FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
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: 0-20704
COORSTEK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-0178380
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16000 TABLE MOUNTAIN PARKWAY, GOLDEN, COLORADO 80403
(Address of principal executive offices) (Zip Code)
(303) 277-4000
(Registrant's telephone number, including area code)
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 [ ]
There were 10,196,067 shares of common stock outstanding as of August 1, 2000.
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COORSTEK, INC.
CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 127,371 $ 95,411 $ 248,190 $ 171,990
Cost of goods sold 97,558 71,646 190,958 129,951
--------- -------- --------- ---------
GROSS PROFIT 29,813 23,765 57,232 42,039
Selling, general and administrative 15,943 13,180 30,393 22,188
--------- -------- --------- ---------
OPERATING INCOME 13,870 10,585 26,839 19,851
Interest expense, net 4,916 1,602 9,629 2,303
--------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 8,954 8,983 17,210 17,548
Income tax expense 3,311 3,137 6,365 6,492
--------- -------- --------- ---------
NET INCOME 5,643 5,846 10,845 11,056
--------- -------- --------- ---------
OTHER COMPREHENSIVE EXPENSE:
Foreign currency translation adjustments 776 196 1,015 431
--------- -------- --------- ---------
COMPREHENSIVE INCOME $ 4,867 $ 5,650 $ 9,830 $ 10,625
========= ======== ========= =========
NET INCOME PER BASIC SHARE OF COMMON STOCK $ 0.79 $ 0.82 $ 1.52 $ 1.54
========= ======== ========= =========
NET INCOME PER DILUTED SHARE OF COMMON STOCK $ 0.76 $ 0.79 $ 1.48 $ 1.51
========= ======== ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 7,170 7,170 7,157 7,157
========= ======== ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 7,442 7,442 7,334 7,334
========= ======== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
2
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COORSTEK, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
June 30, December 31,
2000 1999
------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 242 $ -
Accounts receivable, less allowance for doubtful
accounts of $2,731 in 2000 and $2,765 in 1999 64,462 50,318
Inventories:
Raw materials 17,223 15,052
Work in process 30,124 27,107
Finished goods 33,150 30,856
--------- ---------
Total inventories 80,497 73,015
Other assets 19,533 15,601
--------- ---------
TOTAL CURRENT ASSETS 164,734 138,934
Properties, net 146,326 142,898
Goodwill, less accumulated amortization of
$6,972 in 2000 and $5,718 in 1999 42,298 39,601
Other noncurrent assets 6,814 6,057
--------- ---------
Total assets $ 360,172 $ 327,490
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of debt $ 116,660 $ 8,400
Accounts payable 18,105 15,846
Other current liabilities 36,549 31,014
--------- ---------
TOTAL CURRENT LIABILITIES 171,314 55,260
Long-term debt 99,340 191,600
Accrued postretirement benefits 15,571 15,489
Other long-term liabilities 3,937 5,753
--------- ---------
Total liabilities 290,162 268,102
--------- ---------
SHAREHOLDERS' EQUITY:
Commonstock, $0.01 par value, 100,000,000 shares
authorized, 7,196,723 shares issued in 2000
and 7,141,984 shares issued in 1999 72 72
Paid-in capital 58,594 57,802
Paid-in capital - warrants 1,600 1,600
Retained earnings 10,845 -
Accumulated other comprehensive loss (1,101) (86)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 70,010 59,388
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 360,172 $ 327,490
========= =========
See Notes to Consolidated Financial Statements
3
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COORSTEK, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Six months ended
June 30,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,845 $ 11,056
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,122 12,090
Change in current assets and current
liabilities and other:
Accounts receivable (13,686) (8,289)
Inventories (7,504) (865)
Accounts payable 2,070 2,319
Other (2,283) 6,480
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,564 22,791
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties (14,585) (3,971)
Acquisitions, net of cash acquired (4,250) (55,008)
Other 172 (342)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (18,663) (59,321)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of debt 20,200 -
Payments on debt (4,200) -
Issuance of stock 1,341 -
Net capital contributions from Parent - 19,327
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 17,341 19,327
-------- --------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and cash
equivalents 242 (17,203)
Balance at beginning of period - 17,203
-------- --------
Balance at end of period $ 242 $ -
======== ========
See Notes to Consolidated Financial Statements
4
<PAGE>
COORSTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. EARNINGS PER SHARE
Prior to December 31, 1999, CoorsTek was a privately owned company and
its capital structure was not indicative of the current structure. As such,
earnings per share for the three months and six months ended June 30, 1999 have
been calculated using the weighted average shares outstanding for the three
months and six months ended June 30, 2000, respectively.
