-----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, Or8ysrQjtAKbq5mn/Ce6x5PWn2Y/poNC4nqWcvEpRGCFB9be4kdo3kZEZaIF+Oo/ FVpngXdxh2iLiaN+dZMyzA== 0000950131-97-001359.txt : 19970228 0000950131-97-001359.hdr.sgml : 19970228 ACCESSION NUMBER: 0000950131-97-001359 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970227 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-21109 FILM NUMBER: 97545119 BUSINESS ADDRESS: STREET 1: 400 RESEARCH PARKWAY CITY: HERIDEA STATE: CT ZIP: 06450 BUSINESS PHONE: 203-237-5541 MAIL ADDRESS: STREET 1: 400 RESEARCH PARKWAY CITY: HERIDEA STATE: CT ZIP: 06450 10-Q 1 FORM 10-Q 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 quarter ended January 31, 1997 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 --13,822,076 shares as of February 26, 1997. INDEX CUNO INCORPORATED
Page ---- Part I. Financial Information 3 Item 1. Condensed Financial Statements (Unaudited) Statements of Consolidated Income for the Three Months Ended January 31, 1997 and 1996 3 Consolidated Balance Sheets as of January 31, 1997 and October 31, 1996 4 Statements of Consolidated Cash Flows for the Three Months Ended January 31, 1997 and 1996 5 Notes to Unaudited Condensed Consolidated Financial Statements as of January 31, 1997 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10
-2- CUNO Incorporated and Subsidiaries Statements of Consolidated Income (Unaudited) (dollars in thousands, except share amounts)
Three Months Ended January 31, 1997 1996 ---------------- ----------------- Net sales $ 44,839 $ 41,004 Less costs and expenses: Cost of products sold 25,638 25,256 Selling, general and administrative expenses 15,274 13,112 ---------------- ----------------- 40,912 38,368 ---------------- ----------------- Operating income 3,927 2,636 Nonoperating income (expense): Interest income 36 31 Interest expense (591) (101) Exchange losses (26) (10) Gain on sale of assets 6 98 Other (48) (13) ---------------- ----------------- (623) 5 ---------------- ----------------- Income before income taxes 3,304 2,641 Provision for income taxes 1,239 790 ---------------- ----------------- Net income $ 2,065 $ 1,851 ================ ================= Net income per common share $ 0.15 $ 0.14 =============== =============== Weighted average common shares outstanding 13,809,608 13,565,922 =============== =============== See notes to unaudited condensed consolidated financial statements.
-3- CUNO Incorporated and Subsidiaries Consolidated Balance Sheets (in thousands, except per share data)
January 31, 1997 October 31, (unaudited) 1996 ----------- ----------- Assets Current assets Cash and cash equivalents $ 3,586 $ 5,244 Accounts and notes receivable (less allowances for doubtful accounts of $1,406 and $1,133, respectively) 36,437 36,944 Inventories 19,712 19,149 Deferred income taxes 5,301 5,333 Prepaid expenses and other current assets 1,393 1,484 -------- -------- Total current assets 66,429 68,154 Noncurrent assets Intangible assets, net 19,213 19,695 Pension assets 1,146 1,174 Other noncurrent assets 1,493 1,532 Property, plant and equipment, net 46,817 48,201 -------- -------- Total assets $135,098 $138,756 ======== ======== Liabilities and Stockholders' Equity Current liabilities Bank loans $ 12,306 $ 10,690 Accounts payable 11,797 12,719 Accrued payrolls and related taxes 6,905 9,084 Accrued expenses 7,223 6,986 Accrued income taxes 2,269 1,360 Current portion of long-term debt 912 962 Dividends payable to related party 2,170 4,612 Payable to related party 6,703 10,184 -------- -------- Total current liabilities 50,285 56,597 Noncurrent liabilities Long-term debt 35,577 33,772 Deferred income taxes 3,544 3,670 Retirement benefits 1,541 1,569 -------- -------- Total noncurrent liabilities 40,662 39,011 Stockholders' equity Preferred stock, $.001 par value; 2,000,000 shares authorized, no shares issued and outstanding - - Common Stock, $.001 par value; 50,000,000 shares authorized, 13,822,076 and 13,774,568 shares outstanding 14 14 Additional paid-in-capital 7,262 6,736 Retained earnings 35,701 33,636 Unearned compensation (3,578) (3,448) Minimum pension liability adjustment (811) (811) Translation adjustments 5,563 7,021 -------- -------- Total stockholders' equity 44,151 43,148 -------- -------- Total liabilities and stockholders' equity $135,098 $138,756 ======== ========
See notes to unaudited condensed consolidated financial statements. -4-
