-----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, L+imK0Fvy6mEef6uzcl/vYXHhNCg0OXF13clssGOv9ECadzPm7bgNuoPcsJsy8j4 wbb70PRB2Z43NSty+f4p6w== 0000950124-96-004544.txt : 19961031 0000950124-96-004544.hdr.sgml : 19961031 ACCESSION NUMBER: 0000950124-96-004544 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961030 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-05034 FILM NUMBER: 96649831 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-K405 1 FORM 10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K /x/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended August 31, 1996 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 incorporation or organization) (I.R.S. Employer Identification No.) 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 Securities registered pursuant to Section 12(b) of the Act: ----------------------------------------- Title of each class Name of each exchange on which registered - -------------------------------------------------------------- ----------------------------------------- Common Stock New York Stock Exchange - -------------------------------------------------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act: None ---- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/ As of September 30, 1996, 10,710,930 common shares were outstanding, and the aggregate market value of the common shares held by nonaffiliates of the Registrant (based upon the closing sale price of $13.63 for these shares on the New York Stock Exchange) was approximately $146 million. Certain sections of the definitive proxy statement to be filed for the Annual Meeting of Stockholders to be held on January 14, 1997 are incorporated by reference in Part III of this Form 10-K. 2 PART I ITEM 1. BUSINESS (A) GENERAL DEVELOPMENT OF THE COMPANY The Company was incorporated under the name of Soss Manufacturing Company in 1909 as a manufacturer of a line of concealed hinges sold to the hardware, furniture and home building trades and subsequently developed hinges and other stampings for the infant automotive industry. The Company went public in 1937 and had its shares traded on the American Stock Exchange. In 1958, the Company began to diversify its interests through the acquisition of a number of businesses. It presently groups its businesses into three industry segments: Fluid Controls and Construction Products; Test, Measurement and Control; and Farm Equipment. From sales of $5,000,000 in 1958, 90% of which were derived from the production of automobile parts, the Company has grown to its present size and diversified structure with less than five percent automotive business. The Company changed its name in January 1969 to SOS Consolidated Inc. to help alleviate confusion between the parent company and its automotive division. In April 1969, the Company's shares were listed for trading on the New York Stock Exchange. In January 1978, the Company adopted the name Core Industries Inc, as being more representative of its operations. Various acquisitions, primarily in the electronics industry, contributed to the Company's sales growth in the 1980s. However, in 1992, after several years of declining earnings, the Company divested three unprofitable electronics subsidiaries and instituted a plan to become a more focused business. Since then, the Company has made six acquisitions related to existing businesses and has sold three unrelated operations. During 1996, the Company sold its wholly-owned electronics-related subsidiary, Cherokee International, Inc. and its subsidiaries (collectively "Cherokee") for cash and a long-term note receivable. Cherokee had been classified as a discontinued operation as of August 31, 1995. The Company plans to grow in its focus businesses through new products and additional geographic and end-user markets, as well as making selected, strategic acquisitions in its focus areas. Under the Company's method of operation and control, each division operates as a separate and autonomous entity with its own manufacturing, engineering, accounting, sales staff and distribution network. Personnel at Corporate office direct overall policies and perform services for all divisions in the areas of financial and treasury control, manufacturing consultation, information systems and marketing. Corporate maintains involvement in the divisions through direct contact, reviews of budgets and reports, internal auditing and involvement in formal planning. In addition, the Corporate office develops and implements strategic options to increase shareholder value and responds to division results and opportunities. (B) INDUSTRY SEGMENTS The Company is engaged principally in the manufacture of specialty products for commercial and industrial use. Required industry segment financial information is set forth in the notes to consolidated financial statements incorporated herein by reference. The Company operates in three segments: Fluid Controls and Construction Products; Test, Measurement and Control; and Farm Equipment. FLUID CONTROLS AND CONSTRUCTION PRODUCTS Fluid Controls and Construction Products and services cover a broad range from specialty valves and pipeline strainers for various fluid control applications to molded plastic parts, metal stampings and hinges, and mechanical contracting. This group serves the Heating, Ventilation and Air Conditioning ("HVAC") market as well as the chemical and petrochemical processing industry, oil and gas industry, the irrigation industry, the paper and food processing industry, the commercial construction market, and general industry. 2 3 The CORE FLUID CONTROLS GROUP (CFCG) is a major part of this segment and consists of the following units: MUELLER STEAM SPECIALTY is the largest division of CFCG and manufactures four primary product lines: strainers and specialty valves, check valves, butterfly valves and non-lubricated plug valves. Mueller believes that it is the largest manufacturer of pipeline strainers and check valves in the world. Pipeline strainers catch objects larger than 40 microns and prevent them from damaging machinery. Strainers and valves are used in various kinds of industrial processes and plants, essentially wherever piping systems exist. Mueller believes that it carries a product line that is more extensive than most of its competitors, and Mueller's ability to design, build, and ship products in a short time frame is well known in the industry. Business is derived largely from quoting jobs as well as from stocking distributors and retrofit orders. Valves designed by Mueller are outsourced from approximately 65 foundries throughout the world. Once castings are received at Mueller's North Carolina plant, Mueller machines, assembles, tests, and packages the valves to meet a wide variety of specifications. Orders are typically processed within a week of their receipt. CMB INDUSTRIES (CMB), located in Fresno, California, was acquired in fiscal 1996 and is the second largest division of CFCG. CMB designs and manufactures a broad line of bronze and ductile iron products for the backflow prevention industry under the FEBCO name. FEBCO has a network of highly trained agents that sell worldwide to the end user. FEBCO is an industry leader in backflow prevention sales and is also the valve of choice in many municipal and fire protection markets. CMB's Bailey Polyjet product is a custom-designed, multi-jet, sleeve-type control valve engineered for optimum performance for high pressure drops and precise flow control over a wide range, solving cavitation problems in waterworks, power generation and industrial applications. MUELLER FLOW TECHNOLOGY, located in Houston, Texas, includes two companies acquired in 1994 and 1995. HENDRIX STEEL & FABRICATING is a full-service fabricating company specializing in pressure vessels and specialty and custom flow control products. OIL AND GAS SPECIALTY COMPANY (OGASCO) specializes in fluid measurement systems and related products widely used in the oil and gas industry, petrochemical industry and other markets where precise flow measurement is required. Other United States operations of CFCG include MUELLER WEST, a Phoenix, Arizona, distribution center; ASSOCIATED PIPING EQUIPMENT, INC., a supplier of commodity type valves and strainers; and MUELLER VALVE SPECIALTIES, formed in 1996 to manufacture a full line of manual and automated teflon sleeved and lined plug valves for the chemical and petrochemical industries. CFCG's overseas locations include MUELLER ASIA, located in Singapore, and MUELLER/DAVIS FILTERS LTD., located in the United Kingdom. MUELLER ASIA is a sales, warehouse and distribution center for the entire Pacific Rim which will also begin manufacturing operations in FY 1997. MUELLER/DAVIS FILTERS LTD., which was acquired in 1996, is a manufacturer of "Y" type strainers for the pipeline industry, and also will market other CFCG products in Europe. Other companies in the Fluid Controls and Construction Products segment are POLY CRAFT (injection molded plastic products), UNIVERSAL INDUSTRIAL PRODUCTS (UIP)commercial lawnmower blades and Soss hinges, and THE ROBERT CARTER CORPORATION (mechanical contractor). Poly Craft and UIP each represent less than five percent of Core's total sales and all three account for less than five percent of Core's total earnings. There is substantial competition in the markets served by this segment, and in certain instances, the Company competes with companies whose financial resources are greater. This segment's backlog aggregated $21,500,000 at August 31, 1996, as compared to $21,400,000 at August 31, 1995. It is anticipated that substantially all of the backlog will be filled during the year ending August 31, 1997. In general, this segment business is not seasonal in nature. The primary raw materials used by this product segment are steel coil and sheet, castings made of various metals, resins and plastics. The Company generally obtains these materials from several sources, including foreign suppliers, and materials are readily available. 3 4 The Company holds important patents related to its CMB product line. Other patents relative to this product segment, although of value, do not play a significant part in the Company's operations. The Company also has registered certain product trademarks which are considered to be of value. TEST, MEASUREMENT AND CONTROL The Test, Measurement and Control group is Core's second largest segment. The Company believes it is the leading producer of selected electrical test, measurement and control products. Sales are primarily made through dealers and manufacturers' representatives in the United States and abroad. This group serves the electrical, construction, and maintenance markets; the HVAC industry; factory automation companies; computer and telecommunications manufacturers, and general industry. AMPROBE INSTRUMENT has been recognized as a leader in quality test equipment for professionals in the electrical, HVAC, construction, and maintenance markets. Amprobe primarily manufactures hand-held devices, which are used by professionals for testing and measuring electrical properties in various field applications. Amprobe's name is well recognized in the industry and represents a significant asset in marketing its products. Amprobe believes that its products have a reputation for being reliable and competitively priced. Primary products include clamp-on units, multi-meters (volt/amp/ohmmeters), circuit tracers, harmonic analyzers, ultrasonic leak detectors, and refrigerant recovery products. The 1995 acquisition of Promax, a manufacturer of refrigerant recycling and recovery products, has strengthened Amprobe's presence in the HVAC market. All sales are made through distributors and catalogs. Amprobe's advertising is targeted directly to consumers to create demand at the distributor level. Amprobe performs primarily light assembly and calibration in its ISO 9000 certified plant in Lynbrook, New York, and conducts research and development activities