-----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, LYnMOr/px8Jpe3IssHcdvJOS9kV/zINALTNgEMwFC54Ye8qpFroq15pj9Cy5Nk9u eHcetH6r8IGzihserQBNQw== 0000914039-99-000281.txt : 19990607 0000914039-99-000281.hdr.sgml : 19990607 ACCESSION NUMBER: 0000914039-99-000281 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CUNO INC CENTRAL INDEX KEY: 0001019779 STANDARD INDUSTRIAL CLASSIFICATION: COATING, ENGRAVING & ALLIED SERVICES [3470] IRS NUMBER: 061159240 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21109 FILM NUMBER: 99640500 BUSINESS ADDRESS: STREET 1: 400 RESEARCH PARKWAY CITY: HERIDEA STATE: CT ZIP: 06450 BUSINESS PHONE: 203-237-55 MAIL ADDRESS: STREET 1: 400 RESEARCH PARKWAY CITY: HERIDEA STATE: CT ZIP: 06450 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1999 Commission file number 000-21109 CUNO INCORPORATED (Exact name of registrant as specified in its charter) Delaware 06-1159240 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 400 Research Parkway, Meriden, Connecticut 06450 (Address of principal executive offices) (Zip Code) (203) 237-5541 Registrant's telephone number, including area code Not Applicable Former name, former address and former fiscal year, if changed since last report. 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 periods 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, .001 Par Value -- 16,256,283 shares as of April 30, 1999. 2 CUNO INCORPORATED Page Part I. Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) Consolidated Statements of Income - Three months ended April 30, 1999 and 1998 1 Consolidated Statements of Income - Six months ended April 30, 1999 and 1998 2 Consolidated Balance Sheets - April 30, 1999 and October 31, 1998 3 Consolidated Statements of Cash Flows - Six months ended April 30, 1999 and 1998 4 Notes to Unaudited Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 3 CUNO INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (dollars in thousands, except share amounts)
THREE MONTHS ENDED APRIL 30, 1999 1998 ------------ ------------ Net sales $ 54,027 $ 51,311 Less costs and expenses: Cost of products sold 30,120 28,441 Selling, general and administrative expenses 15,457 13,847 Research, development and engineering 2,955 2,700 ------------ ------------ 48,532 44,988 ------------ ------------ Operating income 5,495 6,323 Nonoperating income (expense): Interest expense (297) (309) Other income, net 64 184 ------------ ------------ (233) (125) ------------ ------------ Income before income taxes 5,262 6,198 Provision for income taxes 1,947 2,169 ------------ ------------ Net income $ 3,315 $ 4,029 ============ ============ Basic earnings per common share $ 0.21 $ 0.25 Diluted earnings per common share $ 0.20 $ 0.25 Basic shares outstanding 16,066,882 15,910,791 Diluted shares outstanding 16,259,528 16,274,109
See notes to unaudited condensed consolidated financial statements. -1- 4 CUNO INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (dollars in thousands, except share amounts)
SIX MONTHS ENDED APRIL 30, 1999 1998 ------------ ------------ Net sales $ 104,653 $ 95,331 Less costs and expenses: Cost of products sold 60,880 53,498 Selling, general and administrative expenses 29,777 26,193 Research, development and engineering 5,807 5,515 ------------ ------------ 96,464 85,206 ------------ ------------ Operating income 8,189 10,125 Nonoperating income (expense): Interest expense (655) (522) Other income, net 233 490 ------------ ------------ (422) (32) ------------ ------------ Income before income taxes 7,767 10,093 Provision for income taxes 2,864 3,531 ------------ ------------ Net income $ 4,903 $ 6,562 ============ ============ Basic earnings per common share $ 0.31 $ 0.41 Diluted earnings per common share $ 0.30 $ 0.41 Basic shares outstanding 16,034,545 15,880,636 Diluted shares outstanding 16,232,053 16,195,241
See notes to unaudited condensed consolidated financial statements. -2- 5 CUNO INCORPORATED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share amounts)
APRIL 30, OCTOBER 31, 1999 1998 --------- ---------- ASSETS Current assets Cash and cash equivalents $ 3,378 $ 4,433 Accounts receivable, less allowances for doubtful accounts of $1,043 and $1,179, respectively 43,004 45,963 Inventories 27,494 27,646 Deferred income taxes 7,256 7,420 Prepaid expenses and other current assets 2,994 2,550 --------- --------- Total current assets 84,126 88,012 Noncurrent assets Deferred income taxes 1,976 2,016 Intangible assets, net 23,103 22,715 Pension intangible asset 540 467 Other noncurrent assets 2,313 2,284 Property, plant and equipment, net 57,417 56,072 --------- --------- Total assets $ 169,475 $ 171,566 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Bank loans $ 17,718 $ 16,955 Accounts payable 14,628 15,655 Accrued payroll and related taxes 8,195 8,476 Other accrued expenses 7,809 9,032 Accrued income taxes 879 293 Current portion of long-term debt 3,290 6,437 --------- --------- Total current liabilities 52,519 56,848 Noncurrent liabilities Long-term debt, less current portion 13,368 15,437 Deferred income taxes 3,743 3,671 Retirement benefits 5,676 5,309 --------- --------- Total noncurrent liabilities 22,787 24,417 Stockholders' equity Preferred stock, $.001 par value; 2,000,000 shares authorized, no shares issued -- -- Common Stock, $.001 par value; 50,000,000 shares authorized, 16,256,283 and 16,162,661 shares issued and outstanding (excluding 4,328 shares in treasury) 16 16 Additional paid-in-capital 39,127 37,780 Unearned compensation (2,643) (2,742) Accumulated other comprehensive income 690 3,171 Retained earnings 56,979 52,076 --------- --------- Total stockholders' equity 94,169 90,301 --------- --------- Total liabilities and stockholders' equity $ 169,475 $ 171,566 ========= =========
See notes to unaudited condensed consolidated financial statements. -3- 6 CUNO INCORPORATED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (dollars in thousands)
SIX MONTHS ENDED APRIL 30, 1999 1998 -------- -------- OPERATING ACTIVITIES Net income $ 4,903 $ 6,562 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,995 3,700 Non-cash compensation recognized under employee stock plans 652 1,231 Gain on sale of property, plant and equipment (1) (330) Pension costs in excess of funding 391 191 Deferred income taxes 160 (376) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 1,280 (1,090) Inventories (797) (1,223) Prepaid expenses and other current assets (744) (1,596) Accounts payable and accrued expenses (784) (1,227) Accrued income taxes 466 (975) -------- -------- Net cash provided by operating activities 9,521 4,867 INVESTING ACTIVITIES Proceeds from sales of property, plant and equipment -- 618 Acquisition of companies, net of cash acquired (1,000) (9,530) Capital expenditures (5,644) (4,656) -------- -------- Net cash used for investing activities (6,644) (13,568) FINANCING ACTIVITIES Proceeds from long-term debt 5,300 12,792 Principal payments on long-term debt (10,696) (1,674) Net borrowings under bank loans 1,285 (141) Proceeds from stock options exercised 118 -- -------- -------- Net cash (used for) provided by financing activities (3,993) 10,977 Effect of exchange rate changes on cash and cash equivalents 61 (112) -------- -------- Net change in cash and cash equivalents (1,055) 2,164 Cash and cash equivalents -- beginning of period 4,433 3,416 -------- -------- Cash and cash equivalents -- end of period $ 3,378 $ 5,580 ======== ========
