-----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, UzIpUjI3sRfq6yF718NbcCoOoK4dOV8tJAhFzL9IP93gjbxSDJKVxnAZLPkrgpMT KYu9bBCT++isbd2hvX1mcA== 0000091817-97-000007.txt : 19970709 0000091817-97-000007.hdr.sgml : 19970709 ACCESSION NUMBER: 0000091817-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970708 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORE INDUSTRIES INC CENTRAL INDEX KEY: 0000091817 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 381052434 STATE OF INCORPORATION: NV FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05034 FILM NUMBER: 97637145 BUSINESS ADDRESS: STREET 1: PO BOX 2000 STREET 2: 500 NORTH WOODWARD CITY: BLOOMFIELD HILLS STATE: MI ZIP: 48304 BUSINESS PHONE: 3136423400 MAIL ADDRESS: STREET 1: PO BOX 2000 STREET 2: 500 NORTH WOODWARD CITY: BLOOMFIELD HILLS STATE: MI ZIP: 48304 FORMER COMPANY: FORMER CONFORMED NAME: SOS CONSOLIDATED INC DATE OF NAME CHANGE: 19780228 FORMER COMPANY: FORMER CONFORMED NAME: SOSS MANUFACTURING CO DATE OF NAME CHANGE: 19690218 10-Q 1 10-Q FOR CORE INDUSTRIES INC SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended May 31, 1997 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . ------- ------- Commission file number 1-5034 CORE INDUSTRIES INC ------------------------------------------------------ (Exact name of registrant as specified in its charter) Nevada 38-1052434 - ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) P. O. Box 2000, Bloomfield Hills, Michigan 48304 - ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (810) 642-3400 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Common Stock outstanding at June 30, 1997 - 10,752,608 shares. -1- CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (In 000s, except per share data)
Third Quarter Ended Nine Months Ended ---------------------- ----------------------- 05/31/97 05/31/96 05/31/97 05/31/96 -------- --------- --------- --------- Net sales $ 76,562 $ 63,124 $ 192,817 $ 167,883 Cost of sales $ 51,096 $ 42,597 $ 127,313 $ 112,718 Selling, general and administrative expenses 17,192 14,110 45,870 38,805 Interest expense 904 1,020 2,403 3,030 Other income (225) (303) (892) (672) -------- --------- --------- --------- $ 68,967 $ 57,424 $ 174,694 $ 153,881 -------- --------- --------- --------- Earnings before taxes on income $ 7,595 $ 5,700 $ 18,123 $ 14,002 Taxes on income 2,870 2,080 6,770 5,110 -------- --------- --------- --------- Net earnings $ 4,725 $ 3,620 $ 11,353 $ 8,892 ======== ========= ========= ========= Net earnings per share $ 0.44 $ 0.34 $ 1.06 $ 0.86 ======== ========= ========= ========= Dividends per share $ 0.06 $ 0.06 $ 0.18 $ 0.18 ======== ========= ========= ========= Average shares of stock outstanding 10,723 10,709 10,721 10,369 ======== ========= ========= ========= See notes to financial statements
-2- CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in 000s) ASSETS
05/31/97 (Unaudited) 08/31/96 ---------- --------- CURRENT ASSETS: Cash and cash equivalents $ 952 $ 572 Accounts receivable, less collection allowances of $1,810 at May 31 and $1,260 at August 31 56,706 56,923 Inventories 65,977 51,935 Prepaid expenses 2,117 1,199 Deferred taxes on income 2,117 2,167 --------- --------- TOTAL CURRENT ASSETS $ 127,869 $ 112,796 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Land and land improvements $ 1,306 $ 896 Buildings 18,244 17,552 Machinery and equipment 44,652 43,173 --------- --------- Total $ 64,202 $ 61,621 Less accumulated depreciation 34,013 35,715 --------- --------- TOTAL PROPERTY, PLANT AND EQUIPMENT $ 30,189 $ 25,906 --------- --------- OTHER ASSETS: Excess of cost over net assets of companies acquired $ 29,917 $ 22,251 Investment in real estate partnership 1,223 1,273 Notes receivable 1,032 4,311 Restricted cash 2,398 -- Prepaid pensions and other 6,950 6,412 --------- --------- TOTAL OTHER ASSETS $ 41,520 $ 34,247 --------- --------- $ 199,578 $ 172,949 ========= ========= LIABILITIES & STOCKHOLDERS' EQUITY 05/31/97 (Unaudited) 08/31/96 ---------- --------- CURRENT LIABILITIES: Notes payable $ 0 $ 5,100 Accounts payable 13,350 13,016 Accrued payroll and other expenses 19,621 15,721 Dividends payable 643 643 Taxes on income 1,081 1,090 Long-term debt due within one year 4,660 4,610 --------- --------- TOTAL CURRENT LIABILITIES $ 39,355 $ 40,180 --------- --------- LONG-TERM DEBT, less amount due within one year 42,188 24,520 DEFERRED TAXES ON INCOME 2,200 2,250 ACCRUED EMPLOYEE BENEFITS 3,632 3,355 STOCKHOLDERS' EQUITY: Preferred stock, par value $1: Authorized - 100,000 shares Issued - none Common stock, par value $1: Authorized - 20,000,000 shares Issued - 11,276,000 shares at May 31 and 11,261,000 at August 31 $ 11,276 $ 11,261 Additional paid-in capital 8,701 8,570 Retained earnings 94,345 84,922 Cumulative translation adjustments 507 517 Treasury stock (553,000 shares) - at cost (2,626) (2,626) --------- --------- TOTAL STOCKHOLDERS' EQUITY $ 112,203 $ 102,644 --------- --------- $ 199,578 $ 172,949 ========= ========= See notes to financial statements