in Denver, Colorado. Amprobe's new product development efforts include enhancing the features of existing products, and introducing new products such as circuit tracers, digital clamp-on units, ultrasonic leak detectors, and refrigerant recovery products. Known in the industry for its clamp-on products, Amprobe is continually improving and expanding its products offerings. Amprobe has developed a strong presence in the refrigerant recycling and recovery product market. The Company believes that oil-less recovery products of Promax offer a number of performance advantages over competitive systems. This product line is sold through its HVAC distribution channels. GSE, INC. operates in three areas: "tech-motive" tools, measurement and control products (including torque sensors), and scales and weighing systems. "tech-motive" tools are a line of direct current electric nutrunners and electronic controllers for accurate fastening in manufacturing or repair applications. GSE's measurement and control products are used in a wide variety of applications and industries. GSE provides process controllers and monitors for process operations and sensors and systems testing equipment for measuring forces such as torque. Scales and weighing systems consist of programmable scales and controllers used for accurate measurement, parts counting, or weight-based processes. GSE manufactures numerous torque measuring devices and has the exclusive license to a non-contact torque sensing technology. Non-contact torque measurement has two important applications in vehicles and predictive maintenance in industrial applications such as oil drilling. Management believes that significant additional revenues from this application may be developed over the next several years, but there can be no assurance that technological obstacles can be overcome or that sufficient market acceptance can be achieved to permit this application to make a significant contribution to this segment's revenues or earnings. "tech-motive" products represent another major growth area for GSE. Their nutrunner products provide accurate, reliable fastening and offer significant performance advantages over other fastener systems products such as pneumatic tools. Its new CS 4000 tech-motive tool nutrunner system is the first tool of its kind with 100% digital communications. Although the overall nutrunner market is fairly mature, DC electric systems are growing and taking market share from other systems. Additionally, GSE is benefitting from the worldwide macro trend toward superior manufacturing quality and the increased emphasis on the importance of quality in safety-related applications. 4 5 GSE's programmable scales and weighing systems is its other growth area. GSE continues to grow in this area by expanding its research and development effort to remain a technology leader and introducing new products that provide greater value than competing systems. New product offerings include both products for general applications and specialized systems for unique applications. GSE's primary strategy is to become the technology leader in applying controlled strain gage technology to high performance tooling, torque sensing, and programmable weighing systems. Through new product development, GSE seeks to grow in its existing markets and penetrate related markets. GSE also seeks to expand its presence in Europe, largely by increasing the distribution of its scale systems. GREAT LAKES/EGLINTON (GLE) is a well-recognized manufacturer of high precision carbide tooling. It accounts for less than five percent of Core's total sales and earnings. There is substantial competition in the markets served by this segment, and in certain instances, the Company competes with companies whose financial resources are greater. The backlog of this segment aggregated $5,500,000 at August 31, 1996, as compared to $5,000,000 at August 31, 1995. It is anticipated that all of the backlog will be shipped during the year ending August 31, 1997. In general, the business of this segment is not highly seasonal in nature. This segment's products are made principally from purchased electronic components and materials which are readily available from numerous sources. The Company holds important patents related to its "tech-motive" tool product line. Other patents relative to this segment, although of value, do not play a significant part in the Company's operations, although the exclusive right to distribute the non-contact torque sensing technology in the Americas and Europe has strong potential. The Company also has licenses and has registered certain product trademarks which are considered to be of value. FARM EQUIPMENT The Farm Equipment segment is made up of short line products for the farm industry. Core believes it is the leading producer of tillage equipment in the High Plains region and a leading manufacturer of grain augers. Although farm equipment is a traditionally seasonal business, certain sales strategies significantly reduce seasonal fluctuations. Sales are made through dealers and distributors primarily in the High Plains and Midwest United States, as well as in Canada. In 1996, while continuing to be profitable, results were reduced by unfavorable weather conditions in the farm belt. SUNFLOWER MANUFACTURING COMPANY, INC. is among the world's leading producers of high-quality disc harrows. Its grain drills and other tillage equipment are also known for their quality, reliability and value. This equipment is used to prepare land for seeding and for seeding operations. The primary market for Sunflower equipment is the High Plains states of Texas, Colorado, Nebraska, Kansas, and the Dakotas. Secondary market areas include the Midwest, and Sunflower is working to expand into the delta region of the South. Sunflower equipment is sold through a direct sales force and an independent dealership network of more than 400 dealers. Within this 400 dealership network, Sunflower believes it has approximately a 20% share of all tillage equipment sold. Tillage equipment usually represents 10 to 15% of a dealer's sales. Sunflower enhances its dealer relationships by training and educating its dealers and by providing outstanding customer service. Sunflower has benefitted from the 1990 Farm Bill, which required farmers on erosion-prone soil to maintain a certain percentage of residue. Sunflower manufactures several conservation tillage tools which protect topsoil from erosion. Sunflower is continually implementing product design changes to comply with conservation tillage regulations. 5 6 FETERL MANUFACTURING COMPANY (grain augers, cleaners and service bodies) and RICHARDTON MANUFACTURING COMPANY (foraging wagons) form the remainder of Core's Farm Equipment segment. Neither business accounts for more than five percent of Core's total sales, although Feterl accounts for slightly more than five percent of total earnings. There is substantial competition in the markets served by this segment, and in certain instances, the Company competes with companies whose financial resources are greater. This segment's backlog aggregated $7,200,000 at August 31, 1996, as compared to $3,800,000 at August 31, 1995. It is anticipated that substantially all of the backlog will be shipped during the first quarter of fiscal 1997. Sales of many products are seasonal in nature. The Company partially mitigates this seasonality by balancing production throughout the year. The farm economy has been, historically, very cyclical and can be significantly affected by the general economy and the weather. As is customary in the farm equipment industry, the Company makes many sales with seasonal dating payment terms to its farm equipment customers. The primary raw material used by the businesses within this segment is standard sheet steel which is readily available from numerous sources. The Company holds various patents relating to the products of this segment which, although of value, do not play a significant part in the Company's operations. The Company also has registered certain product trademarks which are considered to be of value. (C) EMPLOYMENT At August 31, 1996, there were approximately 1,565 people employed by the Company in its operations, of whom 1,500 were employed in the United States. (D) OTHER While the Company places a high emphasis on the development of new and improved products, research and development activities did not represent significant expenditures during the past three years. Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, is not expected to have a material effect upon the capital expenditures, earnings and competitive position of the Company. 6 7 ITEM 2.PROPERTIES - -------------------------- Listed below are the major properties of the Company:
SQUARE OWNED EXPIRATION FOOT OR DATE OF BUSINESS LOCATION AREA LEASED LEASE SEGMENT - -------------------------- ------------------ ------------------ ---------- ----------------------------- Bridgeport, Michigan 23,000 Owned Test, Measurement and Control Farmington Hills, Michigan 36,000 Owned Test, Measurement and Control Lynbrook, New York 49,000 Owned Test, Measurement and Control Southfield, Michigan 8,000 Leased 1999 Test, Measurement and Control Denver, Colorado 18,000 Leased 1997 Test, Measurement and Control Beloit, Kansas 88,000 Owned Farm Equipment Cawker City, Kansas 51,000 Owned Farm Equipment Richardton, North Dakota 37,000 Owned Farm Equipment Salem, South Dakota 108,500 Owned Farm Equipment Houston, Texas 32,000 Owned Fluid Controls and Construction Products 18,000 Leased 1997 Lumberton, North Carolina 144,000 Owned Fluid Controls and Construction Products St. Pauls, North Carolina 216,000 Owned Fluid Controls and Construction Products Fresno, California 116,000 Leased 2005 Fluid Controls and Construction Products Phoenix, Arizona 14,000 Leased 1997 Fluid Controls and Construction Products Pioneer, Ohio 66,400 Owned Fluid Controls and Construction Products Wauseon, Ohio 47,000 Owned Fluid Controls and Construction Products Singapore 26,700 Owned Fluid Controls and Construction Products 9,300 Leased 2006 Bloomfield Hills, Michigan 12,000 Leased 2001 Corporate Offices
All of the above properties are substantially utilized, are suitable for the Company's needs and have sufficient productive capacity. ITEM 3. LEGAL PROCEEDINGS On August 8, 1996, a lawsuit was served on Core Industries Inc (the "Company"). The lawsuit is entitled "Electro Lock, Inc., vs. Dynamic Acquisition Corporation, Inc., Cherokee International, Inc., Core Industries Inc, CI Tustin, Inc., CII Tustin, Inc., and Motec Industries, Inc.," Case No. BC 155007, and was filed in the Superior Court of California, County of Los Angeles, Central District. The Complaint seeks significant unsubstantiated damages in connection with allegedly defective components supplied by Dynamic Acquisition Corporation, Inc. ("Dynamic," which is a subsidiary of a subsidiary of the Registrant) to Electro Lock, Inc. ("Electro Lock"). Electro Lock also seeks damages against CII Tustin, Inc. (the parent of Dynamic) and against the Registrant (the parent of CII Tustin, Inc.), as alter egos of Dynamic. The case is in its early stages. The operations of CII Tustin, Inc. and of Dynamic have been reported by the Company as discontinued operations since August 31, 1995. Dynamic had total assets of approximately $700,000 as of August 31, 1996. The Company intends to defend vigorously any claims against it, and management of the Company believes that the ultimate disposition of this matter will not have a material effect on the Company's financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of 1996 to a vote of security holders through a solicitation of proxies or otherwise. 7 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS At August 31, 1996, there were 1,898 shareholders of record of the common stock of Core Industries Inc. The Company's common stock is traded on the New York Stock Exchange. The following table indicates the high and low sales prices of the common stock of the Company, and the dividends paid per share for the periods indicated:
