SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange
Act of 1934
For the quarterly period ended July 2, 1995
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 1-7568
COLTEC INDUSTRIES INC
(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 13-1846375
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
430 PARK AVENUE, NEW YORK, N.Y. 10022
(Address of principal executive offices) (Zip code)
(212) 940-0400
(Registrant's telephone number, including area code)
________________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 ( )
____________________________________
On July 30, 1995, there were outstanding 69,922,948 shares of common stock,
par value $.01 per share.
Page 1 of 18
<PAGE>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
July 2, December 31,
1995 1994
_________ ____________
(Unaudited)
(In thousands)
A S S E T S
Current assets -
Cash and cash equivalents $ 5,597 $ 4,188
Accounts and notes receivable - net 210,694 198,149
Inventories -
Finished goods 52,841 46,316
Work in process and finished parts 142,957 126,097
Raw materials and supplies 27,283 25,790
________ ________
223,081 198,203
Deferred income taxes 13,577 15,222
Other current assets 10,330 13,936
________ ________
Total current assets 463,279 429,698
Property, plant and equipment 661,192 652,907
Less accumulated depreciation and
amortization 436,900 429,793
________ ________
224,292 223,114
Costs in excess of net assets acquired,
net of amortization 138,779 131,024
Other assets 83,916 63,614
________ ________
$910,266 $847,450
======== ========
2.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
July 2, December 31,
1995 1994
___________ ____________
(Unaudited)
(In thousands, except
share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities -
Current maturities of long-term debt $ 504 $ 886
Accounts payable 70,382 76,648
Accrued expenses 156,634 159,528
Current portion of liabilities of
discontinued operations 3,000 3,000
___________ ___________
Total current liabilities 230,520 240,062
Long-term debt 982,001 969,261
Deferred income taxes 11,886 10,533
Other liabilities 136,150 124,159
Liabilities of discontinued operations 27,210 29,036
Shareholders' equity -
Preferred stock, $.01 par value,
2,500,000 shares authorized,
shares outstanding - none - -
Common stock, $.01 par value,
100,000,000 shares authorized, 70,016,384
shares issued (excluding 25,000,000 shares
held by a wholly owned subsidiary) 700 700
Capital in excess of par value 638,499 638,407
Retained earnings (deficit) (1,111,475) (1,158,948)
Unearned compensation - restricted stock awards (2,361) (3,480)
Foreign currency translation adjustments (1,339) (681)
___________ ___________
(475,976) (524,002)
Less: Cost of 93,436 and 98,862 shares
of common stock in treasury at
July 2, 1995 and December 31, 1994,
respectively (1,525) (1,599)
___________ ___________
(477,501) (525,601)
___________ ___________
$ 910,266 $ 847,450
=========== ===========
The accompanying notes to financial statements are an integral part of this
statement.
3.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
__________________ __________________
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
________ ________ ________ ________
(In thousands, except per share data)
Net sales $361,547 $337,018 $717,891 $668,868
________ ________ ________ ________
Costs and expenses -
Cost of sales 249,385 226,812 495,874 454,453
Selling and administrative 51,811 49,515 103,533 99,045
________ ________ ________ ________
Total costs and expenses 301,196 276,327 599,407 553,498
________ ________ ________ ________
Operating income 60,351 60,691 118,484 115,370
Interest and debt expense, net 23,322 22,593 45,323 45,017
________ ________ ________ ________
Earnings before income taxes and
extraordinary item 37,029 38,098 73,161 70,353
Provision for income taxes 12,960 13,715 25,606 25,327
________ ________ ________ ________
Earnings before extraordinary item 24,069 24,383 47,555 45,026
Extraordinary item - (1,015) (82) (1,015)
________ ________ ________ ________
Net earnings $ 24,069 $ 23,368 $ 47,473 $ 44,011
======== ======== ======== ========
Earnings per common share -
Before extraordinary item $ .34 $ .35 $ .68 $ .65
Extraordinary item - (.02) - (.02)
______ _____ _____ _____
Net earnings $ .34 $ .33 $ .68 $ .63
====== ===== ===== =====
Weighted average number of common
and common equivalent shares 69,939 69,799 69,881 69,798
====== ====== ====== ======
The accompanying notes to financial statements are an integral part of this
statement.
