||||
of liabilities in the acquisition as follows:
|
||||||||
Fair Value of Tangible Assets acquired
|
$ | - | $ | 7,941,000 | ||||
Intangible assets, subject to amortization
|
- | 4,975,000 | ||||||
Goodwill
|
- | 162,000 | ||||||
Liabilities assumed
|
- | (660,000 | ) | |||||
Due to Seller of Old Nassau Tool
|
- | (518,000 | ) | |||||
Common Stock
|
- | (300,000 | ) | |||||
Cash paid for acquisition
|
$ | - | $ | 11,600,000 | ||||
Purchase of certain assets of Decimal Industries, Inc
|
||||||||
Fair Value of Tangible Assets acquired
|
$ | 975,000 | $ | - | ||||
Due to Sellers of Decimal Industries
|
(507,000 | ) | - | |||||
Cash paid for acquisition
|
$ | 468,000 | $ | - |
Customer
|
Percentage of Sales
|
|||
2013
|
2012
|
|||
(Unaudited)
|
(Unaudited)
|
|||
1
|
26.7
|
25.0
|
||
2
|
21.6
|
22.7
|
||
3
|
10.6
|
11.3
|
Customer
|
Percentage of Sales
|
|||
2013
|
2012
|
|||
(Unaudited)
|
(Unaudited)
|
|||
1
|
27.5
|
30.9
|
||
2
|
19.1
|
28.3
|
||
3
|
12.1
|
*
|
||
* Customer was less than 10% of sales for the nine months ended September 30, 2012
|
Customer
|
Percentage of Receivables
|
|||
September
|
December
|
|||
2013
|
2012
|
|||
(Unaudited)
|
||||
1
|
27.6
|
10.7
|
||
2
|
20.3
|
18.6
|
||
3
|
11.9
|
25.3
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Weighted average shares outstanding used to compute basic earning per share
|
5,711,093 | 5,706,510 | 5,711,093 | 4,334,570 | ||||||||||||
Effect of dilutive stock options and warrants
|
142,922 | 84,045 | 116,944 | 72,786 | ||||||||||||
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share
|
5,854,015 | 5,790,555 | 5,828,037 | 4,407,356 |
Septenber 30,
|
Septenber 30,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Stock Options
|
17,048 | 15,548 | ||||||
Warrants
|
- | 250 | ||||||
17,048 | 15,798 |
September 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Accounts Receivable Gross
|
$ | 11,535,000 | $ | 12,336,000 | ||||
Allowance for Doubtful Accounts
|
(987,000 | ) | (705,000 | ) | ||||
Accounts Receivable Net
|
$ | 10,548,000 | $ | 11,631,000 |
September 30,
|
December 31,
|
||||||||
2013
|
2012
|
||||||||
(Unaudited)
|
|||||||||
Machinery and Equipment
|
$ | 6,200,000 | $ | 5,801,000 |
5 - 8 years
|
||||
Capital Lease Machinery and Equipment
|
4,503,000 | 4,503,000 |
5 - 8 years
|
||||||
Tools and Instruments
|
4,567,000 | 3,968,000 |
1.5 - 7 years
|
||||||
Automotive Equipment
|
55,000 | 55,000 |
5 years
|
||||||
Furniture and Fixtures
|
232,000 | 232,000 |
5 - 8 years
|
||||||
Leasehold Improvements
|
612,000 | 612,000 |
Term of Lease
|
||||||
Computers and Software
|
331,000 | 318,000 |
4-6 years
|
||||||
Total Property and Equipment
|
16,500,000 | 15,489,000 | |||||||
Less: Accumulated Depreciation
|
(10,848,000 | ) | (9,606,000 | ) | |||||
Property and Equipment, net
|
$ | 5,652,000 | $ | 5,883,000 |
September 30,
|
December 31,
|
||||||||
2013
|
2012
|
||||||||
(Unaudited)
|
|||||||||
Customer Relationships
|
$ | 5,815,000 | $ | 5,815,000 |
5 to 14 years
|
||||
Trade Names
|
770,000 | 770,000 |
20 years
|
||||||
Technical Know-how
|
660,000 | 660,000 |
10 years
|
||||||
Non-Compete