See notes to unaudited condensed consolidated financial statements. -4- 7 CUNO INCORPORATED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 1999 NOTE 1 - BUSINESS AND BASIS OF PRESENTATION CUNO Incorporated (the "Company" or "CUNO") designs, manufactures and markets a comprehensive line of filtration products for the separation, clarification and purification of liquids and gases. The Company's products, which include proprietary depth filters and semi-permeable membrane filters, are sold in the healthcare, fluid processing and potable water markets throughout the world. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended April 30, 1999 are not necessarily indicative of the results that may be expected for the year ending October 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended October 31, 1998. In connection with the adoption of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", certain reclassifications have been made to the prior year amounts to conform with the current presentation. NOTE 2 - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the three months ended:
APRIL 30, APRIL 30, 1999 1998 ------------ ------------ NUMERATOR: Net income $ 3,315,000 $ 4,029,000 ============ ============ DENOMINATORS: Weighted average shares outstanding 16,216,983 16,151,105 Issued but unearned performance shares (123,790) (188,191) Issued but unearned restricted shares (26,311) (52,123) ------------ ------------ DENOMINATOR FOR BASIC EARNINGS PER SHARE 16,066,882 15,910,791 ============ ============ Weighted average shares outstanding 16,216,983 16,151,105 Effect of dilutive employee stock options 42,545 123,004 ------------ ------------ DENOMINATOR FOR DILUTED EARNINGS PER SHARE 16,259,528 16,274,109 ============ ============ Basic earnings per share $ 0.21 $ 0.25 Diluted earnings per share $ 0.20 $ 0.25
-5- 8 The following table sets forth the computation of basic and diluted earnings per share for the six months ended:
APRIL 30, APRIL 30, 1999 1998 ------------ ------------ NUMERATOR: Net income $ 4,903,000 $ 6,562,000 ============ ============ DENOMINATORS: Weighted average shares outstanding 16,191,218 16,104,161 Issued but unearned performance shares (128,458) (184,173) Issued but unearned restricted shares (28,215) (39,352) ------------ ------------ DENOMINATOR FOR BASIC EARNINGS PER SHARE 16,034,545 15,880,636 ============ ============ Weighted average shares outstanding 16,191,218 16,104,161 Effect of dilutive employee stock options 40,835 91,080 ------------ ------------ DENOMINATOR FOR DILUTED EARNINGS PER SHARE 16,232,053 16,195,241 ============ ============ Basic earnings per share $ 0.31 $ 0.41 Diluted earnings per share $ 0.30 $ 0.41
NOTE 3 - INVENTORIES Inventories consist of the following:
APRIL 30, OCTOBER 31, 1999 1998 ------- ------- Raw materials $10,069 11,139 Work-in-process 2,927 3,703 Finished goods 14,498 12,804 ------- ------- $27,494 $27,646 ======= =======
Inventories are stated at the lower of cost or market. Inventories in the United States are primarily valued by the last-in, first-out (LIFO) cost method. The primary method used for all other inventories is first-in, first-out (FIFO). An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Because these are subject to many factors beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. NOTE 4 - NEW ACCOUNTING STANDARD The Company has adopted Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income" effective November 1, 1998. This Statement requires that all components of comprehensive income and total comprehensive income be reported and that changes be shown in a -6- 9 financial statement displayed with the same prominence as other financial statements. The Company has elected to disclose this information in its Statement of Stockholders' Equity. Total comprehensive income was comprised of the following (amounts in thousands):
THREE MONTHS ENDED APRIL 30, APRIL 30, 1999 1998 ------- ------- Net income $ 3,315 $ 4,029 Other comprehensive loss - foreign currency translation adjustments (264) (250) ------- ------- Total comprehensive income $ 3,051 $ 3,779 ======= =======
SIX MONTHS ENDED APRIL 30, APRIL 30, 1999 1998 ------- ------- Net income $ 4,903 $ 6,562 Other comprehensive loss - foreign currency translation adjustments (2,481) (1,360) ------- ------- Total comprehensive income $ 2,422 $ 5,202 ======= =======
NOTE 5 - OTHER INCOME, NET Other income, net as reported in the accompanying Consolidated Statements of Income consisted of the following (amounts in thousands):
THREE MONTHS ENDED APRIL 30, APRIL 30, 1999 1998 ------ ------ Interest income $ 38 $ 40 Exchange gains (losses) 18 (14) Gain on sale of property, plant and equipment -- 27 Other income 8 131 ------ ------ $ 64 $ 184 ====== ======
SIX MONTHS ENDED APRIL 30, APRIL 30, 1999 1998 ------- ------- Interest income $ 83 $ 73 Exchange gains 231 80 Gain on sale of property, plant and equipment 1 330 Other (expenses) income (82) 7 ------- ------- $ 233 $ 490 ======= =======
-7- 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTH PERIOD ENDED APRIL 30, 1999 VS. THREE MONTH PERIOD ENDED APRIL 30, 1998 NET SALES The Company had record net sales of $54.0 million in the second quarter of fiscal 1999 representing a 5.3 percent increase over 1998's second quarter sales of $51.3 million. Had currency values been unchanged from the second quarter of fiscal 1998, net sales for the second quarter of 1999 would have been $1.1 million higher, or 7.5 percent greater overall than the comparable period in fiscal 1998. North American sales increased 11.3 percent in the second quarter as compared to the same quarter in 1998. North American Water Group sales were responsible for virtually all this growth. The Water Group (within the potable water market) recently launched a series of new filters designed for appliances and these products have led the growth within this Group. Second quarter Latin American sales declined 23.8% percent from the same quarter last year, but increased 23.5% when expressed in local currency. See "Brazilian Real Devaluation" below for further details. Sales in Europe were virtually unchanged as compared to the same period in 1998, and Asia/Pacific sales were up slightly. Economic conditions continue to be weak in Japan, but certain markets have shown signs of stabilizing and even strengthening in other parts of Asia over the past three months. The following table displays the Company's sales by market (amounts in thousands):