4.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
______________________
July 2, July 3,
1995 1994
_________ ________
(In thousands)
Cash flows from operating activities
Net earnings $ 47,473 $ 44,011
Adjustments to reconcile net earnings to cash
provided by operating activities
Extraordinary item 82 1,015
Depreciation and amortization 21,292 21,721
Deferred income taxes 1,353 5,858
Receivable from insurance carriers 5,520 23,071
Payment of liabilities of discontinued operations (1,826) (1,218)
Other operating items (6,424) (4,435)
_________ ________
67,470 90,023
_________ ________
Changes in assets and liabilities
Accounts and notes receivable (16,410) (19,171)
Inventories (21,378) (9,499)
Deferred income taxes 1,645 1,975
Other current assets 3,606 (404)
Accounts payable (6,266) 3,341
Accrued expenses (10,408) (13,667)
_________ ________
Changes in assets and liabilities (49,211) (37,425)
_________ ________
Cash provided by operating activities 18,259 52,598
_________ ________
Cash flows from investing activities
Capital expenditures (17,793) (14,726)
Acquisition of a business (14,000) -
Other - net 2,566 1,282
_________ ________
Cash used in investing activities (29,227) (13,444)
_________ ________
Cash flows from financing activities
Issuance of long-term debt 26,300 329,000
Payments of long-term debt (13,923) (367,108)
_________ ________
Cash provided by (used in) financing activities 12,377 (38,108)
_________ ________
Cash and cash equivalents
Increase 1,409 1,046
At beginning of period 4,188 5,749
_________ ________
At end of period $ 5,597 $ 6,795
========= ========
The accompanying notes to financial statements are an integral part of this
statement.
5.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Financial Statements
July 2, 1995
(Unaudited)
1. SUMMARY OF ACCOUNTING POLICIES
Financial Information: The unaudited financial statements, included herein,
reflect in the opinion of Coltec Industries Inc ("Coltec") all normal
recurring adjustments necessary to present fairly the financial position
and results of operations for the periods indicated. The unaudited
financial statements have been prepared in accordance with the instructions
to Form 10-Q and do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The consolidated balance sheet as of December 31, 1994 has
been derived from the audited financial statements as of that date. For
further information, refer to the financial statements and footnotes
included in Coltec's annual report to shareholders for the year ended
December 31, 1994.
Consolidated Statement of Cash Flows: Interest paid and federal and state
income taxes paid and refunded were as follows:
Six Months Ended
__________________
July 2, July 3,
1995 1994
------- --------
(In thousands)
Interest paid $47,434 $47,219
Income taxes:
Paid 30,412 18,886
Refunded 2,950 1,567
2. EXTRAORDINARY ITEM
During the second quarter of 1994, Coltec incurred an extraordinary charge
of $1,015,000, net of a tax benefit of $547,000, in connection with the
early retirement of debt.
During the six months of 1995, Coltec incurred an extraordinary charge of
$82,000, net of a tax benefit of $44,000, in connection with the early
retirement of debt.
3. COMMITMENTS AND CONTINGENCIES
Coltec and certain of its subsidiaries are defendants in various lawsuits,
including actions involving asbestos-containing products and certain
environmental proceedings. With respect to asbestos product liability and
related litigation costs, as of July 2, 1995, two subsidiaries of Coltec
were among a number of defendants (typically 15 to 40) in approximately
87,900 actions (including approximately 11,000 actions, in advanced stages
of processing) filed in various states by plaintiffs alleging injury or
death as a result of exposure to asbestos fibers. Through July 2, 1995,
approximately 122,600 of the approximately 210,500 total actions brought
have been settled or otherwise disposed of.
6.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Financial Statements
July 2, 1995
(Unaudited)
The damages claimed for personal injury or death vary from case to case and
in many cases plaintiffs seek $1,000,000 or more in compensatory damages
and $2,000,000 or more in punitive damages. Although the law in each state
differs to some extent, it appears, based on advice of counsel, that
liability for compensatory damages would be shared among all responsible
defendants, thus limiting the potential monetary impact of such judgments
on any individual defendant.