-3- CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (Dollars in 000s)
Additional Cumulative Common Paid-In Retained Translation Treasury Stock Capital Earnings Adjustments Stock -------- ------- -------- ----------- -------- Balance, August 31, 1996 $ 11,261 $ 8,570 $ 84,922 $ 517 ($ 2,626) Net earnings 11,353 Cash dividends declared, $.18 per share (1,930) Stock issued - compensation plans 15 131 Foreign currency adjustments (10) -------- ------- -------- ----------- -------- Balance, May 31, 1997 $ 11,276 $ 8,701 $ 94,345 $ 507 ($ 2,626) ======== ======= ======== =========== ======== See notes to financial statements
-4- CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in 000s)
Nine Months Ended --------------------- 05/31/97 05/31/96 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 11,353 $ 8,892 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 5,265 4,245 Deferred taxes on income -- 3,380 Net changes in: Accounts receivable 4,936 (4,847) Inventories (7,790) (3,103) Prepaid expenses (909) (1,409) Taxes on income (9) (2,009) Accounts payable (1,466) 1,038 Accrued payroll and other expenses (30) (291) Other non-current assets and liabilities (408) (91) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 10,942 $ 5,805 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 8,484) ($ 2,691) Net proceeds from sale of division 556 -- Acquisition of businesses (18,800) (15,643) Discontinued operations -- 13,402 Other 257 69 -------- -------- NET CASH USED IN INVESTING ACTIVITIES ($26,471) ($ 4,863) CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) on short-term notes $ (5,100) $ 7,313 Industrial Development Bond financing 4,000 -- Restricted cash re: bond financing (2,398) -- Changes in long-term debt 15,490 (6,066) Payments received on notes receivables 5,847 -- Cash dividends paid (1,930) (1,875) -------- -------- NET CASH FROM (USED IN) FINANCING ACTIVITIES $ 15,909 ($ 628) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 380 314 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 572 1,135 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 952 $ 1,449 ======== ======== SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 2,675 $ 3,644 ======== ======== Income taxes paid $ 6,038 $ 3,981 ======== ======== See notes to financial statements
-5- CORE INDUSTRIES INC AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (Dollars in 000s unless otherwise stated) NOTE A The accompanying consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the information presented therein, and such adjustments are of a normal recurring nature. NOTE B Reference is made to the Company's Annual Report on Form 10-K for the year ended August 31, 1996, for a description of accounting policies and other detailed footnote information. NOTE C - Inventories
05/31/97 08/31/96 -------- -------- Raw materials and supplies $ 29,891 $ 24,399 Work in process 13,726 7,864 Finished goods 22,360 19,672 -------- -------- $ 65,977 $ 51,935 ======== ========
NOTE D - Acquisition Effective March 1, 1997, the Company acquired substantially all the assets of Air Gage Company, a privately held producer of gaging products and systems, with annual sales in excess of $30 million. The business was purchased for approximately $18.8 million. This transaction was accounted for as a purchase and Air Gage's results of operations have been included since March 1, 1997. NOTE E - New Accounting Standards During October, 1995, the Financial Accounting Standards Board issued Statement No. 123. "Accounting for Stock-Based Compensation," which establishes a fair value-based method of accounting for stock-based compensation and incentive plans and requires additional disclosures for those companies that elect not to