THREE MONTHS ENDED CURRENCY APRIL 30, APRIL 30, PERCENT ADJUSTED 1999 1998 CHANGE CHANGE ------- ------- ---- ---- Potable Water $21,170 $16,134 31.2% 35.0% Fluid Processing 18,012 18,838 (4.4%) (3.8%) Healthcare 14,845 16,339 (9.1%) (6.7)% ------- ------- ---- ---- Total sales $54,027 $51,311 5.3% 7.5% ======= ======= ==== ====
The 31.2 percent increase in Potable Water sales was primarily driven by volume in North America associated with the aforementioned appliance filters. The decrease in Fluid Processing sales primarily reflects the continued weakness in the semiconductor markets as well as a worldwide slowdown in petroleum exploration and production caused by the recently depressed oil prices. A decline in sales of the Company's diagnostic membrane products was the primary reason for the 9.1 percent reduction in Healthcare sales in the second quarter as compared to the same period last year. Business conditions in the market remain sound and the decline is not expected to persist beyond the end of the current fiscal year. GROSS PROFIT The Company's gross profit increased $1.0 million to $23.9 million in the second quarter of 1999 from $22.9 million in the second quarter of 1998. Gross profit as a percentage of net sales was relatively flat quarter over quarter (44.3 percent in 1999 vs. 44.6 percent in 1998). This slight decrease is attributable to a lower mix of healthcare sales that generally carry a higher gross margin than sales to -8- 11 either the potable water or fluid processing markets as well as the effect of exporting product from the US for sale in Brazil during the Real's rapid devaluation. The gross margin increased from 39.2 percent in the fiscal 1999 first quarter. OPERATING EXPENSES Selling, general, and administrative expenses increased by $1.6 million in the second quarter of 1999 over the second quarter of 1998, representing an 11.6 percent increase. Administrative and selling expenses increased $1.6 million reflecting the Company's expansion of its sales force, and the timing of certain employee-related expenses and promotional events. Research, development and engineering expenses increased 9.4 percent in the second quarter of 1999 reflecting the Company's continued emphasis on the development of new products. OPERATING INCOME As a result of the above, operating income decreased $.8 million, or 13.1 percent, to $5.5 million or 10.2 percent of sales in the second quarter of 1999 as compared to $6.3 million or 12.3 percent of sales in the second quarter of 1998. NONOPERATING ACTIVITY Interest expense was relatively flat ($0.3 million) quarter over quarter as the level of debt outstanding was also comparable. See "Financial Position and Liquidity" below. As detailed in Note 5 to the condensed consolidated financial statements, other income, net was also comparable quarter over quarter as no material activity occurred in either of the two quarters. INCOME TAXES The Company's effective income tax rate for the second quarter of 1999 was 37.0% compared to 35.0% in the second quarter of 1998. The increase reflects a change in the mix of income attributed to various countries and their taxing authorities in which the Company does business. SIX MONTH PERIOD ENDED APRIL 30, 1999 VS. SIX MONTH PERIOD ENDED APRIL 30, 1998 NET SALES The Company had net sales of $104.7 million in the first six months of fiscal 1999 representing a 9.8 percent increase over 1998's comparable sales of $95.3 million. Currency values had a negligible effect on overseas net sales (period over period) when translated from local currency into US dollars. Led by a strong performance in the Water Group, North American sales increased 18.2 percent in the first six months of 1999 over the comparable period in 1998. The Water Group's line of appliance filters were especially successful during this period. Additionally, Chemical Engineering Corporation, a manufacturer of water treatment equipment which was purchased in March of last year, was only included in the 1998 results for two months. Latin American sales declined 14.7 percent during the first six months of 1999 as compared to the same period last year; however, when stated in local currency, sales increased 18.1%. For a discussion of the currency impact in that region, see "Brazilian Real Devaluation" below. Sales in Europe and Asia/Pacific were relatively unchanged during the first six months of the year when compared to the first six months of last year. -9- 12 The following table displays the Company's sales by market (amounts in thousands):
SIX MONTHS ENDED CURRENCY APRIL 30, APRIL 30, PERCENT ADJUSTED 1999 1998 CHANGE CHANGE -------- -------- ----- ----- Potable Water $ 41,641 $ 27,897 $49.3% 52.2% Fluid Processing 35,067 36,765 (4.6%) (5.3%) Healthcare 27,945 30,669 (8.9%) (8.1)% -------- -------- ----- ----- Total sales $104,653 $ 95,331 9.8% 10.6% ======== ======== ===== =====
The 49.3 percent increase in potable water sales was primarily driven by volume increases associated with the aforementioned appliance filters. The decrease in Fluid Processing sales is primarily attributed to the continued slowdown in the electronics and oil & gas industries. The decrease in healthcare sales is related to an expected temporary decline in the sale of diagnostic membrane products. GROSS PROFIT The Company's gross profit increased $1.9 million to $43.8 million in the first six months of 1999 from $41.8 million in the first six months of 1998. Gross profit as a percentage of net sales decreased to 41.8 percent from 43.9 percent. This decrease was primarily generated in the first quarter of fiscal 1999 and is attributable to a higher mix of Water Group sales that generally carry a lower gross margin than sales to either the healthcare or fluid processing markets; start-up costs primarily associated with a new product in the Water Group; and, higher manufacturing costs in the US membrane operation associated with the introduction of new manufacturing processes. Additionally, pricing pressure on certain products sold in Japan also contributed to the decline in gross margin. OPERATING EXPENSES Selling, general, and administrative expenses increased by $3.6 million in the six months of 1999 over the comparable period in 1998, representing a 13.7 percent increase. Approximately $1.0 million of the increase relates to normal operating expenses attributed to companies acquired subsequent to the first quarter of 1998, but prior to the first quarter of 1999. Results of operations for acquired companies are included in the accompanying financial statements from the date of acquisition. Additionally, selling expenses increased $2.8 million reflecting the Company's continued expansion of its marketing efforts. Research, development and engineering expenses increased a moderate 5.3 percent period over period. OPERATING INCOME As a result of the above, operating income decreased $1.9 million, or 19.1 percent, to $8.2 million or 7.8 