-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MyKbhryWZUFYGGn5ima7LRUHeGQidBSvRN+1ylFH+YmtZgamGZR1j8ajxalBLx1H D1+3V/KIcv2WISVC44B6dw== 0000950150-97-001363.txt : 19970929 0000950150-97-001363.hdr.sgml : 19970929 ACCESSION NUMBER: 0000950150-97-001363 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970926 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDELBROCK CORP CENTRAL INDEX KEY: 0000929037 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 330627520 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-24802 FILM NUMBER: 97686768 BUSINESS ADDRESS: STREET 1: 2700 CALIFORNIA STREET CITY: TORRANCE STATE: CA ZIP: 90503 BUSINESS PHONE: 3107812222 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ____to____ Commission file number 0-24802 EDELBROCK CORPORATION (Exact name of Registrant as specified in its charter) Delaware 33-0627520 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 2700 California Street Torrance, California 90503 (Address of principal executive offices, including Zip Code) Registrant's telephone number, including area code: (310) 781-2222 Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value (Title and Class) Indicate by check mark whether the Registrant (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 X No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in part II of this Form 10-K or any amendments to this Form 10-K. [ X ] The aggregate market value of voting stock held by non-affiliates of the Registrant, as of September 26, 1997, was approximately $101,070,000 (based upon the closing price for shares of the Registrant's Common Stock as reported by the NASDAQ Stock Market for the last trading date prior to that date). On September 26, 1997, approximately 5,250,412 shares of the Registrant's Common Stock, $.01 par value, were outstanding. DOCUMENT INCORPORATED BY REFERENCE Information required by Part III (Items 10, 11, 12 and 13) is incorporated by reference to the Company's definitive proxy statement of its 1997 Annual Meeting of Shareholders. 1 2 ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS PART I
Page ---- Item 1. Business.......................................................... 3 Item 2. Properties........................................................ 5 Item 3. Legal Proceedings................................................. 6 Item 4. Submission of Matters To a Vote of Security Holders............... 6 Additional Item: Executive Officers of the Company................................. 6 PART II Item 5. Market for the Company's Common Stock and Related Shareholder Matters............................................... 7 Item 6. Selected Consolidated Financial Data.............................. 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 10 Item 8. Financial Statements and Supplementary Data....................... 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................... 17 PART III Item 10. Directors of the Company.......................................... 17 Item 11. Executive Compensation............................................ 17 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................. 17 Item 13. Certain Relationships and Related Transactions.................... 17 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................................... 17 Signatures .................................................................. 20
2 3 PART I Item 1. Business GENERAL Edelbrock Corporation (the "Company") is one of America's leading manufacturers and marketers of specialty performance automotive and motorcycle aftermarket parts. The Company designs, manufacturers, distributes and markets a wide range of high quality performance products, including intake manifolds, carburetors, camshafts, cylinder heads, exhaust systems, shock absorbers and other components designed for most domestic V8 and selected V6 engines. These products are designed to enhance street, off-road, recreational and competition vehicle performance through increased horsepower, torque and drivability. The Company also designs and markets products to enhance engine and vehicle appearance, such as chrome and polished aluminum air cleaners, valve covers and breathers. In October 1994, the Company introduced performance aluminum cylinder heads and intake manifolds for the Harley-Davidson Evolution engine which are distributed and marketed through over 5,000 Harley-Davidson performance shops nationwide. In March 1995, the Company acquired substantially all of the assets of QwikSilver II, Inc. of Apple Valley, California a manufacturer of aftermarket Harley-Davidson and other motorcycle carburetors and air cleaners. In May 1997, the Company entered the performance shock absorber market for a range of all aftermarket applications with certain restrictions utilizing RICOR Racing and Development, L.P.'s ("RICOR") patented "inertia sensitive system." In connection therewith, the Company has entered into a royalty agreement with RICOR and issued warrants to purchase common stock of the Company. See Notes 5 and 9 of Notes to Consolidated Financial Statements. The Company's business strategy is to capitalize on recognition of the "Edelbrock" brand name and strong distribution network to expand its leading position in the specialty performance automotive and motorcycle aftermarket parts market. The Company plans to achieve its business objective by pursuing the following business strategies: o Broaden Application of Core Products. o Expand Market Share in Compatible Product Lines. o Expand Presence in Chain Stores. o Introduce New Products. o Expand Production Capacity. o Reduce Manufacturing Costs through Vertical Integration and Automation. HISTORY The Company was founded in 1938 in Los Angeles by O. Victor Edelbrock, Sr. Mr. Edelbrock utilized his experience as a mechanic and a winning car racer to design and produce manifolds and cylinder heads. Upon his father's death in 1962, O. Victor Edelbrock, Jr., also a racing enthusiast who began designing manifolds in the 1960's, assumed his father's position as Chief Executive Officer of the Company. In 1967, the Company moved its operations to El Segundo, California. The Company continued designing and marketing new generations of manifolds throughout the 1960's and 1970's. In the 1980's, the Company expanded it product line to include camshaft kits, valve train parts, exhaust systems and other performance components. In 1987, the Company moved to its present location in Torrance, California and in 1990 built its own sand-cast aluminum foundry in San Jacinto, California. In the 1990's, the Company has continued to expand its product lines to include carburetors, aluminum cylinder heads, aluminum water pumps, fuel-injected manifolds and aftermarket performance parts for Harley-Davidson motorcycles. In 1995, the Company completed the construction of a 37,000 square foot building in Torrance, California to house its exhaust products division and a 15,000 square foot facility to expand the Company's Foundry warehouse space in San Jacinto, California. In late 1996, the Company completed construction of a 45,000 square foot facility adjacent to its existing exhaust facility which is being utilized primarily for the manufacture of shock absorbers, as well as to accommodate additional corporate expansion including warehouse overflow. In May 1997, the Company began production on a new line of performance aftermarket shock absorbers. In July 1997, the Company completed construction of a 12,000 and 15,000 square foot facility on Company owned property at its Foundry location in San Jacinto, California. The 12,000 square foot facility is being utilized for additional Foundry warehouse space and the 15,000 houses the Company's "QwikSilver" motorcycle parts division, which was relocated from Apple Valley, California. 3 4 RESEARCH AND DEVELOPMENT The Company seeks to develop new products to respond to consumer demand, to increase performance characteristics of existing product lines and to enter into new product lines. For the fiscal year ended June 30, 1995, 1996 and 1997 research and development expenditures totalled $1,963,000, $2,227,000 and $2,874,000, respectively. PRODUCTS The Company offers over 1,800 performance automotive and motorcycle aftermarket parts for street, offroad, recreational and competition use. The Company's products are designed to enhance the engine's performance through increased horsepower, torque and drivability primarily by improving induction of fuel and air into and exhaust out of the engine. The Company also designs and markets products to improve appearance. The Company's present lines include, among other items, intake manifolds, which accounted for 33%, 32% and 29%of the Company's revenues for fiscal years 1995, 1996 and 1997, respectively and carburetors, which accounted for 39%, 39% and 42% of the Company's revenue for fiscal years 1995, 1996 and 1997, respectively. See "Item 6. Selected Consolidated Financial Data" for the Company's revenue, operating income and total assets for each of the last three years. DISTRIBUTION, SALES AND MARKETING The Company has established a balanced nationwide distribution network, which encompasses all the major channels of distribution. It is the Company's policy to offer its products at the same price and under the same terms and conditions in each of its channels of distribution. The Company's products are sold in all 50 states and Canada, as well as to a lesser degree in Australia, Europe, New Zealand and the Pacific Rim, and distributed through the following channels: o Retail Automotive Chain Stores. o Mail Order Catalog Houses. o Warehouse Distributors and Performance Specialty Dealers. In addition to the foregoing channels of distribution, the Company supplies select component parts to original equipment manufacturers, including Ford Motor Company, Volvo-Penta of the Americas, Inc., General Motors Corporation, and Mercruiser, Inc., a division of Brunswick Corporation. The Company's aluminum foundry casts components for a variety of third-party manufacturers. The Company's sales are subject to seasonal variations. Customer orders and sales are greatest in the second, third and fourth quarters of the Company's fiscal year in anticipation of and during the spring and summer months. Accordingly, revenues and operating income tend to be relatively higher in the third and fourth fiscal quarters. This seasonality typically results in reduced earnings for the Company's first and second fiscal quarters because a significant portion of operating expenses are fixed throughout the fiscal year. Three customers, Auto Sales, Inc., Super Shops, Inc., and Auto Zone accounted for 12.9%, 11.7% and 11.4%, respectively, of the Company's revenues for fiscal year 1997. For fiscal year 1996 two customers, Auto Sales, Inc. and Super Shops, Inc., accounted for 16.0% and 12.7%, respectively, of the Company's revenues. See Note 7 of Notes to Consolidated Financial Statements of the Company. As a result of events which occurred subsequent to June 30, 1997, Super Shops, Inc. filed voluntary petitions for reorganization on September 19, 1997 under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court. As of September 19, 1997 Super Shops owed the Company approximately $3,182,000 for products purchased from the Company in which it retained a security interest with respect to approximately $1.1 million of inventory. The Company's ability to recover these amounts cannot be determined at this time however, the Company has decided to increase its June 30, 1997 allowance for doubtful accounts by $155,000 to $300,000 for possible loss. No assurance can be made as to the amount and timing of the Company's ultimate loss resulting from the settlement of Super Shops bankruptcy proceedings and it is reasonably possible that a further material loss could ultimately result from the outcome of this matter. 