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, 2014
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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 ________.
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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
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22
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37
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PART II. OTHER INFORMATION
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38
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38
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39
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PART I
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|
Item 1. Financial statements
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Page No.
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Condensed Consolidated Financial Statements:
|
|
2
|
|
3
|
|
4
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|
5
|
Condensed Consolidated Balance Sheets
|
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
ASSETS
|
(Unaudited)
|
|||||||
Current Assets
|
||||||||
Cash and Cash Equivalents
|
$ | 1,568,000 | $ | 561,000 | ||||
Accounts Receivable, Net of Allowance for Doubtful Accounts
of $1,084,000 and $783,000
|
8,806,000 | 8,584,000 | ||||||
Inventory
|
30,686,000 | 26,222,000 | ||||||
Deferred Tax Asset
|
1,310,000 | 1,051,000 | ||||||
Prepaid Expenses and Other Current Assets
|
209,000 | 510,000 | ||||||
Total Current Assets
|
42,579,000 | 36,928,000 | ||||||
Property and Equipment, net
|
5,743,000 | 6,523,000 | ||||||
Capitalized Engineering Costs - net of Accumulated Amortization
of $4,184,000 and $3,879,000
|
693,000 | 752,000 | ||||||
Deferred Financing Costs, net, deposit and other assets
|
680,000 | 605,000 | ||||||
Intangible Assets, net
|
3,854,000 | 4,726,000 | ||||||
Deferred Tax Asset
|
947,000 | 185,000 | ||||||
Goodwill
|
4,620,000 | 453,000 | ||||||
TOTAL ASSETS
|
$ | 59,116,000 | $ | 50,172,000 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities
|
||||||||
Notes Payable and Capitalized Lease Obligations - Current Portion
|
$ | 16,315,000 | $ | 14,969,000 | ||||
Accounts Payable and Accrued Expenses
|
6,280,000 | 6,855,000 | ||||||
Lease Impairment - Current
|
60,000 | 71,000 | ||||||
Deferred Gain on Sale - Current Portion
|
38,000 | 38,000 | ||||||
Customer Deposit
|
174,000 | 251,000 | ||||||
Dividends Payable
|
- | 717,000 | ||||||
Income Taxes Payable
|
382,000 | 1,496,000 | ||||||
Total Current Liabilities
|
23,249,000 | 24,397,000 | ||||||
Long-term liabilities
|
||||||||
Notes Payable and Capitalized Lease Obligation - Net of Current Portion
|
3,191,000 | 2,527,000 | ||||||
Lease Impairment - Net of Current Portion
|
12,000 | 56,000 | ||||||
Deferred Gain on Sale - Net of Current Portion
|
418,000 | 447,000 | ||||||
Deferred Rent
|
1,189,000 | 1,132,000 | ||||||
TOTAL LIABILITIES
|
28,059,000 | 28,559,000 | ||||||
Stockholders' Equity
|
||||||||
Preferred Stock Par Value $.001-Authorized 1,000,000 shares at September 30, 2014 and December 31, 2013, respectively, none issued and outstanding at September 30, 2014 and December 31, 2013, respectively
|
- | - | ||||||
Common Stock - Par Value $.001- Authorized 25,000,000 shares at September 30, 2014 and December 31, 2013, respectively,
7,100,491 and 5,862,346 Shares Issued and Outstanding as of
September 30, 2014 and December 31, 2013, respectively
|
7,000 | 6,000 | ||||||
Additional Paid-In Capital
|
44,905,000 | 36,799,000 | ||||||
Accumulated Deficit
|
(13,855,000 | ) | (15,192,000 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY
|
31,057,000 | 21,613,000 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 59,116,000 | $ | 50,172,000 |
Condensed Consolidated Statements of Income
|
(Unaudited)
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Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Net Sales
|
$ | 15,154,000 | $ | 16,052,000 | $ | 43,967,000 | $ | 45,016,000 | ||||||||
Cost of Sales
|
11,597,000 | 12,309,000 | 33,012,000 | 33,996,000 | ||||||||||||
Gross Profit
|
3,557,000 | 3,743,000 | 10,955,000 | 11,020,000 | ||||||||||||
Operating Expenses
|
2,997,000 | 2,712,000 | 8,909,000 | 7,733,000 | ||||||||||||
Income from operations
|
560,000 | 1,031,000 | 2,046,000 | 3,287,000 | ||||||||||||
Interest and financing costs
|
(260,000 | ) | (281,000 | ) | (867,000 | ) | (1,027,000 | ) | ||||||||
Other (expense) income, net
|
(1,000 | ) | (11,000 | ) | (64,000 | ) | (97,000 | ) | ||||||||