percent of sales in the first six months of 1999 as compared to $10.1 million or 10.6 percent of sales in the first six months of 1998. NONOPERATING ACTIVITY Interest expense increased to $0.7 million in the first six months of 1999 from $0.5 million in the first six months of fiscal 1998. The increase in interest expense primarily results from an increase in debt associated with acquisitions and the expansion of the Company's manufacturing capabilities, beginning primarily in the second quarter of fiscal year 1998. As detailed in Note 5 to the condensed consolidated -10- 13 financial statements, other income in the first quarter of 1998 benefited from the sale of a tract of land in Australia, which was unrelated to the business, resulting in a pre-tax gain of $0.3 million. INCOME TAXES The Company's effective income tax rate for the first six months of 1999 was 36.9% compared to 35.0% in the first six months 1998. The increase reflects a change in the mix of income attributed to various countries and their taxing authorities in which the Company does business. FINANCIAL POSITION AND LIQUIDITY The Company assesses its liquidity in terms of its ability to generate cash to fund operating and investing activities. Of particular importance in the management of liquidity are cash flows generated by operating activities, capital expenditure levels and adequate bank financing alternatives. The Company manages its worldwide cash requirements with consideration of the cost effectiveness of the available funds from the many subsidiaries through which it conducts its business. Management believes that its existing cash position and available sources of liquidity are sufficient to meet current and anticipated requirements for the foreseeable future. Set forth below is selected key cash flow data (in thousands of dollars): Source/(Use) of Cash
SIX MONTHS ENDED APRIL 30, 1999 1998 -------- -------- OPERATING ACTIVITIES: Net cash provided by net income plus depreciation, amortization and non-cash compensation $ 9,550 $ 11,493 Accounts receivable 1,280 (1,090) Accrued income taxes 466 (975) Net cash provided by operating activities 9,521 4,867 INVESTING ACTIVITIES: Capital expenditures (5,644) (4,656) Acquisition of companies, net of cash acquired (1,000) (9,530) FINANCING ACTIVITIES: Net change in total debt (4,111) 10,977
The net cash provided by net income plus depreciation, amortization and non-cash compensation is an important measurement of cash generated from the earnings process before significant non-cash charges. The decrease in net income plus depreciation, amortization and non-cash compensation of $1.9 million reflects the Company's reduced gross profit margin and increased selling, general and administrative expenses as discussed previously above. Accounts receivable were reduced $1.3 million during the first six months of 1999 (vs. an increase of $1.1 million in 1998) due largely to a concentrated effort by management to improve collections worldwide. Overall, improved management of accounts receivable, inventory, accounts payable and taxes payable contributed to the $4.7 million increase in cash -11- 14 flow provided by operating activities during the Company's first six months of 1999 compared to the prior year's first six months. Capital expenditures amounted to $5.6 million in the first six months of 1999 which were primarily comprised of purchases of machinery and equipment. In the second quarter of fiscal 1999, the Company made a planned $1.0 million contingent consideration payment related to the acquisition of Chemical Engineering Corporation. This payment was recorded as additional goodwill. During the first six months of fiscal 1998, the Company utilized $9.5 million of cash to complete the acquisition of Chemical Engineering Corporation and certain other distribution operations. All of the Company's acquisitions have been accounted for as purchases and, accordingly, the results of their operations are included in the Company's consolidated statements of operations from the date of acquisition. Due largely to the Company's strong cash flows from operating activities ($9.5 million) in the first six months of 1999, the Company was able to reduce its long-term debt, on a net basis, by $4.1 million. OTHER MATTERS BRAZILIAN REAL DEVALUATION CUNO has a subsidiary located in Brazil. A significant devaluation in the Brazilian Real took place late in the Company's first quarter. Throughout much of the Company's second quarter, the Real was relatively stable, albeit substantially weaker relative to the US Dollar as compared to the beginning of the Company's fiscal year. The Brazilian subsidiary accounted for approximately 7 percent of consolidated net sales in 1998. Although the Brazilian subsidiary remained profitable during fiscal 1999 and the devaluation had only a minimal impact on the Company's consolidated results of operations, any future effects on the business climate in this region are yet to be determined. A significant portion of the products sold by the subsidiary in Brazil are manufactured locally - this should continue to help minimize the impact of the devaluation on future earnings. See "Market Risk Disclosures" below. COMPLIANCE WITH YEAR 2000 The Company has substantially completed its internal program to remediate its Year 2000 requirements. It has completed the remediation of its information technology systems and has made substantial progress in remediating its non-information technology systems. All non-information technology remediation is expected to be completed in the third quarter of 1999. The Company continues to communicate with its suppliers, customers and other service providers to determine the extent of the Company's exposure to the failure of third parties to remediate their own Year 2000 needs. The most likely worst case scenario would be that a failure by the Company or one or more of its vendors or suppliers to adequately and timely address the Year 2000 issue could interrupt manufacturing of the Company's products for an indeterminable period of time. The Company is identifying alternative vendors should a vendor's ability to meet the Company's raw material and supply requirements be impacted by the Year 2000 issue. In conjunction with this effort, the Company continuously monitors its action plans to address its Year 2000 requirements, including contingencies to address unforeseen problems. This is potentially a significant issue for most, if not all, companies, with implications which can not be anticipated or predicted with any degree of certainty. The risk to CUNO resulting from the failure of the Company's own information systems or third parties to attain Year 2000 readiness is similar to other manufacturing firms and business enterprises. These risks include (1) disruptions in information systems used for transaction processing, (2) disruptions -12- 15 in factories and facilities used in the manufacturing process, (3) disruptions