4 5 MANUFACTURING The Company conducts manufact, uring operations in its Torrance, California facilities and its aluminum foundry in San Jacinto, California. The Company manufactures products such as manifolds, cylinder heads, water pumps, shock absorbers and exhaust systems. Approximately 56% of the Company's revenues for fiscal year 1997 were attributable to products which were manufactured by third-party suppliers. Magneti Marelli, U.S.A., Inc. pursuant to an agreement with the Company, supplied the Company with all of the carburetors which it marketed in fiscal year 1997, representing approximately 42% of the Company's revenue for that fiscal year. The agreement extends through 1999 and is renewable at the option of the parties. See Note 8 of Notes to Consolidated Financial Statements. COMPETITION There is significant competition in the performance automotive and motorcycle parts industries. The Company competes with other companies and individuals in the manufacture and sale of performance automotive and motorcycle parts. The Company competes with, among others, Weiand Automotive and Holley Replacement Parts ("Holley") in the manifold market, Holley and Federal-Mogul Corporation in the automotive carburetor market, Rancho Industries and Billstein in the shock absorber market, Crane Cams and Competition Cams in the camshaft market, World Products and TFS in the cylinder head market and Mr. Gasket, TransDapt and Moroso in the specialty automotive accessories market. The Company competes primarily with S & S Cycle, Incorporated and Mikuni of America in the motorcycle aftermarket. The Company competes primarily on the basis of product quality and brand name recognition, service and price. Some of the Company's competitors are substantially larger and have greater financial resources than the Company. TRADEMARKS AND PATENTS The Company owns over 40 trademarks and patents used in connection with the marketing of the Company's products, including Edelbrock(R), Torker(R), Torker II(R), Tunnel Ram(R), Signature Series(R), Performer Series(R), QwikSilver II(R), Performer IAS(R) and Edelbrock Total Power Package(R). The Company believes that its trademarks and patents and the associated recognition, reputation and customer loyalty contribute to the success of the Company's business operations. The Company possesses a number of United States and international patents, including three United States patents relating to the Company's manifolds, all of which also contribute to the success of the Company's operations. The Company's patents expire between 1997 and 2013. EMPLOYEES As of June 30, 1997 the Company employed 531 persons in the operation of its business. The Company believes that its ability to attract and retain qualified management personnel and skilled production technicians and marketing employees will be a key determinant of the Company's continued success. The Company has not entered into any collective bargaining agreements with any unions and believes that its overall relations with its employees are good. Item 2. Properties The Company owns its headquarters and manufacturing facilities located in buildings of approximately 142,000, 45,000 and 37,000 square feet, respectively, in Torrance, California, and three buildings for its Foundry operations located in approximately 73,000, 15,000, and 12,000 square feet in San Jacinto, California. The 73,000 square foot facility and related land are subject to a deed of trust which secures certain indebtedness incurred in connection with the construction of the facility. See Note 3 of Notes to Consolidated Financial Statements. In December 1996, the Company completed construction of a new 45,000 square foot facility on Company owned property contiguous to its current exhaust facility in Torrance, California. This facility is being utilized primarily for the manufacture of performance aftermarket shock absorbers and to house additional corporate expansion including warehouse overflow. In July 1997, the Company completed construction of 12,000 and 15,000 square foot facilities on Company owned property at its Foundry location in San Jacinto, California. The 12,000 square foot facility is being utilized for additional Foundry warehouse space and the 15,000 square foot facility houses the Company's "QwikSilver" motorcycle parts division, which was relocated from Apple Valley, California. The Company believes that its existing facilities are adequate to meet its current requirements. 5 6 Item 3. Legal Proceedings There is no material legal proceeding to which the Company is a party or to which any of its properties are subject. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted, during the fourth quarter of the fiscal year covered by this report, to a vote of shareholders. Executive Officers of the Company. EXECUTIVE OFFICERS The following sets forth the name, age and business experience of the executive officers of the Company as of June 30, 1997:
NAME AGE POSITION - ---- --- --------- O. Victor Edelbrock...........................60 Chairman, President and Chief Executive Officer Jeffrey L. Thompson...........................44 Executive Vice-President, Chief Operating Officer and Director Aristedes T. Feles............................29 Vice-President of Finance and Director Adrian Murray.................................42 Vice-President of Sales Wayne P. Murray...............................45 Vice-President of Manufacturing Jack B. Mayberry..............................50 Vice-President of Research & Development Cathleen Edelbrock............................37 Vice-President of Advertising, Secretary and Director Nancy Edelbrock...............................60 Treasurer Ronald L. Webb................................63 Executive Vice-President of Edelbrock Foundry Corp.
O. Victor Edelbrock has been Chairman, President and Chief Executive Officer of the Company since 1962. Mr. Edelbrock is the husband of Nancy Edelbrock and the father of Camee Edelbrock. Jeffrey L. Thompson has been the Executive Vice-President/General Manager and Chief Operating Officer of the Company since December 1988. He is also a member of the board of directors of the Specialty Equipment Market Association. Mr. Thompson has been a director of the Company since 1994. Aristedes T. Feles has been the Vice President of Finance since July 1996 and was previously Controller for the Company (since 1992). Prior to 1992, Mr. Feles was employed as a senior accountant at BDO Seidman, LLP (since 1989). Mr. Feles has been a director of the Company since July 1996. Adrian Murray has been Vice-President of Sales for the Company since 1992. Mr. Murray was previously the National Sales Manager for the Company (since 1988). Wayne P. Murray has been employed in various positions by the Company since 1969 and has been Vice-President of Manufacturing for the Company since 1984. Jack B. Mayberry has been the Vice President of Research & Development for the Company since 1995. Prior to joining the Company, Mr. Mayberry was a captain in the U.S. Navy where he served for 25 years. Cathleen Edelbrock has been Vice-President of Advertising for the Company since 1993. Prior to 1993, Ms. Edelbrock was Director of Advertising (since 1987), and has served in various other capacities with the Company (since 1978). Ms. Edelbrock is a director of the Company. Ms. Edelbrock is the daughter of O.Victor Edelbrock Jr., and Nancy Edelbrock. Nancy Edelbrock has been Treasurer of the Company since 1968 and has been involved in all facets of the business since 1962. Mrs. Edelbrock is the wife of O.Victor Edelbrock Jr. and the mother of Camee Edelbrock. Ronald L. Webb has been Executive Vice-President of Edelbrock Foundry Corp. since 1989. Prior to 1989, Mr. Webb served as Vice-President, Operations and in various other capacities for Buddy Bar Castings (since 1958). 6 7 PART II Item 5. Market for Company's Common Stock and Related Shareholder Matters. The Company's Common Stock is traded over-the-counter on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") Stock Market under the symbol EDEL. The following table sets forth the range of high and low closing sales prices, as reported on the NASDAQ Stock Market for fiscal years 1996 and 1997. On September 26, 1997 the Company had 86 holders of record of its Common Stock and 5,250,412 shares outstanding and a closing price of $19.25.
Price Range of Common Stock -------------------------------- Year Ended June 30, 1996 High Low ---- --- First Quarter $17.00 $12.88 Second Quarter $15.75 $13.75 Third Quarter $16.25 $12.25 Fourth Quarter $19.50 $14.00 Year Ended June 30, 1997 High Low ---- --- First Quarter $17.75 $15.25 Second Quarter $17.25 $14.75 Third Quarter $20.75 $15.25 Fourth Quarter $22.25 $17.25
Since its initial public offering, the Company has not declared or paid a dividend on its common stock. The Company currently plans to retain all of its earnings to support the development and expansion of its business and has no present intention of paying any dividends on the Common Stock in the foreseeable future. However, the Board of Directors of the Company will review the dividend policy periodically to determine whether the declaration of dividends is appropriate. 7 8 tem 6. Selected Consolidated Financial Data. The following Selected Consolidated Financial Data is qualified in its entirety by, and should be read in conjunction with, the Consolidated Financial Statements of the Company and the notes thereto and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this Form 10-K. The Balance Sheet Data at June 30, 1997 and the Income Statement Data and the Other Data for each of the three fiscal years in the period ended June 30, 1997 have been derived from the audited Consolidated Financial Statements of the Company, which were audited by BDO Seidman, LLP as indicated in their report included elsewhere in this Form 10-K. The Balance Sheet Data at June 30, 1995 and the Income Statement Data and the Other Data for each of the two fiscal years in the period ended June 30, 1994 have been derived from audited financial statements not included herein.
INCOME STATEMENT DATA: 1993 1994 1995 1996 1997 ------------ ------------ ------------ ------------ ------------ Revenues $ 46,136,000 $ 53,509,000 $ 68,792,000 $ 79,032,000 $ 87,120,000 Cost of sales 26,536,000 31,012,000 40,883,000 47,043,000 52,163,000 ------------ ------------ ------------ ------------ ------------ Gross profit 19,600,000 22,497,000 27,909,000 31,989,000 34,957,000 ------------ ------------ ------------ ------------ ------------ Operating expenses Selling, general and administrative 13,378,000 15,203,000 17,172,000 20,392,000 21,308,000 Research and development 1,494,000 1,862,000 1,963,000 2,227,000 2,874,000 ------------ ------------ ------------ ------------ ------------ ------------ Total operating expenses 14,872,000 17,065,000 19,135,000 22,619,000 24,182,000 ------------ ------------ ------------ ------------ ------------ Operating income 4,728,000 5,432,000 8,774,000 9,370,000 10,775,000 Interest expense 726,000 672,000 552,000 344,000 340,000 Interest income - - 344,000 523,000 317,000 Other income - - - 274,000 469,000 ------------ ------------ ------------ ------------ ------------ Income from continuing operations before taxes on income and cumulative effect of change in accounting principle 4,002,000 4,760,000 8,566,000 9,823,000 11,221,000 Taxes on income from continuing operations 1,493,000 1,740,000 3,336,000 3,346,000 4,076,000 ------------ ------------ ------------ ------------ ------------ Income from continuing operations before cumulative effect of change in accounting principle 2,509,000 3,020,000 5,230,000 6,477,000 7,145,000 Income (loss) from discontinued operations, net of tax (1) (478,000) (62,000) 1,086,000 - - ------------ ------------ ------------ ------------ ------------ Income before cumulative effect of change in accounting principle 2,031,000 2,958,000 6,316,000 6,477,000 7,145,000 Cumulative effect on prior years of change in accounting for taxes on income (2) - 201,000 - - - ------------ ------------ ------------ ------------ ------------ Net income $ 2,031,000 $ 3,159,000 $ 6,316,000 $ 6,477,000 $ 7,145,000 ============ ============ ============ ============ ============
8 9
Year Ended June 30, --------------------------------------------------------------------------------------- PER SHARE DATA: 1993 1994 1995 1996 1997 ---------------- ------------- -------------- -------------- ------------- Income per share before change in accounting principle and discontinued operations $ 0.67 $ 0.81 $ 1.10 $ 1.24 $ 1.36 Income (loss) per share from discontinued operations, net of tax (0.13) (0.02) 0.22 - - Primary net income per share $ 0.54 $ 0.84 $ 1.32 $ 1.24 $ 1.36 Fully diluted net income per share $ 0.54 $ 0.84 $ 1.32 $ 1.24 $ 1.32 Primary weighted average shares outstanding 3,750,000 3,750,000 4,772,000 5,241,000 5,244,000 Fully diluted weighted average shares 3,750,000 3,750,000 4,772,000 5,241,000 5,424,000 outstanding OTHER DATA: Capital expenditures $ 2,026,000 $ 2,396,000 $ 12,221,000 $ 4,342,000 $ 8,602,000 Dividends - - - - -
June 30, --------------------------------------------------------------------------------------- BALANCE SHEET DATA: (In thousands) 1993 1994 1995 1996 1997 ---------------- ------------- -------------- ------------- ------------- Working capital $ 7,514 $ 7,772 $20,033 $23,953 $26,428 Total assets 47,377 50,272 62,771 66,430 77,868 Total long-term debt 19,355 17,278 4,657 3,148 2,178 Shareholders' equity 15,602 18,761 41,923 48,420 55,650