CUNO Incorporated and Subsidiaries Statements of Consolidated Cash Flows (unaudited) (dollars in thousands) Three months ended, January 31, 1997 1996 ---- ---- Operating activities Net income $ 2,065 $ 1,851 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Depreciation and amortization 1,779 2,032 Gain on sale of equipment (4) - Provision for unearned compensation 404 - Pension plan credits - 309 Change in deferred income taxes (228) 708 Changes in assets and liabilities: Accounts receivable (465) (49) Inventories (1,196) 278 Prepaid expenses and other current assets (604) (30) Payables to related party (3,149) 537 Accounts payable and accrued expenses (2,078) (2,787) Accrued income taxes 891 (1,220) ------- ------- Net cash (used for) provided by operating activities (2,585) 1,629 Investing activities Proceeds from sale of equipment 39 9 Capital expenditures (1,001) (1,050) ------- ------- Net cash (used for) investing activities (962) (1,041) Financing activities Proceeds from long-term debt 4,000 - Principal payments on long-term debt (2,049) (46) Net borrowings under bank loan agreements 2,371 344 Conversion of other assets - (558) Dividends paid to related party (2,352) - ------- ------- Net cash provided by (used for) financing activities 1,970 (260) Effect of exchange rate changes on cash and cash equivalents (81) (240) ------- ------- Net change in cash and cash equivalents (1,658) 88 Cash and cash equivalents -- beginning of period 5,244 6,740 ------- ------- Cash and cash equivalents -- end of period $ 3,586 $ 6,828 ======= =======
See notes to unaudited condensed consolidated financial statements. -5- CUNO INCORPORATED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997 Note A - CUNO Organization and Distribution On July 29, 1996, the Board of Directors of Commercial Intertech Corp. ("Commercial Intertech" or "Related Party") approved a plan to spin-off its fluid purification business by declaring a dividend distribution of 100% of the common stock of Cuno Incorporated ("CUNO" or the "Company") on a pro- rata basis to the holders of Commercial Intertech common shares (the "Distribution" or "Spin-off"). On September 10, 1996, the Distribution date, each holder of record of Commercial Intertech common shares as of the close of business on August 9, 1996, the record date for the Distribution, received one share of CUNO Common Stock for every one share of Commercial Intertech common share. No fractional shares of CUNO were issued. In connection with the Spin-off, the Company declared dividends of approximately $35,675,000 payable from the CUNO subsidiaries to the parent (Commercial Intertech), and immediately prior to the Distribution, Cuno assumed $30,000,000 of Commercial Intertech's debt in the form of a dividend. CUNO and Commercial Intertech have entered into a Tax Allocation Agreement in connection with the Distribution. In addition, the companies have entered into a Distribution and Interim Services Agreement which provides that certain services which have historically been provided to CUNO by Commercial Intertech will continue to be provided following the Distribution Date, at rates specified in such agreement, for a period of up to twelve months. Note B - Basis of Presentation 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 three-month period ended January 31, 1997 are not necessarily indicative of the results that may be expected for the year ending October 31, 1997. The condensed consolidated balance sheet at October 31, 1996 was derived from the audited financial statements as of that date. For further information, refer to the consolidated financial statements and footnotes thereto included in CUNO Incorporated's Form 10-K for the year ended October 31, 1996. Note C - Earnings per share data All share and per share information has been retroactively restated to reflect the Distribution in a manner similar to a stock split. In determining the weighted average number of common shares outstanding, it was assumed that the shares issued in conjunction with the reorganization were outstanding during each period presented. Fully diluted earnings per share is not presented as the effect of common stock equivalents was not material. Note D - Income Taxes The Company's effective income tax rate for the period was 37.5% compared to 30.0% during the first quarter of 1996. The change reflects a loss of certain foreign tax benefits previously realized when the Company was a part of Commercial Intertech's combined tax group. -6- Note E - Inventories Inventories consisted of the following:
January 31, October 31, 1997 1996 ----------- ----------- (In thousands) Raw materials $ 2,642 $ 2,817 Work-in-process 8,001 6,503 Finished goods 9,069 9,829 ------- ------- $19,712 $19,149 ======= =======