NOTE 2. BASIS OF PRESENTATION
The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading. A description of
the Company's accounting policies and other financial information is included in
the audited financial statements filed with the Securities and Exchange
Commission in the Company's Form 10-K for the year ended December 31, 1999 and
in the Company's Form S-1 which was filed on July 19, 2000.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position of the Company as of June 30, 2000, and the results of operations and
cash flows for the periods presented. All such adjustments are of a normal
recurring nature. The results of operations for the three and six months ended
June 30, 2000, are not necessarily indicative of the results that may be
achieved for the full fiscal year and cannot be used to indicate financial
performance for the entire year.
NOTE 3. ACQUISITIONS
On March 31, 2000, CoorsTek acquired certain assets and liabilities of
Liberty Machine, Inc. ("Liberty") for approximately $4.0 million. In conjunction
with the transaction, CoorsTek entered into seven-year operating leases for the
manufacturing equipment of Liberty. The acquisition was accounted for under the
purchase method of accounting, and goodwill of approximately $2.9 million is
being amortized over 20 years. Liberty Machine, Inc., located in Fremont,
California, manufactures metal parts and assemblies for the semiconductor,
aerospace, analytical, and medical industries.
NOTE 4. SUBSEQUENT EVENT
On July 20, 2000, CoorsTek sold 3.0 million shares of common stock in
a follow-on public offering. The Company used the net proceeds of $113.3 million
to repay debt incurred in conjunction with the $270.0 million Credit Facility
established in December 1999. Net proceeds were used to repay $78.8 million of
the Senior Term A facility and $6.2 million of the Senior Term B facility, as
required by the Credit Facility agreement. Additionally, the revolving credit
facility was reduced $28.3 million. CoorsTek granted to the underwriters of the
follow-on public offering an over allotment option to purchase an additional
450,000 shares of CoorsTek common stock. If the underwriters exercise the entire
option by August 18, 2000, CoorsTek will receive additional net proceeds of
approximately $17.0 million which will also be used to reduce the borrowings
under the Company's Credit Facility.
NOTE 5. COMMITMENTS AND CONTINGENCIES
On August 12,1999, five current and former employees sued one of
CoorsTek's subsidiaries in the U.S. District Court for the Eastern District of
Arkansas claiming gender discrimination, sexual harassment and retaliation. The
plaintiffs are seeking class certification, which the Company is resisting based
on the distinctions among their respective claims. CoorsTek's preliminary
evaluation indicates the case is largely without merit, however, sufficient
information is not available to determine the ultimate outcome or any potential
liability related to these claims.
5
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NOTE 6. SEGMENT INFORMATION
CoorsTek is comprised of two reportable segments: Semiconductor and
Advanced Materials. In the Semiconductor segment, the Company manufactures,
assembles and integrates ceramic, plastic and metal components for use in
semiconductor manufacturing equipment. In the Advanced Materials segment, the
Company manufactures and assembles engineered ceramic, plastic and metal
products that provide customers with performance solutions that allow components
to function in adverse environments, such as heat or pressure. The Advanced
Materials' products are used in a wide range of industries such as
telecommunications, aerospace, automotive, electronics, and medical.
The Company evaluates the performance of its segments and allocates
resources to them based primarily on gross profit. Generally, there are no
intersegment transactions.