|
50,000 | 50,000 |
5 years
|
||||||
Professional Certifications
|
15,000 | 15,000 |
.25 to 2 years
|
||||||
Total Intangible Assets
|
7,310,000 | 7,310,000 | |||||||
Less: Accumulated Amortization
|
(2,293,000 | ) | (1,421,000 | ) | |||||
Intangible Assets, net
|
$ | 5,017,000 | $ | 5,889,000 |
September 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Revolving credit note payable to PNC Bank N.A. ("PNC") and
|
||||||||
secured by substantially all assets
|
$ | 16,831,000 | $ | 15,667,000 | ||||
Term loan, PNC
|
2,398,000 | 3,748,000 | ||||||
Capital lease obligations
|
1,161,000 | 2,060,000 | ||||||
Notes payable to sellers of WMI
|
897,000 | 1,376,000 | ||||||
Junior subordinated notes
|
1,000,000 | 1,000,000 | ||||||
Subtotal
|
22,287,000 | 23,851,000 | ||||||
Less: Current portion of notes and capital obligations
|
(19,626,000 | ) | (19,211,000 | ) | ||||
Notes payable and capital lease obligations, net of current portion
|
$ | 2,661,000 | $ | 4,640,000 |
|
(i)
|
a $18,000,000 revolving credit note (includes inventory sub-limit of $12,500,000); and
|
|
(ii)
|
a $2,847,604 term loan.
|
For the twelve months ending
|
Amount
|
|||
September 30, 2014
|
$ | 1,800,000 | ||
September 30, 2015
|
598,000 | |||
PNC Term Loan Payable
|
2,398,000 | |||
Less: Current portion
|
(1,800,000 | ) | ||
Long-term portion
|
$ | 598,000 |
For the twelve months ending
|
Amount
|
|||
September 30, 2014
|
$ | 397,000 | ||
September 30, 2015
|
397,000 | |||
September 30, 2016
|
345,000 | |||
September 30, 2017
|
189,000 | |||
Total future minimum lease payments
|
1,328,000 | |||
Less: imputed interest
|
(167,000 | ) | ||
Less: current portion
|
(316,000 | ) | ||
Total Long Term Portion
|
$ | 845,000 |
September 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Former Welding Stockholders
|
$ | 897,000 | $ | 1,376,000 | ||||
Less: Current Portion
|
(679,000 | ) | (644,000 | ) | ||||
Total long-term portion
|
$ | 218,000 | $ | 732,000 |
For the twelve months ending
|
Amount
|
|||
September 30, 2014
|
$ | 679,000 | ||
September 30, 2015
|
218,000 | |||
Former WMI Stockholders Notes Payable
|
897,000 | |||
Less: Current portion
|
(679,000 | ) | ||
Long-term portion
|
$ | 218,000 |
2013
|
2012
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Current
|
||||||||
Federal
|
$ | 922,000 | $ | 778,000 | ||||
State
|
277,000 | 258,000 | ||||||
Prior year overaccruals
|
||||||||
Federal
|
(206,000 | ) | - | |||||
State
|
(244,000 | ) | - | |||||
Total Expense
|
749,000 | 1,036,000 | ||||||
Deferred Tax Benefit
|
(1,625,000 | ) | - | |||||
Net (Benefit) Expense for Income Taxes
|
$ | (876,000 | ) | $ | 1,036,000 |
September 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Deferred tax assets:
|
||||||||
Capital loss carry forwards
|
$ | 1,088,000 | $ | 1,088,000 | ||||
Section 1231 loss carry forward
|
4,000 | 86,000 | ||||||
Bad debts
|
395,000 | 282,000 | ||||||
Stock based compensation - options and restricted stock
|
512,000 | 506,000 | ||||||
Capitalized engineering costs
|
483,000 | 447,000 | ||||||
Account payable, accrued expenses and reserves
|
9,000 | 9,000 | ||||||