Following a decision of the Pennsylvania Supreme Court, in a case in which
neither Coltec nor any of its subsidiaries were parties, that held
insurance carriers are obligated to cover asbestos-related bodily injury
actions if any injury or disease process, from first exposure through
manifestation, occurred during a covered policy period (the "continuous
trigger theory of coverage"), Coltec settled litigation with its primary
and most of its first-level excess insurance carriers, substantially on the
basis of the Court's ruling. Coltec has negotiated a final agreement with
most of its excess carriers that are in the layers of coverage immediately
above its first layer. Coltec is currently receiving payments pursuant to
this agreement. Coltec believes that, with respect to the remaining
carriers, a final agreement can be achieved without litigation and on
substantially the same basis that it has resolved the issues with its
primary and first-level excess carriers. Settlements are generally made on
a group basis with payments made to individual claimants over periods of
one to four years. During the first six months of 1995, two subsidiaries
of Coltec received approximately 19,500 new actions, compared with
approximately 10,200 actions received during the first six months of 1994.
Payments were made with respect to asbestos liability and related costs
aggregating $30,489,000 and $18,981,000 in the first six months of 1995
and 1994, respectively, substantially all of which were covered by
insurance. In accordance with Coltec's internal procedures for the
processing of asbestos product liability actions and due to the proximity
to trial or settlement, certain outstanding actions have progressed to a
stage where Coltec can reasonably estimate the cost to dispose of these
actions. As of July 2, 1995, Coltec estimates that the aggregate remaining
cost of the disposition of the settled actions for which payments remain to
be made and actions in advanced stages of processing, including associated
legal costs, is approximately $76,013,000 and Coltec expects that this cost
will be substantially covered by insurance.
With respect to the 76,900 outstanding actions as of July 2, 1995 which are
in preliminary procedural stages, Coltec lacks sufficient information upon
which judgments can be made as to the validity or ultimate disposition of
such actions, thereby making it difficult to estimate with reasonable
certainty the potential liability or costs to Coltec. When asbestos
actions are received they are typically forwarded to local counsel to
ensure that the appropriate preliminary procedural response is taken. The
complaints typically do not contain sufficient information to permit a
7.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Financial Statements
July 2, 1995
(Unaudited)
reasonable evaluation as to their merits at the time of receipt, and in
jurisdictions encompassing a majority of the outstanding actions, the
practice has been that little or no discovery or other action is taken
until several months prior to the date set for trial. Accordingly, Coltec
generally does not have the information necessary to analyze the actions in
sufficient detail to estimate the ultimate liability or costs to Coltec, if
any, until the actions appear on a trial calendar. A determination to seek
dismissal, to attempt to settle or to proceed to trial is typically not
made prior to the receipt of such information.
It is also difficult to predict the number of asbestos lawsuits that
Coltec's subsidiaries will receive in the future. Coltec has noted that,
with respect to recently settled actions or actions in advanced stages of
processing, the mix of the injuries alleged and the mix of the occupations
of the plaintiffs have been changing from those traditionally associated
with Coltec's asbestos-related actions. Coltec is not able to determine
with reasonable certainty whether this trend will continue. Based upon the
foregoing, and due to the unique factors inherent in each of the actions,
including the nature of the disease, the occupation of the plaintiff, the
presence or absence of other possible causes of a plaintiff's illness, the
availability of legal defenses, such as the statute of limitations or state
of the art, and whether the lawsuit is an individual one or part of a
group, management is unable to estimate with reasonable certainty the cost
of disposing of outstanding actions in preliminary procedural stages or of
actions that may be filed in the future. However, Coltec believes that its
subsidiaries are in a favorable position compared to many other defendants
because, among other things, the asbestos fibers in its asbestos-containing
products were encapsulated. Considering the foregoing, as well as the
experience of Coltec's subsidiaries and other defendants in asbestos
litigation, the likely sharing of judgments among multiple responsible
defendants, and the significant amount of insurance coverage that Coltec
expects to be available from its solvent carriers, Coltec believes that
pending and reasonably anticipated future actions are not likely to have a
material effect on Coltec's results of operations and financial condition.
