UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 June 29, 1997
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.)
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, North Carolina 28217 28217
(Address of principal executive offices) (Zip code)
(704)423-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 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 31, 1997, there were outstanding 65,417,552 shares of
common stock, par value $.01 per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
-------- -------- ------- --------
(in thousands, except per share data)
Net sales $322,227 $293,015 $631,399 $574,213
Cost of sales 217,137 201,900 428,812 409,916
Gross profit 105,090 91,115 202,587 164,297
Selling and administrative 56,336 46,227 108,905 98,078
Operating Income 48,754 44,888 93,682 66,219
Interest expense, net 12,682 20,332 25,046 41,458
Earnings from continuing operations
before income taxes and
extraordinary item 36,072 24,556 68,636 24,761
Income taxes 12,264 8,339 23,336 8,417
Earnings from continuing operations
before extraordinary item 23,808 16,217 45,300 16,344
Discontinued operations
(net of tax) - 43,507 - 51,156
Extraordinary item (net of tax) - - - (1,822)
Net earnings $ 23,808 $ 59,724 $ 45,300 $ 65,678
Earnings per common share
Before extraordinary item $ .36 $ .23 $ .67 $ .23
Discontinued operations - .62 - .73
Extraordinary item - - - (.03)
Net earnings $ .36 $ .85 $ .67 $ .93
Weighted average number of common
and common equivalent shares 66,695 70,322 67,213 70,254
See notes to consolidated financial statements.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 29, Dec. 31,
1997 1996
--------- ---------
(in thousands)
A S S E T S
Current assets:
Cash and cash equivalents $ 8,532 $ 15,029
Accounts and notes receivable, net of
allowance of $2,394 in 1997 and $2,007 in 1996 193,862 190,325
Inventories
Finished goods 44,253 48,813
Work in process and finished parts 144,635 122,817
Raw materials and supplies 33,369 32,568
222,257 204,198
Deferred income taxes 3,065 10,524
Other current assets 14,301 12,769
Total current assets 442,017 432,845
Property, plant and equipment, net 228,890 214,790
Costs in excess of net assets acquired, net 131,292 132,872
Other assets 60,152 58,869
$862,351 $839,376
See notes to consolidated financial statements.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 29, Dec. 31,
1997 1996
--------- ---------
(in thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 528 $ 2,528
Accounts payable 65,412 55,410
Accrued expenses 137,489 145,104
Current portion of liabilities of
discontinued operations 6,002 14,229
Total current liabilities 209,431 217,271
Long-term debt 762,045 717,722
Deferred income taxes 57,371 50,646
Other liabilities 81,949 100,004
Liabilities of discontinued operations 163,750 170,740
Commitments and contingencies - -
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, 70,449,593 and
70,398,661 shares issued at June 29, 1997
and December 31, 1996, respectively (excluding
25,000,000 shares held by a wholly owned
subsidiary) 704 704
Capital surplus 641,715 643,221
Retained deficit (961,603) (1,006,903)
Unearned compensation (2,465) (2,136)
Minimum pension liability (3,200) (3,200)
Foreign currency translation adjustments (2,704) (1,151)
(327,553) (369,465)
Less cost of 5,021,141 and 3,182,822 shares
of common stock in treasury at
June 29, 1997 and December 31, 1996,
respectively (84,642) (47,542)
(412,195) (417,007)
$862,351 $839,376
See notes to consolidated financial statements.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended
June 29, June 30,
1997 1996
--------- --------
Cash flows from operating activities:
Net earnings $ 45,300 $ 65,678
Adjustments to reconcile net earnings to cash
provided by operating activities:
Extraordinary item - 1,822
Depreciation and amortization 16,589 18,903
Deferred income taxes 14,184 24,476
Gain on sale of Automotive Busines s - (52,227)
Payments of liabilities of discontinued
operations (12,717) (1,805)
Other operating items (20,248) (1,746)
Changes in assets and liabilities:
Accounts and notes receivable (3,537) (56,747)
Inventories (18,060) (4,386)
Other current assets (1,532) 2,055
Accounts payable 10,002 (4,263)
Accrued expenses (7,615) 19,815
Cash provided by operating activities 22,366 11,575
Cash flows from investing activities:
Capital expenditures (29,267) (16,025)
Proceeds from sale of Automotive Business - 283,000
Cash provided by (used in) investing
activities (29,267) 266,975
Cash flows from financing activities:
Increase in revolving facility, net 49,500 33,000
Repayment of long-term debt (7,177) (297,819)
Purchase of treasury stock (41,919) (1,863)
Cash provided by (used in) investing
activities 404 (266,682)
Increase (decrease)in cash and cash equivalents (6,497) 11,868
Cash and cash equivalents - beginning of period 15,029 3,971
Cash and cash equivalents - end of period $ 8,532 $ 15,839
Supplemental cash flow data:
Cash paid for interest $ 22,438 $ 42,297
Cash paid for income taxes 1,268 19,235
See notes to consolidated financial statements.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
1. SUMMARY OF ACCOUNTING POLICIES
Financial Information: The unaudited consolidated financial
statements included herein reflect in the opinion of
management of Coltec Industries Inc (the Company) all
normal recurring adjustments necessary to present fairly
the consolidated financial position and results of
operations for the periods indicated. The unaudited
consolidated 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, 1996 has been extracted from the audited
consolidated financial statements as of that date. For
further information, refer to the consolidated financial
statements and footnotes included in the Company's annual
report to shareholders for the year ended December 31,
1996.