Deferred rent
|
445,000 | 423,000 | ||||||
Amortization - NTW Transaction
|
312,000 | 138,000 | ||||||
Inventory - 263A adjustment
|
785,000 | 569,000 | ||||||
Lease Impairment
|
59,000 | 85,000 | ||||||
Deferred gain on sale of real estate
|
198,000 | 209,000 | ||||||
Total deferred tax assets before valuation allowance
|
4,290,000 | 3,842,000 | ||||||
Valuation allowance
|
(1,092,000 | ) | (2,269,000 | ) | ||||
Total deferred tax assets after valuation allowance
|
3,198,000 | 1,573,000 | ||||||
Deferred tax liabilities:
|
||||||||
Property and equipment
|
(1,044,000 | ) | (997,000 | ) | ||||
Goodwill - NTW Transaction
|
(4,000 | ) | - | |||||
Amortization - Welding Transaction
|
(525,000 | ) | (576,000 | ) | ||||
Total Deferred Tax Liability
|
(1,573,000 | ) | (1,573,000 | ) | ||||
Net deferred tax asset
|
$ | 1,625,000 | $ | - |
Three Months Ended September 30,
|
|||||||||
2013
|
2012
|
||||||||
(Unaudited)
|
(Unaudited)
|
||||||||
AIM
|
|||||||||
Net Sales
|
$ | 9,863,000 | $ | 9,587,000 | |||||
Gross Profit
|
1,926,000 | 1,788,000 | |||||||
Pre Tax Income
|
949,000 | 809,000 | |||||||
Assets
|
25,336,000 | 23,946,000 | |||||||
WMI
|
|||||||||
Net Sales
|
3,800,000 | 2,891,000 | |||||||
Gross Profit
|
953,000 | 850,000 | |||||||
Pre Tax Income
|
(126,000 | ) | 47,000 | ||||||
Assets
|
10,334,000 | 8,986,000 | |||||||
NTW
|
|||||||||
Net Sales
|
2,389,000 | 3,080,000 | |||||||
Gross Profit
|
864,000 | 1,196,000 | |||||||
Pre Tax Income
|
25,000 | 406,000 | |||||||
Assets
|
13,005,000 | 13,863,000 | |||||||
Corporate
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(109,000 | ) | (261,000 | ) | |||||
Assets
|
9,964,000 | 15,478,000 | |||||||
Consolidated
|
|||||||||
Net Sales
|
16,052,000 | 15,558,000 | |||||||
Gross Profit
|
3,743,000 | 3,834,000 | |||||||
Pre Tax Income
|
739,000 | 1,001,000 | |||||||
Provision for Taxes
|
(1,795,000 | ) | 387,000 | ||||||
Net Income
|
2,534,000 | 614,000 | |||||||
Elimination of Assets
|
(4,852,000 | ) | (12,082,000 | ) | |||||
Assets
|
53,787,000 | 50,191,000 |
Nine Months Ended September 30,
|
|||||||||
2013
|
2012
|
||||||||
(Unaudited)
|
(Unaudited)
|
||||||||
AIM
|
|||||||||
Net Sales
|
$ | 25,528,000 | $ | 33,314,000 | |||||
Gross Profit
|
4,986,000 | 6,227,000 | |||||||
Pre Tax Income
|
2,037,000 | 2,516,000 | |||||||
Assets
|
25,336,000 | 23,946,000 | |||||||
WMI
|
|||||||||
Net Sales
|
10,246,000 | 9,929,000 | |||||||
Gross Profit
|
2,694,000 | 2,919,000 | |||||||
Pre Tax Income
|
(131,000 | ) | 705,000 | ||||||
Assets
|
10,334,000 | 8,986,000 | |||||||
NTW
|
|||||||||
Net Sales
|
9,242,000 | 3,592,000 | |||||||
Gross Profit
|
3,340,000 | 1,394,000 | |||||||
Pre Tax Income
|
746,000 | 562,000 | |||||||
Assets
|
13,005,000 | 13,863,000 | |||||||
Corporate
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(489,000 | ) | (992,000 | ) | |||||
Assets
|
9,964,000 | 15,478,000 | |||||||
Consolidated
|
|||||||||
Net Sales
|
45,016,000 | 46,835,000 | |||||||
Gross Profit
|
11,020,000 | 10,540,000 | |||||||
Pre Tax Income
|
2,163,000 | 2,791,000 | |||||||
Provision for Taxes
|
(876,000 | ) | 1,036,000 | ||||||
