U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended December 31, 2001
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4530
ASTREX, INC.
(Exact name of small business issuer as specified in its charter)
Delaware |
| 13-1930803 |
(State or other jurisdiction of |
| (I.R.S. Employer Identification No.) |
incorporation or organization) |
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205 Express Street | ||
Plainview, New York 11803 | ||
(Address of principal executive offices) | ||
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(516) 433-1700 | ||
(Issuer’s telephone number, including area code) |
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of February 1, 2002 common shares outstanding were 5,669,751.
ASTREX, INC.
INDEX
PART I: | Financial Information | |||
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Item 1. | Financial Statements: |
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| Consolidated Balance SheetsDecember 31, 2001 (unaudited) and March 31, 2001 | |||
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| Consolidated Statements of Cash Flows (unaudited)Nine months ended December 31, 2001 and 2000 | |||
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2
PART I - Financial Information
ASTREX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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| December 31, 2001 |
| March 31, 2001 |
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| (000's) Omitted, except share data |
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Current Assets: |
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Cash and cash equivalents |
| $ | 198 |
| $ | 8 |
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Accounts receivable (net of allowance for doubtful accounts of $96 at December 31, 2001 and $72 at March 31, 2001) |
| 1,473 |
| 2,321 |
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Inventory |
| 4,933 |
| 5,058 |
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Prepaid expenses and othercurrent assets |
| 82 |
| 59 |
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Net assets from discontinued operation (Note B) |
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| 311 |
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Deferred tax asset |
| 200 |
| 200 |
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Total current assets |
| 6,886 |
| 7,957 |
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Property, plant and equipment at cost (net of accumulated depreciation of $669 at December 31, 2001 and $618 at March 31, 2001) |
| 703 |
| 701 |
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Other long-term assets |
| 82 |
| 88 |
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Total Assets |
| $ | 7,671 |
| $ | 8,746 |
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Current Liabilities: |
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Accounts payable |
| 616 |
| 1,504 |
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Accrued liabilities |
| 594 |
| 781 |
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Total current liabilities |
| 1,210 |
| 2,285 |
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Long-term debt |
| 1,900 |
| 2,000 |
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Shareholders' Equity: |
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Preferred Stock, Series A - issued, none |
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| - |
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Convertible Preferred Stock, Series B - $.01 par value; authorized, 10,000,000; 1,706,596 shares issued and outstanding at December 31, 2001 and 1,897,381 shares issued and outstanding at March 31, 2001 (liquidation preference of $.25 a share) |
| 17 |
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19 |
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Common Stock - par value $.01 par value; authorized,15,000,000 shares; issued, 6,796,148 at December 31 , 2001 and 6,605,363 at March 31,2001 |
| 68 |
| 66 |
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Additional paid-in capital |
| 3,928 |
| 3,928 |
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Retained earnings |
| 877 |
| 767 |
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Deferred compensation |
| (3 | ) | (11 | ) | ||
Treasury stock, at cost (1,127,086 shares at December 31, 2001and 1,059,086 shares at March 31, 2001) |
| (326 | ) | (308 | ) | ||
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Total shareholders' equity |
| 4,561 |
| 4,461 |
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Total liabilities and shareholders' equity |
| $ | 7,671 |
| $ | 8,746 |
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See accompanying notes to unaudited consolidated financial statements.
3
ASTREX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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| NINE MONTHS ENDED |
| THREE MONTHS ENDED |
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| DECEMBER 31, |
| DECEMBER 31, |
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| 2001 |
| 2000 |
| 2001 |
| 2000 |
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| (000's) Omitted |
| (000's) Omitted |
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Net sales |
| $ | 12,601 |
| $ | 12,870 |
| $ | 3,508 |
| $ | 4,360 |
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Cost of sales |
| 9,775 |
| 10,053 |
| 2,736 |
| 3,388 |
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Gross profit |
| 2,826 |
| 2,817 |
| 772 |
| 972 |
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Selling, general andadministrative expenses |
| 2,254 |
| 2,144 |
| 690 |
| 733 |
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Income from operations |
| 572 |
| 673 |
| 82 |
| 239 |
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Interest expense |
| 95 |
| 121 |
| 25 |
| 37 |
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Income from continuing operations before provision for income taxes |
| 477 |
| 552 |
| 57 |
| 202 |
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Provision for income taxes |
| 21 |
| - |
| 6 |
| - |
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Net income from continuing operations |
| $ | 456 |
| $ | 552 |