adopt the new method of accounting. Adoption of this pronouncement is required and the Company intends to adopt the reporting requirements of the pronouncement in its financial statements for the year ended August 31, 1997. The Company will continue to record compensation expense related to stock options issued as prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." In February, 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share," which is required to be adopted by the Company for the year ending August 31, 1998. Under the new requirements for calculating basic earnings per share, the dilutive effect of stock options will be excluded. The impact of this change will not materially affect the previously reported earnings per share. NOTE F - Subsequent Event On June 25, 1997, the Company entered into a definitive agreement pursuant to which all of the outstanding common stock of the Company is expected to be acquired by United Dominion Industries Ltd. United Dominion has commenced a tender offer to purchase for cash all of the outstanding common stock of Core for $25 per share in cash. -6- NOTE G - Segment Information
Third Quarter Ended ----------------------- 05/31/97 05/31/96 --------- --------- Net Sales Fluid Controls and Construction Products $ 31,290 $ 32,656 Test, Measurement and Control 28,242 17,036 Farm Equipment 17,030 13,432 --------- --------- Total $ 76,562 $ 63,124 ========= ========= Earnings Before Income Taxes Fluid Controls and Construction Products $ 4,479 $ 4,320 Test, Measurement and Control 2,958 1,724 Farm Equipment 2,246 1,555 Corporate unallocated (1,184) (879) Interest expense (904) (1,020) --------- --------- Total $ 7,595 $ 5,700 ========= ========= Nine Months Ended ----------------------- 05/31/97 05/31/96 --------- --------- Net Sales Fluid Controls and Construction Products $ 86,366 $ 84,202 Test, Measurement and Control 61,665 49,527 Farm Equipment 44,786 34,154 --------- --------- Total $ 192,817 $ 167,883 ========= ========= Earnings Before Income Taxes Fluid Controls and Construction Products $ 11,307 $ 11,131 Test, Measurement and Control 6,429 5,013 Farm Equipment 6,081 3,804 Corporate unallocated (3,291) (2,916) Interest expense (2,403) (3,030) --------- --------- Total $ 18,123 $ 14,002 ========= =========
-7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the first nine months of fiscal 1997, sales of $192,817,000 were up 15% over $167,883,000 in the first nine months of fiscal 1996. The 1997 record nine month net earnings of $11,353,000 or $1.06 per share were up 28% over the first nine months of fiscal 1996 net earnings of $8,892,000 or $.86 per share. For the third quarter of fiscal 1997, sales of $76,562,000 were 21% over the sales for the same quarter of last year of $63,124,000. The net earnings for the quarter rose 31% to a record $4,725,000 ($.44 per share) from $3,620,000 ($.34 per share) for the third quarter of fiscal 1996. For the first nine months of fiscal 1997, the Company's Fluid Controls and Construction Products Segment provided 45% of total sales; the Test, Measurement and Control Segment, 32% of total sales; and the Farm Equipment Segment, 23% of sales. For the third quarter, each of the Company's segments grew its earnings over the comparable period last year. The Farm Equipment Segment followed up a very strong first six months with a strong third quarter with sales and earnings before income taxes for the first nine months ahead of last year by 31% and 60%, respectively. The improvement was helped by both the strong grain market and excellent product acceptance. The Test, Measurement and Control Segment also had a very strong third quarter with sales and earnings before taxes for the third quarter 66% and 72% higher, respectively, compared with the 1996 third quarter. This significant growth reflects improvements in their base businesses and the acquisition of Air Gage Company, effective at the beginning of the third quarter. The Fluid Controls and Construction Products Segment delivered higher earnings in the third quarter (4% over last year) despite lower sales and earnings at Flow Technologies in Houston. Other divisions within the Fluid Control Group, especially CMB Industries, posted higher sales and earnings in the third quarter compared with last year. The sale of Poly Craft, Inc. as of April 25, 1997 also contributed to the lower sales in