Net Income
|
3,039,000 | 1,755,000 | |||||||
Elimination of Assets
|
(4,852,000 | ) | (12,082,000 | ) | |||||
Assets
|
53,787,000 | 50,191,000 |
Statement of Operations Data
|
||||||||
2013
(Unaudited)
|
2012
(Unaudited)
|
|||||||
Net sales
|
$ | 16,052,000 | $ | 15,558,000 | ||||
Cost of sales
|
12,309,000 | 11,724,000 | ||||||
Gross profit
|
3,743,000 | 3,834,000 | ||||||
Operating and interest costs
|
2,993,000 | 2,831,000 | ||||||
Other income (expense) net
|
(11,000 | ) | (2,000 | ) | ||||
Income taxes (benefit)
|
(1,795,000 | ) | 387,000 | |||||
Net Income
|
$ | 2,534,000 | $ | 614,000 |
Balance Sheet Data
|
||||||||
September 30, 2013
|
December 31, 2012
|
|||||||
(Unaudited)
|
||||||||
Cash and cash equivalents
|
$ | 771,000 | $ | 490,000 | ||||
Working capital
|
10,772,000 | 11,680,000 | ||||||
Total assets
|
53,787,000 | 53,156,000 | ||||||
Total stockholders' equity
|
20,609,000 | 18,988,000 |
Three Months Ended September 30, | |||||||||
2013
|
2012
|
||||||||
(Unaudited)
|
(Unaudited)
|
||||||||
AIM
|
|||||||||
Net Sales
|
$ | 9,863,000 | $ | 9,587,000 | |||||
Gross Profit
|
1,926,000 | 1,788,000 | |||||||
Pre Tax Income
|
949,000 | 809,000 | |||||||
Assets
|
25,336,000 | 23,946,000 | |||||||
WMI
|
|||||||||
Net Sales
|
3,800,000 | 2,891,000 | |||||||
Gross Profit
|
953,000 | 850,000 | |||||||
Pre Tax Income
|
(126,000 | ) | 47,000 | ||||||
Assets
|
10,334,000 | 8,986,000 | |||||||
NTW
|
|||||||||
Net Sales
|
2,389,000 | 3,080,000 | |||||||
Gross Profit
|
864,000 | 1,196,000 | |||||||
Pre Tax Income
|
25,000 | 406,000 | |||||||
Assets
|
13,005,000 | 13,863,000 | |||||||
Corporate
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(109,000 | ) | (261,000 | ) | |||||
Assets
|
9,964,000 | 15,478,000 | |||||||
Consolidated
|
|||||||||
Net Sales
|
16,052,000 | 15,558,000 | |||||||
Gross Profit
|
3,743,000 | 3,834,000 | |||||||
Pre Tax Income
|
739,000 | 1,001,000 | |||||||
Provision for Taxes
|
(1,795,000 | ) | 387,000 | ||||||
Net Income
|
2,534,000 | 614,000 | |||||||
Elimination of Assets
|
(4,852,000 | ) | (12,082,000 | ) | |||||
Assets
|
53,787,000 | 50,191,000 |
|
·
|
Net sales at AIM for the three months ended September 30, 2013 were $9,863,000, an increase of approximately $276,000 or 2.9% compared with $9,587,000 for the three months ended September 30, 2012. The increase in net sales at AIM during the quarter compares favorably with the first half of 2013 in which it reported declines in net sales compared to the prior year. The reduction in the defense department budget commonly referred to as Sequestration began to effect sales at AIM in the third quarter of 2012. In addition, AIM continues to experience delays in manufacturing landing gear product for the Navy’s E2-D aircraft due to late shipments from various suppliers.
|
|
·
|
Net sales at Welding for the three months ended September 30, 2013 were $3,800,000 an increase of approximately $909,000 or 31.4% compared with $2,891,000 for the three months ended September 30, 2012. Net sales at Welding for 2013 included sales of $557,000 relating to the business acquired from Decimal on July 1st.