YEAR ENDED MARKET PRICE ----------------- AUGUST 31, 1996 HIGH LOW DIVIDENDS --------------- --------- ------ --------- First quarter $14 $11 $.06 Second quarter 14-1/2 12-1/8 .06 Third quarter 15-7/8 13-5/8 .06 Fourth quarter 15-3/4 11-1/2 .06 --------- $ .24 =========
YEAR ENDED MARKET PRICE ------------------ AUGUST 31, 1995 HIGH LOW DIVIDENDS --------------- ---------- ------ --------- First quarter $11-1/8 $8-5/8 $.06 Second quarter 12-1/2 9-1/2 .06 Third quarter 12-5/8 10 .06 Fourth quarter 12-5/8 9-3/4 .06 --------- $ .24 =========
NOTE A: Under the Company's debt agreements with insurance companies, retained earnings of approximately $27 million were available for dividends at August 31, 1996 subject to future earnings levels. 8 9 ITEM 6. SELECTED FINANCIAL DATA A summary of selected financial data follows:
YEAR ENDED AUGUST 31, ---------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 -------------- ------------ -------------- ----------- ----------- Net sales $230,157,000 $187,897,000 $166,260,000 $156,615,000 $146,571,000 Earnings from continuing operations (Note B) 12,940,000 10,693,000 9,209,000 7,900,000 (596,000) Net earnings (loss) 12,940,000 3,828,000 10,006,000 8,565,000 (26,368,000) Net earnings (loss) per common share: Continuing operations $1.24 $1.09 $0.94 $0.81 $(0.06) Net earnings (loss) 1.24 0.39 1.02 0.88 (2.70) Cash dividends declared per share 0.24 0.24 0.24 0.24 0.30 As of August 31: Total assets $172,949,000 $147,043,000 $156,387,000 $151,277,000 $156,583,000 Long-term debt 24,520,000 32,609,000 41,608,000 47,134,000 50,146,000
NOTE A: Effective September 23, 1993, the Company sold its Du-Al Manufacturing Division, a manufacturer of front end loaders, back hoes and other equipment sold to the construction and farm industries. Effective May 31, 1994, the Company sold its Pioneer Industries Division, a manufacturer of metal doors and frames for the construction industry. The businesses sold had approximately $9,000,000 of sales in FY 1994 prior to disposition and approximately $20,000,000 of sales in FY 1993. Other income for the year ended August 31, 1994 includes pretax gain of $1,475,000 (total of $.09 per share) related to the sale of the Du-Al Division. NOTE B: Effective February 29, 1992, the Company adopted a formal plan to divest three major electronics-related subsidiaries. The three operations, Anilam Electronics, FlexStar and Hilton Industries, produced machine tool controls, disk-drive test equipment and tantalum capacitors, respectively, were accounted for as discontinued operations. Appropriate provisions were recorded for (a) the estimated losses of the discontinued operations through their expected disposal dates, (b) reduction of assets to their net realizable values and (c) the anticipated liabilities relating to the disposals. The total provision amounted to $20,859,000, net of income tax benefit of $7,315,000. Selected information related to these discontinued operations follows:
1991 1992 ----------- ----------- Sales $42,796,000 $16,291,000 Net earnings (loss) (6,350,000) (4,015,000) Net earnings (loss) per share (0.65) (0.41)
9 10 On October 6, 1995, the Company adopted a formal plan to divest its wholly-owned electronics-related subsidiary, Cherokee International, Inc. and its subsidiaries ("Cherokee") effective August 31, 1995. Cherokee represented a separate line of business producing electronic power supplies to distinct customers and was accounted for as a discontinued operation. Appropriate provisions were recorded in the fourth quarter of fiscal 1995 for (a) the estimated losses for the discontinued operation through its expected disposal date, (b) reduction of assets to their net realizable values, and (c) the anticipated liabilities related to the disposal. The total provision amounted to $6,500,000, net of income tax benefit of $3,500,000. Selected information related to Cherokee's operations prior to discontinuance follows:
1995 1994 1993 ----------- ----------- ----------- Sales $44,669,000 $53,193,000 $50,431,000 Pretax income (loss) (285,000) 1,845,000 1,315,000 Income taxes 80,000 1,048,000 650,000 Net income (loss) (365,000) 797,000 665,000 Earnings (loss) per share (0.04) 0.08 0.07
The net assets of the discontinued Cherokee operation held for sale were included in the Balance Sheet at August 31, 1995 under the caption "Net Assets Held for Sale." In 1996, the net assets of the discontinued operations were sold for cash and a long-term note receivable. It is anticipated that the provision established in 1995 should be adequate. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS During the fiscal year ended August 31, 1996, the Company continued its strong improvement trend which began in 1992 after Core took dramatic action to restructure operations and refocus its resources. Management continues to focus on operating and financial strategies to improve operating performance and shareholder value. These strategies include new product development and market penetration initiatives, improved levels of manufacturing efficiencies and customer service, and the acquisition of selected companies which can increase future growth and profitability. Fiscal 1996 Compared with Fiscal 1995 Sales increased 22% in 1996 over 1995 to $230,157,000 which included approximately $25 million from the acquisition of CMB Industries. Net earnings were $12,940,000 or 21% higher than 1995 earnings from continuing operations of $10,693,000. Net earnings per share increased 14% to $1.24 from earnings from continuing operations of $1.09, while the average number of shares outstanding was 7% higher. The strong earnings growth was fueled by new product offerings and operations improvements in the Company's Fluid Controls and Construction Products, and Test, Measurement and Control segments which more than offset the decline in operating earnings in the Farm Equipment segment principally caused by difficult weather conditions. Overall gross profit margins decreased from 35.6% to 34.9% as a result of unfavorable product mix changes and competitive pressures in the Farm Equipment segment. Margins improved in both of the Company's other two segments. The decrease in selling, general and administrative expenses to 22.5% of sales from 23% reflects the Company's efforts to reduce the growth in administrative expenses, which more than offsets increases in research and development expenditures related to new products, resulting in engineering expenses increasing 39% over 1995 to $5,500,000. Interest expense increased 13.7% over 1995 due to increased borrowings to finance acquisitions. The average number of shares outstanding during 1996 was 10.5 million compared to 9.8 million, primarily due to stock issued in connection with the acquisition of CMB Industries in December 1995. 10 11 Fiscal 1995 Compared with Fiscal 1994 Consolidated sales from continuing operations were up 13% to $187,897,000 over 1994 sales of $166,260,000. Earnings from continuing operations were $10,693,000, or 16% higher than 1994. Included in 1994 earnings was an after-tax gain of $915,000 ($.09 per share) related to the sale of a division. Excluding this item, earnings from continuing operations increased 29% in 1995 compared to 1994. Approximately 67% of the sales increase and 60% of the earnings before income tax increase was attributable to the Test, Measurement and Control segment which had a 30% sales and earnings increase over 1994. Fluid Controls and Construction sales increased 3% with earnings before taxes growing almost 25%. Excluding 1994's gain on the sale of the division, Farm Equipment earnings before taxes increased 11% on a 15% sales increase. Overall gross profit margins improved strongly from 33.1% to 35.6% as a result of favorable product mix changes and new product introductions. The increase in selling, general and administrative expenses from 21.2% of sales to 22.9% relates primarily to key units where there were increased investments in research and development, and promotional and selling costs related to new products and entering new markets. Other income in 1994 included the $1.475 million pretax gain related to the sale of the Company's Du-Al division. Interest expense declined 12.2% in 1995 from 1994 as borrowings were reduced by $9 million throughout the year. Segment Operating Review Fluid Controls and Construction Products Segment
(In Thousands) 1996 1995 1994 -------- ------- ------- Sales $115,497 $80,732 $78,745 Earnings before taxes 15,134 10,766 8,624
Sales and earnings before taxes in 1996 increased 43% and 41%, respectively, over the prior year. This increase was primarily due to the improved performance of the Core Fluid Control Group which benefitted from recent acquisitions and expanded distribution efforts. While all of the recent acquisitions (OGASCO, acquired effective January 1, 1995; CMB Industries, acquired effective December 1, 1995; and Davis Filters, acquired effective January 1, 1996) contributed to the growth in sales and earnings, the base businesses of the Core Fluid Control Group had increases in sales and earnings. Test, Measurement and Control Segment
(In Thousands) 1996 1995 1994 ------- ------- ------- Sales $69,131 $63,819 $49,229 Earnings before taxes 8,015 6,928 5,328
Sales and earnings before taxes increased 8% and 16%, respectively, over 1995. This strong improvement was fueled by new product offerings and operating efficiencies. Farm Equipment Segment
(In Thousands) 1996 1995 1994 ------- ------- ------- Sales $45,529 $43,346 $38,286 Earnings before taxes 5,073 6,075 7,257
11 12 Sales increased 5% over 1995 with earnings before taxes down 16%. Difficult weather conditions early in fiscal 1996 resulted in lower demand for certain higher margin products. This change in product mix also resulted in higher sales incentives. Operations improved during the latter part of fiscal 1996 with fourth quarter sales and earnings ahead of 1995's fourth quarter. LIQUIDITY AND CAPITAL RESOURCES One of the Company's financial strengths has been its ability to generate cash from its operating activities. In 1996, the Company again experienced positive operating cash flow as operating activities provided $14.2 million. Cash flow generation has been enhanced by the Company's ongoing efforts to improve operating efficiencies, make cost reductions, and manage working capital requirements to support increased sales volumes. During 1996 the Company exercised its maximum allowable prepayment options and reduced its 10% rate long-term debt by $8 million. Accordingly, debt as a percentage of capital employed was reduced to 22.1% at August 31, 1996 from 31.5% at the end of the previous fiscal year. The Company continued to invest in its future during 1996 by making two strategic acquisitions and making capital expenditures of $5.4 million. The total cost of the acquisitions included a combination of cash, debt assumptions and notes payable issued totaling $15.6 million and the issuance of 857,283 shares of the Company's common stock, valued at $13.50 per share. The $13 million net cash received during 1996 from the sale of the Company's Cherokee subsidiary helped finance these acquisitions. The majority of capital expenditures were focused at those units where the Company believes it has the greatest growth potential. The Company plans to invest $10 to $12 million in capital expenditures in fiscal 1997, excluding business acquisitions, with major emphasis on expanding facilities at several locations to support growth and improve efficiencies. The Company continues its active program to complement internal growth with acquisition of product lines and businesses that meet the Company's selective criteria. It is expected that this effort may require the significant expenditure of funds over the next few years. At August 31, 1996, the Company had working capital of $72.6 million with a current ratio of 2.8 to 1. Management believes its current cash position, cash flows from operations, unused lines of credit ($15,300,000 at August 31, 1996), along with its borrowing capacity, are adequate to fund its strategies for future growth, including working capital, expenditures for manufacturing expansion and efficiencies, new product development and acquisition activities. At the Company's current quarterly dividend rate of $.06 per share, future annual dividend payments would approximate $2.6 million. Under the Company's debt agreements with insurance companies, retained earnings of approximately $27.3 million are available for dividends, subject to future earnings levels. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company and the report of independent accountants thereon of Coopers & Lybrand L.L.P., independent auditors for the Company, are included in Exhibit 13 and are identified in Item 14(a)(1) of this report. Other financial statement schedules are filed pursuant to Item 14(a)(2) and exhibits are filed pursuant to Item 14(a)(3) of this report. Selected quarterly financial data for the years 1996 and 1995 appear in Note 13 to the financial statements on F-17 (see Exhibit 13). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 12 13 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS The information required by this item is incorporated by reference to a definitive proxy statement involving the election of directors which is filed by the Company pursuant to Regulation 14A within 120 days after the close of its fiscal year. EXECUTIVE OFFICERS OF THE REGISTRANT The following information is provided as to the Executive Officers of the Company:
Percentage of Company's Outstanding Common Common Shares Shares Beneficially Beneficially Owned Owned as of Oct. Name Age Capacities in Which Served as of Oct. 15, 1996 15, 1996 - -------------------- --- -------------------------- -------------------- -------------------- David R. Zimmer* 50 President and Chief 125,407 1.1% Executive Officer since March 1992 (previously President and Chief Executive Officer of New Venture Gear, Inc. since January 1990) Lawrence J. Murphy* 54 Executive Vice President 36,546 *** since October 1990 (previously Vice President-Finance, three years) Mark J. MacGuidwin** 44 Vice President-Finance 0 *** and Chief Financial Officer since October 1996 (previously Vice President, Controller of Varity Corporation since 1995; previously Vice President-Finance of Libbey-Owens-Ford Co. since 1990) Thomas G. Hooper* 52 Treasurer and Controller 12,667 *** since October 1990 (previously Controller since 1981) James P. Dixon* 52 Vice President-Planning 13,069 *** since January 1994 (previously Vice President-Marketing, since October 1990; previously Manager-Marketing Services, since April 1990)
* Elected by the Board of Directors on January 9, 1996 ** Elected by the Board of Directors on October 2, 1996 *** Less than 1% 13 14 ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to a definitive proxy statement involving the election of directors which is filed by the Company pursuant to Regulation 14A within 120 days after the close of its fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to a definitive proxy statement involving the election of directors which is filed by the Company pursuant to Regulation 14A within 120 days after the close of its fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to a definitive proxy statement involving the election of directors which is filed by the Company pursuant to Regulation 14A within 120 days after the close of its fiscal year. 14 15 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS. (Included in Exhibit 13) PAGES IN EX-13 -------- Report of Management..................................................F-1 Report of Independent Accountants.....................................F-2 Consolidated Statements of Earnings for the Years Ended August 31, 1996, 1995 and 1994.................................F-3 Consolidated Balance Sheets as of August 31, 1996 and 1995............F-4 Consolidated Statements of Stockholders' Equity for the Years Ended August 31, 1996, 1995 and 1994.................................F-5 Consolidated Statements of Cash Flows for the Years Ended August 31, 1996, 1995 and 1994.................................F-6 Notes to Consolidated Financial Statements for the Years Ended August 31, 1996, 1995 and 1994 ................................F-7 - F-17 2. FINANCIAL STATEMENT SCHEDULES (A) Consent of Independent Accountants..........................EX-23 (B) Schedule Index: PAGE IN 10-K -------- Schedule II - Valuation and Qualifying Accounts ..........16 Schedules other than those listed are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (A) 3. EXHIBITS The exhibits are listed on the accompanying Index to Exhibits. (B) 4. REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the last quarter of the period covered by this report. 15 16 CORE INDUSTRIES INC AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended August 31, 1996, 1995 and 1994
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------ ---------- --------------- ---------- --------- (1) (2) CHARGED BALANCE AT CHARGED TO TO OTHER BALANCE BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS - AT END OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD ---------- ---------- ------------ ----------------- ---------- (NOTE A) Allowance for doubtful accounts, deducted from accounts receivable in the balance sheet: 1996 $1,020,000 $212,000 $(86,000) (C) $ 58,000 $1,260,000 ========== ======== ========= ======== ========== 1995 $ 960,000 $300,000 $120,000 (B) $120,000 $1,020,000 ========== ======== ========= ======== ========== 1994 $ 970,000 $480,000 $490,000 $ 960,000 ========== ======== ======== ==========
Note A: Accounts written off Note B: Discontinued operations Note C: Acquisition 16 17 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. Date: October 29, 1996 CORE INDUSTRIES INC ---------------- ----------------------------------------- By: /s/ THOMAS G. HOOPER ----------------------------------------- Thomas G. Hooper, Treasurer and Controller Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated. CHIEF EXECUTIVE OFFICER: /s/ DAVID R. ZIMMER October 29, 1996 - ------------------- ---------------- David R. Zimmer, President and Director Date CHIEF FINANCIAL OFFICER: /s/ MARK J. MACGUIDWIN October 29, 1996 - ---------------------- ---------------- Mark J. MacGuidwin, Vice President - Finance Date OTHER DIRECTORS: /s/ JAY A. ALIX October 29, 1996 - --------------- ---------------- Jay A. Alix Date /s/ RICHARD P. KUGHN October 29, 1996 - -------------------- ---------------- Richard P. Kughn Date /s/ HAROLD M. MARKO October 29, 1996 - ------------------- ---------------- Harold M. Marko Date /s/ LAWRENCE J. MURPHY October 29, 1996 - ---------------------- ---------------- Lawrence J. Murphy, Executive Vice President Date /s/ ALAN E. SCHWARTZ October 29, 1996 - -------------------- ---------------- Alan E. Schwartz Date /s/ ROBERT G. STONE, JR. October 29, 1996 - ------------------------ ---------------- Robert G. Stone, Jr. Date 17 18 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION - ------------------------------- ---------------------------------------------------------------------------------- 3(a) Restated Certificate of Incorporation of Company and amendments thereto** 3(b) By-Laws, as amended, of the Company** 10(a) 1991 Director Discounted Stock Option Plan** 10(b) 1988 Director Discounted Stock Option Plan (Incorporated by reference to Appendix B to Company's Proxy Statement dated November 23, 1988 filed pursuant to Regulation 14) 10(d) Preferred Share Purchase Rights (Incorporated by reference to Company's Form 8-K Report dated September 28, 1988) 10(e) Deferred Compensation for Non-Employee Directors** 10(f) Agreement and Plan of Merger between Core Industries Inc and CMB Industries*** 10(g)(1) 9.75% Note Agreement dated August 1, 1987 between the Company and The Northwestern Mutual Life Insurance Company** 10(g)(2) Amendment dated as of March 15, 1989 to the Agreement dated August 1, 1987 between the Company and The Northwestern Mutual Life Insurance Company** 10(g)(3) Amendment dated as of March 15, 1989 to the Agreement dated August 1, 1987 between the Company and The Northwestern Mutual Life Insurance Company** 10(h)(1) 10.02% Note Agreements dated as of March 15, 1989 between the Company and The Northwestern Mutual Life Insurance Company/Allstate Life Insurance Company** 10(h)(2) Amendment dated as of March 15, 1992 to the Agreement dated as of March 15, 1989 between the Company and The Northwestern Mutual Life Insurance Company/Allstate Life Insurance Company** 10(I) 1993 Performance Incentive Plan (Incorporated by reference to Appendix A to Company's Proxy Statement dated November 23, 1993 filed pursuant to Regulation 14) 10(j) 1993 Stock Bonus Plan (Incorporated by reference to Appendix A to Company's Proxy Statement dated November 23, 1993 filed pursuant to Regulation 14) *11 Calculations of Earnings Per Share *13 Financial Statements *22 Subsidiaries of the Company *23 Consent of Coopers & Lybrand L.L.P. relating to Financial Statement Schedule *27 Financial Data Schedule
* Filed herewith ** Incorporated by reference to exhibits to the 1992 Form 10-K ***Incorporated by reference to exhibit 2.1, Form 8-K/A filed February 22, 1996 18 19 NOTE: The Exhibits attached to this report will be furnished to requesting security holders upon payment of a reasonable fee to reimburse the Company for expenses incurred by the Company in furnishing such Exhibits. 19 EX-11 2 CALCULATIONS OF EARNINGS 1 EXHIBIT 11 CORE INDUSTRIES INC AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE for the years ended August 31, 1996, 1995 and 1994
YEAR ENDED AUGUST 31, ----------------------------------------------- 1996 1995 1994 -------------- ----------- ------------- Earnings applicable to common stock $12,940,000 $3,828,000 $10,006,000 Net earnings $12,940,000 $3,828,000 $10,006,000 Average number of common shares outstanding (A) 10,453,360 9,809,041 9,800,135 Earnings per share $1.24 $0.39 $1.02
Note A: The number of common stock equivalents related to stock option plans were 93,000, 77,000 and 117,000 at the fiscal years ended 1996, 1995 and 1994, respectively. EX-13 3 FINANCIAL STATEMENTS 1 EXHIBIT 13 REPORT OF MANAGEMENT Management is responsible for the preparation and integrity of the accompanying financial statements and all other financial information appearing in this Annual Report on Form 10-K. The financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances. The other financial information in this Annual Report on Form 10-K is consistent with the financial statements. Management is responsible for developing and maintaining cost-effective internal accounting control. Internal control effectiveness is supported throughout the Company with written communication of policies and procedures, careful selection and training of personnel, and audits by a professional staff of internal auditors. The Company's control environment is further enhanced through a formal Code of Conduct that sets standards of professionalism and integrity for employees. The financial statements have been audited by the auditors Coopers & Lybrand L.L.P. The Company engages them to render an independent professional opinion based upon an examination conducted in accordance with generally accepted auditing standards. The Audit Committee of the Board of Directors is composed solely of non-employee directors and is responsible for oversight of management's internal control and financial reporting responsibilities. The Audit Committee is also responsible for recommending to the Board the independent accounting firm to be used for the coming year. The Audit Committee meets periodically with management, the internal auditors, and privately with the independent auditors to review auditing, accounting, internal control and financial reporting matters.
