##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 28, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-14275
 EDAC Technologies Corporation
  Wisconsin
    
    39-1515599(State or other jurisdiction of
    
    (I.R.S. employerincorporation or organization)
    
    Identification No.)
 1806 New Britain Avenue, Farmington, CT 06032
 (Registrants telephone number, including area code)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




---



TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONITEM 1 FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESEXHIBIT INDEXExhibit 3.1Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1    Table of Contents  
  
  
 June 28,
    
    
    December 29,2008
    
    
    2007(Unaudited)
    
    
    (Audited)ASSETSCURRENT ASSETS:Cash
    
    $
    2,767,063
    
    
    $
    3,286,203Trade accounts receivable, (net
of allowance for doubtful accounts
of $186,000 as of June 28, 2008
and December 29, 2007)
    
    
    7,305,002
    
    
    
    7,638,573Inventories, net
    
    
    8,408,363
    
    
    
    6,598,111Prepaid expenses and other
    
    
    181,461
    
    
    
    51,339Refundable income taxes
    
    
    284,577
    
    
    
    284,577Deferred income taxes
    
    
    889,124
    
    
    
    933,124TOTAL CURRENT ASSETS
    
    
    19,835,590
    
    
    
    18,791,927PROPERTY, PLANT, AND EQUIPMENT
    
    
    34,940,198
    
    
    
    34,869,219less-accumulated depreciation
    
    
    23,163,609
    
    
    
    22,390,41711,776,589
    
    
    
    12,478,802OTHER ASSETS:Deposits on equipment
    
    
    384,620
    
    
    
    Other
    
    
    480,633
    
    
    
    492,051TOTAL ASSETS
    
    $
    32,477,432
    
    
    $
    31,762,780
  2




---



##### Table of Contents



June 28,
    
    
    December 29,2008
    
    
    2007(Unaudited)
    
    
    (Audited)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Equipment line of credit
    
    $
    903,740
    
    
    $
    Current portion of long-term debt
    
    
    2,336,926
    
    
    
    2,285,704Trade accounts payable
    
    
    3,441,405
    
    
    
    4,021,827Accrued employee compensation
and amounts withheld
    
    
    1,467,662
    
    
    
    1,800,390Other accrued expenses
    
    
    449,331
    
    
    
    395,950Customer advances
    
    
    898,865
    
    
    
    424,439TOTAL CURRENT LIABILITIES
    
    
    9,497,929
    
    
    
    8,928,310LONG-TERM DEBT,
less current portion
    
    
    6,028,025
    
    
    
    7,204,769DEFERRED INCOME TAXES
    
    
    448,660
    
    
    
    448,660SHAREHOLDERS EQUITY:Common stock, $.0025 par value;
issued: 4,666,970 and
4,636,303 shares as of June 28, 2008
and December 29, 2007
    
    
    11,668
    
    
    
    11,591Additional paid-in capital
    
    
    10,404,652
    
    
    
    10,245,877Retained earnings
    
    
    7,183,167
    
    
    
    6,020,24217,599,487
    
    
    
    16,277,710Less: accumulated other
comprehensive loss
    
    
    1,096,669
    
    
    
    1,096,669TOTAL SHAREHOLDERS EQUITY
    
    
    16,502,818
    
    
    
    15,181,041TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
    
    $
    32,477,432
    
    
    $
    31,762,780
  3




---



##### Table of Contents



For the three months ended
    
    
    For the six months endedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Sales
    
    $
    10,849,161
    
    
    $
    12,467,061
    
    
    $
    22,030,264
    
    
    $
    24,782,699Cost of sales
    
    
    9,019,185
    
    
    
    10,020,820
    
    
    
    18,114,279
    
    
    
    19,988,914Gross profit
    
    
    1,829,976
    
    
    
    2,446,241
    
    
    
    3,915,985
    
    
    
    4,793,785Selling, general and
administrative expenses
    
    
    864,244
    
    
    
    980,025
    
    
    
    1,833,364
    
    
    
    1,897,650Income from operations
    
    
    965,732
    
    
    
    1,466,216
    
    
    
    2,082,621
    
    
    
    2,896,135Non-operating income
(expense):Interest expense
    
    
    (155,048
    )
    
    
    (170,053
    )
    
    
    (319,625
    )
    
    
    (364,489
    )Other
    
    
    9,374
    
    
    
    5,520
    
    
    
    53,929
    
    
    
    10,315Income before
income taxes
    
    
    820,058
    
    
    
    1,301,683
    
    
    
    1,816,925
    
    
    
    2,541,961Provision for
income taxes
    
    
    287,000
    
    
    
    482,000
    
    
    
    654,000
    
    
    