| $ | 51 |
| $ | 202 |
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Discontinued operations: |
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Net loss from discontinued operations, net of taxes (Note B) |
| $ | (80 | ) | $ | (50 | ) | $ | (14 | ) | $ | (13 | ) | |
Net loss from disposal (Note B) |
| $ | (265 | ) | $ | 0 |
| $ | (265 | ) | $ | 0 |
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Net income(loss) |
| $ | 111 |
| $ | 502 |
| $ | (228 | ) | $ | 189 |
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Per share data for the nine and three months ended December 31, 2001 and 2000 are as follows: |
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Weighted average common shares and common equivalent shares outstanding: |
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Basic |
| 5,547,880 |
| 5,624,081 |
| 5,635,037 |
| 5,618,717 |
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Diluted |
| 7,418,509 |
| 6,825,754 |
| 7,395,006 |
| 7,581,098 |
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Net income per share: |
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Basic |
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Net income from continuing operations |
| $ | 0.08 |
| $ | 0.10 |
| $ | 0.01 |
| $ | 0.04 |
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Net loss from discontinued operations |
| $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |
Net loss from disposal of discontinued operations |
| $ | (0.05 | ) | $ | 0.00 |
| $ | (0.05 | ) | $ | 0.00 |
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Net income(loss) per share |
| $ | 0.02 |
| $ | 0.09 |
| $ | (0.04 | ) | $ | 0.04 |
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Diluted |
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Net income from continuing operations |
| $ | 0.06 |
| $ | 0.08 |
| $ | 0.01 |
| $ | 0.03 |
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Net loss from discontinued operations |
| $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |
Net loss from disposal of discontinued operations |
| $ | (0.04 | ) | $ | 0.00 |
| $ | (0.04 | ) | $ | 0.00 |
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Net income(loss) per share |
| $ | 0.01 |
| $ | 0.07 |
| $ | (0.03 | ) | $ | 0.03 |
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See accompanying notes to unaudited consolidated financial statements.
4
ASTREX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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| FOR THE NINE MONTHS ENDED DECEMBER 31, |
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| 2001 |
| 2000 |
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| (000's) Omitted |
| (000's) Omitted |
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Cash Flows From Operating Activities: |
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Net income from Continuing Operations |
| $ | 456 |
| $ | 552 |
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Adjustments to reconcile net income to netcash provided by operating activities: |
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Depreciation and amortization |
| 52 |
| 74 |
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Amortization of deferred stock compensation |
| 8 |
| 10 |
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Changes in assets and liabilities: |
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Decrease (increase) in accounts receivable, net |
| 848 |
| (78 | ) | ||
Decrease (increase) in inventory |
| 125 |
| (729 | ) | ||
Increase in prepaid expenses and othercurrent assets |
| (23 | ) | (50 | ) | ||
(Decrease) increase in accounts payable |
| (888 | ) | 197 |
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(Decrease) increase in accrued liabilities |
| (187 | ) | 256 |
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Net cash provided by continuing operations |
| 391 |
| 232 |
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Net operating activities from discontinued operations |
| (35 | ) | (45 | ) | ||
Net cash provided by operating activities |
| 356 |
| 187 |
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Cash flows used in investing activities: |
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Capital expenditures |
| (54 | ) | (57 | ) | ||
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Net cash used in investing activities |
| (54 | ) | (57 | ) | ||
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Cash flows from financing activities: |
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Purchase of Treasury Stock |
| (18 | ) | (25 | ) | ||
Deferred financing costs |
| 6 |
| 8 |
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Principal payments under capital lease obligations |
| - |
| (28 | ) | ||
Payments/(proceeds) under loans payable, net |
| (100 | ) | (135 | ) | ||
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Net cash used in financing activities |
| (112 | ) | (180 | ) | ||
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Net change in cash and cash equivalents |
| 190 |
| (50 | ) | ||
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Cash and cash equivalents - beginning of period |
| 8 |
| 57 |
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Cash and cash equivalents - end of period |
| $ | 198 |
| $ | 7 |
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See accompanying notes to unaudited consolidated financial statements.
5
ASTREX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - UNAUDITED FINANCIAL STATEMENTS
The consolidated balance sheet as of December 31, 2001 and the consolidated statements of income for the nine months and three months ended December 31, 2001 and 2000 and the statement of cash flows for the nine months ended December 31, 2001 and 2000, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normally recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at December 31, 2001 (and for all periods presented) have been made.
Certain information and note disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-KSB for the year ended March 31, 2001 filed by the Company. The results of operations for the periods ended December 31, 2001 and 2000 are not necessarily indicative of the operating results for the respective full years.
