<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 1934
For the quarterly period ended February 28, 1997
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From to
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Commission file number 1-1416
BINKS MANUFACTURING COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 36-0808480
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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
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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 February 28, 1997
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Common, par value $1.00 3,088,837
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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
February 28, 1997 (Unaudited) and November 30, 1996
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Feb 28 Nov 30
1997 1996
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($000 omitted)
ASSETS
Current assets:
Cash and cash equivalents $ 8,443 16,200
Receivables, net 75,801 79,433
Inventories 76,369 84,737
Other current assets 9,810 9,644
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Total current assets 170,423 190,014
Other noncurrent assets 13,472 12,247
Property, plant and equipment, at cost 65,131 65,450
Less accumulated depreciation 37,880 37,482
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Net property, plant and equipment 27,251 27,968
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TOTAL ASSETS $ 211,146 230,229
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<PAGE>
PART I - FINANCIAL INFORMATION - (Continued)
Binks Manufacturing Company and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
February 28, 1997 (Unaudited) and November 30, 1996
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Feb 28 Nov 30
1997 1996
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($000 omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, bank overdrafts
and current maturities of long-term debt $ 11,461 9,384
Accounts payable 40,307 52,987
Other current liabilities 23,541 31,188
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Total current liabilities 75,309 93,559
Deferred compensation 9,186 9,564
Deferred income taxes 399 425
Long-term debt, less current maturities 45,507 44,634
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Total liabilities 130,401 148,182
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Stockholders' equity:
Capital stock, $l.00 par value. Authorized
12,000,000 shares; issued 3,088,837 shares 3,089 3,089
Additional paid-in capital 24,504 24,504
Retained earnings 54,469 54,327
Foreign currency translation adjustment (1,317) 127
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Total stockholders' equity 80,745 82,047
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $211,146 230,229
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Binks Manufacturing Company and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended February 28, 1997 and February 29, 1996
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(Unaudited)
For the three
months ended
------------------------
Feb 28 Feb 29
1997 1996
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($000 omitted)
Net sales $ 64,591 65,429
Cost of goods sold 45,968 44,283
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Gross profit 18,623 21,146
Selling, general and administrative expenses 17,522 18,051
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Operating income 1,101 3,095
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Other expense (income):
Interest expense 1,074 1,120
Other expense (income), net (130) (29)
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944 1,091
Earnings before income taxes 157 2,004
Income tax expense 15 886
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Net earnings $ 142 1,118
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Net earnings per share $ .05 .36
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Cash dividends declared per share $ - .10
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Binks Manufacturing Company and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended February 28, 1997 and February 29, 1996
(Unaudited)
1997 1996
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($000 omitted)
Cash flows from operating activities:
Net earnings $ 142 1,118
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,052 1,056
Deferred compensation, net of payments (17) 76
Deferred income taxes (294) (32)
Other, net 56 161
Cash provided by (used in) changes in:
Receivables (2,150) (399)
Inventories 8,087 (1,006)
Other current assets (1,350) 430
Accounts payable (9,030) (187)
Accrued expenses (6,333) (931)
Income taxes 54 170
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Net cash provided by (used in) operating activities (9,783) 456
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Cash flows from investing activities:
Purchase of property, plant and equipment (719) (368)
Proceeds from sale of equipment 29 14
Other investments and assets 67 480
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Net cash provided by (used in) investing activities (623) 126
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Cash flows from financing activities:
Proceeds from long-term borrowings 1,035 24
Net increase (decrease) in short-term borrowings 1,971 (2,551)
Principal payments on long-term debt (140) (199)
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Net cash provided by (used in) financing activities 2,866 (2,726)
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Effect of exchange rate changes on cash (217) (50)
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Net increase (decrease) in cash and cash equivalents (7,757) (2,194)
Cash and cash equivalents at beginning of period 16,200 8,527
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Cash and cash equivalents at end of period $ 8,443 6,333
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Binks Manufacturing Company and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1997 (Unaudited) and November 30, 1996
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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 periods presented. 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 10-K for the year ended November 30, 1996.
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 the Company "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 issue of whether the
patent was valid and infringed. Graco asserts that on remand it will seek
damages and interest of approximately $750 thousand. 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.
The Company is the defendant in a lawsuit filed by former financial advisors
seeking approximately $900 thousand under terms of a contract. Management
believes that all required payments have been made and no further amounts have
been provided for.
The Company has certain other contingent liabilities resulting from litigation
and claims incident to the ordinary course of business. Management believes
that the probable resolution of such contingencies will not materially affect
the financial position or results of operations of the Company.
NOTE 3
The Company has entered into a contract to sell the Franklin Park plant that was
closed at the end of February 1997. An auction sale of surplus machinery and
equipment is scheduled to take place in late April. Cash proceeds in excess of
$14 million are expected to be realized from the plant and equipment sales.
