<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 May 31, 1997
/ / 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 SAMES CORPORATION
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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
--- ---
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 May 31, 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 Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 (UNAUDITED) AND NOVEMBER 30, 1996
May 31 Nov 30
1997 1996
---------- ---------
($000 omitted)
ASSETS
Current assets:
Cash and cash equivalents $ 7,473 16,200
Receivables, net 66,491 79,433
Inventories 76,516 84,737
Other current assets 8,461 9,644
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Total current assets 158,941 190,014
Other noncurrent assets 16,087 12,247
Property, plant and equipment, at cost 64,838 65,450
Less accumulated depreciation 38,578 37,482
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Net property, plant and equipment 26,260 27,968
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TOTAL ASSETS $ 201,288 230,229
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Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 (UNAUDITED) AND NOVEMBER 30, 1996
May 31 Nov 30
1997 1996
---------- ---------
($000 omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, bank overdrafts
and current maturities of long-term debt $ 11,768 9,384
Accounts payable 33,717 52,987
Other current liabilities 18,945 31,188
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Total current liabilities 64,430 93,559
Deferred compensation 9,275 9,564
Deferred income taxes 361 425
Long-term debt, less current maturities 49,396 44,634
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Total liabilities 123,462 148,182
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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 52,279 54,327
Foreign currency translation adjustment (2,046) 127
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Total stockholders' equity 77,826 82,047
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 201,288 230,229
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Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997 AND MAY 31, 1996
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the three For the six
months ended months ended
--------------------- ----------------------
May 31 May 31 May 31 May 31
1997 1996 1997 1996
---------- --------- ---------- ----------
($000 omitted) ($000 omitted)
<S> <C> <C> <C> <C>
Net sales $ 52,967 62,877 117,558 128,306
Cost of goods sold 37,162 42,087 83,130 86,370
---------- --------- ---------- ----------
Gross profit 15,805 20,790 34,428 41,936
Selling, general and administrative expenses 17,718 20,475 35,240 38,526
---------- --------- ---------- ----------
Operating income (loss) (1,913) 315 (812) 3,410
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Other expense (income):
Interest expense 1,189 1,019 2,263 2,139
Other expense (income), net (388) (15) (518) (44)
---------- --------- ---------- ----------
801 1,004 1,745 2,095
Earnings (loss) before income taxes (2,714) (689) (2,557) 1,315
Income taxes (832) (398) (817) 488
---------- --------- ---------- ----------
Net earnings (loss) $ (1,882) (291) (1,740) 827
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Net earnings (loss) per share $ (.61) (.09) (.56) .27
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Cash dividends declared per share $ .10 .10 .10 .20
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</TABLE>
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Binks Sames Corporation and Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended May 31, 1997 and May 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
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($000 omitted)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (1,740) 827
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 2,161 2,188
Deferred compensation, net of payments 115 445
Deferred income taxes (41) (47)
Other, net 106 160
Cash provided by (used in) changes in:
Receivables 5,036 14,173
Inventories 7,128 (12,527)
Other current assets (3,101) 1,030
Accounts payable (13,291) 7,186
Accrued expenses (9,096) (529)
Income taxes (1,559) (716)
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Net cash provided by (used in) operating activities (14,282) 12,190
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Cash flows from investing activities:
Purchase of property, plant and equipment (1,111) (1,656)
Proceeds from sale of equipment 62 61
Other investments and assets 67 277
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Net cash provided by (used in) investing activities (982) (1,318)
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Cash flows from financing activities:
Proceeds from long-term borrowings 5,642 966
Dividends paid (309) (309)
Net increase (decrease) in short-term borrowings 2,002 (4,498)
Principal payments on long-term debt (254) (373)
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Net cash provided by (used in) financing activities 7,081 (4,214)
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Effect of exchange rate changes on cash (544) (250)
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Net increase (decrease) in cash and cash equivalents (8,727) 6,408
Cash and cash equivalents at beginning of period 16,200 8,527
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Cash and cash equivalents at end of period $ 7,473 14,935
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</TABLE>
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Binks Sames Corporation and Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED) AND NOVEMBER 30, 1996
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 Franklin Park plant was closed at the end of February 1997. The
Company has entered into a contract to sell the Franklin Park
facility. The Company has also taken steps to sell surplus machinery
and equipment. Cash proceeds of approximately $14 million are
expected to be realized from the plant and equipment sales.
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Binks Sames Corporation and Consolidated Subsidiaries
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company had net sales of $117.6 million for six months fiscal 1997, a
decrease of $10.7 million, or 8%, from the $128.3 million reported for six
months fiscal 1996. In second quarter fiscal 1997, sales declined 16% to
$53 million as compared to second quarter fiscal 1996 sales of $62.9
million. Operations in Europe continued to show strong sales growth,
achieving a 7% increase over the six month period of the prior year. If the
prevailing currency exchange rates for six months fiscal 1996 had remained
in effect during six months fiscal 1997, sales growth in European markets
would have been 11%. For six months fiscal 1997, sales in the Americas
declined 21% compared to the prior year. This decline was largely
attributable to 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. Order backlog
at May 31, 1997 was over $65 million. For the six months ended May 31,
sales in the Pacific Rim decreased by 6% compared to prior year. This
decline was primarily due to the rising U.S. Dollar against local
currencies.
