<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
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FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of l934
For the quarterly period 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 1-1416
BINKS MANUFACTURING COMPANY
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-0808480
- ---------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9201 WEST BELMONT AVENUE, FRANKLIN PARK, ILLINOIS 60131
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(Address of principal executive offices)
Registrant's telephone number, including area code 847-671-3000
Indicate by check mark whether the registrant (l) 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
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock, as of the close of the period covered by this report:
Class Outstanding August 31, 1996
----------------------- ---------------------------
Common, par value $1.00 3,088,837
<PAGE>
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL STATEMENTS
Company or group of companies
for which report is filed:
Binks Manufacturing Company and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
August 31, 1996 (Unaudited) and November 30, 1995
-------------------------------------------------
Aug 31 Nov 30
1996 1995
------ ------
($000 omitted)
ASSETS
Current assets:
Cash and cash equivalents $ 9,414 8,527
Receivables, net 77,739 90,726
Inventories 106,616 86,207
Other current assets 4,558 5,221
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Total current assets 198,327 190,681
Investments and other assets 6,455 7,098
Goodwill 2,632 2,695
Property, plant and equipment, at cost 66,223 65,186
Less accumulated depreciation 37,474 35,559
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28,749 30,627
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TOTAL ASSETS $236,163 231,101
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------- -------
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<PAGE>
PART l - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL STATEMENTS (Continued)
Company or group of companies
for which report is filed:
Binks Manufacturing Company and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
August 31, 1996 (Unaudited) and November 30, 1995
-------------------------------------------------
Aug 31 Nov 30
1996 1995
------- -------
($000 omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, bank overdrafts
and current maturities of long-term debt $ 10,287 11,040
Accounts payable 58,856 53,969
Other current liabilities 18,654 19,070
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Total current liabilities 87,797 84,079
Deferred compensation 9,375 8,725
Deferred income taxes 418 490
Long-term debt, less current maturities 44,085 43,202
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Total liabilities 141,675 136,496
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Stockholder's equity:
Capital stock, $1.00 par value. Authorized
12,000,000 shares: issued 3,088,837 shares 3,089 3,089
Additional paid-in capital 24,505 24,505
Retained earnings 67,377 66,671
Foreign currency translation adjustment ( 483) 340
------- -------
Total stockholders' equity 94,488 94,605
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $236,163 231,101
------- -------
------- -------
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<PAGE>
Binks Manufacturing Company and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Nine months ended August 31, 1996 and August 31, 1995
-----------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the three For the nine
months ended months ended
--------------------- ---------------------
Aug 31 Aug 31 Aug 31 Aug 31
1996 1995 1996 1995
------ ------ ------ ------
($000 omitted) ($000 omitted)
<C> <C> <C> <C>
<S>
Net Sales $71,536 67,871 199,841 191,239
Cost of goods sold 47,707 45,191 134,077 126,236
------- ------- ------- -------
Gross profit 23,829 22,680 65,764 65,003
Selling, general and administrative expenses 20,164 19,809 58,674 56,459
------- ------- ------- -------
Operating income 3,665 2,871 7,090 8,544
Other expenses (income):
Interest expense 963 1,034 3,102 3,014
Contribution to employee profit
sharing funds 283 8 298 22
Other expense (income), net 442 ( 36) 398 ( 200)
------- ------- ------- -------
1,688 1,006 3,798 2,836
Earnings before income taxes and equity
in earnings (loss) of unconsolidated
subsidiaries 1,977 1,865 3,292 5,708
Income taxes 1,170 845 1,659 2,410
------- ------- ------- -------
Earnings before equity in earnings (loss)
of unconsolidated subsidiaries 807 1,020 1,633 3,298
Equity in earnings (loss) of unconsolidated
subsidiaries - - - -
------- ------- ------- -------
Net earnings $ 807 1,020 1,633 3,298
------- ------- ------- -------
------- ------- ------- -------
Net earnings per share $ .26 .33 .53 1.07
------- ------- ------- -------
------- ------- ------- -------
Cash dividend declared per share $ .10 .10 .30 .40
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
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<PAGE>
Binks Manufacturing Company and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended August 31, 1996 and August 31, 1995
-----------------------------------------------------
(Unaudited)
1996 1995
-------- --------
($000 omitted)
Cash flows from operating activities:
Net earnings $ 1,633 3,298
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 3,259 2,775
Equity in (earnings) loss of unconsolidated
subsidiaries - -