Although the insurance coverage which Coltec has is substantial, it should
be noted that insurance coverage for asbestos claims is not available to
cover exposures initially occurring on and after July 1, 1984. Coltec's
subsidiaries continue to be named as defendants in new cases, some of which
allege initial exposure after July 1, 1984.
In addition to claims for personal injury, Coltec's subsidiaries have been
involved in an insignificant number of property damage claims based upon
asbestos-containing materials found in schools, public facilities and
private commercial buildings. Based upon proceedings to date, the
overwhelming majority of these claims have been resolved without a material
adverse impact on Coltec. Likewise, the insignificant number of claims
8.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Financial Statements
July 2, 1995
(Unaudited)
remaining to be resolved are not expected to have a material effect on
Coltec's results of operations and financial condition.
Coltec has recorded an accrual for its liabilities for asbestos-related
matters that are deemed probable and can be reasonably estimated (settled
actions and actions in advanced stages of processing), and has separately
recorded an asset equal to the amount of such liabilities that is expected
to be recovered by insurance. In addition, Coltec has recorded a
receivable for that portion of payments previously made for asbestos
product liability actions and related litigation costs that is recoverable
from its insurance carriers. Liabilities for asbestos related matters and
the receivable from insurance carriers included in the Consolidated Balance
Sheet are as follows:
July 2, Dec. 31,
(In thousands) 1995 1994
_________________________________________________________________
Accounts and notes receivable - other $64,314 $68,179
Other assets 36,914 13,119
Accrued expenses - other 41,657 34,099
Other liabilities 34,356 8,155
With respect to environmental proceedings, Coltec has been notified that it
is among the Potentially Responsible Parties ("PRPs") under the federal
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or similar state laws, for the costs of
investigating and in some cases remediating contamination by hazardous
materials at several sites. CERCLA imposes joint and several liability for
the costs of investigating and remediating properties contaminated by
hazardous materials. Liability for these costs can be imposed on present
and former owners or operators of the properties or on parties who
generated the wastes that contributed to the contamination. The process of
investigating and remediating contaminated properties can be lengthy and
expensive. The process is also subject to the uncertainties occasioned by
changing legal requirements, developing technological applications and
liability allocations among PRPs. Based on the progress to date in the
investigation, cleanup and allocation of responsibility for these sites,
Coltec has estimated that its costs in connection with these sites
approximates $20,000,000 at July 2, 1995, and has accrued for this amount
in the Consolidated Balance Sheet as of July 2, 1995. Although Coltec is
pursuing insurance recovery in connection with certain of these matters,
Coltec has not recorded a receivable with respect to any potential recovery
of costs in connection with any environmental matter.
4. SUBSEQUENT EVENT
On August 2, 1995, Coltec announced that it will close a Walbar plant in
Mississauga, Ontario, Canada by the end of 1996. In connection with this
shutdown, Coltec will incur a charge in the third quarter of 1995. The
amount of such a charge has not yet been determined.
9.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
July 2, 1995
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following table shows financial information by industry segment for
the three months and six months ended July 2, 1995 and July 3, 1994.
Three Months Ended Six Months Ended
__________________ ________________
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
_______ _______ _______ ______
(In millions)
Sales:
Aerospace/Government $125.6 $105.3 $240.6 $204.4
Automotive 125.2 133.7 257.5 262.1
Industrial 110.9 98.5 220.4 203.2
Intersegment elimination (.2) (.5) (.6) (.8)
______ ______ ______ ______
Total $361.5 $337.0 $717.9 $668.9
====== ====== ====== ======
Operating income:
Aerospace/Government $ 16.9 $ 16.4 $ 31.9 $ 30.0
Automotive 24.6 31.2 52.4 59.5
Industrial 27.1 22.6 51.9 44.9
______ ______ ______ ______
Total segments 68.6 70.2 136.2 134.4
Corporate unallocated (8.2) (9.5) (17.7) (19.0)
______ ______ ______ ______
Operating income $ 60.4 $ 60.7 $118.5 $115.4
====== ====== ====== ======
Results of Operations
Three Months Ended July 2, 1995 Compared With Three Months Ended July
3, 1994.