in the supply of raw materials and other components from major vendors, and (4) disruptions in the shipment of manufactured goods to major customers due to their Year 2000 noncompliance. The Company is expensing software maintenance or modification costs as incurred. The costs of new leased software is being expensed over the term of the lease while items of a capital nature are being depreciated over their estimated useful lives. For expenditures related to Year 2000 to date, the Company has expensed approximately $50,000 in maintenance or modification costs (excluding operating lease payments for new systems implemented as part of the spin-off) and capitalized approximately $100,000. Based on information currently available, the total remaining maintenance or modification costs are not expected to be material, while future purchases of a capital nature are expected to be approximately $150,000. The costs of this project and its completion date are based on management's best estimates, which were derived from numerous assumptions about future events, including the availability of certain resources, third party remediation plans, and other factors. There can be no guarantee that these estimates will be achieved and actual results could differ materially from those plans. EUROPEAN ECONOMIC AND MONETARY UNION On January 1, 1999, the Euro became the official currency of the European Economic and Monetary Union (the "Union"). Companies in the Union may begin conducting their business operations in the new currency, however, the previous local currencies in those countries may also continue to be used as legal tender through January 1, 2002. The Company has completed its plans and implemented its program to accommodate the new currency. Software used by the Company at its European facilities, as well as new software being implemented, is capable of handling multi-currencies, including the Euro. As such, the Company is able to accept customer or supplier orders in either the new Euro or the previous local currency. The Company continues to address the Euro's impact on its operations (e.g. banking, payroll processing, pricing, currency hedging requirements, etc.) The estimated costs of required system modifications and other operational changes are not expected to be material to the Company. MARKET RISK DISCLOSURES Other than the "Brazilian Real Devaluation" discussed previously above, there have been no material changes in the information reported in the Company's Form 10-K for the year ended October 31, 1998 under the "Market Risk Disclosures" section of Management's Discussion and Analysis of Financial Condition and Results of Operations. FORWARD LOOKING INFORMATION The Company wants to provide stockholders and investors with more meaningful and useful information and therefore, this quarterly report describes the Company's belief regarding business conditions and the outlook for the Company, which reflects currently available information. These forward looking statements are subject to risks and uncertainties which, as described in Management's Discussion and Analysis in the Company's Annual Report on Form 10-K for the year ended October 31, 1998, could cause the Company's actual results or performance to differ materially from those expressed herein. The Company assumes no obligation to update the information contained in this quarterly report. -13- 16 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Corporation held its annual meeting of Stockholders on March 25, 1999. (b) The following individuals were nominated and elected to serve a term of three years as Directors: Mr. Frederick C. Flynn, Jr. Mr. C. Edward Midgley Mr. Paul J. Powers Mr. David L. Swift (c) The stockholders voted on the following matters: 1. Election of Directors -- the voting results for each nominee, all of whom were elected or reelected, are as follows:
Name Votes For Votes Withheld Not Voted ---- --------- -------------- --------- Mr. Frederick C. Flynn, Jr 13,875,313 158,267 2,134,404 Mr. C. Edward Midgley 13,820,528 213,052 2,134,404 Mr. Paul J. Powers 13,734,116 299,464 2,134,404 Mr. David L. Swift 13,876,831 156,749 2,134,404
2. A proposal for the approval of the 1996 Stock Incentive Plan First Amendment was approved by a count of 8,549,608 votes for, 5,244,990 votes against, 167,325 votes abstaining, and 2,206,061 shares not voted. 3. A proposal for the approval of the Non-Employee Directors' Stock Option Plan First Amendment was approved by a count of 11,294,165 votes for, 2,491,292 votes against, 176,466 votes abstaining, and 2,206,061 shares not voted. 4. A proposal for the appointment of Ernst & Young LLP as independent auditors was approved by a count of 13,924,024 votes for, 79,048 votes against, 30,508 votes abstaining, and 2,134,404 shares not voted. Item 6. Exhibits and Reports on Form 8-K (a) Documents filed as part of this report. Exhibit 10 - Material Contracts 10.23 Employment Agreement - Frederick C. Flynn, Jr. Exhibit 27. Financial Data Schedule (submitted electronically herewith) (b) Reports on Form 8-K No reports were filed on Form 8-K during the quarter for which this 10-Q is filed. -14- 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CUNO INCORPORATED Date June 4, 1999 By /s/ Frederick C. Flynn, Jr. --------------------------- Frederick C. Flynn, Jr. Senior Vice President - Finance and Administration, Chief Financial Officer, Treasurer and Assistant Secretary By /s/ Timothy B. Carney --------------------------- Timothy B. Carney Vice President, Controller, and Assistant Secretary -15- EX-10.23 2 EXHIBIT 10.23 1 Exhibit 10.23 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, effective nunc pro tunc January 5, 1999 (the "Effective Date"), is made by and between CUNO INCORPORATED, a Delaware corporation (the "Company"), and FREDERICK C. FLYNN, JR.("Executive") RECITALS WHEREAS, Executive has been offered employment as a member of the Company's Board of Directors (the "Board") and the Senior Vice President-Finance and Administration, and Chief Financial Officer of the Company and will be an integral part of its management; WHEREAS, Executive has accepted the offer of employment from the Company; and, WHEREAS, Executive and the Company desire to memorialize the terms and conditions surrounding the Executive's employment with the Company. NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein set forth, the parties hereto have agreed and do hereby mutually agree as follows: 1. Employment, Contract Period. During the period specified in this Section 1, the Company shall employ Executive, and Executive shall serve the Company, on the term and subject to the conditions set forth herein. The term of Executive's employment hereunder shall commence as of January 5. 1999 (the "Effective Date") and, subject to prior termination as provided in Section 6 hereof, shall continue through January 4, 2002. The term of Executive's employment hereunder is sometimes hereinafter referred to as the "Contract Period." 