(1) On May 1, 1995, the Company disposed of substantially all of its real estate operations. See Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 6 of Notes to Consolidated Financial Statements for further information regarding the Company's real estate activities. (2) On July 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." 9 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. The following is a discussion and analysis of the consolidated financial condition and results of operations of the Company for the fiscal years ended June 30, 1995, 1996 and 1997. The following should be read in conjunction with the Consolidated Financial Statements and related notes appearing elsewhere herein. OVERVIEW The Company was founded in 1938, and is one of America's leading manufacturers and marketers of specialty performance automotive and motorcycle aftermarket parts. The Company designs, manufactures, packages and markets performance automotive and motorcycle aftermarket parts, including intake manifolds, carburetors, shock absorbers, camshafts, cylinder heads, exhaust systems and other performance components for most domestic V8 and selected V6 engines. In addition, the Company offers performance aftermarket manifolds, cylinder heads, camshafts, air cleaners, and carburetors for Harley-Davidson motorcycles. The Company currently offers over 1,800 performance automotive and motorcycle aftermarket parts for street, off-road, recreational and competition use. Product Mix The Company manufactures its own products and purchases other products designed to the Company's specifications from third-party manufacturers for subsequent packaging and distribution to the Company's customers. Generally, the Company can achieve a higher margin on those products which it manufactures as compared to those purchased from third-party manufacturers. Accordingly, the Company's results of operations in any given period are affected by product mix. For example, in recent years, the Company has experienced significant growth in the sale of carburetors, which it has purchased pursuant to a long-term contract with a third-party manufacturer. Product Concentration Historically, the Company has derived a substantial portion of its revenues from the sale of intake manifolds and carburetors. For the fiscal years ended June 30, 1996 and 1997 approximately 32% and 29% of revenues were derived from the sales of intake manifolds and 39% and 42% from the sales of carburetors, respectively. Manufacturing Capacity During the most recent peak manufacturing period, the Company used substantially all of its manufacturing capability for producing its specialty performance automotive and motorcycle aftermarket parts. In fiscal year 1995, the Company expanded its manufacturing capacity by constructing an additional 37,000 square-foot manufacturing facility in Torrance, California to house its exhaust division, and a 15,000 square-foot expansion of its foundry operation on Company-owned property adjacent to its current San Jacinto, California foundry site. In December 1996, the Company completed construction of a new 45,000 square foot facility on Company owned property contiguous to its current Exhaust facility in Torrance, California. This facility is being utilized primarily for the manufacture of performance aftermarket shock absorbers and to house additional corporate expansion including warehouse overflow. In July 1997, the Company completed construction of 12,000 and 15,000 square foot facilities on Company owned property at its Foundry location in San Jacinto, California. The 12,000 square foot facility is being utilized for additional Foundry warehouse space and the 15,000 square foot facility houses the Company's "QwikSilver" motorcycle parts division, which was relocated from Apple Valley, California. Seasonality The Company's sales are subject to seasonal variations. Customer orders and sales are greatest in the second, third and fourth quarters of the Company's fiscal year in anticipation of and during the spring and summer months. Accordingly, revenues and operating income tend to be relatively higher in the third and fourth fiscal quarters. This seasonality typically results in reduced earnings for the Company's first and second fiscal quarters because a significant portion of operating expenses are fixed throughout the fiscal year. 10 11 Real Estate In May 1995, the Company completed the sale of substantially all of its Arizona real estate portfolio to Arizona Presidio Industrial Partners for $17.1 million. The $17.1 million sales price included $1.9 million for real estate held by two partnerships, of which the Company is a general partner, and $0.5 million was for real estate held by the Company Employee Stock Ownership Plan ("ESOP"). The Company netted, after payment of debt and sales expenses, cash of $3.2 million and 2.31 acres of prime industrial property contiguous to its new exhaust facility in Torrance, California. The partnerships and ESOP netted cash of approximately $536,000 and $435,000, respectively. Through the sale, the Company was able to eliminate approximately $10.0 million in debt and the varying degrees of risk associated with real property investments. In addition, through this sale, the Company has focused its efforts on automotive and motorcycle operations. The results of the real estate division have been reported separately as discontinued operations. 11 12 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage of revenues of certain items in the Company's consolidated statements of income and the percentage change in each item from the prior period.
Percentage of Percentage of Revenues for Year Year Ended Revenues for Year Ended June 30, June 30, 1996 Ended June 30, Year Ended ---------------------- As Compared --------------------- June 30, 1997 To Year As Compared Ended To Year Ended 1995 1996 June 30, 1995 1996 1997 June 30, 1996 ------ ------ ------------ ------ ---- -------------- Revenues 100.0% 100.0% 14.9% 100.0% 100.0% 10.2% Cost of sales 59.4 59.5 15.1 59.5 59.9 10.9 ----- ----- ----- ----- Gross profit 40.6 40.5 14.6 40.5 40.1 9.3 ----- ----- ----- ----- Operating expenses Selling, general and administrative 25.0 25.8 18.8 25.8 24.5 4.5 Research and development 2.8 2.8 13.4 2.8 3.3 29.1 ----- ----- ----- ----- Total operating expenses 27.8 28.6 18.2 28.6 27.8 6.9 ----- ----- ----- ----- Operating income 12.8 11.9 6.8 11.9 12.4 15.0 Interest expense 0.8 0.4 (37.7) 0.4 0.4 (1.2) Interest income 0.5 0.7 52.0 0.7 0.4 (39.4) Other income - 0.3 NM 0.3 0.5 71.2 ----- ----- ----- ----- Income from continuing operations before taxes on income and cumulative effect of change in accounting principle 12.5 12.4 14.7 12.4 12.9 14.2 Taxes on income from continuing 4.9 4.2 0.3 4.2 4.7 21.8 operations ----- ----- ----- ----- Income from continuing operations 7.6 8.2 23.8 8.2 8.2 10.3 Income (loss) from discontinued operations, net of tax 1.6 N/A N/A N/A N/A N/A ----- ----- ----- ----- Net income 9.2% 8.2% 2.5% 8.2% 8.2% 10.3% ==== ===== ===== =====
12 13 FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1997 Revenues Revenues increased 10.2% to $87.1 million in fiscal year 1997 from $79.0 million in fiscal year 1996. The increase was primarily the result of an increase in volume of approximately $5.8 million, or 18.6%, in the sale of carburetors, an increase of $1.7 million, or 38.0%, in the sale of aluminum cylinder heads, and an increase of $600,000, or 34.4%, in the sale of performance aftermarket parts for Harley-Davidson motorcycles. Cost of Sales Cost of sales increased 10.9% to $52.2 million in fiscal year 1997 from $47.0 million in fiscal year 1996. As a percent of revenues, cost of sales increased to 59.9% in fiscal year 1997 from 59.5% in fiscal year 1996. The increase in cost of sales was primarily due to an increase in sales which included a change in product mix toward third-party manufactured products, partially offset by improved production efficiencies associated with the introduction of high-tech machining centers used in the production of manifolds, cylinder heads and water pumps. Selling, General and Administrative Expense Selling, general and administrative expenses increased 4.5% to $21.3 million in fiscal year 1997 from $20.4 million in fiscal year 1996. This increase was primarily due to increased advertising expense, sales commissions and salaries associated with increased sales. As a percent of sales, selling, general and administrative expenses decreased to 24.5% in fiscal year 1997 from 25.8% in fiscal year 1996. Research and Development Expense Research and development expense increased 29.1% to $2.9 million in fiscal year 1997 from $2.2 million in fiscal year 1996. As a percent of revenue, research and development expense increased to 3.3% in fiscal year 1997 from 2.8% in fiscal year 1996, primarily as a result of increased expenditures relating to the development of performance aftermarket shock absorbers. The Company plans on continuing to expand its research and development program, but through improved efficiency, expenditures may decrease as a percent of revenue in the future. Operating Income Operating income increased 15.0% to $10.8 million in fiscal year 1997 from $9.4 million in fiscal year 1996. This increase was a result of the items mentioned above. Interest Expense Interest expense decreased 1.2% to $340,000 in fiscal year 1997 from $344,000 in fiscal year 1996, primarily as a result of a decrease in average debt outstanding. Interest Income Interest income decreased 39.4% to $317,000 in fiscal year 1997 from $523,000 in fiscal year 1996. This decrease was the result of a decrease in the balance of invested funds raised from the Company's initial public offering. Other Income During fiscal year 1997, the Company sold a piece of property that resulted in a $274,000 pre-tax gain. Additionally, one of the partnerships in which the Company holds a 50% interest sold a portion of its real estate, which resulted in a $192,000 pretax gain. Taxes on Income The provision for taxes on income increased $730,000 to $4.1 million in fiscal year 1997 from $3.3 million in fiscal year 1996. The effective tax rate increased to 36.3% in fiscal year 1997 from 34.1% in fiscal year 1996 as a result of a decrease in available capital expenditures relating to state income tax credits. Net Income The Company's net income increased 10.3% to $7.1 million in fiscal 1997 from $6.5 million in fiscal 1996. This increase was primarily due to the items mentioned above. 13 14 FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1996 Revenues Revenues increased 14.9% to $79.0 million in fiscal year 1996 from $68.8 million in fiscal year 1995. The increase was primarily the result of an increase in volume of approximately $4.1 million, or 15.3%, in the sale of carburetors, an increase of $0.9 million, or 24.8%, in the sale of aluminum cylinder heads, and an increase of $900,000, or 46.4%, in the sale of exhaust systems. Cost of Sales Cost of sales increased 15.1% to $47.0 million in fiscal year 1996 from $40.9 million in fiscal year 1995. As a percent of revenues, cost of sales increased to 59.5% in fiscal year 1996 from 59.4% in fiscal year 1995. The increase in cost of sales was primarily due to an increase in sales which included a change in product mix toward third-party manufactured products, partially offset by improved production efficiencies associated with the introduction of high-tech machining centers used in the production of manifolds, cylinder heads and water pumps. Selling, General and Administrative Expense Selling, general and administrative expenses increased 18.6% to $20.4 million in fiscal year 1996 from $17.2 million in fiscal year 1995. This increase was primarily due to increased advertising expense, sales commissions and salaries associated with increased sales. As a percent of sales, selling, general and administrative expenses increased to 25.8% in fiscal year 1996 from 25.0% in fiscal year 1995. This increase was the result of expenditures relating to being a public company and increased advertising expenses including catalogs and television advertising. Research and Development Expense Research and development expense increased 13.4% to $2.2 million in fiscal year 1996 from $2.0 million in fiscal year 1995. As a percent of revenue, research and development expense decreased to 2.8% in fiscal year 1996 from 2.9% in fiscal year 1995. The Company plans on continuing to expand its research and development program, but through improved efficiency, expenditures may decrease as a percent of revenue in the future. Operating Income Operating income increased 6.8% to $9.4 million in fiscal year 1996 from $8.8 million in fiscal year 1995. This increase was a result of the items mentioned above. Interest Expense Interest expense decreased 37.7% to $344,000 in fiscal year 1996 from $552,000 in fiscal year 1995. This decrease was primarily due to retirement of debt and a decrease in the principal amount of average debt outstanding. Interest Income Interest income increased 52.0% to $523,000 in fiscal year 1996 from $344,000 in fiscal year 1995. This increase was the result of interest earned on invested proceeds from the Company's initial public offering, which occurred during the second quarter of fiscal 1995. Other Income During fiscal year 1996, the Company sold a piece of equipment that resulted in a $162,000 pre-tax gain. Additionally, the Company settled its lawsuit against a supplier of defective foundry furnace equipment relating to the original construction of the refractory furnaces at the Company's aluminum foundry in 1990. Under the terms of the settlement, the Company received net proceeds of $112,000. 14 15 Taxes on Income The provision of income taxes increased $10,000 to $3,346,000 in fiscal year 1996 from $3,336,000 in fiscal year 1995. The effective tax rate decreased to 34.1% in fiscal year 1996 from 38.9% in fiscal year 1995 as a result of state income tax credits relating to research and development and manufacturing. Net Income The Company's net income increased 23.8% to $6.5 million in fiscal 1996 from $5.2 million (excluding net income of $1.1 million from discontinued real estate operations) in fiscal year 1995. This increase was primarily due to the items mentioned above. Quarterly Results The following table sets forth unaudited operating data for each of the specified quarters of fiscal years 1996 and 1997. This quarterly information has been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, contains all adjustments necessary to state fairly the information set forth herein. The sum of the four quarters earnings per share may not agree to the fiscal year earnings per share due to rounding. The unaudited quarterly financial data presented below has not been subject to a review by BDO Seidman, LLP, Edelbrock's independent certified public accountants.