NOTE B — DISCONTINUED OPERATIONS
On November 1, 2001, the measurment date, the Company approved a plan to close TF Cushing, Inc., (TF Cushing) a wholly owned subsidiary of the Company. The decision was made based on TF Cushing’s declining sales over the past several years, and the Company’s opinion that a return to profitability was unlikely. The Company also felt that TF Cushing’s customer base, supplier base, and business focus (MRO vs OEM) were significantly different from the Company’s core business and therefore not easily integrated into the Company’s core operations. The Company recognized a loss for the period ended December 31, 2001 from discontinued operations of approximately $80,000 (net of state net worth tax of $1,400) for the seven months up to the measurement date. The Company recognized a loss from disposal of its discontinued operations of approximately $265,000 from the measurement date to December 31, 2001. The loss on disposal includes operating losses from the measurement date of approximately $44,000, loss on disposal of inventory of approximately $70,000 and estimates for further impairment of inventory caused by the disposal decision of $100,000.
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The remainder of the disposal loss includes liabilities for severance and estimates for miscellaneous expenses related to the disposal of its TF Cushing subsidiary. The Company has retained TF Cushing’s remaining assets and assumed its liabilities at December 31, 2001, consisting of net accounts receivable of approximately $44,000, net inventory of approximately $15,000 and liabilities of approximately $59,000. There were no net assets for the TF Cushing subsidiary at December 31, 2001 and approximately $311,000 at March 31, 2001. For the nine months and three months ended December 31, 2000, the loss from discontinued operations was approximately $50,000 and $13,000, respectively.
NOTE C — EARNINGS PER COMMON SHARE
The following table sets forth the reconciliation of the weighted average number of common shares:
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| Nine months ended |
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| December 31, |
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| 2001 |
| 2000 |
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| (Unaudited) |
| (Unaudited) |
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Basic |
| 5,547,880 |
| 5,624,081 |
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Effect of series B convertible preferred stock |
| 1,816,756 |
| 1,159,127 |
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Effect of dilutive securities (non-vested restricted stock) |
| 53,873 |
| 42,546 |
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Diluted |
| 7,418,509 |
| 6,825,754 |
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7
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| Three months ended |
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| December 31, |
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| 2001 |
| 2000 |
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| (Unaudited) |
| (Unaudited) |
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Basic |
| 5,635,037 |
| 5,618,717 |
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Effect of series B convertible preferred stock |
| 1,714,969 |
| 1,897,381 |
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Effect of dilutive securities (non-vested restricted stock) |
| 45,000 |
| 65,000 |
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Diluted |
| 7,395,006 |
| 7,581,098 |
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NOTE C — SHAREHOLDERS’ EQUITY
During the nine months ended December 31, 2001, the Company purchased 68,000 shares of its stock on the open market. These shares were recorded as treasury stock at their aggregate cost of approximately $18,500. During the fiscal year ended March 31, 2001, the Company purchased 145,500 shares of its common stock for approximately $43,000 on the open market. These shares are being held as treasury shares.
On August 1, 2001, 20,000 shares of the Company’s common stock which were granted to to the President on July 31, 2000, became fully vested. During the period August 1, 2001 through December 31, 2001, 190,785 shares of the Company’s Series B Convertible Preferred Stock were converted into the Company’s common stock.
8
ASTREX, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
During the quarter ending December 31, 2001 the Company approved and implemented a plan to close its wholly owned subsidiary, TF Cushing. TF Cushing had operated as a separate Maintenance Repair Organization (“MRO”) distributor of electronic, electrical, and industrial supplies, with a customer base, supplier base and business focus (MRO vs Original Equipment Manufacturer (“OEM”)), significantly different from the Company’s core business. Based on several years of declining sales, the potential loss of two key franchises, the Company’s opinion that a return to profitability was extremely unlikley, and the Company’s opinion that TF Cushing’s business could not be efficiently integrated into its core business, the decision was made to discontinue operations.
The following discussion of results of operations is from continuing operations and exclusive of the Company’s TF Cushing subsidiary.
Net income from continuing operations for the nine months ended December 31, 2001 was approximately $456,000, a decrease of $96,000 or 17% from the same nine month period last fiscal year. Net income from continuing operations for the three months ended December 31, 2001 was approximately $51,000, a decrease of $151,000 or 75% from the same three month period last fiscal year. The decrease for the nine month period ended December 31, 2001 is primarily the result of lower sales volume in the third quarter of this year as compared to the third quarter of last year offset by increases in sales for the first six months of this year. The decrease in the three month period is primarily the result of a decrease in sales volume for the three month period ended December 31, 2001 as compared to the same three month period last year.
Sales decreased by approximately $269,000 or 2%, for the nine months ended December 31, 2001, from the comparable nine month period in 2000. Sales decreased for the three months ended December 31, 2001, from the comparable three month period in 2000, by approximately $852,000 or 20%. During the quarter ended December 31, 2001, backlog decreased with confirmed but unshipped orders at January 1, 2002 of approximately $3,527,000 as compared to approximately $4,376,000 on January 1, 2001, a decrease of approximately 19%. Bookings for the quarter ended December 31, 2001, were approximately $3,248,000 as compared to approximately $4,745,000 for the quarter ended December 31, 2000, or a decrease of approximately 32%. The Company attributes these weakening numbers to the overall weakness in the national economy, and the much publicized decline in the overall global electronics market.