Income before benefit from income taxes
|
299,000 | 739,000 | 1,115,000 | 2,163,000 | ||||||||||||
Benefit from income taxes
|
(81,000 | ) | (1,795,000 | ) | (222,000 | ) | (876,000 | ) | ||||||||
Net income
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$ | 380,000 | $ | 2,534,000 | $ | 1,337,000 | $ | 3,039,000 | ||||||||
Income per share - basic
|
$ | 0.05 | $ | 0.44 | $ | 0.21 | $ | 0.53 | ||||||||
Income per share - diluted
|
$ | 0.05 | $ | 0.43 | $ | 0.20 | $ | 0.52 | ||||||||
Weighted average shares outstanding - basic
|
7,092,655 | 5,711,093 | 6,415,402 | 5,711,093 | ||||||||||||
Weighted average shares outstanding - diluted
|
7,388,686 | 5,854,015 | 6,711,742 | 5,828,037 |
Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30,
|
(Unaudited)
|
2014
|
2013
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net Income
|
$ | 1,337,000 | $ | 3,039,000 | ||||
Adjustments to Reconcile Net Income to Net
|
||||||||
Cash (used in) provided by Operating Activities
|
||||||||
Depreciation of property and equipment
|
1,680,000 | 1,242,000 | ||||||
Amortization of intangible assets
|
872,000 | 872,000 | ||||||
Amortization of capitalized engineering costs
|
306,000 | 316,000 | ||||||
Bad debt expense
|
299,000 | 275,000 | ||||||
Non-cash compensation expense
|
25,000 | 15,000 | ||||||
Amortization of deferred financing costs
|
33,000 | 46,000 | ||||||
Gain on sale of real estate
|
(28,000 | ) | (28,000 | ) | ||||
Deferred Income Taxes
|
(1,021,000 | ) | (1,625,000 | ) | ||||
Changes in Assets and Liabilities
|
||||||||
(Increase) Decrease in Operating Assets:
|
||||||||
Accounts Receivable
|
(119,000 | ) | 807,000 | |||||
Inventory
|
(4,401,000 | ) | (1,295,000 | ) | ||||
Prepaid Expenses and Other Current Assets
|
332,000 | 359,000 | ||||||
Deposits
|
(1,000 | ) | 125,000 | |||||
Other Assets
|
(84,000 | ) | (37,000 | ) | ||||
Increase (Decrease) in Operating Liabilities
|
||||||||
Accounts payable and accrued expenses
|
(795,000 | ) | (362,000 | ) | ||||
Deferred Rent
|
56,000 | 56,000 | ||||||
Income Taxes payable
|
(1,114,000 | ) | (249,000 | ) | ||||
Customer Deposits
|
(77,000 | ) | - | |||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
(2,700,000 | ) | 3,556,000 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Cash paid for acquisitions
|
(4,476,000 | ) | (468,000 | ) | ||||
Cash acquired in acquisition
|
5,000 | - | ||||||
Capitalized engineering costs
|
(247,000 | ) | (316,000 | ) | ||||
Purchase of property and equipment
|
(384,000 | ) | (136,000 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES
|
(5,102,000 | ) | (920,000 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from Private Placement
|
9,530,000 | - | ||||||
Costs to raise capital
|
(968,000 | ) | - | |||||
Notes payable - Sellers
|
(513,000 | ) | (479,000 | ) | ||||
Capital lease obligations
|
(248,000 | ) | (899,000 | ) | ||||
Note payable - Revolver
|
3,202,000 | 1,164,000 | ||||||
Proceeds from note payable - Term Loan
|
1,328,000 | - | ||||||
Payments of note payable - Term Loan
|
(759,000 | ) | (1,350,000 | ) | ||||
Cash paid for deferred financing costs
|
(25,000 | ) | (10,000 | ) | ||||
Payments related to Lease Impairment
|
(55,000 | ) | (65,000 | ) | ||||
Dividends Paid
|
(2,683,000 | ) | (716,000 | ) | ||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
8,809,000 | (2,355,000 | ) | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
1,007,000 | 281,000 | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
561,000 | 490,000 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 1,568,000 | $ | 771,000 | ||||
Supplemental cash flow information
|
||||||||
Cash paid during the period for interest
|
$ | 753,000 | $ | 935,000 | ||||
Supplemental cash flow information
|
||||||||
Cash paid during the period for income taxes
|
$ | 2,011,000 | $ | 1,061,000 | ||||
Supplemental schedule of non-cash investing and financing activities
|
||||||||
Dividends payable
|
$ | - | $ | 716,000 | ||||
Conversion of Junior Subordinated Notes
|
$ | 1,000,000 | $ | - | ||||
Purchase of stock of Woodbine Products
|
||||||||
Fair Value of Tangible Assets acquired
|
$ | 472,000 | ||||||
Goodwill
|
2,402,000 | |||||||
Liabilities assumed
|
(19,000 | ) | ||||||
Common Stock issued
|
(290,000 | ) | ||||||
Cash paid for acquisition
|
$ | 2,565,000 | ||||||
Purchase of stock of Eur-Pac Corporation
|
||||||||
Fair Value of Tangible Assets acquired
|
$ | 409,000 | ||||||
Goodwill
|
1,659,000 | |||||||
Liabilities assumed
|
(170,000 | ) | ||||||