For the Fiscal Year Ended For the Fiscal Year Ended June 30, 1996 June 30, 1997 ------------------------------------------ ------------------------------------------ First Second Third Fourth First Second Third Fourth (In thousands except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter -------- -------- -------- -------- -------- -------- -------- --------- Revenues $ 16,843 $ 18,536 $ 18,854 $ 24,799 $ 18,950 $ 20,551 $ 20,619 $ 27,000 Cost of sales 9,916 11,060 11,316 14,751 11,506 12,450 12,474 15,733 -------- -------- -------- -------- -------- -------- -------- -------- Gross profit 6,927 7,476 7,538 10,048 7,444 8,101 8,145 11,267 -------- -------- -------- -------- -------- -------- -------- -------- Operating expenses Selling, general and 4,731 4,919 4,923 5,819 4,874 5,030 5,099 6,305 administrative 426 408 405 988 548 608 605 1,113 Research and development -------- -------- -------- -------- -------- -------- -------- -------- Total operating expenses 5,157 5,327 5,328 6,807 5,422 5,638 5,704 7,418 -------- -------- -------- -------- -------- -------- -------- -------- Operating income 1,770 2,149 2,210 3,241 2,022 2,463 2,441 3,849 Interest expense 114 112 108 10 87 87 86 80 Interest income 157 153 51 162 116 104 21 76 Other income 192 (20) 102 - - 4 273 192 -------- -------- -------- -------- -------- -------- -------- -------- Income before taxes on income 2,005 2,170 2,255 3,393 2,051 2,484 2,649 4,037 Taxes on income 778 787 846 935 759 919 980 1,418 -------- -------- -------- -------- -------- -------- -------- -------- Net income $ 1,227 $ 1,383 $ 1,409 $ 2,458 $ 1,292 $ 1,565 $ 1,669 $ 2,619 ======== ======== ======== ======== ======== ======== ======== ======== Primary net income per share $ 0.23 $ 0.26 $ 0.27 $ 0.47 $ 0.25 $ 0.30 $ 0.32 $ 0.50 ======== ======== ======== ======== ======== ======== ======== ======== Fully diluted net income per share $ 0.23 $ 0.26 $ 0.27 $ 0.47 $ 0.25 $ 0.30 $ 0.32 $ 0.48 ======== ======== ======== ======== ======== ======== ======== ======== Primary weighted average number of shares outstanding 5,240 5,240 5,241 5,241 5,242 5,242 5,246 5,248 ======== ======== ======== ======== ======== ======== ======== ======== Fully diluted weighted average number of shares outstanding 5,240 5,240 5,241 5,241 5,242 5,242 5,246 5,428 ======== ======== ======== ======== ======== ======== ======== ========
15 16 LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements arise primarily from the funding of its seasonal working capital needs and capital expenditures. Historically, the Company has met these liquidity requirements through cash flow generated from operating activities and with borrowed funds under the Company's $2.0 million revolving credit facility ("Revolving Credit Facility"). Due to the seasonal demand for the Company's products, the Company builds inventory during the Company's first fiscal quarter in advance of the typically stronger selling periods during the Company's second, third and fourth fiscal quarters. The Revolving Credit Facility consists of an unsecured line of credit agreement with one bank, which provides a total loan commitment not to exceed $2.0 million, all of which was available to the Company as of September 26, 1997. The line of credit borrowings are at the applicable bank's base rate (8.5% at June 30, 1997 ). The line of credit agreement expires in February 1998. Net cash provided by operating activities was $5.0 million, $4.2 million and $9.9 million in fiscal years 1995, 1996, and 1997, respectively. Because of the seasonality of the Company's business, more funds from operating activities are generated in its third and fourth fiscal quarters. During fiscal year 1997, the Company paid down $1.0 million on its long-term debt which primarily represents one principal payment on its Industrial Development Bond (see Note 3 of Notes to Consolidated Financial Statements). Under the Revolving Credit Facility, the Company is subject to certain customary restrictive financial requirements. The Company has been and is in compliance with all such financial covenants as of September 26, 1997. Accounts payable increased $4.0 million for fiscal year 1997 compared to fiscal year 1996 primarily as a result of an increase in payment terms from a principal supplier and costs associated with the initial production of shock absorbers. Income taxes payable increased by $431,000 primarily as a result of an increase in income before taxes. Accounts receivable increased $2.1 million for fiscal year 1997 compared to fiscal year 1996, while sales increased $8.1 million for fiscal year 1997 compared to fiscal year 1996. The increase in accounts receivable in fiscal year 1997 was primarily due to an increase in sales in the fourth quarter over prior year and to the timing of payments from customers in connection with the Company's dating programs. As a result of events which occurred subsequent to June 30, 1997, Super Shops, Inc. filed voluntary petitions for reorganization on September 19, 1997 under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court. As of September 19, 1997 Super Shops owed the Company approximately $3,182,000 for products purchased from the Company in which it retained a security interest with respect to approximately $1.1 million of inventory. The Company's ability to recover these amounts cannot be determined at this time however, the Company has decided to increase its June 30, 1997 allowance for doubtful accounts by $155,000 to $300,000 for possible loss. No assurance can be made as to the amount and timing of the Company's ultimate loss resulting from the settlement of Super Shops bankruptcy proceedings and it is reasonably possible that a further material loss could ultimately result from the outcome of this matter. Inventories increased $3.3 million primarily as a result of initial raw material purchases relating to the Company's introduction of performance aftermarket shock absorbers and an overall increase in inventory levels relating to increased sales. The Company believes that funds generated from operations and funds available under the Revolving Credit Facility will be adequate to meet its working capital, debt service and capital expenditure requirements through fiscal 1998. The Company's total capital expenditures were $12.2 million in fiscal year 1995, $4.3 million in fiscal year 1996 and $8.6 million in fiscal year 1997. The $8.6 million of capital expenditures for fiscal year 1997 included the purchase of computerized machining centers and costs associated with the construction of the shock absorber facility, Foundry and relocation of the Company's QwikSilver facility. The Company anticipates making capital expenditures of approximately $6.5 million in fiscal year 1998 primarily for the purchase of additional machinery and equipment for the Company's newly constructed shock absorber facility, and additional capital equipment to increase the company's production capacity. RECENT ACCOUNTING PRONOUNCEMENTS In March 1997, the FASB issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). This pronouncement provides a different method of calculating earnings per share than is currently used in accordance with APB 15, "Earnings per Share." SFAS 128 provides for the calculation of Basic and Diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, similar to fully diluted earnings per share. This pronouncement is effective for fiscal years and interim periods ending after December 15, 1997. Early adoption is not permitted. The Company has not determined the effect, if any, of adoption on its EPS computations. INFLATION General inflation over the last three years has not had a material effect on the Company's cost of doing business and it is not expected to have a material effect in the foreseeable future. 16 17 "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Any statements set forth above which are not historical facts are forward-looking statements that involve known and unknown risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include such factors as the financial strength and competitive pricing environment of the automotive and motorcycle aftermarket industries, product demand, market acceptance, manufacturing efficiencies, new product development, the success of planned advertising, marketing and promotional campaigns, and other risks identified in documents filed by the Company with the Securities and Exchange Commission. Item 8. Financial Statements and Supplementary Data. See Item 14 for an index to the consolidated financial statements and supplementary financial information which are included herewith. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors of the Company The information required by Item 10 will be set forth in the Proxy Statement under the caption "Directors of the Company" and is incorporated herein by reference. Item 11. Executive Compensation. The information required by Item 11 will be set forth on the Proxy Statement under the caption "Executive Compensation" and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required by Item 12 will be set forth on the Proxy Statement under the caption "Security Ownership of Certain Beneficial Owners and Management" an is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. None PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Financial Statements and Schedules. See Index to Financial Statements which appears on page 21 hereof. Other Financial Data. See Summary of Selected Financial Data, which appears in "Item 6. Selected Financial Data." Reports on Form 8-K. The Company filed no Reports on Form 8-K during the last quarter of the 1997 fiscal year. Exhibits. The exhibits listed on the Exhibit Index following the signature page hereof are filed herewith in response to this Item. 17 18 EDELBROCK CORPORATION EXHIBIT INDEX