2. Responsibility. At all times during the Contract Period, Executive shall serve the Company as the Company's Senior Vice President-Finance and Administration, and Chief Financial Officer and shall (a) devote his full business time and effort exclusively to the performance of duties as assigned to him by the Board that are normally incident to the office of Senior Vice President-Finance and Administration, and Chief Financial Officer, and (b) use his best efforts to promote the interests of the Company and its affiliates. 3. Remuneration. At all times during the Contract Period, the Company shall pay to Executive compensation as provided in this Section 3. (a) Base Salary. The Corporation shall pay Executive a base salary at an annual rate of not less than $250,000 paid on a monthly basis. The annual rate of base salary may be increased at the discretion of the Compensation Committee of the Board (the "Committee"). If increased, the annual rate of base salary may not thereafter be decreased during the term of this Agreement. (b) Annual Incentive Compensation. The Corporation may pay Executive an 2 annual bonus under the provisions of the Company's Senior Management Target Incentive Plan and the Salaried Employee Incentive Plan or any successor plans but only if and when authorized by the Committee. For 1999, the Company will pay Executive a bonus of not less that $100,000, which shall be paid in December 1999, after the Company' books have been approved by the Audit Committee of the Board. (c) Signing Bonus. Upon the Effective Date of this Agreement, Company shall be obligated to pay Executive a signing bonus to be determined upon the final bonus received from Executive's previous employer. Such Signing Bonus has been determined to be $130,000, cash, which Executive may elect to take in Company Restricted Stock, with a 10% increase. (d) Performance Shares. The Company will grant herewith 10,000 Performance Shares under the Company's Performance Share Plan to Executive with respect to a three-year performance period ending on October 31, 2001. If, while Executive remains employed pursuant to this Agreement, the Company makes grants of Performance Shares under the Company's Performance Share Plan, the Executive shall be eligible for consideration to receive grants as deemed appropriate by the Committee. Each grant of Performance Shares is subject to the terms of the Company's Performance Share Plan, and will not be distributed until earned according to the performance requirements for each performance period. (e) Restricted Shares. The Company shall grant to Executive, effective as of the Effective Date, 20,000 restricted shares of the Company's Common Stock pursuant to the Company's 1996 Stock Incentive Plan (with 5-year vesting). During the five year restricted period you will vote the shares, although the share certificates will bare a legend and be held in escrow by the Company's Corporate Secretary. Should Executive involuntarily without cause leave the Company at any time during the five-year period, the shares will vest 20% per year of accrued employment with the Company. (f) Options. The Company shall grant to the Executive, effective as of the Effective Date, options to purchase 13,000 shares of the Company's Common Stock in the form of non-qualified stock options pursuant to the Company's 1996 Stock Incentive Plan. 4. Employee Benefits. Executive shall be included, to the extent eligible thereunder with respect to the requirements applicable to all employees eligible thereunder, under any and all existing plans (and any plans that later may be adopted) providing benefits for the Company's employees. These plans, include, but are not limited to: (a) The Company's group life insurance plan, under which Executive shall be eligible for life insurance equal to four times his then-current base salary as defined in the Plan. (b) The Company's hospitalization and medical plans, as provided to all Company employees, 2 3 (c) The Company's long-term disability plan, as provided to all Company employees. (d) Any pension, thrift plans, profit-sharing plans, stock purchase plans, and any and all other similar or comparable benefits. Executive shall also be provided with a suitable automobile allowance under the terms of the Company's executive automobile program, automobile insurance, paid vacation of at least four weeks per year, officers' and directors' liability insurance coverage in an amount reasonably available, and estate planning counsel. 5. Termination. (a) Death or Disability. Executive's employment hereunder will terminate immediately upon Executive's death. The Company may terminate Executive's employment hereunder immediately upon giving notice of termination if Executive is disabled, by reason of physical or mental impairment, to such an extent that he has been unable to substantially perform his duties under this Agreement for an aggregate of 180 days (whether business or non-business days and whether or not consecutive) during any period of twelve consecutive calendar months. (b) For "Cause." The Company may terminate Executive's employment under this Agreement for "Cause" only on the basis of: (i) Executive's willful failure substantially to perform his duties with the Company, after a written demand for substantial performance is delivered to Executive by the Board, which written demand specifically identifies the manner in which the Board believes Executive has not substantially performed his duties, or (ii) Executive's willful engagement in conduct materially injurious to the Company. For purposes of this Agreement, no act or failure to act on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for that purpose, finding that in good faith opinion of the Board, Executive was guilty of conduct set forth in clause (i) or clause (ii) of this subsection 5(b) and specifying the particulars thereof in detail. No termination of Executive's employment by the Company for "Cause" shall be effective unless and until it is communicated by the Company to Executive by a written notice that refers to either or both of clause (i) and clause (ii) of this subsection 5(b) as the specific termination provision or provisions relied upon by the Company and that sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of 3 4 Executive's employment under the provision or provisions so indicated. (c) Without "Cause." The Company may terminate Executive's employment under this Agreement without "Cause" at any time, effective at such time as the Board may specify in a motion duly adopted by the affirmative vote of two-thirds of the members of the Board then in office. 