/s/ DAVID R. ZIMMER /s/ MARK J. MACGUIDWIN /s/ THOMAS G. HOOPER ------------------- ---------------------- --------------------- David R. Zimmer Mark J. MacGuidwin Thomas G. Hooper President and Chief Vice President-Finance and Treasurer and Executive Officer Chief Financial Officer Controller
F-1 2 REPORT OF INDEPENDENT ACCOUNTANTS Stockholders and Board of Directors Core Industries Inc We have audited the accompanying consolidated balance sheets of Core Industries Inc and subsidiaries as of August 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three years in the period ended August 31, 1996. Our audits also included the financial statement schedule listed in the index at Item 14 for each of the three years in the period ended August 31, 1996. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Core Industries Inc and subsidiaries as of August 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended August 31, 1996, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /s/ COOPERS & LYBRAND L.L.P. - --------------------------- COOPERS & LYBRAND L.L.P. Detroit, Michigan October 9, 1996 F-2 3 CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended August 31 ---------------------------------------------- 1996 1995 1994 ------------ ------------ ------------ Net sales $230,157,000 $187,897,000 $166,260,000 Cost of sales, exclusive of depreciation and amortization $149,772,000 $121,088,000 $111,294,000 Depreciation and amortization 5,670,000 4,364,000 4,004,000 Selling, general and administrative expenses 51,743,000 43,126,000 35,333,000 Interest expense 3,815,000 3,355,000 3,820,000 Other income (1,283,000) (929,000) (2,402,000) ------------ ------------ ------------ $209,717,000 $171,004,000 $152,049,000 ------------ ------------ ------------ Earnings from continuing operations before taxes on income $ 20,440,000 $ 16,893,000 $ 14,211,000 Taxes on income 7,500,000 6,200,000 5,002,000 ------------ ------------ ------------ Earnings from continuing operations $ 12,940,000 $ 10,693,000 $ 9,209,000 Discontinued operations (net of income tax): Income (loss) from discontinued operations - ($365,000) $ 797,000 Estimated loss on disposal - (6,500,000) ------------ ------------ ------------ Income (loss) from discontinued operations - ($6,865,000) $ 797,000 ------------ ------------ ------------ Net earnings $ 12,940,000 $ 3,828,000 $ 10,006,000 ============ ============ ============ Net earnings (loss) per share: Continuing operations $ 1.24 $ 1.09 $ 0.94 Discontinued operations - (0.70) 0.08 ------------ ------------ ------------ Net earnings $ 1.24 $ 0.39 $ 1.02 ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. F-3 4 CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS August 31 -------------------------------- 1996 1995 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 572,000 $ 1,135,000 Accounts receivable, less collection allowances of $1,260,000 in 1996 and $1,020,000 in 1995 56,923,000 44,214,000 Inventories 51,935,000 41,276,000 Prepaid expenses 1,199,000 953,000 Deferred taxes on income 2,167,000 5,447,000 Net assets held for disposition - 16,089,000 ------------ ------------ TOTAL CURRENT ASSETS $112,796,000 $109,114,000 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT: Land and land improvements $ 896,000 $ 896,000 Buildings 17,552,000 17,746,000 Machinery and equipment 43,173,000 36,532,000 ------------ ------------ Total $ 61,621,000 $ 55,174,000 Less accumulated depreciation 35,715,000 32,332,000 ------------ ------------ TOTAL PROPERTY, PLANT AND EQUIPMENT $ 25,906,000 $ 22,842,000 ------------ ------------ OTHER ASSETS: Excess of cost over net assets of companies acquired $ 22,251,000 $ 6,774,000 Investment in real estate partnership 1,273,000 1,323,000 Notes receivable 4,311,000 1,500,000 Prepaid pensions and other 6,412,000 5,490,000 ------------ ------------ TOTAL OTHER ASSETS $ 34,247,000 $ 15,087,000 ------------ ------------ $172,949,000 $147,043,000 ============ ============ LIABILITIES & STOCKHOLDERS' EQUITY August 31 -------------------------------- 1996 1995 ------------ ------------ CURRENT LIABILITIES: Notes payable $ 5,100,000 $ 787,000 Accounts payable 13,016,000 7,581,000 Accrued payroll and other expenses 15,721,000 13,181,000 Dividends payable 643,000 589,000 Taxes on income 1,090,000 2,041,000 Long-term debt due within one year 4,610,000 4,610,000 ------------ ------------ TOTAL CURRENT LIABILITIES $ 40,180,000 $ 28,789,000 ------------ ------------ LONG-TERM DEBT, less amount due within one year 24,520,000 32,609,000 DEFERRED TAXES ON INCOME 2,250,000 1,690,000 ACCRUED EMPLOYEE BENEFITS 3,355,000 2,942,000 STOCKHOLDERS' EQUITY: Preferred stock, par value $1: Authorized - 100,000 shares Issued - none Common stock, par value $1: Authorized - 20,000,000 shares Issued - 11,261,499 shares in 1996 11,237,172 shares in 1995 $ 11,261,000 $ 11,237,000 Additional paid-in capital 8,570,000 999,000 Retained earnings 84,922,000 74,499,000 Cumulative translation adjustments 517,000 976,000 Treasury stock (552,877 shares in 1996 and 1,410,160 in 1995) - at cost (2,626,000) (6,698,000) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY $102,644,000 $ 81,013,000 ------------ ------------ $172,949,000 $147,043,000 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. F-4 5 CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Cumulative Common Paid-In Retained Translation Treasury Stock Capital Earnings Adjustments Stock ----- ---------- -------- ------------ -------- Balance, August 31, 1993 $11,208,000 $ 728,000 $65,372,000 $ 356,000 ($6,698,000) Net earnings 10,006,000 Cash dividends declared, $.24 per share (2,353,000) Exercise of stock options 4,500 19,000 Incentive compensation awards 6,500 63,000 Foreign currency adjustments 305,000 ----------- ---------- ----------- --------- ----------- Balance, August 31, 1994 $11,219,000 $ 810,000 $73,025,000 $ 661,000 ($6,698,000) Net earnings 3,828,000 Cash dividends declared, $.24 per share (2,354,000) Incentive compensation awards 18,000 189,000 Foreign currency adjustments 315,000 ----------- ---------- ----------- --------- ----------- Balance, August 31, 1995 $11,237,000 $ 999,000 $74,499,000 $ 976,000 ($6,698,000) Net earnings 12,940,000 Cash dividends declared, $.24 per share (2,517,000) Exercise of stock options 24,000 69,000 Treasury shares issued re: acquisition 7,502,000 4,072,000 Foreign currency adjustments (459,000) ----------- ---------- ----------- --------- ----------- Balance, August 31, 1996 $11,261,000 $8,570,000 $84,922,000 $ 517,000 ($2,626,000) =========== ========== =========== ========= ===========
The accompanying notes are an integral part of the consolidated financial statements. F-5 6 CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended August 31 ------------------------------------------------- 1996 1995 1994 ------------ ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 12,940,000 $ 3,828,000 $10,006,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation $ 4,900,000 $ 3,953,000 $ 3,794,000 Amortization 770,000 412,000 211,000 Loss from discontinued operations - 10,000,000 - Discontinued operations - 365,000 (797,000) Net gain on sale of division - - (915,000) (Increase) decrease in assets: Accounts receivable (7,206,000) (2,828,000) (1,345,000) Inventories (2,665,000) (4,205,000) (1,969,000) Prepaid expenses (215,000) (322,000) 580,000 Taxes on income (951,000) 514,000 935,000 Deferred taxes on income 3,840,000 (3,500,000) 800,000 Increase (decrease) in liabilities: Accounts payable 2,397,000 (1,947,000) (200,000) Accrued payroll and other expenses 1,472,000 2,208,000 1,147,000 Other non-current assets and liabilities (1,131,000) (225,000) 113,000 ------------ ------------ ----------- TOTAL ADJUSTMENTS $ 1,211,000 $ 4,425,000 $ 2,354,000 ------------ ------------ ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 14,151,000 $ 8,253,000 $12,360,000 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($5,396,000) ($4,988,000) ($4,242,000) Net proceeds from sale of divisions - - 9,816,000 Acquisition of businesses ($15,643,000) (4,325,000) (2,510,000) Discontinued operations 13,008,000 (1,728,000) 4,407,000 Other 10,000 333,000 381,000 ------------ ------------ ----------- NET CASH FROM (USED IN) INVESTING ACTIVITIES ($8,021,000) ($10,708,000) $ 7,852,000 CASH FLOWS FROM FINANCING ACTIVITIES: Net (payments) borrowings on short-term notes $ 3,913,000 $ 300,000 ($900,000) Reductions in long-term debt (8,089,000) (8,999,000) (2,967,000) Cash dividends paid (2,517,000) (2,354,000) (2,353,000) ------------ ------------ ----------- NET CASH USED IN FINANCING ACTIVITIES ($6,693,000) ($11,053,000) ($6,220,000) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (563,000) (13,508,000) 13,992,000 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 1,135,000 $ 14,643,000 $ 651,000 ------------ ------------ ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 572,000 $ 1,135,000 $14,643,000 ============ ============ =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 4,133,000 $ 3,512,000 $ 3,757,000 ============ ============ =========== Income taxes paid $ 4,800,000 $ 5,500,000 $ 3,200,000 ============ ============ ===========