Common Stock issued
|
(195,000 | ) | ||||||
Cash paid for acquisition
|
$ | 1,703,000 | ||||||
Purchase of stock of Electronic Connection Corporation
|
||||||||
Fair Value of Tangible Assets acquired
|
$ | 129,000 | ||||||
Goodwill
|
106,000 | |||||||
Cash Acquired
|
5,000 | |||||||
Liabilities Assumed
|
(31,000 | ) | ||||||
Cash paid for acquisition
|
$ | 209,000 | ||||||
Purchase of certain assets of Decimal Industries, Inc
|
||||||||
Fair Value of Tangible Assets acquired
|
$ | 975,000 | ||||||
Due to Sellers of Decimal Industries
|
(660,000 | ) | ||||||
Cash paid for acquisition
|
$ | 315,000 |
Fair Value of Tangible Assets acquired
|
$ | 472,000 | ||
Goodwill
|
2,402,000 | |||
Liabilities assumed
|
(19,000 | ) | ||
Total
|
$ | 2,855,000 |
Fair Value of Tangible Assets acquired
|
$ | 409,000 | ||
Goodwill
|
1,659,000 | |||
Liabilities assumed
|
(170,000 | ) | ||
Total
|
$ | 1,898,000 |
Fair Value of Tangible Assets acquired
|
$ | 129,000 | ||
Goodwill
|
106,000 | |||
Cash Acquired
|
5,000 | |||
Liabilities Assumed
|
(31,000 | ) | ||
Total
|
$ | 209,000 |
Customer
|
Percentage of Net Sales
|
|||
2014
|
2013
|
|||
(Unaudited)
|
(Unaudited)
|
|||
1
|
30.1
|
21.6
|
||
2
|
27.6
|
26.7
|
||
3
|
10.6
|
**
|
||
4
|
*
|
10.6
|
||
* Customer was less than 10% of net sales for the quarter ended September 30, 2014
|
||||
** Customer was less than 10% of net sales for the quarter ended September 30, 2013
|
Customer
|
Percentage of Net Sales
|
|||
2014
|
2013
|
|||
(Unaudited)
|
(Unaudited)
|
|||
1
|
30.0
|
27.5
|
||
2
|
18.8
|
19.1
|
||
3
|
*
|
12.1
|
||
* Customer was less than 10% of net sales for the nine months ended September 30, 2014
|
Percentage of
|
||||
Customer
|
Gross Accounts Receivable
|
|||
September 30,
|
December 31,
|
|||
2014
|
2013
|
|||
(Unaudited)
|
||||
1
|
25.0
|
20.1
|
||
2
|
24.7
|
22.8
|
||
3
|
12.0
|
*
|
||
4
|
11.6
|
*
|
||
* Customer was less than 10% of gross accounts receivables at December 31, 2013
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Weighted average shares outstanding used to compute basic earning per share
|
7,092,655 | 5,711,093 | 6,415,402 | 5,711,093 | ||||||||||||
Effect of dilutive stock options and warrants
|
296,031 | 142,922 | 296,341 | 116,944 | ||||||||||||
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share
|
7,388,686 | 5,854,015 | 6,711,743 | 5,828,037 |
Three and Nine Months Ended
|
||||||||
September 30,
|
September 30,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Stock Options
|
17,048 | 17,048 | ||||||
Warrants
|
46,800 | - | ||||||
63,848 | 17,048 |
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Accounts Receivable Gross
|
$ | 9,890,000 | $ | 9,367,000 | ||||
Allowance for Doubtful Accounts
|
(1,084,000 | ) | (783,000 | ) | ||||
Accounts Receivable Net
|
$ | 8,806,000 | $ | 8,584,000 |
September 30,
|
December 31,
|
||||||||
2014
|
2013
|
||||||||
(Unaudited)
|
|||||||||
Machinery and Equipment
|
$ | 6,537,000 | $ | 6,251,000 |
5 - 8 years
|
||||
Capital Lease Machinery and Equipment
|
5,261,000 | 5,261,000 |
5 - 8 years
|
||||||
Tools and Instruments
|
5,491,000 | 5,009,000 |
1.5 - 7 years
|
||||||
Automotive Equipment
|
140,000 | 59,000 |
5 years
|
||||||
Furniture and Fixtures
|
260,000 | 257,000 |
5 - 8 years
|
||||||
Leasehold Improvements
|
646,000 | 646,000 |
Term of Lease
|
||||||
Computers and Software
|
369,000 | 357,000 |
4-6 years
|
||||||
Total Property and Equipment
|
18,704,000 | 17,840,000 | |||||||
Less: Accumulated Depreciation
|
(12,961,000 | ) | (11,317,000 | ) | |||||
Property and Equipment, net
|
$ | 5,743,000 | $ | 6,523,000 |
September 30,
|
December 31,
|
||||||||
2014
|
2013
|
||||||||
(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
|
(3,456,000 | ) | (2,584,000 | ) | |||||
Intangible Assets, net
|
$ | 3,854,000 | $ | 4,726,000 |
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Revolving credit note payable to PNC Bank N.A. ("PNC")
|
$ | 15,232,000 | $ | 12,029,000 | ||||
Term Loan A, PNC
|
2,517,000 | 1,948,000 | ||||||
Capital lease obligations
|
1,539,000 | 1,787,000 | ||||||
Notes payable to sellers of WMI
|
218,000 | 732,000 | ||||||
Junior subordinated notes
|
- | 1,000,000 | ||||||
Subtotal
|
19,506,000 | 17,496,000 | ||||||
Less: Current portion of notes and capital obligations
|
(16,315,000 | ) | (14,969,000 | ) | ||||
Notes payable and capital lease obligations, net of current portion
|
$ | 3,191,000 | $ | 2,527,000 |
(i)
|
a $20,000,000 revolving loan (includes inventory sub-limit of $12,500,000) and
|
(ii)
|
$2,676,000 for Term Loan A.