6. Compensation and Benefits Following Termination Without "Cause." If the Company terminates Executive's employment under this Agreement without "Cause:" (a) the Company shall pay to Executive, in immediately available funds, within 10 days of the date of termination of Executive's employment, a lump sum amount that is equal to the sum of (A) 24 months' of base salary at the highest rate paid to Executive before the termination, plus (B) two times the average of the annual cash bonuses, if any, received by Executive under the provisions of the Company's Incentive plans or any successor plan with respect to each of the two most recent fiscal years of the Company ended before the termination; (b) the restrictions on any restricted shares held by Executive immediately before the termination of his employment shall expire simultaneously with the termination of his employment; (c) any options to purchase shares in the Company held by Executive immediately before the termination of his employment that were not otherwise exercisable by Executive shall be exercisable by Executive at any time during the 90-day period beginning immediately after the date of termination of his employment; and (d) with the exception of health and medical benefits, which the Company will provide for a period of one year after termination, the Company shall not be obligated to pay any compensation, benefits, or perquisites to Executive by reason of this Agreement after the termination of his employment. If Executive receives any payments under this Agreement as a result of termination of his employment following a termination without Cause, those payments shall be in lieu of any and all other claims or rights that Executive may have for severance, separation, and/or salary continuation pay upon that termination of his employment. 7. Compensation and Benefits Following Termination on Account of Disability. If the Company terminates Executive's employment under subsection 5(a) of this Agreement by reason of Executive's disability: (a) the Company shall pay and provide to Executive, not later than 75 days after the end of the fiscal year in which the termination occurs, that portion of the total bonus, if any, to which he would have been entitled had he continued to be employed under this Agreement through the end of the fiscal year in which the termination occurs, equal to the total bonus multiplied by a fraction, the numerator of which is the number of days in the fiscal year ending on or before the date of Executive's termination and the 4 5 denominator of which is 365; (b) the restrictions on any restricted shares held by Executive immediately before the termination of his employment shall terminate simultaneously with the termination of his employment. 8. Miscellaneous Services following Termination of Employment. Following termination of his full-time employment under this Agreement, Executive shall make himself available at all reasonable times for consultation by and with the Company's officers and directors. If Executive is called upon to render services of this nature, he shall, in consideration therefor and as a condition thereto, receive reasonable compensation for the services rendered and reimbursement for any travel or other out-of-pocket expenses incurred in connection therewith. 9. Benefit. This Agreement shall inure to the benefit of and be enforceable by Executive's personal and legal representatives, executors, administrators, successors, heirs, distributed, devisees, and legatees. If Executive should die while any amounts are still payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there be no such designee, to Executive's estate. 10. Successor to the Company. The Company shall require any successor or assign (whether direct or indirect by purchase, merger. consolidation or otherwise) to all or substantially all the business and/or assets of the Company, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. 11. Confidential Information and Noncompetition. Executive agrees and acknowledges that Executive's talents, skills, and experience are unique, and that Company has invested considerable efforts and money in developing and compiling customer lists, supplier lists, and trade and market information, in developing business techniques and practices, and in maintaining valuable market relationships; that such items and all other information that relates to the business of the Company, the business of any customer or supplier of the Company, or the business of any person, firm, or corporation that consults with or is affiliated with the Company, constitute for purposes hereof the "Confidential Information" of the Company; and that the Confidential Information is valuable property of the company and is vital to the operation and continuation of the Company's business. Confidential Information shall not include information so generally known as to be part of the public domain. Executive acknowledges that the Company has and will disclose Confidential Information to Executive and afford him access to Confidential Information in connection with his employment with the Company. Executive agrees that he shall use such Confidential Information solely for the benefit of the Company. Executive further acknowledges that Executive has received valuable consideration commensurate with those restrictions. Accordingly, Executive agrees and acknowledges that: (a) Except as required in the performance of his duties as an employee of the Company, Executive shall not at any time, either directly or indirectly, use, divulge, 5 6 disclose, or communicate to any person, firm, or corporation in any manner whatsoever any Confidential Information. 6 7 (b) Executive shall be given access to the Company's Confidential Information solely for purposes relating to his employment by the Company. Executive shall have no rights in such Confidential Information or any letters patent, copyrights, or other proprietary rights relating thereto, and Executive hereby assigns to the Company any supplemental or additional information relating to the Confidential Information acquired by Executive, whether solely or in collaboration with others, that relates in any manner to either the subject of Executive's work for the Company or any business of the Company during the Contract Period ("Improvements"). Executive will disclose promptly in writing to the Company all such Improvements or information supplemental or related thereto, and such Improvements shall be treated for all purposes as Confidential Information hereunder. (c) During the Contract Period and thereafter, at the request of the Company and without expense to Executive, Executive shall cooperate in the procurement of any patent, copyright, trademark, or trade name protection in the Company's name that may be necessary or desirable to vest, or to perfect the record of, title to the Confidential Information in the Company. Executive agrees to execute all documents and do all things necessary or desirable in any controversy or otherwise to aid Company in obtaining and enforcing proper protection of its Confidential Information. (d) During the period commencing on the Effective Date and ending on the second anniversary of the