Deferred compensation, net of payments 472 690
Deferred income taxes ( 78) ( 6)
Other, net 428 ( 258)
Cash provided by (used in) changes in:
Receivables 11,826 ( 7,404)
Inventories (20,810) ( 7,112)
Other current assets 56 584
Accounts payable 5,165 8,376
Accrued employees' profit-sharing
contributions 345 ( 264)
Accrued expenses 148 ( 1,479)
Income taxes 448 582
-------- --------
Net cash provided by (used in) operating activities 2,892 2,740
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment ( 2,537) ( 4,741)
Proceeds from sale of equipment 793 1,954
Sale (purchase) of other investments and assets 432 ( 2,014)
-------- --------
Net cash provided by (used in) investing activities ( 1,312) ( 4,801)
-------- --------
Cash flows from financing activities:
Proceeds from long-term borrowings 1,041 4,141
Dividends paid ( 927) ( 1,235)
Net increase (decrease) in commercial paper,
notes payable and bank overdrafts 180 ( 1,869)
Principal payments on long-term debt ( 920) ( 1,194)
-------- --------
Net cash provided by (used in) financing activities ( 626) ( 157)
-------- --------
Effect of exchange rate changes on cash ( 67) 210
-------- --------
Net increase (decrease) in cash and cash equivalents 887 ( 2,008)
-------- --------
Cash and cash equivalents at beginning of period 8,527 8,564
-------- --------
Cash and cash equivalents at end of period $ 9,414 6,556
-------- --------
-------- --------
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<PAGE>
Binks Manufacturing Company and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1996 (Unaudited) and November 30, 1995
-------------------------------------------------
NOTE 1
The accompanying financial statements are unaudited, but in the opinion of
management include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations and
financial position for the applicable period. Results of operations for any
interim period are not necessarily indicative of results for any other period or
for the full year. These interim financial statements should be read in
conjunction with the financial statements and related notes contained in the
Annual Report on Form l0-K for the year ended November 30, 1995.
NOTE 2
On June 30, 1995, the Court of Appeals for the Federal Circuit, in GRACO, INC.
V. BINKS MANUFACTURING COMPANY, vacated a judgment of infringement and an award
of $2.75 million against the Company regarding certain pumps sold prior to June
1993. The United States District Court for the Southern District of Texas
previously found that the Company had "willfully" infringed a patent and awarded
Graco treble damages, attorney fees and costs. The Federal Circuit reversed the
district court's finding that Binks "willfully" infringed Graco's patent and
the resulting enhancement of damages and award of attorneys' fees. The Federal
Circuit remanded the case for findings on the issues of whether the patent was
valid and infringed. Graco asserts that on remand it will seek damages and
interest of approximately $750,000. The Company believes that there are
meritorious defenses to these claims and thus no provision for any liability has
been made in the financial statements.
NOTE 3
In the first quarter of 1995, the Company sold two buildings in the United
States. The pretax gains on these sales amounted to $258,000 and are included
in other income in the consolidated statement of earnings. The after tax gains
on these sales were $127,000.
NOTE 4
In the third quarter of 1996, the Company sold its corporate jet. The pretax
loss on this sale amounted to $194,000 and is included in other expense in the
consolidated statement of earnings. The after tax loss on this sale was
$152,000.
NOTE 5
The Company is attempting to negotiate a settlement of litigation brought
against the Company in 1993 to limit the costs associated with protracted
litigation. No estimate of loss can be made at this time.
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<PAGE>
Binks Manufacturing Company and Consolidated Subsidiaries
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Revenue generated from operations constitutes the primary source of the
Company's liquidity. Short-term funds are also provided for current operations
through bank loans and the issuance of bankers acceptances. The Company
maintains substantial lines of credit for general corporate purposes and to
provide support for the issuance of bankers acceptances. The unused lines of
credit were effectively $27,604,000 at August 31, 1996.
The Company's cash balances increased $887,000 during the nine months ended
August 31, 1996. The net increase was the result of $2,892,000 provided by
operations due to higher sales volumes, $1,312,000 used for investing activities
principally for purchases of property, plant and equipment, $626,000 used in
financing activities mainly for the payment of dividends and a $67,000 decrease
based on the changes in foreign exchanges rates during the period.
On November 30, 1993 the Company agreed to issue $15,000,000 of 7.14% senior
notes with a final maturity in 2008. Funding of the notes took place on
December 6, 1993 and the proceeds were used to repay a portion of the debt
outstanding under one of the Company's lines of credit. The Company will repay
the principal in 11 annual installments beginning in 1998.
A dividend was paid August 2, 1996 at the rate of $.10 per share to stockholders
of record on July 19, 1996. For the first nine months of 1996, dividends have
been paid at the rate of $.30 per share versus $.40 per share for the same
period in 1995.