9
The Company’s gross margin remained constant at 22% for both the nine month and three month periods ending December 31, 2001 as compared to the same nine month period last year.
Selling, general and administrative expenses increased by approximately $110,000, or 5%, for the nine months ended December 31, 2001 from the comparable previous nine month period in 2000 and decreased $43,000 or 6% for the three month period ended December 31, 2001 as compared to the same three month period last year. The increase for the nine month period was primarily the result of increases in advertising, salary, bonus, commission and employee benefit related expenses. The decrease for the three month period is primarily the result of reductions in direct sales related expenses such as bonuses, and commissions.
Interest expense decreased by approximately $26,000 or 22% for the nine months and $12,000 or 32% for the three months ended December 31, 2001, from the previous comparable nine and three month period in 2000 due to a reduction in outstanding principal balances and interest rates.
The provision for income taxes for the nine months and three months ended December 31, 2001 consists principally of state and local taxes. The Company did not record a provision for income tax expense for the nine month and three months ended December 31, 2000 based on the recognition of certain tax benefits available to the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated approximately $356,000 in cash from its operating activities for the nine months ended December 31, 2001. At December 31, 2001, the Company had working capital of $5,676,000 and its stockholders’ equity was $4,561,000. The Company believes that its present working capital, cash generated from operations and amounts available under the loan agreement will be sufficient to meet its cash needs during the next year. The Company’s principal credit facility is a line of credit and a term loan from a bank (“Line”). The Line is secured by substantially all of the Company’s assets including a mortgage on the 205 Express Street property. The term of the Line runs to April 30, 2002. Borrowings under the line of credit portion of the Line, are based on the Company’s eligible inventory and receivables, as defined. On December 31, 2001, the Company owed $1,900,000 on the Line. The Company’s relationship with its secured lender is satisfactory and the Company believes that the lending arrangement will be adequate for the foreseeable future. The Company is currently renegotiating its current line of credit and intends to enter into a new facility agreement before April 30, 2002.
10
CAUTIONARY LANGUAGE REGUARDING FORWARD LOOKING STATEMENTS
When used herein, the words “believe,” “anticipate,” “think,” “intend,” “will be,” “expect” and similar expressions identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and involve certain risks and uncertainties discussed herein, which could cause actual results to differ materially from those in the forward-looking statements. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date hereof. Readers are also urged carefully to review and consider the various disclosures made by the Company which attempt to advise interested parties of the factors
which affect the Company’s business, including, without limitation, the disclosures made in the Company’s Annual Report on Form 10-KSB for the fiscal year ended March 31, 2001 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”
Item 2. Changes in Securities and use of proceeds.
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
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Item 5. Other Information
In the nine months ended December 31, 2001, the Company purchased 68,000 shares of its stock on the open market. These shares were recorded as treasury stock at their aggregate cost of approximately $18,500.
During the second and third quarter of fiscal year ended March 31, 2002, 190,785 shares of the Company’s Series B Convertible Preferred Stock have been converted to the Company’s common stock.
Item 6. Exhibits and Reports on Form 8–K.
(A) |
| Exhibits |
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Exhibit |
| Description |
| Previously Filed and Incorporated by reference or Filed Herewith |
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3 (a) |
| Certificate of Incorporation of Astrex, Inc., as amended (a Delaware corporation) |
| Filed as Exhibit 3(a) to the Form 10-QSB of the Company for the quarter ended September 30, 1997 |
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3 (b) |
| By-Laws of Astrex, Inc., as amended |
| Filed as Exhibit 3(b) to the Form 10-QSB of the Company for the quarter ended September 30, 1996 |
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4 |
| Astrex, Inc. Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock |
| Filed as Exhibit 4 to the Form 10-QSB of the Company for the quarter ended June 30, 2000 |
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(B) |
| Reports on Form 8-K: |
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| None |
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12
In accordance with the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf, thereunto duly authorized.
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| ASTREX, INC. | |||
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Date: | February 14, 2002 |
| By: | s/ Michael McGuire | |
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| Michael McGuire | |||
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| Director, President and | |||
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| Chief Executive Officer | |||
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| CHIEF FINANCIAL OFFICER | |||
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| OF ASTREX, INC. | |||
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Date: | February 14, 2002 |
| By: | s/ Lori A. Sarnataro | |
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| Lori A. Sarnataro | |||
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| Chief Financial Officer, Executive Vice President, | |||
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| Treasurer, and Secretary | |||
13