|
|
·
|
Net sales at NTW for the three months ended September 30, 2013 were $2,389, 000 a decrease of $(691,000) or (22.5%) compared with net sales of $3,080,000 for the three months ended September 30, 2012. The decline in sales at NTW results from delays in certain shipments which are now expected to be made in the fourth quarter of 2013.
|
Customer
|
Percentage of Sales
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Sikorsky Aircraft
|
26.7 | 25.0 | ||||||
Goodrich Landing Gear Systems
|
21.6 | 22.7 | ||||||
Northrup Grumman Corporation
|
10.6 | 11.3 |
●
|
Consolidated: Gross profit from operations for the three months ended September 30, 2013 decreased by approximately $(91,000) or (2.4%), to approximately $3,743,000 or approximately 23.3% of sales as compared to gross profit of $3,834,000 or approximately 24.6% for the comparable period in 2012.The decrease in gross profit results in part from the decline in sales at NTW. NTW earns a greater gross profit margin on sales than our other subsidiaries consequently, a decline in sales at NTW, or a decline in NTW’s proportion of total sales has a disproportionate effect on gross profit.
|
|
●
|
AIM: Gross profit for three months ended September 30, 2013 at AIM increased by approximately $138,000 or 7.7% to $1,926,000 as compared to $1,788,000 for the comparable period in 2012. The increase in gross margin is proportionate to the increase in net sales.
|
|
●
|
WMI: Gross profit at Welding for three months ended September 30, 2013 increased by approximately $103,000 or 12.1% to $953,000 for 2013 compared to $850,000 for the comparable period in 2012. Gross margin increased at a slower rate than sales. Sales in 2013 included sales of products acquired in the Decimal Acquisition which have lower gross profit margin than WMI’s traditional products.
|
|
●
|
NTW: Gross profit for three months ended September 30, 2013 decreased by approximately $(332,000) or (27.8%) to $864,000 compared to $1,196,000 for the comparable period in 2012. The decline in gross profit is roughly proportionate to the decline in sales.
|
● |
Consolidated SG&A costs for the three months ended September 30, 2013 totaled $2,712,000 and increased by $333,000 or 14.0% compared to $2,379,000 for the three months ended September 30, 2012. SG&A costs at NTW accounted for all of the increase. Beginning January 1, 2013, the Company began to allocate all of the corporate SG&A costs of Air Industries Group to AIM, WMI and NTW. For 2013 these are allocated 50% to AIM and 25% to each of WMI and NTW. For the three months ended September 30, 2012 SG&A costs have been reclassified to reflect an allocation of AIR corporate costs of 50% to AIM and 25% to each of WMI and NTW. The amount reclassified in the three months ended September 30, 2012 is approximately $187,000 to AIM; $93,000 to WMI; and $93,000 to NTW.
The principal components of SG&A costs were:
|
o | AIM: SG&A costs for the three months ended September 30, 2013 totaled approximately $823,000 a decrease of $(3,000) or less than (1%) compared to $826,000 for the comparable period in 2012. | ||
o | WMI: SG&A costs for the three months ended September 30, 2013 totaled approximately $1,050,000 an increase of $107,000 or approximately 11.3% compared to $943,000 for the comparable period in 2012. | ||
o | NTW: SG&A costs totaled approximately $839,000 for the three months ended September 30, 2013 an increase of $52,000 or approximately 6.6% compared to $787,000 for the comparable period in 2012. |
Statement of Operations Data
|
||||||||
2013
(Unaudited)
|
2012
(Unaudited)
|
|||||||
Net sales
|
$ | 45,016,000 | $ | 46,835,000 | ||||
Cost of sales
|
33,996,000 | 36,295,000 | ||||||
Gross profit
|
11,020,000 | 10,540,000 | ||||||
Operating and interest costs
|
8,760,000 | 7,612,000 | ||||||
Other income (expense) net
|
(97,000 | ) | (137,000 | ) | ||||