The accompanying notes are an integral part of the consolidated financial statements. F-6 7 CORE INDUSTRIES INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED AUGUST 31, 1996, 1995 AND 1994 1. PRINCIPLES OF REPORTING AND ACCOUNTING Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany profits, transactions and balances have been eliminated. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Inventories - Approximately 91% and 88% of inventories at August 31, 1996 and 1995, respectively, are valued at the lower of cost or market on a first-in, first-out (FIFO) basis. Other inventories are valued at cost on a last-in, first-out (LIFO) basis. If all inventories were valued on a FIFO basis, inventories would have been $1,613,000 and $1,562,000 higher than reported at August 31, 1996 and 1995, respectively.
Following is the detail of inventories: 1996 1995 ----------- ----------- Raw materials and supplies $24,399,000 $17,734,000 Work in process 7,864,000 8,225,000 Finished goods 19,672,000 15,317,000 ----------- ----------- Total $51,935,000 $41,276,000 =========== ===========
Property, Plant and Equipment - Items of property, plant and equipment, including significant improvements to existing facilities and leasehold improvements, are recorded at cost. Expenditures for maintenance and repairs are charged to operations in the year incurred. Long-term lease obligations incurred in connection with industrial development revenue bond financing have been capitalized at the total principal amount of the obligations. Depreciation is computed principally on an accelerated basis. Excess of Cost Over Net Assets of Companies Acquired - The excess of total cost over net assets of companies acquired is being amortized over either 15 or 40 years except for $2,048,000 relating to acquisitions prior to October 31, 1970 which is not being amortized. Amortization expense amounted to $584,000 in 1996, $227,000 in 1995 and $84,000 in 1994. Accumulated amortization amounted to $2,734,000 and $2,150,000 at August 31, 1996 and 1995, respectively. Investment in Real Estate Partnership - The Company has a minority interest in a partnership formed for the purpose of owning an office building, a portion of which the Company leases for its corporate offices. Rents paid were $445,000 in 1996, $382,000 in 1995 and $346,000 in 1994. The investment is accounted for according to the equity method. Revenue Recognition - Revenue from sales of products is recognized at the time of shipment. Revenue from long-term construction contracts is recognized using the percentage-of-completion method. Earnings Per Common Share are computed by dividing net earnings by the weighted average shares outstanding (10,453,360 shares in 1996, 9,809,041 shares in 1995, and 9,800,135 shares in 1994). The number of common stock equivalents was not significant. F-7 8 Foreign Currency Translation - Assets and liabilities of certain foreign subsidiaries whose functional currencies are other than the U.S. dollar are translated at year-end rates of exchange. Income and expense items are translated at average exchange rates for the year. The resulting translation adjustments are recorded directly into a separate component of stockholders' equity. Reclassifications - Certain reclassifications have been made to conform prior years' data to the current year presentation. Cash Flow Statement - In connection with the acquisition of CMB Industries and Davis Filters in the second quarter of fiscal 1996, the Company issued 857,283 shares of its common stock from treasury valued at approximately $11,574,000 and issued notes payable totaling $7,400,000. 2. DEBT AND COMMITMENTS The Company has a $20,000,000 unsecured line of credit with a major domestic bank at interest rates on an as-offered basis, which have been less than the prime rate. There was $15,300,000 available under this facility at August 31, 1996. Long-term debt consists of the following:
1996 1995 ----------- ----------- Notes payable $22,330,000 $30,440,000 Industrial development revenue bonds 6,800,000 6,779,000 ----------- ----------- Total $29,130,000 $37,219,000 Portion due within one year 4,610,000 4,610,000 ----------- ----------- Total $24,520,000 $32,609,000 =========== ===========
Notes payable include three unsecured promissory notes to insurance companies: one 9.8%, $4,000,000 note and two 10.02% notes aggregating $18,000,000. The notes require semi-annual interest payments with repayment of principal in 10 equal annual installments which commenced August 1993 for the 9.8% note and commenced May 1995 for the 10.02% notes. The other note payable requires repayment in three annual equal installments. At August 31, 1996, letters of credit amounting to $5,500,000 were outstanding. Industrial development revenue bonds mature principally in 2006 and 2013 and include $5,000,000 related to a 15-year loan agreement with a variable interest rate entered into during 1991. Interest rates on the bonds change based on prevailing market rates which averaged 3.79% as of August 31, 1996. Scheduled principal repayments of long-term debt are $4,610,000 in 1997 and 1998, $4,110,000 in 1999, and $3,000,000 in the two years ending 2000 and 2001. Certain of the Company's loan agreements contain restrictive covenants pertaining to the maintenance of working capital and tangible net worth. Under the most restrictive covenant, retained earnings of $27,295,000 were available for the payment of cash dividends at August 31, 1996. The estimated fair value of the notes payable at August 31, 1996 was approximately $23,800,000. The fair value was estimated based on the discounted amounts of future cash flows at the current note rates assuming all prepayment options were exercised. The estimated fair value of industrial development revenue bonds is the book value of $6,800,000. F-8 9 3. TAXES ON INCOME Income taxes on a continuing operations basis are as follows:
1996 1995 1994 ---------- ---------- ---------- Current: Federal $2,560,000 $5,250,000 $3,654,000 State and local 1,100,000 950,000 548,000 ---------- ---------- ---------- Total $3,660,000 $6,200,000 $4,202,000 Deferred 3,840,000 0 800,000 ---------- ---------- ---------- Total taxes on income $7,500,000 $6,200,000 $5,002,000 ========== ========== ==========
Federal income taxes include foreign income taxes of $93,000 in 1996, ($17,000) in 1995, and ($44,000) in 1994. The foreign pretax earnings (loss) amounted to $500,000 in 1996, ($400,000) in 1995, and ($199,000) in 1994. A reconciliation of income taxes computed using the U.S. federal statutory rate to the provision for federal income taxes follows:
1996 1995 1994 ---------- ---------- ---------- Computed at U.S. statutory rate $7,154,000 $5,911,000 $4,974,000 State and local taxes 385,000 616,000 356,000 Goodwill amortization and write-offs 129,000 62,000 62,000 Foreign income taxes (82,000) 123,000 26,000 Research tax credit (45,000) (353,000) (235,000) Other (41,000) (159,000) (181,000) ---------- ---------- ---------- Total taxes on income $7,500,000 $6,200,000 $5,002,000 ========== ========== ==========
Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The source and deferred tax effect of these differences is as follows:
1996 1995 1994 --------- --------- --------- Disposed operations $3,131,000 - - Depreciation (96,000) $(185,000) $(229,000) Employee benefits 374,000 144,000 496,000 Inventory related 69,000 (60,000) 67,000 Accounts receivable allowances (148,000) (84,000) - Tax credit carryforwards - - 567,000 Acquisition 304,000 - - Other 206,000 185,000 (101,000) ---------- --------- --------- Total deferred $3,840,000 $ 0 $ 800,000 ========== ========== =========
F-9 10 Deferred tax (assets) liabilities are comprised of the following:
1996 1995 ---------- ---------- Discontinued operations ($3,823,000) Inventory related ($901,000) (693,000) Accrued expenses (153,000) (324,000) Accounts receivable allowances (239,000) (358,000) Other (365,000) - ----------- ---------- Gross deferred tax assets ($1,658,000) ($5,198,000) ----------- ---------- Depreciation $928,000 $ 871,000 Employee benefits 520,000 296,000 Other 293,000 274,000 ----------- ---------- Gross deferred tax liabilities $ 1,741,000 $1,441,000 ----------- ---------- Net deferred tax liabilities (assets) $ 83,000 ($3,757,000) =========== ==========
4. RETIREMENT PLANS PENSION PLANS The Company has three defined benefit retirement plans covering a portion of its domestic employees. The plans' benefits are based principally on years of credited service and on participants' compensation. The plans' assets consist principally of marketable fixed income and equity securities. Net pension credit from the Company's defined benefit plans included the following components:
1996 1995 1994 ----------- ----------- ----------- Service cost $ 309,000 $ 162,000 $ 187,000 Interest on projected benefit obligations 728,000 548,000 544,000 Actual return on plan assets (1,322,000) (1,963,000) (4,000) Net amortization and deferral (129,000) 719,000 (1,225,000) ----------- ----------- ---------- Net pension credit ($ 414,000) ($ 534,000) ($ 498,000) =========== =========== ==========
F-10 11 The following table sets forth the funded status of the defined benefit plans at August 31:
1996 1995 ------------------------ ----------- Assets Accumulated Assets Exceed Benefits Exceed Accumulated Exceed Accumulated Benefits Assets Benefits ----------- ----------- ----------- Vested benefit obligation $ 7,074,000 $ 1,607,000 $ 6,860,000 =========== =========== =========== Accumulated benefit obligation $ 7,363,000 $ 1,712,000 $ 7,208,000 =========== =========== =========== Plan assets at fair value $13,594,000 $ 1,469,000 $12,989,000 Projected benefit obligation (8,267,000) (2,304,000) (8,126,000) ----------- ----------- ----------- Assets in excess of (less than) projected benefit obligation $ 5,327,000 ($ 835,000) $ 4,863,000 Unrecognized net (gain) loss: From excess funding at implementation of SFAS 87 683,000 776,000 Other (665,000) 440,000 (901,000) ----------- ----------- ----------- Prepaid pension cost (or pension liability) $ 5,345,000 ($ 395,000) $ 4,738,000 =========== =========== ===========