Number and Sequential Description of Page Exhibit Number - ------------------- ----------------- 3.(i).1 Form of Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3(i).1 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 3(ii).1 Form of Amended and Restated Bylaws of the Company (filed as Exhibit 3(ii).1 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 4.1 Specimen Common Stock Certificate (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 4.2 Form of Edelbrock Corp. Employee Stock Ownership Plan (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 10.1 Form of Indemnification Agreement entered into with officers and directors of the Company (filed as Exhibit 10.1 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 10.2 Mutual Agreement between Weber U.S.A.and Edelbrock (filed as Exhibit 10.2 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 10.3 Form of Employment Agreement with O. Victor Edelbrock, Jr. (filed as Exhibit 10.2 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference)* 10.4 Form of Employment Agreement with Jeffrey L. Thompson (filed as Exhibit 10.4 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference)* 10.5 Form of Employment Agreement with Ronald L. Webb (filed as Exhibit 10.6 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference)* 10.6 Form of Benefit Plans - 1994 Incentive Equity Plan - 1994 Stock Option Plan for Non-Employee Directors(filed as Exhibit 10.7 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 10.7 Loan Agreement between Edelbrock Corporation and City National Bank (filed as Exhibit 10.8 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 10.8 Business Loan Agreement between Edelbrock Corporation and Bank of America, NT&SA (filed as Exhibit 10.9 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference)
18 19 EDELBROCK CORPORATION EXHIBIT INDEX
Number and Sequential Description of Page Exhibit Number - --------------------- ---------------- 10.9 Business Loan Agreement between Edelbrock Foundry Corp. and Bank of America NT&SA (filed as Exhibit 10.10 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 10.10 Industrial Development Bond Agreements (filed as Exhibit 10.11 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 10.11 Industrial Redevelopment Bond Agreements (filed as Exhibit 10.12 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 10.12 Amendments to Purchase Agreements dated December 2, 1994 (filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended March 25, 1995 and incorporated herein by reference.) 10.13 Amendment to Purchase Agreements dated April 13, 1995. (filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended March 25, 1995 and incorporated herein by reference.) 10.14 License Agreement dated February 2, 1996 between Edelbrock Corporation and RICOR Racing and Development, L.P. (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended December 25, 1995 and incorporated herein by reference). 10.15 Warrant Agreement dated February 2, 1996 between Edelbrock Corporation and RICOR Racing and Development L.P. (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended December 25, 1995 and incorporated herein by reference). 10.16 Amendment to Business Loan Agreement between Edelbrock Corporation and Bank of America, NT&SA. (filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996 and incorporated herein by reference). 10.17 Second amendment to Business Loan Agreement between Edelbrock Corporation and Bank of America, NT & SA (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended March 25, 1997). 10.18 Amendment No. 1 to License Agreement, dated February 21, 1997 by and between Edelbrock Corporation and RICOR Racing and Development, L.P. (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter Ended March 25, 1997). 11 Calculation of Earnings per Common Share 42 21.1 Subsidiaries of the Company (filed as Exhibit 21.1 to the Company's Registration Statement on Form S-1 (File No. 33-83258) and incorporated herein by reference) 23.2 Consent of BDO Seidman, LLP 43 24.1 Powers of Attorney 44 27.1 Financial Data Schedule 52
- ------------- *Management Contract or compensatory plan or arrangement which is separately identified in accordance with Item 14(a)(3) of Form 10-K. 19 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on it behalf by the undersigned, thereunto duly authorized. September 26, 1997 EDELBROCK CORPORATION By: JEFFREY L. THOMPSON ------------------------------------------------- Jeffrey L. Thompson Executive Vice President, Chief Operating Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date * President, Chief Executive - --------------------------------------------- O. Victor Edelbrock Officer and Chairman of the Board (Principal Executive Officer) September 26, 1997 JEFFREY L. THOMPSON Executive Vice President and - --------------------------------------------- Jeffrey L. Thompson Director September 26, 1997 * Vice-President, Finance and Director September 26, 1997 - --------------------------------------------- Aristedes T. Feles (Principal Financial Officer and Principal Accounting Officer) * Vice President of Advertising, September 26, 1997 - --------------------------------------------- Cathleen Edelbrock and Director * Director September 26, 1997 - --------------------------------------------- E. A. Breitenbach * - --------------------------------------------- Alexander Michalowski Director September 26, 1997 * - --------------------------------------------- Jerry Herbst Director September 26, 1997 * - --------------------------------------------- Richard Wilbur Director September 26, 1997 JEFFREY L. THOMPSON - --------------------------------------------- *By: Jeffrey L. Thompson Attorney-in-fact
20 21 EDELBROCK CORPORATION INDEX TO FINANCIAL STATEMENTS
Page ---- Report of independent certified public accountants........................................................ 22 Consolidated financial statements Balance sheets................................................................................... 23 Statements of income............................................................................. 25 Statements of shareholders' equity............................................................... 27 Statements of cash flows ........................................................................ 28 Notes to consolidated financial statements....................................................... 30
21 22 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Edelbrock Corporation We have audited the accompanying consolidated balance sheets of Edelbrock Corporation as of June 30, 1996 and 1997, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three year period ended June 30, 1997 . These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Edelbrock Corporation at June 30, 1997 and the results of its operations and its cash flows for each of the years in the three year period ended June 30, 1997, in conformity with generally accepted accounting principles. BDO SEIDMAN, LLP Los Angeles, California August 29, 1997, except for Notes 1 and 10 which are as of September 24, 1997 22 23 EDELBROCK CORPORATION CONSOLIDATED BALANCE SHEETS
June 30, --------------------------- 1996 1997 ----------- ----------- Assets Cash and cash equivalents $ 8,771,000 $ 9,744,000 Accounts receivable, net of allowance for doubtful accounts of $145,000 for 1996 and $300,000 for 1997 17,973,000 19,876,000 Inventories (Note 2) 9,735,000 13,048,000 Prepaid expenses and other 436,000 1,203,000 ----------- ----------- Total current assets 36,915,000 43,871,000 ----------- ----------- Property, plant and equipment (Note 3) Land 4,658,000 4,658,000 Buildings and improvements 10,070,000 12,330,000 Machinery and equipment 22,201,000 26,311,000 Office equipment 1,579,000 2,626,000 Furniture and fixtures 722,000 821,000 Transportation equipment 4,051,000 4,440,000 ----------- ----------- 43,281,000 51,186,000 Less accumulated depreciation and amortization 15,899,000 19,268,000 ----------- ----------- 27,382,000 31,918,000 Real estate properties (Notes 3 and 6) 971,000 1,282,000 Other 1,162,000 797,000 ----------- ----------- Total assets $66,430,000 $77,868,000 =========== ===========
See accompanying notes to consolidated financial statements. 23 24 EDELBROCK CORPORATION CONSOLIDATED BALANCE SHEETS
June 30, --------------------------- 1996 1997 ----------- ----------- Liabilities and shareholders' equity Current liabilities Accounts payable $ 9,454,000 $13,444,000 Accrued expenses Payroll and bonuses 1,377,000 1,487,000 ESOP contribution (Note 5) 568,000 568,000 Commissions 493,000 515,000 Income taxes payable 22,000 453,000 Other 77,000 - Current portion of long-term debt (Note 3) 971,000 976,000 ----------- ----------- Total current liabilities 12,962,000 17,443,000 Long-term debt (Note 3) 3,148,000 2,178,000 Deferred income taxes (Note 4) 1,900,000 2,597,000 ----------- ----------- Total liabilities 18,010,000 22,218,000 ----------- ----------- Commitments and contingency (Notes 5, 9 and 10) Shareholders' equity Common stock (Note 9) Common stock, par value $.01 per share; authorized 15,000,000 shares; 5,241,604 and 5,248,440 shares issued and outstanding 52,400 52,400 Paid-in capital 16,942,100 17,027,100 Retained earnings 31,425,500 38,570,500 ----------- ----------- Total shareholders' equity 48,420,000 55,650,000 ----------- ----------- Total liabilities and shareholders' equity $66,430,000 $77,868,000 =========== ===========
See accompanying notes to consolidated financial statements. 24 25 EDELBROCK CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Year Ended June 30, ------------------------------------------- 1995 1996 1997 ----------- ----------- ----------- Revenues (Note 7) $68,792,000 $79,032,000 $87,120,000 Cost of sales 40,883,000 47,043,000 52,163,000 ----------- ----------- ----------- Gross profit 27,909,000 31,989,000 34,957,000 ----------- ----------- ----------- Operating expenses Selling, general and administrative 17,172,000 20,392,000 21,308,000 Research and development 1,963,000 2,227,000 2,874,000 ----------- ----------- ----------- Total operating expenses 19,135,000 22,619,000 24,182,000 ----------- ----------- ----------- Operating income 8,774,000 9,370,000 10,775,000 Interest expense 552,000 344,000 340,000 Interest income 344,000 523,000 317,000 Other income - 274,000 469,000 ----------- ----------- ----------- Income from continuing operations before taxes on income 8,566,000 9,823,000 11,221,000 Taxes on income from continuing operations (Note 4) 3,336,000 3,346,000 4,076,000 ----------- ----------- ----------- Income from continuing operations 5,230,000 6,477,000 7,145,000 Income from discontinued operations, net of tax (Note 6) 1,086,000 - - ----------- ----------- ----------- Net income $ 6,316,000 $ 6,477,000 $ 7,145,000 =========== =========== =========== See accompanying notes to consolidated financial statements.