first date on which Executive is neither employed by the Company nor a member of the Board (the "Restriction Period"), Executive shall not, directly or indirectly, own, operate, have any other than a minor financial interest in, be employed by, or in any other manner take part in or consult with any business that is the same as, similar to, or competitive with the business of the Company as such business is conducted during the Contract Period. During the Restriction Period, Executive shall not solicit (other than for the benefit of the Company during the Contract Period) any sale or purchase to or from any person who is or was a customer or supplier of the Company during the term of Executive's employment by the Company, either as an employee, agent, consultant, licensee, independent contractor; owner, or otherwise, (e) At any time upon request of the Company and upon termination of his employment by the Company, Executive shall deliver to the Company, and shall not retain for his own or another's Use, any and all lists, information, notes, memoranda, documents, devices, and any other material, and all copies thereof, relating to Executive's work or the products or business of the company of which Executive had knowledge. (f) if any provision of this Section 11 is determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area, it shall be interpreted to extend only over the maximum period of time for which it may be enforceable, or over the maximum geographical area to which it may be enforceable, or both; and such partial unenforceability shall not affect any other provision of this Agreement. Executive acknowledges that, in light of the proprietary interest of the Company in the Confidential Information, the restrictions set forth herein are reasonable and that the remedies at law for the breach of any provision of this Section 11 are inadequate. Accordingly, in the event of any breach, or reasonable belief as to the existence or imminence of a breach, of 7 8 the provisions hereof, the Company shall be entitled to injunctive relief to enjoin the breach (in addition to any other legal and equitable remedies that the Company may have, including an equitable accounting of gain to Executive resulting from the breach), together with all costs and expenses, including reasonable attorney's fees, related to the enforcement by the Company of its rights hereunder. 12. Anti-dilution. If, at any time after the Effective Date and before the date on which any grant of Performance Shares is to be made to Executive pursuant to Section 3(c), above, there occurs any stock dividend, stock split, or share combination of the shares of Common Stock of the Company or any reclassification, recapitalization, merger, consolidation, other form of business combination, liquidation, or dissolution involving the Company or any spin-off or other distribution to shareholders of the Company (other than normal cash dividends), the number of shares of the Company's Common Stock to be granted as Performance Shares shall be appropriately adjusted to the extent necessary in such manner that the benefit to Executive of the grant of those Performance Shares is maintained substantially as before the occurrence of the event. 13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 15. Legal Fees and Expenses. Except for fees and expenses related to the Company's enforcement of the provisions of Section 11, the Company shall pay all legal fees and expenses that Executive may incur as a result of the Company's contesting the validity, enforceability, or Executive's interpretation of, or determinations under, this Agreement. 16. Notice. All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person, or three days after deposit thereof in the official U.S. mails, postage prepaid, for delivery as registered or certified mail, addressed as follows: If to the Company: CUNO Incorporated Attention: Corporate Secretary 400 Research Parkway Meriden, Connecticut 06450 If to the Executive: Frederick C. Flynn, Jr. 256 Ocean Drive West Stamford, Connecticut 06902 8 9 In lieu of personal notice or notice by deposit in the official U.S. mails, a party may give notice by confirmed telegram or fax. Either party may change the address to which notice to that party may be mailed by notifying the other party of the change in the manner contemplated in this section. 17. Effect on Termination and Change of Control Agreement. Executive and the Company shall enter into a Termination and Change of Control Agreement, pursuant to which Executive may become entitled to severance compensation if Executive's employment is terminated under certain circumstances following a Change in Control, as defined in that agreement (the "Change in Control Agreement'). Executive and the Company intend that if a Change in Control, as defined in the Change in Control Agreement, occurs and thereafter Executive receives any payments pursuant to Section 6 of this Agreement (any "Section 6 Payments"), the entire amount of such Section 6 Payments will be treated as damages paid to the Executive by the Company as a result of the Company's breach of an employment contract with the Executive with the result that the payments otherwise due under the Change in Control Agreement will be reduced by the full amount of the Section 6 Payments. The provisions of this Section 17 shall prevail over any inconsistent language in the Change in Control Agreement and, to the extent necessary to be effective shall be deemed to be an amendment to the Change in Control Agreement. 18. Entire Agreement. This Agreement expresses the entire agreement of the parties with respect to the subject matter hereof, and all promises, representations, understandings, arrangements, and prior agreements are merged herein and superseded hereby. No person, other than pursuant to a resolution of the Board, shall have any authority on behalf of the Company to agree to modify or change this Agreement or anything in reference thereto, and any such modification or change must be in writing and signed by both parties. 19. Governing Law. This Agreement has been entered into in, and is intended to be performed primarily within, the State of Connecticut and shall be construed, interpreted, and governed in accordance with the laws of the State of Connecticut. IN WITNESS WHEREOF, the parties have executed this Agreement, effective nunc pro tunc January 5, 1999, as indicated below EXECUTIVE CUNO INCORPORATED /s/ Frederick C. Flynn By: /s/ Mark G. Kachur - --------------------------- --------------------------- FREDERICK C. FLYNN MARK G. KACHUR President & Chief Executive Officer 9 EX-27 3 EXHIBIT 27
5 0001019779 CUNO, INC. 1,000 U.S. DOLLARS 3-MOS OCT-31-1999 FEB-01-1999 APR-30-1999 1 3,378 0 44,047 1,043 27,494 84,126 111,745 54,328 169,475 52,519 13,368 0 0 16 94,153 169,475 54,027 54,027 30,120 30,120 18,412 60 297 5,262 1,947 3,315 0 0 0 3,315 .21 .20
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