The table below summarizes information about reportable segments, in
thousands, for the three months ended June 30:
Net Gross
Sales Profit
--------- --------
2000
Semiconductor $ 57,822 $ 14,163
Advanced Materials 69,549 15,650
--------- --------
Consolidated total $ 127,371 $ 29,813
========= ========
1999
Semiconductor $ 30,817 $ 8,631
Advanced Materials 64,594 15,134
--------- --------
Consolidated total $ 95,411 $ 23,765
========= ========
The table below summarizes information about reportable segments, in
thousands, for the six months ended June 30:
Net Gross
Sales Profit
--------- --------
2000
Semiconductor $ 111,398 $ 27,843
Advanced Materials 136,792 29,389
--------- --------
Consolidated total $ 248,190 $ 57,232
========= ========
1999
Semiconductor $ 44,005 $ 12,471
Advanced Materials 127,985 29,568
--------- --------
Consolidated total $ 171,990 $ 42,039
========= ========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL OVERVIEW
CoorsTek, Inc. ("CoorsTek") is a leading designer and manufacturer of
components and integrated assemblies for semiconductor capital equipment and for
telecommunications, electronics, automotive, medical and other industrial
applications. The Company uses advanced materials such as precision-machined
metals, technical ceramics and engineered plastics to design solutions that
enable the customers' products to overcome technological barriers and enhance
performance.
6
<PAGE>
In January of 2000, CoorsTek began to provide clean room assembly services
for a major semiconductor capital equipment customer to enhance the Company's
ability to provide integrated solutions from product design and prototyping to
manufacturing and assembly. These services include assembling various
components, some of which are manufactured by the Company, for inclusion in the
customer's highly sophisticated and complex machinery. Compared with the
Company's historical semiconductor business, the assembly services have lower
gross margins but significantly lower capital requirements.
CoorsTek recognizes revenue when products are shipped or services have been
rendered. The Company sells products primarily to OEMs for incorporation into
semiconductor capital equipment and other industrial applications. CoorsTek
generates sales through direct sales employees, manufacturers' representatives
and distributors located throughout the U.S., Asia and Europe.
On March 31, 2000, CoorsTek acquired certain assets and liabilities of
Liberty Machine, Inc. ("Liberty") for approximately $4.0 million. In conjunction
with the acquisition, CoorsTek executed seven-year operating leases for
substantially all of the manufacturing equipment of Liberty. Liberty, located in
Fremont, California, manufactures parts and assemblies with complex geometry and
dimensional tolerances for the semiconductor, aerospace, analytical and medical
industries.
During 1999, CoorsTek was a wholly owned subsidiary of ACX Technologies,
Inc., now known as Graphic Packaging International Corporation ("Graphic
Packaging".) At the close of business on December 31, 1999, Graphic Packaging
distributed 100% of the shares of CoorsTek to Graphic Packaging shareholders
("spin-off"). For 1999, Graphic Packaging provided general management, legal,
treasury, tax, internal audit, financial reporting and environmental services to
CoorsTek. These Graphic Packaging costs were allocated to CoorsTek in the form
of an annual management fee. Graphic Packaging also provided centralized cash
management and allocated interest income or interest expense to CoorsTek based
on cash balances.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
NET SALES. Net sales consist of gross sales of components, assemblies and
services, less discounts, allowances and returns. Net sales for the three months
ended June 30, 2000 were $127.4 million, an increase of $32.0 million or 33.5%
from net sales of $95.4 million for the three months ended June 30, 1999. This
increase in sales was primarily attributable to strong growth in the
semiconductor capital equipment market and the start of the clean room assembly
business in January 2000. In addition, net sales in the Advanced Materials
segment grew approximately 7.7% in the three months ended June 30, 2000
following stronger demand and pricing in certain product lines, specifically
telecommunications, oil and gas and electronics, as compared with the three
months ended June 30, 1999.
COST OF GOODS SOLD AND GROSS PROFIT. Cost of goods sold consists primarily
of expenses for manufacturing labor, raw materials and manufacturing overhead.
Gross profit for the three months ended June 30, 2000 was $29.8 million, an
increase of $6.0 million, or 25.4%, from $23.8 million for the three months
ended June 30, 1999. The start of the clean room assembly business and strong
demand in the semiconductor equipment industry fueled this growth. In addition,
gross profit in the Advanced Materials segment grew approximately 3.4% in the
three months ended June 30, 2000 as a result of cost reduction measures and
stronger demand in the telecommunications, oil and gas and electronics product
lines compared with the three months ended June 30, 1999. Gross margin decreased
to 23.4% for the three months ended June 30, 2000 from 24.9% for the three
months ended June 30, 1999. The decrease in the gross margin is primarily
attributable to the clean room assembly business, started in January 2000 to
enhance the Company's ability to provide integrated solutions to customers. The
clean room assembly business has a lower margin than the historical
Semiconductor segment business, but also significantly lower capital
requirements.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses consist primarily of expenses for executive management
compensation, sales salaries and commissions, accounting, information
technology, legal, risk management, treasury, goodwill amortization and certain
other corporate overhead costs. Selling, general and administrative expenses for
the three months ended June 30, 2000 were $15.9 million, an increase of $2.8
million, or 21.0%, from $13.2 million for the three months ended June 30, 1999.