Earnings before extraordinary item in the second quarter of 1995
declined slightly to $24.1 million, or 34 cents per share, from $24.4
million, or 35 cents per share, in the 1994 second quarter. Sales for
the quarter ended July 2, 1995, increased 7% to $361.5 million compared
with $337.0 million in the like quarter last year. Operating income
was $60.4 million, and the operating margin was 16.7%. This compared
with operating income of $60.7 million and an operating margin of 18.0%
in the 1994 second quarter.
In the Aerospace/Government segment, operating income increased 3% on a
19% sales increase. Operating income in the Automotive segment was
down 21% on a 6% sales decline, while operating income in the
Industrial segment increased 20% on a 13% sales increase.
10.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
July 2, 1995
In the Aerospace/Government segment, improved performances were
achieved by Menasco and Delavan Gas Turbine Products. However, the
segment's operating margin was depressed due to higher production costs
at Fairbanks Morse Engine, declining volume in a product line at Walbar
and pricing pressures. At Fairbanks Morse Engine, production and
start-up costs on the Alco engine product line have been higher than
expected due to the tight local labor market and the need for extensive
training programs for new employees. At Walbar, intensive pricing
pressure and declining volume in its compressor blades business
contributed to the decline in operating income. On August 2, 1995,
Coltec announced that it will close a Walbar plant in Mississauga,
Ontario, Canada by the end of 1996. In connection with this shutdown,
Coltec will incur a charge in the third quarter of 1995. The amount of
such a charge has not yet been determined. Automotive segment results
were impacted by the adverse pricing environment in the original
equipment market and the decline in demand from key automotive
customers. Operating results in the Industrial segment continued to
benefit from improved market conditions and new product introductions.
All but two of the 11 units in the segment showed second quarter sales
and earnings gains, with especially strong improvements at Quincy
Compressor, Garlock Bearings and France Compressor Products.
The operating issues and business trends experienced in the second
quarter are expected to persist to some extent into the second half of
the year.
Following is a discussion of the results of operations for the three
months ended July 2, 1995 compared with the three months ended July 3,
1994.
Sales. In the Aerospace/Government segment, sales were $125.6 million
compared with $105.3 million a year ago. Fairbanks Morse Engine
reported higher shipments of engines for U.S. Navy programs and began
deliveries in 1995 of its Alco engines. Higher sales at Chandler Evans
Control Systems were due to increased shipments of fuel pumps to
original equipment manufacturers and spare parts to the commercial
aftermarket. Menasco reported higher sales as deliveries of landing
gear systems on new programs for the Boeing 777 aircraft and the Fokker
70 and 100 aircraft began to accelerate. Sales were up at Delavan Gas
Turbine Products on increased demand for fuel nozzles and overhaul
services to regional airlines.
Automotive segment sales were $125.2 million in the second quarter
compared with $133.7 million last year. Sales were negatively affected
by the adverse pricing environment in the original equipment market and
the decline in demand for throttle bodies, manifold assemblies,
mechanical air pumps and seals from key automotive customers. Demand
for Stemco's hub oil seal from the truck and trailer aftermarket was
down in the second quarter of 1995. Holley Performance Products
reported higher sales on increased demand in the automotive aftermarket
for performance and remanufactured carburetors. Sales of oil pumps
were higher on the ramp-up in volume for Ford's V6 and Zetec engines.
11.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
July 2, 1995
In the Industrial segment, sales were $110.9 million compared with
$98.5 million last year. Sales were higher at Quincy Compressor on
increased shipments of rotary screw air compressors and on strong
demand for compressor parts and accessories. Garlock Bearings reported
higher sales on strong demand for bearings from the automotive and
truck markets. At Garlock Mechanical Packing, sales were higher on
increased demand for the gasketing and KLOSURE product lines, improved
pricing, higher shipments in Canada and strengthening European
currencies. France Compressor Products and Garlock Valves & Industrial
Plastics also benefitted from stronger European currencies as well as
from improving economic conditions.