this segment. Overall gross margins on net sales for the nine months of fiscal 1997 improved to 34.0% from 32.9% last year as a result of favorable product mix changes. Selling, general and administrative expenses increased to 23.8% of sales in this year's nine months from 23.1% last year, primarily due to higher sales expenses at CMB Industries. CMB (acquired in the second quarter of fiscal 1996), traditionally has had higher selling expenses as a percent of sales than Core due to its higher distribution costs. Interest expense declined 21% in this year's first half compared with last year due to reduced borrowings. The increase in other income for the first nine months of 1997 compared with last year relates primarily to higher interest income. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) LIQUIDITY AND CAPITAL RESOURCES At May 31, 1997, the Company had working capital of $89 million and a current ratio of 3.2 to 1, and the Company's capital employed (total debt and equity) amounted to $159 million. The debt to capital ratio remains at the year ago level of 28% despite significant investments made in the business. Over the past 12 months $11.2 million was invested in capital expenditures and $18.8 million was invested in the acquisition of Air Gage Company, acquired effective March 1, 1997. These investments were financed principally by the $19.3 million in cash provided by operating activities and increases in long-term debt. In January 1997, the Company replaced a $20 million line of credit facility with a $50 million unsecured revolving agreement with a major domestic bank. $21.6 million was borrowed under this facility at May 31, 1997. Management believes that this new committed borrowing facility, together with the Company's expected cash flows from operations are adequate to fund its strategies for future growth, including working capital, expenditures for manufacturing expansion and efficiencies, new product development, and future acquisitions. In December 1996, the Company obtained $4,000,000 in low interest industrial development revenue bond financing. These funds are being used to support expansion at the Company's Sunflower Manufacturing facility in Beloit, Kansas. At the Company's current quarterly dividend rate of $.06 per share, annual dividend payments would approximate $2.6 million. Under the Company's debt agreements with insurance companies, retained earnings of approximately $34 million are available for dividends, subject to future earnings levels. -9- PART II - OTHER INFORMATION Items 1, 2, 3 and 4 of Part II are omitted because they are not applicable or because they are not required. ITEM 5. OTHER INFORMATION On June 25, 1997, the Company entered into a definitive agreement pursuant to which all of the outstanding common stock of the Company is expected to be acquired by United Dominion Industries Ltd. United Dominion has commenced a tender offer to purchase for cash all of the outstanding common stock of Core for $25 per share in cash. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10(k)(1) Change in Control Agreement with Mark J. MacGuidwin* 10(k)(2) Agreement and Plan of Merger, dated as of June 25, 1997, among the Company, Parent and Purchaser* (b) With respect to the Company's acquisition of Air Gage Company, a Form 8-K was filed on May 16, 1997. *Incorporated by reference to the Company's Schedule 14D-9 Solicitation Statement filed July 2, 1997. -10- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CORE INDUSTRIES INC ---------------------------------------------------- (Registrant) Date: July 8, 1997 /s/ MARK J. MACGUIDWIN ------------ ---------------------------------------------------- Mark J. MacGuidwin Vice President-Finance and Chief Financial Officer Date: July 8, 1997 /s/ THOMAS G. HOOPER ------------ ---------------------------------------------------- Thomas G. Hooper Treasurer and Controller -11- INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION 27 Financial Data Schedule
EX-27 2 EXHIBIT 27
5 9-MOS AUG-31-1997 SEP-01-1996 MAY-31-1997 952,000 0 58,516,000 (1,810,000) 65,977,000 127,869,000 64,202,000 34,013,000 199,578,000 39,355,000 42,188,000 0 0 11,276,000 100,927,000 199,578,000 192,817,000 192,817,000 127,313,000 173,183,000 (892,000) 0 2,403,000 18,123,000 6,770,000 11,353,000 0 0 0 11,353,000 1.06 1.06
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