7
<PAGE>
The increase in the selling, general and administrative expenses, in dollars, is
primarily attributable to increased sales volume and from the building of
infrastructure as a public company. Selling, general and administrative expenses
as a percent of sales declined to 12.5% for the three months ended June 30, 2000
from 13.8% for the three months ended June 30, 1999.
OPERATING INCOME. Operating income for the three months ended June 30, 2000
was $13.9 million, an increase of $3.3 million, or 31.0%, from $10.6 million for
the three months ended June 30, 1999. The increase in operating income is
primarily due to the increase in net sales in the Semiconductor segment.
Operating margin for the three months ended June 30, 2000 was 10.9% compared
with 11.1% for the three months ended June 30, 1999. The decrease in operating
margin resulted from the decrease in gross margin discussed above.
INTEREST EXPENSE, NET. For the three months ended June 30, 2000, interest
expense, net, consisted primarily of interest expense associated with the
Company's bank credit facilities. For 1999, interest expense, net, consisted
primarily of interest expense associated with intercompany borrowings with
Graphic Packaging. Interest expense for the three months ended June 30, 2000 was
$4.9 million compared with $1.6 million for the three months ended June 30,
1999. This increase resulted from a $200.0 million payment to Graphic Packaging
for a one-time dividend and intercompany obligations in conjunction with the
spin-off, which was funded under a $270.0 million credit facility. In addition,
interest expense has increased due to borrowings to fund working capital and
capital expenditures, primarily in the Semiconductor segment.
INCOME TAX EXPENSE. Income tax expense for the three months ended June 30,
2000 increased to $3.3 million from $3.1 million for the three months ended June
30, 1999. The consolidated effective tax rate was 37.0% for the three months
ended June 30, 2000 compared with 34.9% for the three months ended June 30,
1999.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
NET SALES. Net sales for the six months ended June 30, 2000 were $248.2
million, an increase of $76.2 million, or 44.3%, from net sales of $172.0
million for the six months ended June 30, 1999. This increase in sales was
primarily attributable to the Semiconductor segment. The start of the clean room
assembly business in January 2000 and strong demand in the semiconductor capital
equipment market contributed to this growth. In addition, net sales in the
Advanced Materials segment grew approximately 6.9% for the six months ended June
30, 2000 following stronger demand and pricing in certain product lines compared
with the six months ended June 30, 1999.
COST OF GOODS SOLD AND GROSS PROFIT. Cost of goods sold for the six months
ended June 30, 2000 was $191.0 million, an increase of $61.0 million, or 46.9%,
from $130.0 million for the six months ended June 30, 1999. The start of the
clean room assembly business and strong demand in the semiconductor equipment
industry fueled this growth. Gross profit in the Advanced Materials segment
decreased slightly for the six months ended June 30, 2000 from the six months
ended June 30, 1999. This decline was a result of costs associated with
production inefficiencies experienced at certain facilities for the three months
ended March 31, 2000. Gross margin decreased to 23.1% for the six months ended
June 30, 2000 from 24.4% for the six months ended June 30, 1999. This decrease
was partially attributable to the clean room assembly business started in
January 2000 to enhance the Company's ability to provide integrated solutions to
customers. The assembly business has a lower margin than the historical
Semiconductor segment business, but also significantly lower capital
requirements. In addition, the gross margin was impacted by the decrease in the
gross profit of the Advanced Materials segment described above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the six months ended June 30, 2000 were $30.4
million, an increase of $8.2 million, or 37.0%, from $22.2 million for the six
months ended June 30, 1999. The increase in selling, general and administrative
expenses, in dollars, is primarily attributable to increased sales volume and
from building infrastructure as a public company. Selling, general and
administrative expenses as a percent of sales declined to 12.2% for the six
months ended June 30, 2000 from 12.9% for the six months ended June 30, 1999.