Cost of Sales. Cost of sales increased 10% in the second quarter of
1995. This increase is related to the increased volume of business and
higher than expected production and start-up costs at Fairbanks Morse
Engine on the Alco engine product line. As a percentage of sales, cost
of sales increased to 69.0% from 67.3% last year.
Selling and Administrative Expense. Selling and administrative
expense, including other income and expense, increased 5% due primarily
to higher sales. As a percent of sales, selling and administrative
expense was 14.3% in the second quarter compared with 14.7% last year.
Interest and Debt Expense, Net. Interest and debt expense, net
increased $.7 million or 3% in the second quarter due to higher
interest rates.
Provision for Income Taxes. The provision for income taxes for the
three months ended July 2, 1995 resulted in an effective income tax
rate of 35.0% compared with 36.0% for the like period last year.
Six Months Ended July 2, 1995 Compared With Six Months Ended July 3,
1994.
Earnings before extraordinary item for the six months ended July 2,
1995 increased 6% to $47.6 million, or 68 cents per share, from $45.0
million, or 65 cents per share, in 1994. Sales for the six months of
1995 increased 7% to $717.9 million compared with $668.9 million last
year. Operating income was $118.5 million, and the operating margin
was 16.5%. This compared with operating income of $115.4 million and
an operating margin of 17.2% in 1994.
In the Aerospace/Government segment, operating income increased 6% on a
18% sales increase. Operating income in the Automotive segment was
down 12% on a 2% sales decline, while operating income in the
Industrial segment increased 16% on a 8% sales increase.
The Aerospace/Government segment benefitted from improved performances
by Chandler Evans Control Systems, Fairbanks Morse Engine and Delavan
Gas Turbine Products. However, the segment's operating margin was
depressed due to higher production costs at Fairbanks Morse Engine,
12.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
July 2, 1995
declining volume in a product line at Walbar and pricing pressures. At
Fairbanks Morse Engine, production and start-up costs on the Alco
engine product line have been higher than expected due to the tight
local labor market and the need for extensive training programs for new
employees. At Walbar, intensive pricing pressure and declining volume
in its compressor blades business contributed to the decline in
operating income. Automotive segment results were impacted by the
adverse pricing environment in the original equipment market and the
decline in demand from key automotive customers. Operating results in
the Industrial segment continued to benefit from improved market
conditions and new product introductions. Strong sales and earnings
gains were reported by Quincy Compressor, Garlock Bearings and France
Compressor Products.
Following is a discussion of the results of operations for the six
months ended July 2, 1995 compared with the six months ended July 3,
1994.
Sales. In the Aerospace/Government segment, sales were $240.6 million
compared with $204.4 million a year ago. Fairbanks Morse Engine
reported higher shipments of engines for U.S. Navy programs and began
deliveries in 1995 of its Alco engines. Higher sales at Chandler Evans
Control Systems were due to increased shipments of fuel pumps to
original equipment manufacturers and spare parts to the commercial
aftermarket. Menasco reported higher sales as deliveries of landing
gear systems on new programs for the Boeing 777 aircraft and the Fokker
70 and 100 aircraft began to accelerate. Sales were up at Delavan Gas
Turbine Products on increased demand for fuel nozzles and overhaul
services to regional airlines.
Automotive segment sales were $257.5 million for the six months of 1995
compared with $262.1 million last year. Sales were negatively affected
by the adverse pricing environment in the original equipment market and
the decline in demand for throttle bodies, manifold assemblies,
mechanical air pumps and seals from key automotive customers. Demand
for Stemco's hub oil seal from the truck and trailer aftermarket was
down in the six months of 1995. Holley Performance Products reported
higher sales on increased demand in the automotive aftermarket for
performance and remanufactured carburetors. Sales for oil pumps were
higher on the ramp-up in volume for Ford's V6 and Zetec engines.