25 26 EDELBROCK CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Year Ended June 30, ------------------------------------------------------- 1995 1996 1997 --------- --------- ---------- Net income per share Income per share from continuing operations $1.10 $1.24 $1.36 Income per share from discontinued operations, net of tax .22 - - --------- --------- ---------- Primary net income per share $1.32 $1.24 $1.36 ========= ========= ========= Fully diluted net income per share $1.32 $1.24 $1.32 ========= ========= ========= Primary weighted average number of shares outstanding 4,772,000 5,241,000 5,244,000 ========= ========= ========= Fully diluted weighted average number of shares outstanding 4,772,000 5,241,000 5,424,000 ========= ========= =========
See accompanying notes to consolidated financial statements. 26 27 EDELBROCK CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock ------------------------------------------------------------ Class A ------------------------------ Shares Amount Shares Amount ------------ ----------- -------------- ------------- Balance, July 1, 1994 0 $- 2,400,000 $ 24,000 Initial public offering, net of offering costs (Note 9) 5,240,000 52,400 (2,400,000) (24,000) Net income for year - - - - ----------- ----------- ----------- ----------- Balance, June 30, 1995 5,240,000 52,400 0 0 Net income for year - - - - Stock options exercised 1,604 - - - ----------- ----------- ----------- ----------- Balance June 30, 1996 5,241,604 52,400 0 0 Net income for year Stock options exercised 6,836 - - - ----------- ----------- ----------- ----------- Balance June 30, 1997 5,248,440 $ 52,400 0 $ 0 =========== =========== =========== ===========
EDELBROCK CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
Common Stock ------------------------- Class B ------------------------- Total Paid-in Retained Shareholders' Shares Amount Capital Earnings Equity ----------- ----------- ----------- ----------- ----------- Balance, July 1, 1994 1,350,000 $ 13,500 $ 91,000 $18,632,500 $18,761,000 Initial public offering, net of offering costs (Note 9) (1,350,000) (13,500) 16,831,100 - 16,846,000 Net income for year - - - 6,316,000 6,316,000 ----------- ----------- ----------- ----------- ----------- Balance, June 30, 1995 0 0 16,922,100 24,948,500 41,923,000 Net income for year - - - 6,477,000 6,477,000 Stock options exercised - - 20,000 - 20,000 ----------- ----------- ----------- ----------- ----------- Balance June 30, 1996 0 0 16,942,100 31,425,500 48,420,000 Net income for year 7,145,000 7,145000 Stock options exercised - - 85,000 - 85,000 ----------- ----------- ----------- ----------- ----------- Balance June 30, 1997 0 $ 0 $17,027,100 $38,570,500 $55,650,000 =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. 27 28 EDELBROCK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year Ended June 30, -------------------------------------------- 1995 1996 1997 ------------ ------------ ------------ Cash flows from operating activities Net income $ 6,316,000 $ 6,477,000 $ 7,145,000 Adjustments to reconcile net income to net cash provided by operating activities Allowance for doubtful accounts - - 155,000 Depreciation and amortization of property, plant and equipment 2,700,000 3,646,000 3,922,000 Gain from sale of property, plant and equipment (13,000) (149,000) (24,000) Depreciation and amortization of real estate properties 437,000 30,000 22,000 (Gain) loss from sale of real estate properties (2,075,000) 34,000 (274,000) Increase(decrease) in deferred income taxes (205,000) (108,000) 337,000 Equity in net income of partnerships (Note 7) 32,000 (151,000) (421,000) Increase (decrease) from changes in Accounts receivable (2,034,000) (3,985,000) (2,058,000) Inventories (2,571,000) (489,000) (3,313,000) Prepaid expenses and other assets (132,000) 88,000 (406,000) Other assets 199,000 (367,000) 365,000 Accounts payable 934,000 (314,000) 3,989,000 Accrued expenses 1,436,000 (540,000) 486,000 ------------ ------------ ------------ Net cash provided by operating activities 5,024,000 4,172,000 9,925,000 ------------ ------------ ------------ Cash flows from investing activities Acquisition of property, plant and equipment (12,221,000) (4,342,000) (8,602,000) Proceeds from sale of property, plant and equipment 21,000 345,000 168,000 Purchase of QwikSilver II, Inc. (314,000) - - Acquisition of real estate properties - (5,000) (57,000) Proceeds from sale of real estate properties, net 13,071,000 - 369,000 Investments in partnerships (310,000) (64,000) - Distributions from partnerships 221,000 143,000 50,000 ------------ ------------ ------------ Net cash provided by (used in) investing activities 468,000 (3,923,000) (8,072,000) ------------ ------------ ------------
See accompanying notes to consolidated financial statements. 28 29 EDELBROCK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year Ended June 30, -------------------------------------------- 1995 1996 1997 ------------ ------------ ------------ Cash flows from financing activities Net proceeds from issuance of common stock 16,846,000 20,000 85,000 Proceeds from issuance of long-term debt - 8,000 - Principal payments on long-term debt (12,928,000) (1,804,000) (965,000) ------------ ------------ ------------ Net cash provided by (used in) financing activities 3,918,000 (1,776,000) (880,000) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 9,410,000 (1,527,000) 973,000 Cash and cash equivalents, beginning of year 888,000 10,298,000 8,771,000 ============ ============ ============ Cash and cash equivalents, end of year $ 10,298,000 $ 8,771,000 $ 9,744,000 ============ ============ ============ Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 1,517,000 $ 422,000 $ 340,000 ============ ============ ============ Income taxes $ 2,810,000 $ 4,375,000 $ 3,712,000 ============ ============ ============
See accompanying notes to consolidated financial statements. 29 30 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BUSINESS AND SUMMARY OF ACCOUNTING POLICIES Business Edelbrock Corporation and its wholly-owned subsidiaries, Edelbrock Foundry Corp. and Edelbrock II, Inc. (collectively "the Company") are engaged in the design, manufacture, distribution and marketing of performance automotive and motorcycle aftermarket parts. Consolidation Policy The consolidated financial statements include the accounts of Edelbrock Corporation and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, contingent liabilities, revenues, and expenses at the date and for the periods that the financial statements are prepared. Actual results could differ from those estimates. Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. Inventories Inventories, which consist of raw materials, work in process, and finished goods, are stated at the lower of cost (first-in, first-out method) or market. Property, Plant, Equipment and Depreciation Property, plant and equipment are stated at cost. Depreciation is computed, primarily utilizing the straight-line method, over the estimated useful lives of the assets as follows:
Estimated Useful Life* (in years) ------------ Buildings and improvements 7-40 Machinery and equipment 3-7 Office equipment 5 Furniture and fixtures 7 Transportation equipment 3-10
*The average life more closely reflects the high end of the range. 30 31 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED) Revenue Recognition Revenue is recognized upon shipment of the products. Taxes on Income The Company has adopted SFAS No. 109, "Accounting for Income Taxes," which uses the asset and liability method for the calculation of income taxes. The asset and liability method requires the recognition of deferred tax assets and liabilities for the future tax consequences of temporary differences between the financial statement basis and the tax basis of assets and liabilities. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade accounts receivable. The Company places its temporary cash investments with various financial institutions and, by policy, limits the amount of credit exposure to any one financial institution. The Company believes that no significant credit risk exists as these investments are made with high-credit-quality financial institutions. The Company's business activities and accounts receivable are with customers in the automotive and motorcycle industries located primarily throughout the United States. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses totaling $145,000 at June 30, 1996 and $300,000 at June 30, 1997. As a result of events which occurred subsequent to June 30, 1997, Super Shops, Inc. filed voluntary petitions for reorganization on September 19, 1997 under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court. As of September 19, 1997 Super Shops owed the Company approximately $3,182,000 for products purchased from the Company in which it retained a security interest with respect to approximately $1.1 million of inventory. The Company's ability to recover these amounts cannot be determined at this time however, the Company has decided to increase its June 30, 1997 allowance for doubtful accounts by $155,000 to $300,000 for possible loss. No assurance can be made as to the amount and timing of the Company's ultimate loss resulting from the settlement of Super Shops bankruptcy proceedings and it is reasonably possible that a further material loss could ultimately result from the outcome of this matter. Fair Value The Company has cash and cash equivalents, receivables, and accounts payable for which the carrying value approximates fair value due to the short-term nature of these instruments. The fair value of the Company's long-term debt is estimated based on the market values of financial instruments with similar terms. Management believes that the fair value of the long-term debt approximates its carrying value. 31 32 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED) Stock-based Compensation As of July 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which establishes a fair value method of accounting for stock-based compensation plans. In accordance with SFAS 123, the Company has chosen to continue to account for stock-based compensation utilizing the intrinsic value method prescribed in APB 25. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Also, in accordance with SFAS 123, the Company has provided footnote disclosure with respect to stock-based employee compensation. The cost of stock-based compensation is measured at the grant date based on the value of the award and recognizes this cost over the service period. The value of the stock-based award is determined using a pricing model whereby compensation cost is the excess of the fair market value of the stock as determined by the model at grant date or other measurement date over the amount an employee must pay to acquire the stock. Earnings Per Share Information The computation of earnings per share is based upon the weighted average number of common shares outstanding during the period plus (in periods in which they have a dilutive effect) the effect of common shares contingently issuable, primarily from the exercise of stock options and exercise of warrants, using the treasury stock method. The fully diluted per share computation reflects the effect of common shares contingently issuable upon the exercise of warrants in periods in which such exercise would cause dilution. Fully diluted earnings per share also reflect additional dilution related to the exercise of stock options and warrants due to the use of the market price at the end of the period, when higher than average price for the period using the treasury stock method. New Accounting Pronouncements In March 1997, the FASB issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). This pronouncement provides a different method of calculating earnings per share than is currently used in accordance with APB 15, "Earnings per Share." SFAS 128 provides for the calculation of Basic and Diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, similar to fully diluted earnings per share. This pronouncement is effective for fiscal years and interim periods ending after December 15, 1997. Early adoption is not permitted. The Company has not determined the effect, if any, of adoption on its EPS computations. Reclassification Certain prior period amounts have been reclassified for comparison with the 1997 presentation. 32 33 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - INVENTORIES Inventories consist of the following:
June 30, ---------------------------- 1996 1997 ----------- ------------ Raw materials $ 5,421,000 $ 8,005,000 Work in process 626,000 948,000 Finished goods 3,688,000 4,095,000 ----------- ------------ $ 9,735,000 $13,048,000 =========== ============
NOTE 3 - LONG-TERM DEBT AND REVOLVING LINE OF CREDIT The Company's long-term debt consists of the following:
June 30, ------------------------- 1996 1997 ---------- ---------- Mortgage note (a) $2,159,000 $2,108,000 Industrial Redevelopment Bonds (b) 1,840,000 920,000 Other 120,000 126,000 ---------- ---------- 4,119,000 3,154,000 Less current portion 971,000 976,000 ---------- ---------- 3,148,000 $2,178,000 ========== ==========
(a) Mortgage note, collateralized by a trust deed on real estate with a net book value of $3,259,000 at June 30, 1997 payable in various monthly principal and interest payments, totalling approximately $22,000, at an interest rate of 10%, due June 2001. (b) Industrial Redevelopment Bonds, City of San Jacinto, California, issued to finance the purchase and installation of foundry equipment, collateralized by a standby letter of credit for $953,120 at June 30, 1997. The standby letter of credit is collateralized by a financing statement and security agreement on the foundry equipment. Payments are made to the trustee in annual principal installments of $920,000 on June 1 through 1998. Interest is due semiannually on June 1 and December 1 and is fixed at 7.2%. 33 34 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - LONG-TERM DEBT AND REVOLVING LINE OF CREDIT (CONTINUED) Principal payments are due on long-term debt as follows:
Years Ending June 30, Amount ------------------- ------ 1998 $ 976,000 1999 62,000 2000 69,000 2001 2,047,000 Thereafter -0- ----------- $ 3,154,000 ===========
The Company has one unsecured line of credit agreement with a bank, which provides total loan commitment not to exceed $2,000,000. All line of credit financing is at the bank's prime rate (8.5% at June 30, 1997 ). This agreement expires in February 1998. There were no borrowings on the line at June 30, 1996 and 1997. This obligation contains covenants, among other items, relating to various financial ratios. The Company was in compliance with all such covenants at June 30, 1997. NOTE 4 - TAXES ON INCOME The provision for taxes on income consists of the following:
Year Ended June 30, ---------------------------------------------- 1995 1996 1997 ----------- ----------- ----------- Current Federal $ 3,141,000 $ 2,768,000 $ 3,450,000 State 864,000 686,000 746,000 ----------- ----------- ----------- 4,005,000 3,454,000 4,196,000 ----------- ----------- ----------- Deferred Federal 48,000 (188,000) (546,000) State (24,000) 80,000 426,000 ----------- ----------- ----------- 24,000 (108,000) (120,000) =========== =========== =========== $ 4,029,000 $ 3,346,000 $ 4,076,000 =========== =========== ===========
34 35 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - TAXES ON INCOME (CONTINUED) The differences between the U.S. federal statutory tax rate and the Company's effective rate are as follows:
Year Ended June 30, ----------------------------- 1995 1996 1997 ------- ------- ------- U.S. federal statutory tax rate 34.0% 34.0% 34.0% State income taxes (net of federal benefits) 5.8 6.3 6.8 State income tax credits (0.4) (5.9) (2.6) Federal income tax credits (1.1) (0.0) (1.6) Other 0.6 (0.3) (0.3) ---- ---- ---- Effective tax rate 38.9% 34.1% 36.3% ==== ==== ====
The components of deferred taxes at June 30, 1996 and 1997 are as follows:
1996 1997 --------- --------- Deferred tax assets State income taxes $ 351,000 $269,000 Uniform capitalization rule 110,000 156,000 Accrued vacation 156,000 155,000 Deferred gains 15,000 15,000 Allowance for doubtful accounts 49,000 102,000 --------- --------- $ 681,000 $697,000 ========= ========= Deferred tax liabilities: Advertising accrual $ 128,000 $ -0- Depreciation and amortization 1,032,000 1,243,000 Like kind exchange 1,207,000 1,272,000 State tax deferred items 0 205,000 --------- --------- $2,367,000 $2,720,000 ========= =========
35 36 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 - COMMITMENTS Royalty Agreement In February 1996, the Company entered into a Royalty Agreement with RICOR Racing and Development L.P. ("RICOR") whereby the Company will pay RICOR a percentage of revenue derived from the sale of shock absorbers based on the following:
Aggregate Net Sales Price Royalty ----------------------------------- -------- Up to $4,000,000 8% From $4,000,001 to $8,000,000 7% $8,000,001 and above 6%
Royalty expense under this agreement amounted to $12,000 during 1997. There was no expense incurred during 1996. Retirement Plans An employee stock ownership plan ("ESOP") was established July 1, 1979 covering substantially all employees of Edelbrock Corporation who have attained one year of service. The minimum annual contribution is 1% of the total salaries or wages of plan participants and may be supplemented with additional amounts at the discretion of the Board of Directors. During fiscal year 1997, Edelbrock Corporation established a 401(k) defined contribution plan to enhance the existing ESOP for participating employees. The Company intends to match 50% of a certain portion of participants' contribution to this plan. The maximum annual contribution for both plans cannot exceed 25% of the total salaries or wages of the plan participants. Contributions to the ESOP amounted to $513,000 for the years ended June 30, 1995 and 1996 and $513,000 for both plans for the year ended June 30, 1997. Edelbrock Foundry Corp. maintains a defined contribution profit sharing plan (the "Plan") covering substantially all employees who have attained one year of service. Contributions to the Plan are at the discretion of the Company's Board of Directors; however, contributions cannot exceed 15% of the total salaries or wages of the plan participants. During fiscal year 1997, Edelbrock Foundry Corp. established a 401(k) defined contribution plan to enhance the existing plan for participating employees. The Company intends to match 50% of a certain portion of participants' contribution to this plan. Contributions to the Plan amounted to $50,000 for the year ended June 30, 1995, $55,000 for the year ended June 30, 1996 and $55,000 for both plans for the year ended June 30, 1997. 36 37 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 - COMMITMENTS (CONTINUED) Employment Agreements The Company has an employment agreement with its President and Chief Executive Officer for a term expiring on June 30, 1999. The agreement provides for a base salary of $300,000 per year, with an annual raise and bonus to be determined by the Compensation Committee of the Board of Directors based on such factors as the performance of the officer and the financial results of the Company. Upon termination of the officer's employment during the term of the agreement for any reason other than "cause," death or voluntary termination, the Company will be obligated to make a lump sum severance payment in an amount equal to the then current annual base compensation plus an amount equal to the bonus paid the year prior to such termination. The Company also has similar employment agreements with two other officers, each having a term expiring on June 30, 1999. Pursuant to these employment agreements, the two officers are entitled to an aggregate base salary of $415,000. Each officer is entitled to an annual bonus to be determined by the Compensation Committee of the Board of Directors based on such factors as the performance of the officer and the financial results of the Company. NOTE 6 - DISCONTINUED OPERATIONS On May 1, 1995, the Company completed the sale of substantially all of its Arizona real estate portfolio to Arizona Presidio Industrial Partners for $17.1 million. The $17.1 million sales price included $1.9 million for real estate held by two partnerships, of which the Company is a general partner, and $500,000 for real estate held by the Company's ESOP. The Company received cash of $3.2 million and 2.31 acres of prime industrial property, valued at $850,000, contiguous to its new exhaust facility in Torrance, California. The partnerships and ESOP received cash of approximately $536,000 and $435,000, respectively. The sale resulted in a pre-tax gain of $2,075,000 ($1,268,000 after-tax or $.27 per share), which included selling costs incurred in connection with the sale. Through the sale, the Company was able to extinguish approximately $10.0 million of real estate debt. The results of the real estate division have been reported separately as discontinued operations. Prior year consolidated financial statements have been restated to present the real estate division as a discontinued operation. Summarized results are as follows:
Year Ended June 30, 1995 ---------- Real estate revenue $2,002,000 Real estate expense 904,000 General and administrative expenses 533,000 ---------- Operating income 565,000 Interest expense 861,000 Gain on sale of real estate 2,075,000 ---------- Income before income taxes 1,779,000 Income tax 693,000 ---------- Net income $1,086,000 ==========
37 38 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - MAJOR CUSTOMERS A significant portion of the Company's revenues has been derived from three major customers. For the years ended June 30, 1995, 1996 and 1997, one customer accounted for 11.6%, 12.7% and 11.7%, respectively, of revenues, and the other customer accounted for 16.6%, 16.0% and 12.9%, respectively, of revenues. In addition, for the fiscal year ended June 30, 1997 one customer accounted for 11.4% of revenues. The loss of all, or substantial portion, of sales to these customers could have a material adverse effect on the Company's results of operations. See Note 10 of Notes to Consolidated Financial Statements. NOTE 8 - DEPENDENCE ON KEY SUPPLIER The Company has entered into an agreement expiring in 1999 with a key supplier that requires, among other things, that (i) the Company sell only carburetors manufactured by the supplier, (ii) the Company purchase a minimum number of carburetors from the supplier and (iii) the Company prices the carburetors so as to remain market competitive. The Company's minimum obligation under this agreement aggregates $55,616,000, or $13,904,000 each calendar year. These carburetors accounted for 42% of the Company's revenues for the year ended June 30, 1997. Any failure of the supplier to supply carburetors to the Company would have a material adverse effect on the Company's results of operations, since alternative sources for obtaining the types of carburetors marketed by the Company are not readily available. The Company's inability to source supply with other manufacturers, the Company's failure to sell carburetors in excess of the minimum purchase requirement or the contractual limitations on the Company's pricing of carburetors could have a material adverse effect on the Company. NOTE 9 - SHAREHOLDERS' EQUITY Initial Public Offering On October 19, 1994, the Company consummated an initial public offering of its Common Stock (the "Offering"). Prior to the consummation of the Offering, Edelbrock Corp., a California corporation, was merged with and into the Company, a Delaware corporation, which was formed on August 10, 1994. Pursuant to the Offering, 1,600,000 shares of Common Stock were sold at $12.50 per share of which 1,250,000 shares were issued and sold by the Company and 350,000 shares were sold by the Company's principal stockholder. Proceeds to the Company, after deducting underwriters' commissions and discounts and expenses payable by the Company in connection with the Offering of approximately $468,000, were $14,058,000. On November 17, 1994, the underwriters exercised their over-allotment option to purchase 240,000 shares of Common Stock from the Company at $12.50 per share. Proceeds from the sale of these shares that were issued and sold by the Company totaled $2,788,000 and reflects $212,000 of underwriters' commissions and discounts. 1994 Incentive Equity Plan The Company adopted the Edelbrock Corporation 1994 Incentive Equity Plan (the "Plan") that authorizes the granting of options to purchase shares of Common Stock, stock appreciation rights, restricted shares, deferred shares, performance shares and performance units. The maximum number of shares of Common Stock transferred, plus the number of shares of Common Stock covered by outstanding awards granted under the Plan, shall not, in the aggregate exceed 562,500. The stock options have been granted at the current quoted market price at the date of grant. 38 39 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED) The options vest 20% on October 19 of each year for a period of five years. The first 20% vested on October 19, 1995. A summary of changes in common stock options during 1996 and 1997 are as follows:
Number of Weighted Average Aggregate Shares Price Per Share Value ------------- -------------------- ------------------ Outstanding at July 1, 1995 357,179 $12.51 $4,468,309 Granted - - - Exercised 1,604 12.50 20,050 Cancelled 8,070 12.50 100,875 ------- ---------- Outstanding at June 30, 1996 347,505 12.51 4,347,384 Granted 23,000 17.52 402,960 Exercised 6,836 12.50 85,450 Canceled 9,341 12.50 116,762 ------- ---------- Outstanding at June 30, 1997 354,328 12.84 $4,548,132 ======= ========= Options exercisable (vested) at June 30, 1997 131,531 12.84 $1,688,858 ======= =========