|
(i)
|
a $23,000,000 revolving loan (includes inventory sub-limit of $15,000,000) and
|
(ii)
|
$2,613,000 for Term Loan A.
|
(i)
|
a $23,000,000 revolving loan (includes inventory sub-limit of $15,000,000);
|
(ii)
|
$2,613,000 term loan, less repayments for Term Loan A and
|
(iii)
|
a new term loan of $3,500,000 (“Term Loan B”).
|
For the twelve months ending
|
Amount
|
|||
September 30, 2015
|
$ | 382,000 | ||
September 30, 2016
|
382,000 | |||
September 30, 2017
|
1,753,000 | |||
PNC Term Loan Payable
|
2,517,000 | |||
Less: Current portion
|
(382,000 | ) | ||
Long-term portion
|
$ | 2,135,000 |
For the twelve months ending
|
Amount
|
|||
September 30, 2015
|
$ | 584,000 | ||
September 30, 2016
|
532,000 | |||
September 30, 2017
|
377,000 | |||
September 30, 2018
|
197,000 | |||
September 30, 2019
|
29,000 | |||
Thereafter
|
11,000 | |||
Total future minimum lease payments
|
1,730,000 | |||
Less: imputed interest
|
(191,000 | ) | ||
Less: current portion
|
(483,000 | ) | ||
Total Long Term Portion
|
$ | 1,056,000 |
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Former Welding Stockholders
|
$ | 218,000 | $ | 732,000 | ||||
Less: Current Portion
|
(218,000 | ) | (691,000 | ) | ||||
Total long-term portion
|
$ | - | $ | 41,000 |
2014
|
2013
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Current
|
||||||||
Federal
|
$ | 1,061,000 | $ | 922,000 | ||||
State
|
18,000 | 277,000 | ||||||
Prior year (over) under accruals
|
||||||||
Federal
|
10,000 | (206,000 | ) | |||||
State
|
(290,000 | ) | (244,000 | ) | ||||
Total Expense
|
799,000 | 749,000 | ||||||
Deferred Tax Benefit
|
(1,021,000 | ) | (1,625,000 | ) | ||||
Net Benefit for Income Taxes
|
$ | (222,000 | ) | $ | (876,000 | ) |
September 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Deferred tax assets:
|
||||||||
Current:
|
||||||||
Bad debts
|
434,000 | 313,000 | ||||||
Inventory - 263A adjustment
|
867,000 | 729,000 | ||||||
Account payable, accrued expenses and reserves
|
9,000 | 9,000 | ||||||
Total current deferred tax
|
$ | 1,310,000 | $ | 1,051,000 | ||||
Non- Current:
|
||||||||
Capital loss carry forwards
|
$ | 1,088,000 | $ | 1,088,000 | ||||
Section 1231 loss carry forward
|
4,000 | 4,000 | ||||||
Stock based compensation - options and restricted stock
|
526,000 | 521,000 | ||||||
Capitalized engineering costs
|
528,000 | 503,000 | ||||||
Deferred rent
|
475,000 | 453,000 | ||||||
Amortization - NTW Transaction
|
597,000 | 475,000 | ||||||
Lease Impairment
|
29,000 | 51,000 | ||||||
Deferred gain on sale of real estate
|
183,000 | 194,000 | ||||||
Total non-current deferred tax assets before valuation allowance
|
3,430,000 | 3,289,000 | ||||||
Valuation allowance
|
(1,092,000 | ) | (1,092,000 | ) | ||||
Total non-current deferred tax assets after valuation allowance
|
2,338,000 | 2,197,000 | ||||||
Deferred tax liabilities:
|
||||||||
Property and equipment
|
(922,000 | ) | (1,497,000 | ) | ||||
Goodwill - NTW Transaction
|
(10,000 | ) | (7,000 | ) | ||||
Amortization - Welding Transaction
|
(458,000 | ) | (508,000 | ) | ||||
Total Deferred Tax Liability
|
(1,390,000 | ) | (2,012,000 | ) | ||||
Net non-current deferred tax assets
|
$ | 948,000 | $ | 185,000 |
Three Months Ended September 30,
|
|||||||||
2014
|
2013
|
||||||||
(Unaudited)
|
(Unaudited)
|
||||||||
AIM
|
|||||||||
Net Sales
|
$ | 9,678,000 | $ | 9,863,000 | |||||
Gross Profit
|
1,744,000 | 1,926,000 | |||||||
Pre Tax Income
|
723,000 | 949,000 | |||||||
Assets
|
20,952,000 | 25,336,000 | |||||||
WMI
|
|||||||||
Net Sales
|