In the Industrial segment, sales were $220.4 million compared with
$203.2 million last year. Sales were higher at Quincy Compressor on
increased shipments of rotary screw air compressors and on strong
demand for compressor parts and accessories. Garlock Bearings reported
higher sales on strong demand for bearings from the automotive and
truck markets. At Garlock Mechanical Packing, sales were higher on
increased demand for the gasketing and KLOSURE product lines, improved
pricing, higher shipments in Canada and strengthening European
currencies. France Compressor Products and Garlock Valves & Industrial
Plastics also benefitted from stronger European currencies as well as
from improving economic conditions.
13.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
July 2, 1995
Cost of Sales. Cost of sales increased 9% during the six months ended
July 2, 1995. This increase is related to the increased volume of
business and higher than expected production and start-up costs at
Fairbanks Morse Engine on the Alco engine product line. As a
percentage of sales, cost of sales increased to 69.1% from 67.9% last
year.
Selling and Administrative Expense. Selling and administrative
expense, including other income and expense, increased 5% due primarily
to higher sales. As a percent of sales, selling and administrative
expense was 14.4% in 1995 compared with 14.8% in 1994.
Interest and Debt Expense, Net. Interest and debt expense, net
increased slightly during the first six months of 1995 due to higher
interest rates.
Provision for Income Taxes. The provision for income taxes for the six
months ended July 2, 1995 resulted in an effective income tax rate of
35.0% compared with 36.0% for 1994.
Extraordinary Item. The extraordinary charges in both the six months
of 1995 and 1994 resulted from early retirement of debt.
Liquidity and Financial Position
At July 2, 1995, total debt was $982.5 million compared with $970.1
million at year-end 1994. The negative balance in shareholders' equity
of $477.5 million compares with a negative balance of $525.6 million at
December 31, 1994. Cash and cash equivalents were $5.6 million
compared with $4.2 million at year-end 1994. Working capital was
$232.8 million and the current ratio was 2.01. This compares with
working capital of $189.6 million and a current ratio of 1.79 at
December 31, 1994.
On June 30, 1995, Coltec acquired AlliedSignal Inc's ("AlliedSignal")
aircraft landing gear business for a purchase price of $14.0 million.
The acquisition includes the development and production of landing
gears for the McDonnell Douglas F/A-18 E/F fighter as well as
production and product support of existing military programs including
the F-15 fighter.
During the six months ended July 2, 1995, Coltec generated $18.3
million of cash from operating activities compared with $52.6 million
last year. The lower cash generated from operations in 1995 was due
primarily to lower net receipts from insurance carriers for asbestos-
related matters and to the build up of inventory to support the
increased level of business and new programs in the Aerospace/
Government segment. For the six months of 1995, net receipts from
insurance carriers were $5.5 million compared with $23.1 million last
year. The receivable from insurance carriers for asbestos-related
14.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
July 2, 1995
matters was $101.2 million and $81.3 million at July 2, 1995 and
December 31, 1994, respectively, (including the current portion of
$64.3 million and $68.2 million, respectively). Excluding the current
receivable due from insurance carriers, receivables increased 13% to
$146.4 million, reflecting the higher sales volume, and receivables
days outstanding were 39 days at July 2, 1995 compared with 36 days at
year-end 1994. Inventories of $223.1 million at July 2, 1995 were 13%
higher than the level at year-end 1994.
15.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
July 2, 1995
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Coltec and certain of its subsidiaries are defendants in various
lawsuits involving asbestos-containing products. In addition, Coltec
has been notified that it is among the Potentially Responsible Parties
under the federal Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, or similar state laws, for the
costs of investigating and in some cases remediating contamination by
hazardous materials at several sites. See Note 3 of the Notes to
Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of the shareholders of Coltec was held on
April 27, 1995.
(b) At the annual meeting of shareholders held on April 27, 1995,
shareholders voted for:
1. The election of a Board of Directors consisting of seven
members.
2. Appointment of Arthur Andersen LLP as the independent public
accountants for 1995.