Income taxes (benefit)
|
(876,000 | ) | 1,036,000 | |||||
Net Income
|
$ | 3,039,000 | $ | 1,755,000 |
Balance Sheet Data
|
||||||||
September 30, 2013
|
December 31, 2012
|
|||||||
(Unaudited) | ||||||||
Cash and cash equivalents
|
$ | 771,000 | $ | 490,000 | ||||
Working capital
|
10,772,000 | 11,680,000 | ||||||
Total assets
|
53,787,000 | 53,156,000 | ||||||
Total stockholders' equity
|
20,609,000 | 18,988,000 |
Nine Months Ended September 30, | |||||||||
2013
|
2012
|
||||||||
(Unaudited)
|
(Unaudited)
|
||||||||
AIM
|
|||||||||
Net Sales
|
$ | 25,528,000 | $ | 33,314,000 | |||||
Gross Profit
|
4,986,000 | 6,227,000 | |||||||
Pre Tax Income
|
2,037,000 | 2,516,000 | |||||||
Assets
|
25,336,000 | 23,946,000 | |||||||
WMI
|
|||||||||
Net Sales
|
10,246,000 | 9,929,000 | |||||||
Gross Profit
|
2,694,000 | 2,919,000 | |||||||
Pre Tax Income
|
(131,000 | ) | 705,000 | ||||||
Assets
|
10,334,000 | 8,986,000 | |||||||
NTW
|
|||||||||
Net Sales
|
9,242,000 | 3,592,000 | |||||||
Gross Profit
|
3,340,000 | 1,394,000 | |||||||
Pre Tax Income
|
746,000 | 562,000 | |||||||
Assets
|
13,005,000 | 13,863,000 | |||||||
Corporate
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(489,000 | ) | (992,000 | ) | |||||
Assets
|
9,964,000 | 15,478,000 | |||||||
Consolidated
|
|||||||||
Net Sales
|
45,016,000 | 46,835,000 | |||||||
Gross Profit
|
11,020,000 | 10,540,000 | |||||||
Pre Tax Income
|
2,163,000 | 2,791,000 | |||||||
Provision for Taxes
|
(876,000 | ) | 1,036,000 | ||||||
Net Income
|
3,039,000 | 1,755,000 | |||||||
Elimination of Assets
|
(4,852,000 | ) | (12,082,000 | ) | |||||
Assets
|
53,787,000 | 50,191,000 |
|
·
|
Net sales at AIM for the nine months ended September 30, 2013 were $25,528,000, a decrease of approximately $(7,786,000) or (23.4%) compared with $33,314,000 for the nine months ended September 30, 2012. The decrease in net sales at AIM is primarily attributable to a reduction in sales to Sikorsky and Goodrich Landing Gear Systems which management believes resulted from the reduction in the defense department budget commonly referred to as Sequestration. In addition AIM continued to experience delays in manufacturing landing gear product for the Navy’s E2-D aircraft due to late shipments from various suppliers.
|
|
·
|
Net sales at WMI for the nine months ended September 30, 2013 were $10,246,000 an increase of approximately $317,000 or 3.2% compared with $9,929,000 for the nine months ended September 30, 2012. Net sales at WMI for the nine months ended September 30, 2013 included sales of $557,000 relating to the business that was acquired from Decimal on July 1st.
|
|
·
|
Net sales at NTW for the nine months ended September 30, 2013 were $9,242,000 compared with net sales of $3,592,000 for the period June 20, 2012, the date of the NTW Acquisition, to September 30, 2012.
|
Customer
|
Percentage of Sales
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Sikorsky Aircraft
|
27.5 | 30.9 | ||||||
Goodrich Landing Gear Systems
|
19.1 | 28.4 | ||||||
United States Department of Defense
|
12.1 | * | ||||||
* Customer was less than 10% of sales for the nine months ended September 30, 2012
|
Customer
|
Percentage of Receivables
|
|||||||
September 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
(Unaudited)
|
||||||||
Goodrich Landing Gear Systems
|
27.6 | 10.7 | ||||||
GKN Aerospace
|
20.3 | 18.6 | ||||||
Northrup Grumman Corporation
|
11.9 | 25.3 |
●
|
Consolidated: Gross profit from operations for the nine months ended September 30, 2013 increased by approximately $480,000 or 4.6% to approximately $11,020,000 or approximately 24.5% of sales as compared to gross profit of $10,540,000 or approximately 22.5% of sales for the comparable period in 2012.The increase in gross profit results from the inclusion of NTW for the entire nine month period in 2013 which offset the decline in gross profit at both AIM and WMI.