3,339,000 | 3,800,000 | |||||||
Gross Profit
|
815,000 | 953,000 | |||||||
Pre Tax Loss
|
(352,000 | ) | (126,000 | ) | |||||
Assets
|
18,386,000 | 10,334,000 | |||||||
NTW
|
|||||||||
Net Sales
|
731,000 | 2,389,000 | |||||||
Gross Profit
|
284,000 | 864,000 | |||||||
Pre Tax (Loss) Income
|
(503,000 | ) | 25,000 | ||||||
Assets
|
11,970,000 | 13,005,000 | |||||||
EPC
|
|||||||||
Net Sales
|
1,406,000 | - | |||||||
Gross Profit
|
714,000 | - | |||||||
Pre Tax Income
|
492,000 | - | |||||||
Assets
|
2,858,000 | - | |||||||
Corporate
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(61,000 | ) | (109,000 | ) | |||||
Assets
|
15,772,000 | 9,964,000 | |||||||
Consolidated
|
|||||||||
Net Sales
|
15,154,000 | 16,052,000 | |||||||
Gross Profit
|
3,557,000 | 3,743,000 | |||||||
Pre Tax Income
|
299,000 | 739,000 | |||||||
Benefit From Income Taxes
|
(81,000 | ) | (1,795,000 | ) | |||||
Net Income
|
380,000 | 2,534,000 | |||||||
Elimination of Assets
|
(10,822,000 | ) | (4,852,000 | ) | |||||
Assets
|
59,116,000 | 53,787,000 |
Nine Months Ended September 30,
|
|||||||||
2014
|
2013
|
||||||||
(Unaudited)
|
(Unaudited)
|
||||||||
AIM
|
|||||||||
Net Sales
|
$ | 23,944,000 | $ | 25,528,000 | |||||
Gross Profit
|
4,315,000 | 4,986,000 | |||||||
Pre Tax Income
|
1,208,000 | 2,037,000 | |||||||
Assets
|
20,952,000 | 25,336,000 | |||||||
WMI
|
|||||||||
Net Sales
|
10,414,000 | 10,246,000 | |||||||
Gross Profit
|
2,758,000 | 2,694,000 | |||||||
Pre Tax Loss
|
(886,000 | ) | (131,000 | ) | |||||
Assets
|
18,386,000 | 10,334,000 | |||||||
NTW
|
|||||||||
Net Sales
|
7,926,000 | 9,242,000 | |||||||
Gross Profit
|
3,025,000 | 3,340,000 | |||||||
Pre Tax Income
|
441,000 | 746,000 | |||||||
Assets
|
11,970,000 | 13,005,000 | |||||||
EPC
|
|||||||||
Net Sales
|
1,683,000 | - | |||||||
Gross Profit
|
857,000 | - | |||||||
Pre Tax Income
|
587,000 | - | |||||||
Assets
|
2,858,000 | - | |||||||
Corporate
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(235,000 | ) | (489,000 | ) | |||||
Assets
|
15,772,000 | 9,964,000 | |||||||
Consolidated
|
|||||||||
Net Sales
|
43,967,000 | 45,016,000 | |||||||
Gross Profit
|
10,955,000 | 11,020,000 | |||||||
Pre Tax Income
|
1,115,000 | 2,163,000 | |||||||
Benefit From Income Taxes
|
(222,000 | ) | (876,000 | ) | |||||
Net Income
|
1,337,000 | 3,039,000 | |||||||
Elimination of Assets
|
(10,822,000 | ) | (4,852,000 | ) | |||||
Assets
|
59,116,000 | 53,787,000 |
|
·
|
On July 1, 2013 we acquired the business and operations of Decimal Industries, Inc. (“Decimal”) in an asset acquisition. These operations have been absorbed into Welding Metallurgy, Inc. (“WMI”).
|
|
·
|
On November 6, 2013, we acquired 100% of the stock of Miller Stuart Inc., (“MSI”). MSI continues to operate as an independent business unit and its results are reported in the WMI segment.
|
|
·
|
On April 1, 2014, we acquired 100% of the stock of Woodbine Products, Inc. ("WPI"). We are incorporating the operations of WPI into WMI.
|
|
·
|
On June 1, 2014, we acquired 100% of the stock of Eur-Pac Corporation (“EPC”) of Waterbury, Connecticut. For the immediate future EPC will continue to operate as an independent business unit.
|
|
·
|
On September 1, 2014 we acquired 100% of the stock of Electronic Connection Corporation (“ECC”) of Bloomfield, CT. We are now in the process of incorporating the operations of ECC into EPC.
|
|
·
|
On October 1, 2014 we acquired 100% of the stock of AMK Technical Services (“AMK”) of South Windsor; CT. AMK will be operated as an independent business unit.