OPERATING INCOME. Operating income for the six months ended June 30, 2000
was $26.8 million, an increase of $6.9 million, or 35.2%, from $19.9 million for
the six months ended June 30, 1999. The increase in operating income is
primarily due to the increase in net sales in the Semiconductor segment.
8
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Operating margin for the six months ended June 30, 2000 was 10.8% compared with
11.5% for the six months ended June 30, 1999. The decrease in the operating
margin resulted from the decrease in the gross margin discussed above.
INTEREST EXPENSE, NET. Interest expense for the six months ended June 30,
2000 was $9.6 million compared with $2.3 million for the six months ended June
30, 1999. This increase resulted from a $200.0 million payment to Graphic
Packaging for a one-time dividend and intercompany obligations in conjunction
with the spin-off, which was funded under the $270.0 million credit facility. In
addition, interest expense has increased due to borrowings to fund working
capital and capital expenditures, primarily in the Semiconductor segment.
INCOME TAX EXPENSE. Income tax expense for the six months ended June 30,
2000 decreased to $6.4 million from $6.5 million for the six months ended June
30, 1999. The consolidated effective tax rate was 37.0% for the six months ended
June 30, 2000 and for the six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
CoorsTek's liquidity is generated by both internal and external sources
and is used to fund short-term working capital requirements, capital
expenditures and acquisitions. On July 20, 2000, CoorsTek sold 3.0 million
shares of common stock in a follow-on offering. The Company used the entire net
proceeds of $113.3 million from this offering to repay debt under the $270.0
million Credit Facility. The Credit Facility required that 75% of the net
proceeds be used to repay, ratably, the Senior Term A and Senior Term B
facilities. The Company voluntarily used the remaining proceeds to repay
borrowings under the revolving line of credit.
Per the terms of the Credit Facility, Senior Term B note holders had
the ability to reject any prepayment so long as there was a balance remaining on
the Senior Term A facility. Accordingly, most of the Senior Term B note holders
rejected the prepayment. Therefore, the net proceeds from the follow-on offering
reduced the revolving line of credit by $28.3 million, reduced Term Loan A by
$78.8 million, and reduced Term Loan B by $6.2 million. There are no prepayment
penalties under the Credit Facility.
As a result of the repayment, current maturity of debt at June 30, 2000
increased by $107.0 million and reduced working capital to a negative $6.6
million from $83.7 million at December 31, 1999. CoorsTek's current ratio was
reduced to 0.96 at June 30, 2000 from 2.51 at December 31, 1999. As of June 30,
2000, CoorsTek had a total of $49.8 million in cash and borrowings available
under the Credit Facility. After the repayment, CoorsTek had $72.8 million of
borrowings available under the Credit Facility.
Currently, the interest rate on the revolving line of credit and Senior
Term A facility is LIBOR plus 2% and the interest rate on the Senior Term B
facility is LIBOR plus 2.75%. The interest rate spreads on the Credit Facility
vary based upon the Company's financial performance. As of June 30, 2000, the
interest rates on the credit facilities were as follows:
* 8.63% for the revolving line of credit
* 8.55% for the Senior Term A facility; and
* 9.30% for the Senior Term Loan B facility.
The Credit Facility contains customary covenants, including covenants
limiting indebtedness, dividends and distributions on, and redemptions and
repurchases of, capital stock and other similar payments, and the acquisition
and disposition of assets. The Credit Facility also requires that the Company
comply with specified financial covenants, including interest coverage ratios
and indebtedness to total capital ratios and other covenants. CoorsTek is
currently in compliance with all covenants under the credit facility.
As of June 30, 2000, there was $216.0 million outstanding under the Credit
Facility. The majority of the borrowings were used to pay Graphic Packaging, on
January 4, 2000, for intercompany obligations and a one-time dividend. The
remainder of the borrowings was used to fund working capital and capital
expenditures primarily in the Semiconductor segment. The unused portion of the
revolving line of credit is expected to be used to fund working capital
requirements, acquisitions and capital expenditures. The payment of non-stock
dividends is prohibited under the Credit Facility.