|
|
●
|
AIM: Gross profit for the nine months ended September 30, 2013 at AIM decreased by approximately $(1,241,000) or (19.9%) to $4,986,000 as compared to $6,227,000 for the comparable period in 2012. The decrease in gross profit at AIM is attributable to and declined by a comparable percentage as the decline in net sales.
|
|
●
|
WMI: Gross profit at Welding for the nine months ended September 30, 2013 decreased by approximately $(225,000) or (7.7%) to $2,694,000 for the nine months ended September 30, 2013 compared to $2,919,000 for the comparable period in 2012. The decrease in gross profit at WMI was attributable to lower sales, offset in part by an increase in gross margin resulting from the reclassification of costs of certain personnel from indirect labor – factory overhead expense - to General and Administrative expense. This reclassification was made in June 2012. The decrease was also offset by the inclusion of sales resulting from the Decimal Acquisition on July 1, 2013.
|
|
●
|
NTW: Gross profit for nine months ended September 30, 2013 was $3,340,000.
|
●
|
Consolidated SG&A costs for the nine months ended September 30, 2013 totaled $7,733,000 and increased by $1,543,000 or 24.9% compared to $6,190,000 for the comparable period in 2012. The inclusion of SG&A costs at NTW for the entire first nine months of 2013 compared to the period from June 20 to September 30, 2012 in the prior year accounted for nearly all of the increase in costs. Beginning January 1, 2013, the Company began to allocate all of the corporate SG&A costs of Air Industries Group to its three operating segments. For 2013, these are allocated 50% to AIM and 25% to each of WMI and NTW. For 2012 SG&A costs have been reclassified to reflect an allocation of AIR corporate SG&A costs of 75% to AIM and 25% to WMI for the first six months of 2012 and 50% to AIM and 25% each to WMI and NTW beginning with the three months ended September 30, 2012. (NTW was acquired on June 20, 2012). The amount reclassified for the nine months ended September 30, 2012 is approximately $775,000 to AIM; $289,000 to WMI and $93,000 to NTW.
|
o
|
AIM: SG&A costs for the nine months ended September 30, 2013 totaled approximately $2,405,000 and decreased by $(411,000) or (14.6%) compared to $2,816,000 for the comparable period in 2012. The decline in SG&A costs at AIM results from the reclassification of AIR corporate SG&A costs described above and from other cost reductions.
|
|||
o
|
WMI: SG&A costs for the nine months ended September 30, 2013 totaled approximately $2,734,000 and increased by $611,000 or approximately 28.8% compared to $2,123,000 for the comparable period in 2012. A portion of this increase is related to the allocation of corporate expenses to WMI and the additional SG&A costs associated with the acquisition of the assets of Decimal.
|
o
|
NTW: SG&A costs totaled approximately $2,594,000 for nine months ended September 30, 2013. SG&A costs were $828,000 for the period June 20 to September 30, 2012. NTW was acquired on June 20, 2012
|
Nine months ended
|
Nine months ended
|
|||||||
September 30, 2013
|
September 30, 2012
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash Provided by (used in):
|
||||||||
Operating activities
|
$ | 3,556 | $ | 2,885 | ||||
Investing activities
|
(920 | ) | (12,361 | ) | ||||
Financing Activities
|
(2,355 | ) | 10,019 | |||||
Net increase in cash and cash equivalents
|
$ | 281 | $ | 543 |
31.1
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
31.2
|
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
|
32.1
|
|
Certification of the Principal Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of the Principal Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS*
|
XBRL Instance Document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition
|
|
101.LAB*
|
XBRL Taxonomy Extension Label
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation
|
AIR INDUSTRIES GROUP, INC.
|
|||
By:
|
/s/ Peter D. Rettaliata
|
||
Peter D. Rettaliata
|
|||
President and Chief Executive Officer
|
|||