Gross profit declined $7.5 million (18%) in six months fiscal 1997 compared
to six months fiscal 1996. The gross profit margin was 29.3% for six
months fiscal 1997 as compared to 32.7% for the same period last year.
This decline was largely 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. Gross profit margin in second quarter fiscal 1997
improved to 29.8%, but was below the 33.1% attained in second quarter
fiscal 1996.
For the six month period, selling, general, and administrative expenses
decreased $3.3 million (8.5%) as compared to prior year. A total of $2.8
million of these expense reductions were achieved in the second quarter and
reflect efficiencies resulting from the fiscal 1996 restructuring.
Interest expense increased by $124 thousand (6%) for the six month period
due to higher average borrowing levels.
Other income, which increased $474 thousand for the six month period,
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 benefit was $817 thousand on pretax loss of $2.6 million in six
months fiscal 1997. This amounted to an effective tax rate of 32% as
compared to 37% in six months fiscal 1996. The tax rate is a function of
the geographical mix of the Company's pretax profitability.
As a result of all of the factors above, the Company recorded a net loss of
$1.7 million ($.56 per share) in six months fiscal 1997, and a net loss of
$1.9 million ($.61 per share) in second quarter fiscal 1997 as compared to
net earnings of $827 thousand for six months fiscal 1996 ($.27 per share)
and a net loss of $291 thousand ($.09 per share) in second quarter fiscal
1996.
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Binks Sames Corporation 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 $21.7 million at May 31, 1997.
The Company's cash balances decreased $8.7 million during the six months ended
May 31, 1997, largely due to cash outflows of $22.4 million used to decrease
accounts payable and accrued expenses. Decreases in accounts receivable and
inventories partially offset the liability reductions. Cash used in operating
activities for the six month period amounted to $14.3 million. Total cash
outlays in six months fiscal 1997 relating to accruals established at November
30, 1996 for restructuring amounted to $3.8 million.
The Company used $982 thousand in investing activities, primarily for the
purchase of computer equipment and machinery to improve efficiency in
administrative activities and production.
Financing activities provided $7.1 million to the Company during six months
fiscal 1997 which was primarily used to fund previously accrued restructuring
costs in the Americas and to support increased sales activity in Europe.
Changes in foreign currency translation rates resulted in a $543 thousand cash
reduction as reported at May 31, 1997.
On June 26, 1997 the Board of Directors declared a dividend of $.10 per share to
stockholders of record on July 18, 1997, payable on August 1, 1997.
The Franklin Park plant was closed at the end of February 1997. The Company has
entered into a contract to sell the Franklin Park facility. The Company has
also taken steps to sell surplus machinery and equipment. Cash proceeds of
approximately $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 expected sales of the Franklin
Park plant and equipment 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 3 Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders on April 29, 1997, the stockholders
of the Company approved the following matters by the votes indicated:
1. Election of the following nominees for directors of the Company
to hold office until the year 2000.
William W. Roche: For: 2,811,223; Against: 1,621; Abstain:
275,983, Clifford J. Vaughan: For: 2,811,663; Against: 2,043;
Abstain: 275,131, Dr. Wayne F. Edwards: For: 2,811,661;
Against: 2,045; Abstain: 275,131.
2. Amendment to Article First of the Company's Restated Certificate
of Incorporation, as amended (the "Certificate of
Incorporation"), to change the name of the Company to "Binks
Sames Corporation." For: 2,802,763; Against: 10,655; Abstain:
275,419.
3. Amendment to Article Fourth of the Certificate of Incorporation
to allow the Board of Directors of the Company to declare stock
dividends without stockholder approval. For: 2,761,839;
Against: 44,907; Abstain: 282,091.
4. Adoption of the Company's 1996 Stock Option Plan. For:
2,366,962; Against: 64,143; Abstain: 657,732.
5. Ratification of KPMG Peat Marwick LLP as the Company's
independent accountants for the fiscal year ending November 30,
1997. For: 2,812,582; Against: 2,186; Abstain: 274,069.
Item 5 Not applicable
Item 6 (a) Exhibits. Exhibit 27 - Financial Data Schedule
(b) None
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Pursuant to the requirements 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. 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 Sames Corporation
--------------------------
/s/ Jeffrey W. Lemajeur
--------------------------
Jeffrey W. Lemajeur, Treasurer/
Chief Financial Officer
/s/ Doran J. Unschuld
--------------------------
Doran J. Unschuld, President/
Chief Executive Officer
Date July 15, 1997
-----------------
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 7,473
<SECURITIES> 0
<RECEIVABLES> 66,491
<ALLOWANCES> 0
<INVENTORY> 76,516
<CURRENT-ASSETS> 158,941
<PP&E> 64,838
<DEPRECIATION> 38,578
<TOTAL-ASSETS> 201,288
<CURRENT-LIABILITIES> 64,430
<BONDS> 49,396
0
0
<COMMON> 3,089
<OTHER-SE> 74,737
<TOTAL-LIABILITY-AND-EQUITY> 201,288
<SALES> 117,558
<TOTAL-REVENUES> 117,558
<CGS> 83,130
<TOTAL-COSTS> 83,130
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,263
<INCOME-PRETAX> (2,557)
<INCOME-TAX> (817)
<INCOME-CONTINUING> (1,740)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,740)
<EPS-PRIMARY> (.56)
<EPS-DILUTED> (.56)
</TABLE>