1994 Stock Option Plan For Non-Employee Directors Additionally, the Company adopted the Edelbrock Corporation 1994 Stock Option Plan for Non-Employee Directors ("Director Plan"), which authorizes the granting of non qualified stock options to certain non-employee directors of the Company. The maximum number of shares granted under the Director Plan shall not exceed 25,000 shares of Common Stock. Initial grants of options under the Director Plan totaled 14,000, three grants of 3,500 shares each were granted at the initial offering price of $12.50 per share and one grant of 3,500 shares was granted at a price of $12.75 per share. Stock Warrants On February 2, 1996 the Company issued Warrants to purchase 100,000 shares of common stock at $14.75 per share to RICOR Racing and Development L.P. The Warrants were granted at the current quoted market price at the date of grant. The Warrants vest 20% on December 31 of each year for a period of five years with the first 20% vesting on December 31, 1996. The Warrants expire on February 2, 2006. 39 40 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED) STOCK - BASED COMPENSATION FASB Statement 123, "Accounting for Stock-Based Compensation," requires the Company to provide pro forma information regarding net income and earnings per share as if compensation cost for the Company's stock option plans had been determined in accordance with the fair value based method prescribed in FASB Statement 123. The company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model with the following weighted-average assumption used for grants in fiscal 1996 and fiscal 1997: dividend yield of zero percent; expected volatility of 8.1 percent; risk-free interest rate of 6 percent; and expected lives of ten years. Under the accounting provisions of FASB Statement 123, the Company's net income and income per share for 1997 and 1996 would have been reduced to the pro forma amounts indicated below:
Year Ended June 30, --------------------------------------- Net income 1996 1997 --------------- ----------------- As reported $6,477,000 $7,145,000 Pro forma $5,955,000 $6,805,000 Income per share As reported - primary $1.24 $1.36 As reported - fully diluted $1.24 $1.32 Pro forma - primary $1.14 $1.30 Pro forma - fully diluted $1.14 $1.25
Due to the fact that the Company's stock option programs vest over five years; the above pro forma numbers are not indicative of the financial impact had the disclosure provisions of FASB 123 been applicable to all years of previous grants. The numbers above do not include the effect of options granted prior to 1996 that vested in 1996 and 1997. The following table summarizes information about stock options and warrants outstanding at June 30, 1997:
Options and Warrants Outstanding Options and Warrants Number Weighted-Average Exercisable Number Range of Exercise Outstanding Remaining Weighted-Average Exercisable Weighted-Average Prices at 6/30/97 Contractual Life Exercise Price at 6/30/97 Exercise Price - ------------------- -------------- ----------------------- ---------------------- --------------- ----------------- $12.50 336,828 7.29 $12.50 134,731 $12.50 $12.75 - $13.50 8,500 7.79 $13.50 1,700 $13.19 $14.75 100,000 8.58 $14.75 20,000 $14.75 $16.00 - $19.50 23,000 9.49 $17.52 - 0 - - 0 - - ------------------- -------------- ----------------------- ---------------------- --------------- ----------------- $12.50 - $19.50 468,328 7.68 $13.24 156,431 $12.80 =================== ============== ======================= ====================== =============== =================
40 41 EDELBROCK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - SUBSEQUENT EVENT AND FOURTH QUARTER ADJUSTMENT As a result of events which occurred subsequent to June 30, 1997, Super Shops, Inc. filed voluntary petitions for reorganization on September 19, 1997 under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court. As of September 19, 1997 Super Shops owed the Company approximately $3,182,000 for products purchased from the Company in which it retained a security interest with respect to approximately $1.1 million of inventory. The Company's ability to recover these amounts cannot be determined at this time however, the Company has decided to increase its June 30, 1997 allowance for doubtful accounts by $155,000 to $300,000 for possible loss. No assurance can be made as to the amount and timing of the Company's ultimate loss resulting from the settlement of Super Shops bankruptcy proceedings and it is reasonably possible that a further material loss could ultimately result from the outcome of this matter. 41 EX-11 2 CALCULATION OF EARNINGS PER SHARE 1 EXHIBIT 11 EDELBROCK CORPORATION COMPUTATION OF EARNINGS PER COMMON SHARE
Year Ended June 30, --------------------------------------------------- 1995 1996 1997 ---------- ---------- ----------- ENDING MARKET PRICE PER SHARE $13.50 $17.50 $21.50 ---------- ---------- ----------- AVERAGE MARKET PRICE PER SHARE $13.31 $15.31 $17.19 ---------- ---------- ----------- EARNINGS: Net income applicable to common stock $6,316,000 $6,477,000 $7,145,000 ========== ========== =========== PRIMARY EARNINGS PER SHARE: Weighted average number of common shares outstanding 4,772,000 5,241,000 5,244,000 Incremental shares assuming all dilutive options and warrants exercised and proceeds used to purchase shares in the market at the average stock price during the period 27,000 70,000 108,000 ---------- ---------- ----------- Total 4,799,000 5,311,000 5,352,000 ========== ========== =========== Primary earnings per share $1.32* $1.22* $1.34* ========== ========== =========== FULLY DILUTED EARNINGS PER SHARE: Weighted average number of common shares outstanding 4,772,000 5,241,000 5,244,000 Incremental shares assuming all dilutive options and warrants exercised and proceeds used to purchase shares in the market at the average stock price during the period, 22,000 119,000 180,000 or the stock price at the end of the period, whichever is higher ---------- ---------- ----------- Total 4,794,000 5,360,000 5,424,000 ========== ========== =========== Fully diluted earnings per share $1.32* $1.21* 1.32 ========== ========== ===========
*Not reported because less than 3% dilutive. Earnings per share reported during these periods were calculated by dividing weighted average number of common shares outstanding into net income applicable to common stock. EX-23.2 3 CONSENT OF BDO SEIDMAN, LLP 1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Edelbrock Corporation We hereby consent to the use in the Registration Statement on Form S-8, Registration Number 33-91354, of our report dated August 29, 1997, except for Notes 1 and 10 which are as of September 24, 1997, relating to the audit of the consolidated financial statements of Edelbrock Corporation, which are contained in and incorporated by reference to the Annual Report on Form 10-K for the year ended June 30, 1997. BDO SEIDMAN, LLP Los Angeles, California September 26, 1997 EX-24.1 4 POWERS OF ATTORNEY 1 Exhibit 24.1.a POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Jeffrey L. Thompson and Aristedes T. Feles, and each of them, the true and lawful attorney and attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf as director or officer or both, as the case may be, of Edelbrock Corporation, a Delaware corporation (the "Company"), the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, and to sign any and all amendments to such annual report, and to deliver and file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact, or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 26th day of September, 1997. O. VICTOR EDELBROCK --------------------------------- O. Victor Edelbrock 2 Exhibit 24.1.b POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Jeffrey L. Thompson and Aristedes T. Feles, and each of them, the true and lawful attorney and attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf as director or officer or both, as the case may be, of Edelbrock Corporation, a Delaware corporation (the "Company"), the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, and to sign any and all amendments to such annual report, and to deliver and file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact, or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 26th day of September, 1997. JEFFREY L. THOMPSON --------------------------------- Jeffrey L. Thompson 3 Exhibit 24.1.c POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Jeffrey L. Thompson and Aristedes T. Feles, and each of them, the true and lawful attorney and attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf as director or officer or both, as the case may be, of Edelbrock Corporation, a Delaware corporation (the "Company"), the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, and to sign any and all amendments to such annual report, and to deliver and file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact, or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 26th day of September, 1997. ARISTEDES T. FELES --------------------------------- Aristedes T. Feles 4 Exhibit 24.1.d POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Jeffrey L. Thompson and Aristedes T. Feles, and each of them, the true and lawful attorney and attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf as director or officer or both, as the case may be, of Edelbrock Corporation, a Delaware corporation (the "Company"), the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, and to sign any and all amendments to such annual report, and to deliver and file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact, or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 26th day of September, 1997. CATHLEEN EDELBROCK --------------------------------- Cathleen Edelbrock 5 Exhibit 24.1.e POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Jeffrey L. Thompson and Aristedes T. Feles, and each of them, the true and lawful attorney and attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf as director or officer or both, as the case may be, of Edelbrock Corporation, a Delaware corporation (the "Company"), the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, and to sign any and all amendments to such annual report, and to deliver and file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact, or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 26th day of September, 1997. AL BREITENBACH --------------------------------- Al Breitenbach 6 Exhibit 24.1.f POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Jeffrey L. Thompson and Aristedes T. Feles, and each of them, the true and lawful attorney and attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf as director or officer or both, as the case may be, of Edelbrock Corporation, a Delaware corporation (the "Company"), the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, and to sign any and all amendments to such annual report, and to deliver and file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact, or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 26th day of September, 1997. ALEXANDER MICHALOWSKI --------------------------------- Alexander Michalowski 7 Exhibit 24.1.g POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Jeffrey L. Thompson and Aristedes T. Feles, and each of them, the true and lawful attorney and attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf as director or officer or both, as the case may be, of Edelbrock Corporation, a Delaware corporation (the "Company"), the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, and to sign any and all amendments to such annual report, and to deliver and file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact, or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 26th day of September, 1997. RICHARD WILBUR --------------------------------- Richard Wilbur 8 Exhibit 24.1.h POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Jeffrey L. Thompson and Aristedes T. Feles, and each of them, the true and lawful attorney and attorneys-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, to sign on his behalf as director or officer or both, as the case may be, of Edelbrock Corporation, a Delaware corporation (the "Company"), the Company's annual report on Form 10-K for the fiscal year ended June 30, 1997, and to sign any and all amendments to such annual report, and to deliver and file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney or attorneys-in-fact, and each of them with or without the others, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact, or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 26th day of September, 1997. JERRY HERBST --------------------------------- Jerry Herbst EX-27.1 5 FINANCIAL DATA SCHEDULE
5 YEAR JUN-30-1997 JUN-30-1997 9,744,000 0 20,176,000 300,000 13,048,000 43,871,000 51,186,000 19,268,000 77,868,000 17,443,000 2,178,000 0 0 52,400 55,597,600 77,868,000 87,120,000 87,120,000 52,163,000 52,163,000 24,182,000 0 340,000 11,221,000 4,076,000 7,145,000 0 0 0 7,145,000 1.36 1.32
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