RESULTS OF OPERATIONS
Net sales increased 5% or $8,602,000 to a total of $199,841,000 for the nine
months ended August 31, 1996, as compared with $191,239,000 for the same period
in 1995. In the third quarter ended August 31, 1996, sales increased 5% to
$71,536,000 as compared to $67,871,000 in the third quarter of 1995. Increased
demand for electrostatic products produced by the Company's subsidiary in France
was chiefly responsible for the increase.
Gross profit increased 1% to a total of $65,764,000 for the nine months ended
August 31, 1996 as compared to the first nine months in 1995 mainly because of
higher sales. The gross profit percentage was 33% in 1996 and 34% in 1995. The
gross profit percentage varies depending on the amount of larger contracts that
generally have lower margins.
Selling, general and administrative expenses increased $2,215,000 or 4% as
compared to the first nine months in 1995 mainly to support the increase in
sales. As a percentage of net sales, these expenses were 29% in 1996 and 30% in
1995. Interest expense increased $88,000 when compared to the same period in
1995 primarily due to an increase in the average amount of interest bearing debt
outstanding.
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<PAGE>
Binks Manufacturing Company and Consolidated Subsidiaries
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Contributions to employee profit sharing funds are based on profitability of the
parent company and certain subsidiaries that have profit sharing funds. Amounts
will vary according to contribution formulas and the related profits.
Contributions of $298,000 were made in the first nine months of 1996 compared to
contributions of $22,000 in the first nine months of 1995.
Other nonoperating expense increased by $598,000 in the nine months ended August
31, 1996 when compared to the corresponding period in 1995. This net cost
increase was primarily due to gains on the sales of buildings by the Company in
the first quarter of 1995 totalling $258,000. Also contributing to the variance
was a loss on the disposition of the corporate jet in the third quarter of 1996
that amounted to $194,000. In addition there was a $172,000 cost adjustment by
the Japanese subsidiary in the second quarter of 1996 related to the liability
associated with their Employee Retirement Fund.
The percentage of income taxes to pretax earnings was 50% in 1996 as compared
with 42% in 1995. The change relates to the geographic mix of profitability.
Net income for the nine months ended August 31, 1996 totalled $1,633,000, a
decrease of 50% versus the $3,298,000 earned in the corresponding period of
1995. The decrease in net income is the result of all of the factors described
above.
CURRENT DEVELOPMENTS
To improve future profitability the Company is examining all of its operations
and the way it serves its markets. Material one time charges are expected to
occur in the fourth quarter of fiscal 1996 to settle disputes, reduce headcount,
exit unprofitable product lines and lower recurring facilities costs.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. The matters discussed under "Current
Developments" are forward-looking statements that involve risks and
uncertainties which include, but are not limited to, the timing and amount of
any or all of such one-time charges relating to the anticipated dispute
settlements and restructuring and the general effects of the restructuring on
the Company's business, financial condition and results of operations.
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<PAGE>
PART II - OTHER INFORMATION
Items 1 thru 5 Not applicable
Item 6
(a) None
(b) On June 18, 1996 the Company filed a Form 8-K dated June 6,
1996 reporting change in management under Item 5.
On August 29, 1996 the Company filed a Form 8-K dated August
23, 1996 reporting a change in registrant's certifying
accountant under Item 4 and an increase in the number of
members of the Board of Directors from 5 directors to 7
directors under Item 5.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has dully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The enclosed financial statements
include all adjustments, including normal and recurring adjustments, which are
necessary to a fair presentation of the results of operations for the periods
presented.
Binks Manufacturing Company
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/s/ Jeffrey W. Lemajeur
-------------------------------
Jeffrey W. Lemajeur, Treasurer/
Chief Financial Officer
/s/ Doran J. Unschuld
--------------------------------
Doran J. Unschuld, President/
Chief Executive Officer
Date October 14, 1996
---------------------
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 9,414
<SECURITIES> 0
<RECEIVABLES> 77,739
<ALLOWANCES> 0
<INVENTORY> 106,616
<CURRENT-ASSETS> 198,327
<PP&E> 66,223
<DEPRECIATION> 37,474
<TOTAL-ASSETS> 236,163
<CURRENT-LIABILITIES> 87,797
<BONDS> 44,085
0
0
<COMMON> 3,089
<OTHER-SE> 91,399
<TOTAL-LIABILITY-AND-EQUITY> 236,163
<SALES> 199,841
<TOTAL-REVENUES> 199,841
<CGS> 134,077
<TOTAL-COSTS> 134,077
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,102
<INCOME-PRETAX> 3,292
<INCOME-TAX> 1,659
<INCOME-CONTINUING> 1,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,633
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