There were 69,917,522 shares of Coltec Common Stock, par value
$.01 per share, outstanding and entitled to one vote per share as
of the record date for said meeting. The voting results were as
follows:
1. Election of Directors
Number of Votes
_____________________
Name of Candidates For Withheld
______________________ __________ _______
Joseph R. Coppola 63,857,708 360,437
John W. Guffey, Jr. 63,851,333 366,812
David I. Margolis 63,858,308 359,837
J. Bradford Mooney, Jr. 63,857,708 360,437
Joel Moses 63,857,308 360,837
Paul G. Schoen 63,860,708 357,437
Richard A. Stuckey 63,857,508 360,637
2. Appointment of Arthur Andersen LLP as the independent public
accountants for 1995.
For Against Abstain
__________ _______ _______
63,814,625 56,352 347,168
16.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
July 2, 1995
Item 5. Other Information
In connection with the announcement on August 2, 1995 that Coltec will
close a Walbar plant in Mississauga, Ontario, Canada, Coltec will
incur a charge in the third quarter of 1995. The amount of such a
charge has not yet been determined.
Item 6. Exhibits and Reports on Form 8-K.
(a)(27) Financial Data Schedule
(99) Coltec Industries Inc Release dated August 2, 1995
Coltec Industries To Close Unprofitable Walbar Canada Plant.
(b) No reports on Form 8-K were filed during the quarter ended
July 2, 1995 by Coltec Industries Inc.
17.
<PAGE>
S I G N A T U R E
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.
COLTEC INDUSTRIES INC
(Registrant)
by Paul G. Schoen
___________________________
Paul G. Schoen
Executive Vice President,
Finance
Treasurer and Chief Financial
Officer
Date: August 10, 1995
18.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
July 2, 1995 CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED July 2, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-02-1995
<CASH> 5,597
<SECURITIES> 0
<RECEIVABLES> 215,163
<ALLOWANCES> 4,469
<INVENTORY> 223,081
<CURRENT-ASSETS> 463,279
<PP&E> 661,192
<DEPRECIATION> 436,900
<TOTAL-ASSETS> 910,266
<CURRENT-LIABILITIES> 230,520
<BONDS> 982,001
<COMMON> 700
0
0
<OTHER-SE> (478,201)
<TOTAL-LIABILITY-AND-EQUITY> 910,266
<SALES> 717,891
<TOTAL-REVENUES> 717,891
<CGS> 495,874
<TOTAL-COSTS> 599,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,323
<INCOME-PRETAX> 73,161
<INCOME-TAX> 25,606
<INCOME-CONTINUING> 47,555
<DISCONTINUED> 0
<EXTRAORDINARY> (82)
<CHANGES> 0
<NET-INCOME> 47,473
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
Ex-99
C:14 FOR IMMEDIATE RELEASE
8/2/1995 CONTACT: Michael Dunn
(212) 940-0523
COLTEC INDUSTRIES TO CLOSE
UNPROFITABLE WALBAR CANADA PLANT
New York, NY, August 2, 1995 -- Coltec Industries Inc (NYSE: COT) will close its
Walbar plant on Aerowood Drive in Mississauga, Ontario, Canada. The plant,
which produces compressor blades for jet engines, employs 110 workers and will
be closed toward the end of 1996.
Coltec will continue to operate its remaining Walbar plants in the United States
and Canada.
John M. Cybulski, senior vice president, aerospace, Coltec Industries, said,
"The extended, severe downturn in the aerospace industry has dramatically
decreased the sales volume at our Aerowood Drive facility. Operating this plant
has been a drain on our profitability. This business accounts for only 6% of
Walbar's sales and 16% of Walbar Canada's sales and less than one-half of a
percent of Coltec's sales. We intend to focus our Walbar Canada operations on
producing turbine blades and vanes, which has been a growing business for us."
Mr. Cybulski added, "This move will strengthen our presence in the turbine blade
marketplace and enhance our service to customers. This also will strengthen
Walbar's financial position and improve its profitability."
Coltec Industries Inc is a New York-based manufacturing company serving
aerospace, automotive and other industrial markets.
###
<PAGE>