    941,000Net income
    
    $
    533,058
    
    
    $
    819,683
    
    
    $
    1,162,925
    
    
    $
    1,600,961Income per share data (Note A):Basic
    
    $
    0.11
    
    
    $
    0.18
    
    
    $
    0.25
    
    
    $
    0.35Diluted
    
    $
    0.11
    
    
    $
    0.17
    
    
    $
    0.23
    
    
    $
    0.33
  4




---



##### Table of Contents



For the six months endedJune 28,
    
    
    June 30,2008
    
    
    2007Operating Activities:Net income
    
    $
    1,162,925
    
    
    $
    1,600,961Adjustments to reconcile net income
to net cash provided by
operating activities:Depreciation and amortization
    
    
    1,032,418
    
    
    
    1,144,418Deferred income taxes
    
    
    44,000
    
    
    
    446,000Gain on sale of property,
plant & equipment
    
    
    (21,850
    )
    
    
    Stock compensation expense
pursuant to stock options
    
    
    111,498
    
    
    
    27,612Excess tax benefit from
share-based compensation
    
    
    (81,836
    )
    
    
    (62,000
    )Changes in working capital items
    
    
    (1,992,146
    )
    
    
    (646,913
    )Net cash provided by
operating activities
    
    
    255,009
    
    
    
    2,510,078Investing Activities:Additions to property, plant
and equipment
    
    
    (318,787
    )
    
    
    (1,138,616
    )Equipment deposits
    
    
    (384,620
    )
    
    
    Proceeds from sale of property,
plant and equipment
    
    
    21,850
    
    
    
    Net cash used in investing
activities
    
    
    (681,557
    )
    
    
    (1,138,616
    )Financing Activities:Increase (decrease) in lines
of credit, net
    
    
    903,740
    
    
    
    (243,660
    )Repayments of long-term debt
    
    
    (1,125,522
    )
    
    
    (934,139
    )Proceeds from exercise of options
and issuance of common stock
    
    
    47,354
    
    
    
    114,783Excess tax benefit from
share-based compensation
    
    
    81,836
    
    
    
    62,000Net cash used in
financing activities
    
    
    (92,592
    )
    
    
    (1,001,016
    )(Decrease) increase in cash
    
    
    (519,140
    )
    
    
    370,446Cash at beginning of period
    
    
    3,286,203
    
    
    
    925,197Cash at end of period
    
    $
    2,767,063
    
    
    $
    1,295,643Supplemental Disclosure of
Cash Flow Information:Interest paid
    
    $
    319,625
    
    
    $
    364,489Income taxes paid
    
    
    456,000
    
    
    
    515,973
  5




---



##### Table of Contents



June 28,
    
    
    December 29,2008
    
    
    2007Raw materials
    
    $
    1,262,724
    
    
    $
    1,530,440Work-in-progress
    
    
    6,468,931
    
    
    
    4,635,437Finished goods
    
    
    1,320,846
    
    
    
    1,110,9579,052,501
    
    
    
    7,276,834Reserve for excess
and obsolete
    
    
    (644,138
    )
    
    
    (678,723
    )Inventories, net
    
    $
    8,408,363
    
    
    $
    6,598,111
  For the three months ended
    
    For the six months endedJune 28,
    
    June 30,
    
    June 28,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Basic:Average common
shares outstanding
    
    
    4,666,970
    
    
    
    4,571,853
    
    
    
    4,658,946
    
    
    
    4,554,294Diluted:Dilutive effect of
stock options
    
    
    289,769
    
    
    
    349,019
    
    
    
    311,364
    
    
    
    331,449Average common
shares diluted
    
    
    4,956,739
    
    
    
    4,920,872
    
    
    
    4,970,310
    
    
    
    4,885,743Options excluded
since anti-dilutive
    
    
    188,500
    
    
    
    
    
    
    
    188,500
    
    
    
    32,000
 6




---



##### Table of Contents



7




---



##### Table of Contents



8




---



##### Table of Contents



June 28,
    
    
    December 29,2008
    
    
    2007Term notes
    
    $
    4,890,514
    
    
    
    5,834,479Mortgage loans
    
    
    3,075,040
    
    
    
    3,138,313Equipment note payable
    
    
    
    
    
    
    2,999Capital lease obligations
    
    
    399,397
    
    
    
    514,6828,364,951
    
    
    
    9,490,473Less  current portion of
long-term debt
    
    
    2,336,926
    
    
    
    2,285,704$
    6,028,025
    
    
    $
    7,204,769
    9




---



##### Table of Contents



For the three months ended
    
    
    For the six months endedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Components of net periodic benefit cost:Interest cost
    
    $
    91
    
    
    $
    88
    
    
    $
    182
    
    
    $
    176Expected return on plan assets
    
    
    (93
    )
    
    
    (90
    )
    
    
    (186
    )
    
    
    (180
    )Amortization of actuarial loss
    
    
    2
    
    
    
    10
    
    
    
    4
    
    
    
    20Net periodic pension expense
    
    $
    0
    
    
    $
    8
    
    
    $
    0
    
    
    $
    16
  
   For the three months ended
    
    
    For the six months endedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Current provision
    
    $
    268
    
    
    $
    262
    
    
    $
    610
    
    
    $
    495Deferred provision
    
    
    19
    
    
    
    220
    
    
    
    44
    
    
    