|
Statement of Operations Data (Unaudited)
|
||||||||
2014
|
2013
|
|||||||
Net sales
|
$ | 15,154,000 | $ | 16,052,000 | ||||
Cost of sales
|
11,597,000 | 12,309,000 | ||||||
Gross profit
|
3,557,000 | 3,743,000 | ||||||
Operating and interest costs
|
3,257,000 | 2,993,000 | ||||||
Other income (expense) net
|
(1,000 | ) | (11,000 | ) | ||||
Income taxes (Benefit)
|
(81,000 | ) | (1,795,000 | ) | ||||
Net Income
|
$ | 380,000 | $ | 2,534,000 | ||||
Balance Sheet Data
|
||||||||
September 30, 2014
|
December 31, 2013
|
|||||||
(Unaudited) | ||||||||
Cash and cash equivalents
|
$ | 1,568,000 | $ | 561,000 | ||||
Working capital
|
19,330,000 | 12,531,000 | ||||||
Total assets
|
59,116,000 | 50,172,000 | ||||||
Total stockholders' equity
|
31,057,000 | 21,613,000 |
2014 |
2013
|
||||||||
(Unaudited)
|
(Unaudited)
|
||||||||
AIM
|
|||||||||
Net Sales
|
$ | 9,678,000 | $ | 9,863,000 | |||||
Gross Profit
|
1,744,000 | 1,926,000 | |||||||
Pre Tax Income
|
723,000 | 949,000 | |||||||
Assets
|
20,952,000 | 25,336,000 | |||||||
WMI
|
|||||||||
Net Sales
|
3,339,000 | 3,800,000 | |||||||
Gross Profit
|
815,000 | 953,000 | |||||||
Pre Tax Loss
|
(352,000 | ) | (126,000 | ) | |||||
Assets
|
18,386,000 | 10,334,000 | |||||||
NTW
|
|||||||||
Net Sales
|
731,000 | 2,389,000 | |||||||
Gross Profit
|
284,000 | 864,000 | |||||||
Pre Tax (Loss) Income
|
(503,000 | ) | 25,000 | ||||||
Assets
|
11,970,000 | 13,005,000 | |||||||
EPC
|
|||||||||
Net Sales
|
1,406,000 | - | |||||||
Gross Profit
|
714,000 | - | |||||||
Pre Tax Income
|
492,000 | - | |||||||
Assets
|
2,858,000 | - | |||||||
Corporate
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(61,000 | ) | (109,000 | ) | |||||
Assets
|
15,772,000 | 9,964,000 | |||||||
Consolidated
|
|||||||||
Net Sales
|
15,154,000 | 16,052,000 | |||||||
Gross Profit
|
3,557,000 | 3,743,000 | |||||||
Pre Tax Income
|
299,000 | 739,000 | |||||||
Benefit From Income Taxes
|
(81,000 | ) | (1,795,000 | ) | |||||
Net Income
|
380,000 | 2,534,000 | |||||||
Elimination of Assets
|
(10,822,000 | ) | (4,852,000 | ) | |||||
Assets
|
59,116,000 | 53,787,000 |
|
·
|
Net sales at AIM for the three months ended September 30, 2014 were $9,678,000, a decrease of approximately $(185,000) or (1.9%) compared with $9,863,000 for the three months ended September 30, 2013. The decrease in sales at AIM results from continuing low levels of defense spending and continued delays in manufacturing landing gear product for the Navy’s E2-D aircraft due to late shipments from various suppliers and defective raw materials. We had previously stated that our backlog indicated and we anticipated a stronger third quarter and this has been the case. We also anticipate a stronger fourth quarter compared with the fourth quarter of 2013.
|
|
·
|
Net sales at WMI for the three months ended September 30, 2014 were $3,339,000, a decrease of approximately $(461, 000) or (12.1%) compared with $3,800,000 for the three months ended September 30, 2013. Net sales at WMI for 2014 included sales of $363,000 from new acquisitions. Of these sales, $99,000 related to MSI, which was acquired on November 6, 2013, and $264,000 related to WPI, which was acquired on April 1, 2014.
|
|
·
|
Net sales at NTW for the three months ended September 30, 2014 were $731,000, a decrease of $(1,658,000) or (69.4%) compared with net sales of $2,389,000 for the three months ended September 30, 2013. This decline was anticipated due to a delay in receiving expected orders for the US Navy relating to landing gear for F-18 aircraft. We have begun to receive these orders and expect a return to higher sales in the fourth quarter of 2014 and through all of 2015.
|
|
·
|
Net sales at EPC were $1,406,000 for the three months ended September 30, 2014. EPC was acquired on June 1, 2014. Net sales at EPC included $ 97,000 in sales from ECC for the period September 1, to September 30, 2014.
|
Customer
|
Percentage of Net Sales
|
|||
2014
|
2013
|
|||
(Unaudited)
|
(Unaudited)
|
|||
Goodrich Landing Gear Systems
|
31.1
|
21.6
|
||
Sikorsky Aircraft
|
27.6
|
26.7
|
||
GKN Aerospace
|
10.6
|
**
|
||
Northrup Grumman Corporation
|
*
|
10.6
|
||
* Customer was less than 10% of net sales for the quarter ended September 30, 2014
|
||||
** Customer was less than 10% of net sales for the quarter ended September 30, 2013
|
|
·
|
AIM: Gross profit from operations for the three months ended September 30, 2014 was $1,744,000, a decrease of approximately $(182,000) or (9.5%), compared to approximately $1,926,000 for the comparable period in 2013.