9
<PAGE>
Capital expenditures for the six months ended June 30, 2000 and June 30,
1999 were $14.6 million and $4.0 million, respectively. These capital
expenditures were primarily used for the addition of production capacity,
computerized manufacturing equipment and enhancing existing computer systems.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain statements in this document constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The projections and
statements contained in these forward-looking statements involve known or
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of CoorsTek to be materially different from
any future results, performance or achievements expressed or implied by the
forward-looking statements. CoorsTek's future results of operations and
performance are dependent upon numerous factors, including the actions of
competitors and customers, CoorsTek's ability to execute its marketing plans,
the ability of CoorsTek to maintain or increase sales to existing customers and
capture new business, CoorsTek's ability to successfully integrate and operate
businesses that may be acquired in the future, continued strength of the U.S.
and key foreign economies and the relative position of the U.S. dollar related
to key European and Asian currencies. CoorsTek's ability to achieve its business
strategy is also dependent upon securing adequate financing. CoorsTek's ability
to increase revenues and operating income is dependent upon continuing its track
record for new product innovation, the availability and pricing of substitute
materials such as metals and plastics, the performance of key industries such as
semiconductor, automotive and electronics and other factors. CoorsTek's ability
to successfully execute its assembly business initiative is dependent on its
ability to continue to provide quality and timely manufacturing, innovation and
service to its customers. Because CoorsTek has borrowings with adjustable
interest rates, its net income is sensitive to fluctuation in short-term
interest rates. CoorsTek's compliance with the revenue ruling issued by the IRS
in connection with the spin-off of CoorsTek by Graphic Packaging could
materially impact the future results, performance or financial condition of the
Company. The Company's ability to attract and maintain employees at all levels
of the organization could also materially impact the future results, performance
or financial condition of the Company. CoorsTek derives a significant percentage
of its net sales from a small number of large customers, and if the Company is
not able to retain these customers, or they reschedule, reduce or cancel orders,
net sales would be reduced and financial results would suffer. You are
encouraged to read the more detailed discussions of risks and uncertainties
contained in CoorsTek's recent registration statement on Form S-1 (No.
333-41802) and on the Company's Form 10-K for the year ended December 31, 1999,
both of which are available on line, free of charge, at www.sec.gov.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CHANGES IN INTEREST RATES WILL IMPACT THE EARNINGS OF COORSTEK.
CoorsTek had approximately $216.0 million of floating interest rate
debt as of June 30, 2000. As interest rates fluctuate, CoorsTek may experience
interest increases, which may materially impact financial results. For example,
if applicable interest rates were to increase or decrease 1%, assuming a
constant principal amount of debt, the result would be an annual increase or
decrease of interest expense of $2.2 million dollars.
10
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CHANGES IN THE RELATIONSHIP BETWEEN THE U.S. DOLLAR AND FOREIGN CURRENCIES MAY
IMPACT THE EARNINGS OF COORSTEK.
For the six months ended June 30, 2000 approximately 3.1% of
CoorsTek's revenue was generated by its operations in Scotland and Korea.
CoorsTek sells products directly through its subsidiaries in Scotland and Korea
and through domestic channels that have end-user customers located outside the
United States. CoorsTek uses the U.S. dollar as its functional currency, except
for the operations in Scotland and Korea. The assets and liabilities of these
two foreign operations are translated into U.S. dollars at an exchange rate in
effect at the period end date. Income and expense items are translated at the
year-to-date average rate. An increase in the exchange value of the United
States dollar reduces the value of revenue and profits generated by CoorsTek's
international operations in Scotland and Korea. Periodically, CoorsTek hedges
the dollar against foreign currencies used in certain markets in order to
mitigate the effects of adverse currency fluctuations when sales are made in the
foreign currency. The strength of the dollar relative to the currency of our
customers or competitors may have a material effect on CoorsTek's profit margins
or sales to international customers.
11
<PAGE>
Part II
(a) Exhibits:
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K during the quarter ended June
30, 2000.
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.
CoorsTek, Inc.
Date: August 14, 2000 By /s/ Joseph Coors, Jr.
---------------------- ------------------------------------
Joseph Coors, Jr.
Chairman and Chief Executive Officer
Date: August 14, 2000 By /s/ Joseph G. Warren, Jr.
---------------------- ------------------------------------
Joseph G. Warren, Jr.
Chief Financial Officer and Treasurer
12