    446Total provision
    
    $
    287
    
    
    $
    482
    
    
    $
    654
    
    
    $
    941
    10




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Sales.
  For the three months endedJune 28,
    
    
    June 30,Product Line
    
    2008
    
    
    2007
    
    
    ChangePrecision Aerospace
    
    $
    5,471
    
    
    $
    6,610
    
    
    $
    (1,139
    )Apex Machine Tool
    
    
    4,242
    
    
    
    4,789
    
    
    
    (547
    )Gros-Ite Spindles
    
    
    1,136
    
    
    
    1,068
    
    
    
    68Total
    
    $
    10,849
    
    
    $
    12,467
    
    
    $
    (1,618
    )
 For the six months endedJune 28,
    
    
    June 30,Product Line
    
    2008
    
    
    2007
    
    
    ChangePrecision Aerospace
    
    $
    10,754
    
    
    $
    12,977
    
    
    $
    (2,223
    )Apex Machine Tool
    
    
    9,288
    
    
    
    9,889
    
    
    
    (601
    )Gros-Ite Spindles
    
    
    1,988
    
    
    
    1,917
    
    
    
    71Total
    
    $
    22,030
    
    
    $
    24,783
    
    
    $
    (2,753
    )
  11




---



##### Table of Contents



For the three months ended
    
    
    For the six months endedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Aerospace customers
    
    $
    7,742
    
    
    $
    9,332
    
    
    $
    16,187
    
    
    $
    18,512Non-aerospace customers
    
    
    3,107
    
    
    
    3,135
    
    
    
    5,843
    
    
    
    6,271$
    10,849
    
    
    $
    12,467
    
    
    $
    22,030
    
    
    $
    24,783
  Cost of Sales.
 12




---



##### Table of Contents



Selling, General & Administrative Expenses.
 Interest Expense.
 Income Taxes.
 Liquidity and Capital Resources.
  Six Months EndedJune 28,
    
    June 30,2008
    
    2007Net cash flows provided by
operating activities:
    
    $
    255,000
    
    
    $
    2,510,000
   Six Months EndedJune 28,
    
    June 30,2008
    
    2007Net cash flows used in investing activities:
    
    $
    682,000
    
    
    $
    1,139,000
  13




---



##### Table of Contents



Six Months EndedJune 28,
    
    June 30,2008
    
    2007Net cash flows used in financing activities:
    
    $
    93,000
    
    
    $
    1,001,000
     CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   14




---



##### Table of Contents



15




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of disclosure and procedures
  Changes in internal control over financial reporting
  
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1)
    
    The following directors were elected at the meeting:
 Votes
    
    VotesDirector
    
    Cast For
    
    WithheldJoseph Lebel
    
    
    3,829,518
    
    
    
    308,330Dominick A. Pagano
    
    
    3,934,906
    
    
    
    202,942Stephen J. Raffay
    
    
    3,829,381
    
    
    
    308,467Ross C. Towne
    
    
    3,888,354
    
    
    
    249,494Daniel C. Tracy
    
    
    3,888,654
    
    
    
    249,194
 2)
    
    The Companys Articles of Incorporation were amended to increase the number of shares of
common stock authorized for issuance with a vote of 3,244,779 for and 885,438 against.
 16




---



##### Table of Contents



3)
    
    The EDAC Technologies Corporation 2008 Equity Incentive Plan was approved with a vote of
1,392,314 for and 1,297,397 against.
 4)
    
    The appointment of Carlin, Charron & Rosen LLP as auditors for the Company for the fiscal
year ending January 3, 2009 was ratified with a vote of 3,996,182 for 79,364 against and
62,302 abstained.
 
 ITEM 5. OTHER INFORMATION
 EDAC Technologies Corporation 2008 Equity Incentive Plan
   Amendment to the Companys Articles of Incorporation
  
 ITEM 6. EXHIBITS
 3.1
    
    EDACs Amended and Restated Articles of Incorporation3.2*
    
    EDACs Amended and Restated By-laws10.1
    
    EDAC Technologies Corporation 2008 Equity Incentive Plan
 17




---



##### Table of Contents



31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended.
 
 *
    
    Incorporated by reference 
   EDAC TECHNOLOGIES CORPORATIONJuly 30, 2008
    By /s/ Glenn L. PurpleGlenn L. Purple, Chief FinancialOfficer and duly authorized officer 18




---



##### Table of Contents



NUMBER
    
    DESCRIPTION3.1*
    
    EDACs Amended and Restated Articles of Incorporation (1)3.2
    
    EDACs Amended and Restated By-laws (2)10.1*
    
    EDAC Technologies Corporation 2008 Equity Incentive Plan31.1*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended.32.1*
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended.
 
 (1)
    
    Exhibit incorporated by reference to the Companys registration
statement on Form S-1 dated August 6, 1985, commission file
No. 2-99491, Amendment No.1.
 (2)
    
    Exhibit incorporated by reference to the Companys Report
on Form 8-K dated February 19, 2002.
 *

    Filed herewith. 19