Inventories are stated at the lower of cost of market. Inventories in the United States are primarily valued on the last-in, first-out (LIFO) cost method. The 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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three Months Ended January 31, 1997 Compared To Three Months Ended January 31, 1996 Results of operations for the three months ended January 31, 1997 are not comparable to the three months ended January 31, 1996 because the Spin-off occurred in the last quarter of fiscal year 1996. Results for the first quarter of fiscal year 1996 do not include increased interest expense related to the $30.0 million in debt assumed in the Spin-off, a higher tax rate resulting from the loss of certain foreign tax benefits previously realized when the Company was part of the Commercial Intertech combined tax group and the amortization expense of performance shares. Net Sales. Net sales of $44.8 million in the first quarter of fiscal year 1997 represented a 9.4% increase over net sales of $41.0 million in the first quarter of fiscal year 1996. The effects of foreign currency fluctuations reduced net sales by $3.8 million as compared to the first quarter in the prior fiscal year. Net sales for the Company's U.S. operations increased by 15.0% over the same period, reflecting continued penetration of the health care market by nylon membrane products. Gross Profit. Gross profit in the first quarter of fiscal year 1997 increased by $3.5 million, or 21.9%, to $19.2 million from $15.7 million in the first quarter of fiscal year 1996 and increased as a percentage of net sales to 42.8% from 38.4%. This increase was a result of continued improvement in manufacturing efficiencies, particularly in the U.S., in combination with expanded sales of higher margin nylon membrane products. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $2.2 million, or 16.5%, to $15.3 million in the first quarter of fiscal year 1997 from $13.1 million in the first quarter of fiscal year 1996 and increased as a percentage of net sales to 34.1% from 32.0% over the same period. Growth in these expenses stems from continued investment in selling and engineering resources worldwide and from projects related to new data processing systems in the U.S., Brazil and Singapore. Operating Income. Operating income increased by $1.3 million, or 49.0%, to $3.9 million in the first quarter of fiscal year 1997 from $2.6 million in the first quarter of fiscal year 1996, with most of that gain in the U.S., where expanded sales, an improved product mix and greater efficiencies resulted in an overall significant improvement in operating performance. Interest Expense. Interest expense increased by $0.5 million to $0.6 million in the first quarter of fiscal year 1997 from $0.1 million in the first quarter of fiscal year 1996. The increase in interest expense primarily resulted from the $30.0 million of debt assumed by the Company in conjunction with the Spin-off. Income Taxes. The Company's effective income tax rate for the first quarter of 1997 was 37.5% as compared to 30.0% during the first quarter of fiscal year 1996. The change reflects a loss of certain foreign tax benefits previously realized when the Company was a part of the Commercial Intertech combined tax group. -7- Liquidity and Capital Resources In the first quarter of fiscal year 1997, the Company generated cash from operations of $.6 million before reducing its related party payables to Commercial Intertech by $3.2 million, resulting in a net cash used in operations of $2.6 million. In addition, the Company reduced its dividends payable to Commercial Intertech by $2.4 million. By October 1997, the Company expects to pay the balance of $8.9 million of payables due to Commercial Intertech as of January 31, 1997, as well as other amounts due under the Distribution and Interim Services Agreement between the Company and Commercial Intertech. -8- PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K No reports were filed on Form 8-K during the quarter for which this 10-Q is filed. -9- 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 2/26/97 By /s/ Ronald C. Drabik -------------------- ---------------------------- Ronald C. Drabik Senior Vice President and Chief Financial Officer -10- EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS 3-MOS OCT-31-1996 OCT-31-1996 NOV-01-1996 NOV-01-1995 JAN-31-1997 JAN-31-1996 3,586 5,244 0 0 37,843 38,077 1,406 1,133 19,712 19,149 66,429 68,154 95,366 96,150 48,548 47,949 135,008 138,756 50,285 56,597 0 0 14 14 0 0 0 0 44,137 43,134 135,008 138,756 44,839 41,004 44,839 41,004 25,638 25,256 40,912 38,368 32 (106) 0 0 591 101 3,304 2,641 1,239 790 2,065 1,851 0 0 0 0 0 0 2,065 1,851 .15 .14 0 0
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