|
|
·
|
WMI: Gross profit from operations for the three months ended September 30, 2014 was $815,000, a decrease of approximately $(138,000) or (14.5%), compared to approximately $953,000 for the comparable period in 2013. For the three months ended September 30, 2014, the gross profit as a percentage of sales was 24.4% as compared to 25.1% for the prior year. The products of WPI are generally sold at a higher gross profit margin than WMI’s traditional products, a lower gross profit at MSI partially offset the beneficial impact of WPI’s higher profit margins.
|
|
·
|
NTW: Gross profit from operations for the three months ended September 30, 2014 was $284,000, a decrease of approximately $(580,000) or (67.1%), compared to approximately $864,000 for the comparable period in 2013 due to the previously mentioned lower sales.
|
|
·
|
EPC: Gross profit from operations for the three months ended September 30, 2014 was $713,000. EPC was acquired on June 1, 2014, and from September 1, 2014, its results include those of ECC.
|
|
·
|
AIM: SG&A costs for the three months ended September 30, 2014 totaled approximately $850,000, an increase of $27,000 or 3.3% compared to $823,000 for the comparable period 2013.
|
|
·
|
WMI: SG&A costs for the three months ended September 30, 2014 totaled approximately $1,137,000, an increase of $86,000 or approximately 8.2% compared to $1,051,000 for the comparable period in 2013. The increase in SG&A costs at WMI reflects the additions of the operations of Decimal, MSI and WPI and the costs expected as a result of the effort to consolidate their operations into WMI. Once we fully integrate all of these operations into one cohesive operating unit, we anticipate a reduction of these costs.
|
|
·
|
NTW: SG&A costs totaled approximately $788,000 for the three months ended September 30, 2014, a decrease of $(51,000) or approximately (6.1%) compared to $839,000 for the comparable period in 2013.
|
|
·
|
EPC: SG&A costs, including those of ECC from September 1, 2014, the date it was acquired, totaled $221,000.
|
Statement of Operations Data (Unaudited)
|
||||||||
2014
|
2013
|
|||||||
Net sales
|
$ | 43,967,000 | $ | 45,016,000 | ||||
Cost of sales
|
33,012,000 | 33,996,000 | ||||||
Gross profit
|
10,955,000 | 11,020,000 | ||||||
Operating and interest costs
|
9,776,000 | 8,760,000 | ||||||
Other income (expense) net
|
(64,000 | ) | (97,000 | ) | ||||
Income taxes (Benefit)
|
(222,000 | ) | (876,000 | ) | ||||
Net Income
|
$ | 1,337,000 | $ | 3,039,000 | ||||
Balance Sheet Data
|
||||||||
September 30, 2014
|
December 31, 2013
|
|||||||
(Unaudited) | ||||||||
Cash and cash equivalents
|
$ | 1,568,000 | $ | 561,000 | ||||
Working capital
|
19,330,000 | 12,531,000 | ||||||
Total assets
|
59,116,000 | 50,172,000 | ||||||
Total stockholders' equity
|
31,057,000 | 21,613,000 |
2014 |
2013
|
||||||||
(Unaudited)
|
(Unaudited)
|
||||||||
AIM
|
|||||||||
Net Sales
|
$ | 23,944,000 | $ | 25,528,000 | |||||
Gross Profit
|
4,315,000 | 4,986,000 | |||||||
Pre Tax Income
|
1,208,000 | 2,037,000 | |||||||
Assets
|
20,952,000 | 25,336,000 | |||||||
WMI
|
|||||||||
Net Sales
|
10,414,000 | 10,246,000 | |||||||
Gross Profit
|
2,758,000 | 2,694,000 | |||||||
Pre Tax Loss
|
(886,000 | ) | (131,000 | ) | |||||
Assets
|
18,386,000 | 10,334,000 | |||||||
NTW
|
|||||||||
Net Sales
|
7,926,000 | 9,242,000 | |||||||
Gross Profit
|
3,025,000 | 3,340,000 | |||||||
Pre Tax Income
|
441,000 | 746,000 | |||||||
Assets
|
11,970,000 | 13,005,000 | |||||||
EPC
|
|||||||||
Net Sales
|
1,683,000 | - | |||||||
Gross Profit
|
857,000 | - | |||||||
Pre Tax Income
|
587,000 | - | |||||||
Assets
|
2,858,000 | - | |||||||
Corporate
|
|||||||||
Net Sales
|
- | - | |||||||
Gross Profit
|
- | - | |||||||
Pre Tax Loss
|
(235,000 | ) | (489,000 | ) | |||||
Assets
|
15,772,000 | 9,964,000 | |||||||
Consolidated
|
|||||||||
Net Sales
|
43,967,000 | 45,016,000 | |||||||
Gross Profit
|
10,955,000 | 11,020,000 | |||||||
Pre Tax Income
|
1,115,000 | 2,163,000 | |||||||
Benefit From Income Taxes
|
(222,000 | ) | (876,000 | ) | |||||
Net Income
|
1,337,000 | 3,039,000 | |||||||
Elimination of Assets
|
(10,822,000 | ) | (4,852,000 | ) | |||||
Assets
|
59,116,000 | 53,787,000 |
|
·
|
Net sales at AIM for the nine months ended September 30, 2014 were $23,944,000, a decrease of approximately $(1,584,000) or (6.2%) compared with $25,528,000 for the nine months ended September 30, 2013. The decrease in sales at AIM results from continuing low levels of defense spending and continued delays in manufacturing landing gear product for the Navy’s E2-D aircraft due to late shipments from various suppliers and defective raw materials. We had previously stated that our backlog indicated and we anticipated a stronger third quarter and this has been the case. We are also anticipating a stronger fourth quarter compared with the fourth quarter of 2013.