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Binks Manufacturing Company and Consolidated Subsidiaries
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company had net sales of $64.6 million in first quarter fiscal 1997, a
decrease of $838 thousand, or 1%, from the $65.4 million reported for first
quarter fiscal 1996. Operations in Europe and the Pacific Rim continued to show
strong sales growth, achieving a 10% increase over the same period of the prior
year. If prevailing first quarter 1996 currency exchange rates had remained in
effect during first quarter 1997, sales growth in these markets would have been
12%. Sales in the Americas declined 13% compared to the prior year. This
decline was largely attributable to the logistical issues associated with
restructuring North American manufacturing operations. The Company believes
that sales in the Americas will improve as order backlogs related to start-up
inefficiencies of new and expanded manufacturing facilities are eliminated.
Gross profit declined $2.5 million (12%) in first quarter fiscal 1997 compared
to first quarter fiscal 1996. The gross profit margin was 28.8% in first
quarter fiscal 1997 as compared to 32.3% for the same period last year. This
decline was primarily due to the cost impact of diminished productivity at the
Franklin Park plant following the announcement of its impending closure. The
last day of production at the Franklin Park plant was February 20, 1997.
Currency translation accounted for over 18% of the $2.5 million gross profit
decrease between first quarter fiscal 1997 and first quarter fiscal 1996.
Selling, general, and administrative expenses decreased $529 thousand (3%) as
compared to first quarter fiscal 1996 reflecting cost reductions resulting from
the 1996 restructuring.
Interest expense declined by $45 thousand (4%), due to lower average borrowing
levels combined with lower effective interest rates.
Other income, which increased $101 thousand, includes interest income, exchange
gains and losses, gains on sales of fixed assets, and miscellaneous income. The
majority of this increase was in European and Pacific Rim markets.
Income tax expense was $15 thousand on pretax profit of $157 thousand in first
quarter fiscal 1997. The tax rate is due to the geographical mix of the
Company's pretax profitability.
As a result of all of the factors above, the Company recorded net earnings of
$142 thousand ($.05 per share) in first quarter fiscal 1997 as compared to net
earnings of $1.1 million (.36 per share) in first quarter fiscal 1996.
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<PAGE>
Binks Manufacturing Company and Consolidated Subsidiaries
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
LIQUIDITY AND CAPITAL RESOURCES
Revenue generated from operations is 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. The unused lines of
credit were approximately $35.6 million at February 28, 1997.
The Company's cash balances decreased $7.8 million during the three months ended
February 28, 1997, largely due to cash outflows of $9.8 million used to decrease
accounts payable and accrued expenses. Reduced inventories partially offset the
liability reductions. Total cash outlays in first quarter fiscal 1997 relating
to accruals established at November 30, 1996 for restructuring amounted to $579
thousand.
The Company used $623 thousand in investing activities, primarily for the
purchase of computer equipment and machinery to improve efficiency in
administrative activities and production.
Financing activities provided $2.9 million to the Company during first quarter
1997 which was primarily used in European operations to support increased sales
activity.
Changes in foreign currency translation rates resulted in a $217 thousand cash
reduction as reported at February 28, 1997.
On March 20, 1997 the Board of Directors declared a dividend of $.10 per share
to stockholders of record on April 3, 1997, payable on April 17, 1997.
The Company has entered into a contract to sell the Franklin Park plant that was
closed at the end of February 1997. An auction sale of surplus machinery and
equipment is scheduled to take place in late April. Cash proceeds in excess of
$14 million are expected to be realized from the plant and equipment sales.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Statements contained herein regarding the Company's expectations for fiscal year
1997 revenues and the amount of proceeds from the sale of the Franklin Park
plant and the equipment auction constitute "forward looking statements" within
the meaning of 21E of the Securities Exchange Act of 1934, as amended, and are
subject to the safe harbor created thereby. Although the Company believes that
the expectations reflected in such forward looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct.
Important factors that could cause actual results to differ materially from the
Company's expectations include, without limitation, in the case of 1997
revenues, general conditions in the Company's markets, unfavorable changes in
currency exchange rates, and product mix; and with respect to the sale of the
Franklin Park plant and equipment, a change in the market for such properties at
the time of the actual sale. No assurance can be given that the forward looking
statements will prove to be accurate.
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PART II - OTHER INFORMATION
Items 1 through 5 Not applicable
Item 6 (a) None
(b) None
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
/S/ JEFFREY W. LEMAJEUR
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Jeffrey W. Lemajeur, Treasurer/
Chief Financial Officer
/S/ DORAN J. UNSCHULD
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Doran J. Unschuld, President/
Chief Executive Officer
Date APRIL 14, 1997
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 8,443
<SECURITIES> 0
<RECEIVABLES> 75,801
<ALLOWANCES> 0
<INVENTORY> 76,369
<CURRENT-ASSETS> 170,423
<PP&E> 65,131
<DEPRECIATION> 37,880
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<CURRENT-LIABILITIES> 75,309
<BONDS> 45,507
0
0
<COMMON> 3,089
<OTHER-SE> 77,656
<TOTAL-LIABILITY-AND-EQUITY> 211,146
<SALES> 64,591
<TOTAL-REVENUES> 64,591
<CGS> 45,968
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<INTEREST-EXPENSE> 1,074
<INCOME-PRETAX> 157
<INCOME-TAX> 15
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142
<EPS-PRIMARY> .05
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