The company-sponsored pension plans generally provide benefits based on average salary levels and years of service. The projected unit credit funding method was used along with discount rates of 7.75% in 1996 and 1995. The assumed rate of return on assets was 9%, and the assumed rate of increase in future compensation levels was 5%. The primary reason for increases in plan assets and benefit obligations relates to the Company assuming a defined benefit plan in connection with the acquisition of CMB Industries. The Company also contributes certain amounts per labor hour to multi-employer union pension funds. Such contributions amounted to $528,000 in 1996, $389,000 in 1995, and $427,000 in 1994. F-11 12 OTHER POSTRETIREMENT BENEFIT PLANS Certain divisions and subsidiaries of the Company provide health care and life insurance benefits for retirees which are, depending on the type of plan, either contributory or non-contributory. Approximately 31% of employees may become eligible for these benefits. Net periodic postretirement benefit cost included the following components:
1996 1995 1994 -------- -------- -------- Service cost - benefits attributed to service during the period $ 48,000 $ 42,000 $ 49,000 Interest cost on accumulated postretirement benefit obligation 274,000 263,000 260,000 -------- -------- -------- Net periodic postretirement benefit cost $322,000 $305,000 $309,000 ======== ======== ========
The Company's postretirement plans are not funded. The status of the plans at August 31 follows:
1996 1995 ---------- ----------- Accumulated postretirement benefit obligation Retirees $2,635,000 $2,729,000 Fully eligible and other active participants 709,000 612,000 ---------- ---------- Total $3,344,000 $3,341,000 Unrecognized loss (361,000) (399,000) ---------- ---------- Total accrued postretirement benefits $2,983,000 $2,942,000 ========== ==========
For measurement purposes, a 11.2% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1996. The rate was assumed to decrease gradually to 6.0% through the year 2008 and remain constant thereafter. The assumptions for the health care cost trend rate has a significant effect on the amount of the obligation and periodic cost reported. An increase in the assumed health care cost trend rates by 1% in each year would increase the accumulated postretirement benefit obligation as of August 31, 1996 by approximately 3.7% and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by 3.2%. The weighted-average discount rates used in determining the accumulated postretirement benefit obligation was 7.75% as of August 31, 1996 and August 31, 1995. Cash expenditures for postretirement benefits were $282,000 in 1996, $270,000 in 1995, and $216,000 in 1994. 5. LEASES The Company leases certain office and production facilities and equipment under agreements expiring from 1997 through 2006. Several of the lease commitments contain renewal and/or purchase options exercisable at the end of the lease terms. F-12 13 The following is a schedule of future minimum rental payments required under operating leases for continuing operations that have remaining terms in excess of one year as of August 31, 1996:
Year ending August 31: 1997 $ 720,000 1998 700,000 1999 600,000 2000 520,000 2001 450,000 Later years 1,070,000 ---------- Total minimum payments required $4,060,000 ==========
The rental expense for all operating leases was $850,000, $560,000, and $610,000 for the years ended August 31, 1996, 1995 and 1994, respectively. 6. STOCK OPTIONS AND AWARDS The Company's 1993 Performance Incentive Plan approved during 1994 permits the grant of up to 490,000 shares of Company common stock for stock options, stock appreciation rights and restricted stock to key employees of the Company. Options for 222,500 shares ($13.75 to $14.56 per share) were granted during 1996 and options for 229,000 shares ($13.31 to $13.56 per share) were granted during 1994. With 13,000 options expiring in 1996 and 1995, 438,500 shares were outstanding at August 31, 1996. Vesting of most of the shares over the first three years following grant is dependent upon appreciating stock market valuation of Core stock. If the Company's stock fails to reach and maintain for defined periods of time those specified levels, vesting is delayed until 9 1/2 years after grant. Under prior employee stock option plans, options were outstanding as of August 31, 1996, for 136,200 shares ($5.25 to $10.94 per share) with expiration dates through 2002. Options for 2,000 and 4,500 shares were exercised in 1994 and options for 8,700, 5,000 and 8,900 shares expired in 1996, 1995, and 1994, respectively. The 1991 and 1988 Director Discounted Stock Option Plans are for non-employee directors of the Company. In accordance with the Plans, directors may elect to receive discounted stock options in lieu of director fees payable in cash, with the aggregate discounts equal to the cash fees forfeited. Under the Plan, 300,000 shares were reserved for issuance of non-qualified stock options at either 50% or 75% of market value at the date of grant. Stock options for 12,941 shares ($9.56 per share), and 28,128 shares ($7.3594) were granted in 1996 and 1995, respectively. Options for 45,027 shares were exercised in 1996. 173,317 options were outstanding as of August 31, 1996, with 81,656 shares reserved for future grants. Pursuant to incentive compensation programs, the Company in 1995 and 1994 awarded 18,620 and 6,594 shares of common stock, respectively, to key employees of the Company. 7. PREFERRED SHARE PURCHASE RIGHTS In September 1987, the Board of Directors declared a dividend distribution of one Preferred Share Purchase Right for each outstanding share of common stock. Each right will entitle shareholders to purchase one two-hundredth of a share of a new series of junior participating preferred stock at an exercise price of $50. The rights will only be exercisable 30 days after a person or group acquires 20% or more of the Company's common stock or commences a tender offer to acquire 30% or more of the common stock. The Company has reserved 48,876 shares of its preferred stock for the outstanding rights. If the Company is acquired in a merger or other business combination after the rights become exercisable, each right will entitle the holder to purchase common stock F-13 14 of the acquiring company having a market value of twice the exercise price of the right. The rights may be redeemed by the Company at a price of $0.02 per right up to 30 days after a 20% position has been acquired or completion of a tender offer for 30% or more of common stock. The rights will expire on September 28, 1997. 8. ACQUISITIONS During fiscal 1996, the Company acquired two companies. Effective December 2, 1995, the Company acquired the common stock of CMB Industries, a privately held producer of specialty valves, with annual revenues of approximately $30 million. Effective January 1, 1996, the Company purchased Davis Filters, Ltd., a manufacturer of pipeline strainers located near Birmingham, England, with annual sales of approximately $1 million. The total cost of these acquisitions included a combination of cash, debt assumptions and notes payable issued totaling approximately $15.6 million plus 857,283 shares of the Company's common stock, which stock was valued at $13.50 per share. During fiscal 1995, the Company purchased two companies. Core's Amprobe Instrument Division purchased Promax Industries, Inc., a manufacturer of refrigerant recycling and recovery products for the heating, ventilating, and air conditioning (HVAC) industry. Core's Fluid Control Group purchased Oil and Gas Specialties, Inc. (OGASCO) which designs and fabricates skid-mounted pipeline metering systems and fabricated strainers. The total cost of the above acquisitions was approximately $4,800,000, including a short-term note payable with a balance due of $487,000 at August 31, 1995. During fiscal 1994, the Company purchased the grain drill business of Best Manufacturing (Farm Equipment Group), and Hendrix Steel & Fabricating, Inc. (Fluid Control Group), a fabricator of strainers and other specialty flow control products. The total cost of these acquisitions was approximately $3,370,000, including a five year note payable with a balance due of $440,000 at August 31, 1995. These acquisitions were accounted for as purchases, and accordingly, the operating results of the acquired businesses have been included in the Company's financial statements from their respective dates of acquisition. The following unaudited pro forma summary reflects the Company's consolidated results from continuing operations as if the above-noted acquisitions had been acquired as of the beginning of fiscal 1995. This pro forma summary includes adjustments to give effect to amortization of goodwill, interest expense on acquisition debt, together with related income tax effects. The pro forma results are not necessarily indicative of what would have occurred if the acquisition had been in effect for the entire year, nor are they intended to be a projection of future results.