|
|
·
|
Net sales at WMI for the nine months ended September 30, 2014 were $10,414,000, an increase of approximately $168,000 or 1.6% compared with $10,246,000 for the nine months ended September 30, 2013. Net sales at Welding for 2014 included sales of $1,001,000 from new acquisitions. Of these new sales, $198,000 was attributable to MSI which was acquired in 2013 and $803,000 related to WPI which was acquired on April 1, 2014.
|
|
·
|
Net sales at NTW for the nine months ended September 30, 2014 were $7,926,000, a decrease of $(1,316,000) or (14.2%) compared with net sales of $9,242,000 for the nine months ended September 30, 2013. This decline was anticipated due to a delay in receiving expected orders for the US Navy relating to landing gear for F-18 aircraft. We have begun to receive these orders and expect a return to higher sales in the fourth quarter of 2014 and through all of 2015.
|
|
·
|
Net sales at EPC were $1,683,000 for the period June 1, 2014 (the date of acquisition of EPC) through September 30, 2014. Net sales at EPC included $97,000 in sales from ECC for the period September 1, the date of acquisition of ECC, to September 30, 2014.
|
Customer
|
Percentage of Net Sales | |||
2014
|
2013
|
|||
(Unaudited)
|
(Unaudited)
|
|||
Sikorsky Aircraft
|
30.0
|
27.5
|
||
Goodrich Landing Gear Systems
|
18.8
|
19.1
|
||
United States Department of Defense
|
*
|
12.1
|
||
* Customer was less than 10% of net sales for the nine months ended September 30, 2014
|
|
·
|
AIM: Gross profit from operations for the nine months ended September 30, 2014 was $4,315,000 a decrease of approximately $(671,000) or (13.5%), compared to approximately $4,986,000 for the comparable period in 2013.
|
|
·
|
WMI: Gross profit from operations for the nine months ended September 30, 2014 was $2,758,000 an increase of approximately $(64,000) or (2.4%), compared to approximately $2,694,000 for the comparable period in 2013. For the nine months ended September 30, 2014, the gross profit as a percentage of sales was 26.5% as compared to 26.3% for the prior year. The products of WPI are generally sold at a higher gross profit margin than WMI’s traditional products, a lower gross profit at MSI partially offset the beneficial impact of WPI’s higher profit margins.
|
|
·
|
NTW: Gross profit from operations for the nine months ended September 30, 2014 was $3,025,000, a decrease of approximately $(315,000) or (9.4%), compared to approximately $3,340,000 for the comparable period in 2013.
|
|
·
|
EPC: Gross profit from operations for the period June 1, 2014 through September 30, 2014 was $857,000. The results of EPC include those of ECC from the date it was acquired, September 1, 2014.
|
|
·
|
AIM: SG&A costs for the nine months ended September 30, 2014 totaled approximately $2,488,000, an increase of $83,000 or 3.5% compared to $2,405,000 for the comparable period 2013.
|
|
·
|
WMI: SG&A costs for the nine months ended September 30, 2014 totaled approximately $3,567,000, an increase of $832,000 or approximately 30.4% compared to $2,735,000 for the comparable period in 2013. The increase in SG&A costs at WMI reflects the additions of the operations of Decimal, MSI and WPI and increases expected as a result of the effort to consolidate the operations of these businesses into WMI. Once we fully integrate all of these operations into one cohesive operating unit, we anticipate a reduction of these costs.
|
|
·
|
NTW: SG&A costs totaled approximately $2,583,000 for the nine months ended September 30, 2014, a decrease of $11,000 or less than one-percent compared to $2,594,000 for the comparable period in 2013.
|
|
·
|
EPC: SG&A costs totaled $270,000 for the period June 1, 2014 through September 30, 2014. The results of EPC include those of ECC from the date it was acquired, September 1, 2014.
|
Nine months ended
|
Nine months ended
|
|||||||
September 30, 2014
|
September 30, 2013
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Cash (used in) provided by
|
||||||||
Operating activities
|
$ | (2,700 | ) | $ | 3,556 | |||
Investing activities
|
(5,102 | ) | (920 | ) | ||||
Financing activities
|
8,809 | (2,355 | ) | |||||
Net increase in cash and cash equivalents
|
$ | 1,007 | $ | 281 |
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
|
|||