(Unaudited) Year Ended August 31 ------------------------- 1996 1995 ------------ ----------- Net Sales $237,357,000 $218.600,000 ============ ============ Earnings from continuing operations $ 12,937,000 $ 10,443,000 ============ ============ Net earnings per share $1.21 $0.98 ===== =====
9. SALE OF DIVISIONS Effective September 23, 1993, the Company sold its Du-Al Manufacturing Division, a manufacturer of front end loaders, back hoes and other equipment sold to the construction and farm industries. Effective May 31, 1994, the Company sold its Pioneer Industries Division, a manufacturer of metal doors and frames for the construction industry. The total sale price of these transactions was approximately $12,000,000, consisting of cash and a promissory note for $1,500,000. The businesses sold had approximately $9,000,000 of sales in FY 1994 prior to disposition. F-14 15 Other income for the year ended August 31, 1994 includes pretax gain of $1,475,000 (total of $.09 per share) related to the sale of the Du-Al Division. 10. DISCONTINUED OPERATIONS On October 6, 1995, the Company adopted a formal plan to divest its wholly-owned electronics-related subsidiary, Cherokee International, Inc. and its subsidiaries (Cherokee) effective August 31, 1995. Cherokee represented a separate line of business producing electronic power supplies sold to distinct customers and has been accounted for as a discontinued operation. Appropriate provisions were recorded in the fourth quarter of fiscal 1995 for (a) the estimated losses for the discontinued operation through its expected disposal date, (b) reduction of assets to their net realizable values, and (c) the anticipated liabilities related to the disposal. The total provision amounted to $6,500,000, net of income tax benefit of $3,500,000. Selected information related to Cherokee's operations prior to discontinuation follows:
1995 1994 ----------- ----------- Sales $44,669,000 $53,193,000 Pretax income (loss) (285,000) 1,845,000 Income taxes 80,000 1,048,000 Net income (loss) (365,000) 797,000 Earnings (loss) per share (.04) .08
The net assets of the discontinued Cherokee operation held for sale were included in the Balance Sheet as of August 31, 1995 under the caption "Net Assets Held for Sale." In 1996 the net assets of the discontinued operation were sold for cash and a long-term note receivable. It is anticipated that the provision established in 1995 should be adequate. 11. CONTINGENCIES The Company is a defendant in various lawsuits covering a wide range of matters. In some of these pending lawsuits, the remedies sought or damages claimed are substantial. The Company is vigorously defending against these claims. While it is not possible to predict with certainty the ultimate outcome of these lawsuits, management believes that resolution of these matters will not have a material effect on the consolidated financial position of the Company. F-15 16 12. PRODUCT SEGMENT INFORMATION The Company groups its products and services into three segments. Financial information by segment is summarized below (based upon continuing operations). Assets and capital expenditures are also reported net of items applicable to discontinued operations. (In Thousands)
Earnings Depreciation Before Capital and Net Income Assets Expenditures Amortization Sales Taxes -------- ------------ ------------ -------- ------- Year ended August 31, 1996: Fluid controls and construction products $ 87,830 $3,722 $3,399 $115,497 $15,134 Test, measurement and control 38,029 912 1,156 69,131 8,015 Farm equipment 35,533 711 996 45,529 5,073 Corporate unallocated 11,557 51 119 - (3,966) Interest expense - - - (3,816) -------- ------ ------ -------- ------- Total $172,949 $5,396 $5,670 $230,157 $20,440 ======== ====== ====== ======== ======= Year ended August 31, 1995: Fluid controls and construction products $ 49,951 $2,483 $2,404 $ 80,732 $10,766 Test, measurement and control 34,702 984 1,022 63,819 6,928 Farm equipment 38,239 1,571 813 43,346 6,075 Corporate unallocated 7,266 139 125 - (3,521) Discontinued operations 16,089 - - - - Interest expense - - - - (3,355) -------- ------ ------ -------- ------- Total $146,247 $5,177 $4,364 $187,897 $16,893 ======== ====== ====== ======== ======= Year ended August 31, 1994: Fluid controls and construction products $ 44,606 $1,610 $2,351 $ 78,745 $ 8,624 Test, measurement and control 26,627 1,512 833 49,229 5,328 Farm equipment 34,082 1,073 693 38,286 7,257 Corporate unallocated 21,112 115 127 - (3,178) Discontinued operations 29,960 Interest expense - - - - (3,820) -------- ------ ------ -------- ------- Total $156,387 $4,310 $4,004 $166,260 $14,211 ======== ====== ====== ======== =======
F-16 17 13. QUARTERLY SALES AND EARNINGS SUMMARY (UNAUDITED)
Continuing Operations Total ------------------------------------------ -------------------- Net Net Net Earnings Cost Net Earnings Earnings (Loss) Net Sales of Sales Earnings Per Share (Loss) Per Share --------- -------- -------- --------- -------- --------- (In Thousands, except per share data) - ----------------------------------------------------------------------------------- FISCAL 1996 First Quarter $ 46,437 $ 29,999 $ 2,410 $ .25 $ 2,410 $ .25 Second Quarter 58,322 38,173 2,862 .27 2,862 .27 Third Quarter 63,124 41,525 3,620 .34 3,620 .34 Fourth Quarter 62,274 40,075 4,048 .38 4,048 .38 -------- -------- ------- ----- ------- ----- Total Year $230,157 $149,772 $12,940 $1.24 $12,940 $1.24 ======== ======== ======= ===== ======= ===== FISCAL 1995 First Quarter $ 43,187 $ 27,724 $ 2,250 $ .23 $ 2,021 $ .21 Second Quarter 44,819 28,745 2,316 .24 2,362 .24 Third Quarter 52,426 34,269 3,023 .30 3,133 .32 Fourth Quarter 47,465 30,350 3,104 .32 (3,688) (.38) -------- -------- ------- ----- ------- ----- Total Year $187,897 $121,088 $10,693 $1.09 $ 3,828 $ .39 ======== ======== ======= ===== ======= =====
F-17 EX-22 4 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 22 CORE INDUSTRIES INC AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT NAME OF SUBSIDIARY STATE OF INCORPORATION ---------------------------------------------------- ---------------------- Anilam Electronics Corporation* Florida The Robert Carter Corporation Indiana CII Tustin, Inc.* California Dynamic Electronics Manufacturing Inc.* California Feterl Mfg. Co. South Dakota FlexStar, Inc.* California GSE, Inc. Michigan Hilton Industries, Inc.* Florida Hendrix Steel & Fabricating, Inc. Texas Mueller Asia Pte. Ltd. Singapore Mueller U.K. Ltd. United Kingdom Davis Filters Ltd. United Kingdom Oil & Gas Specialties Co. Texas Pasar, Inc. Colorado Poly-Craft, Inc. Ohio Sunflower Manufacturing Co., Inc. Kansas CMB Industries, Inc. California *Discontinued operation EX-23 5 CONSENT OF COOPERS & LYBRAND LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Core Industries Inc and subsidiaries on Form S-3 (File No. 333-5195) and Form S-8 (File No. 033-56149) of our report dated October 9, 1996, on our audits of the consolidated financial statements and financial statement schedule of Core Industries Inc as of August 31, 1996 and 1995, and for each of the three years in the period ended August 31, 1996, which report is included in this Annual Report on Form 10-K. /s/ COOPERS & LYBRAND L.L.P. - ---------------------------- Coopers & Lybrand L.L.P. Detroit, Michigan October 29, 1996 EX-27 6 FINANCIAL DATA SCHEDULE
5 3-MOS YEAR AUG-31-1996 AUG-31-1996 JUN-01-1996 SEP-01-1995 AUG-31-1996 AUG-31-1996 572,000 572,000 0 0 58,183,000 58,183,000 (1,260,000) (1,260,000) 51,935,000 51,935,000 112,796,000 112,796,000 61,621,000 61,621,000 (35,715,000) (35,715,000) 172,949,000 172,949,000 40,180,000 40,180,000 24,520,000 24,520,000 0 0 0 0 11,261,000 11,261,000 91,383,000 91,383,000 172,949,000 172,949,000 62,274,000 230,157,000 62,274,000 230,157,000 40,075,000 149,772,000 15,450,000 57,413,000 (474,000) (1,283,000) 0 0 785,000 3,815,000 6,438,000 20,440,000 2,390,000 7,500,000 4,048,000 12,940,000 0 0 0 0 0 0 4,048,000 12,940,000 .38 1.24 .38 1.24
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