2. DISCONTINUED OPERATIONS
In June 1996, the Company sold Holley Automotive, Coltec
Automotive and Performance Friction Products to Borg-Warner
Automotive, Inc. In December 1996, the Company sold Farnam
Sealing Systems Division to Meillor SA. The sale of these
businesses represented a disposal of the Company's
Automotive Segment. Accordingly, the Consolidated
Statements of Earnings for the three months and six months
ended June 30, 1996 have been restated to reflect the
operations of the automotive original equipment components
businesses as a discontinued operation.
Liabilities of discontinued operations at June 29, 1997 of
$169,752 relate to contingent contractual obligations,
environmental matters, reserves for postretirement benefits
and other future estimated costs for various discontinued
operations.
3. EXTRAORDINARY ITEM
The Company incurred an extraordinary charge of $1,822, net
of income taxes of $937, in the first quarter of 1996 in
connection with early retirement of debt.
4. COMMITMENTS AND CONTINGENCIES
The Company 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 June 29, 1997, two subsidiaries of
the Company were among a number of defendants (typically 15
to 40) in approximately 105,300 actions (including
approximately 3,600 actions in advanced stages of
processing) filed in various states by plaintiffs alleging
injury or death as a result of exposure to asbestos fibers.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
During the first six months of 1997, two subsidiaries of
the Company received approximately 22,800 new actions
compared to approximately 23,200 new actions received
during the first six months of 1996. Through June 29,
1997, approximately 194,800 of the approximately 300,100
total actions brought have been settled or otherwise
disposed.
The damages claimed for personal injury or death vary from
case to case, and in many cases plaintiffs seek $1,000 nor
more in compensatory damages and $2,000 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 the Company or any or 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"), the
Company settled litigation with its primary and most of its
first-level excess insurance carriers, substantially on the
basis of the Court's ruling. The Company has negotiated a
final agreement with most of its excess carriers that are
in the layers of coverage immediately above its first
layer. The Company is currently receiving payments
pursuant to this agreement. The Company 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 other
carriers. Settlements are generally made on a group basis
with payments made to individual claimants over periods of
one to four years. Payments were made with respect to
asbestos liability and related costs aggregating $34,281
and $32,534 for the first six months of 1997 and 1996,
respectively, substantially all of which were covered by
insurance. Related to payments not covered by insurance,
the Company recorded charges to operations amounting to
$4,000 and $4,250 for the first six months of 1997 and
1996, respectively.
In accordance with the Company'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 the
Company can reasonably estimate the cost to dispose of
these actions. As of June, 29, 1997, the Company 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 $56,460 and the
Company expects that this cost will be substantially
covered by insurance.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
With respect to the 101,700 outstanding actions as of June
29, 1997, which are in preliminary procedural stages, the
Company 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
the Company. 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 reasonable evaluation as to their merits at the
time or 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, the Company generally does not have the
information necessary to analyze the actions in sufficient
detail to estimate the ultimate liability or costs to the
Company, if any, until the actions appear on a trial
calendar. A determination to seek dismissal, to attempt to
settle or 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 the Company's subsidiaries will receive in
the future. The Company 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 the Company's asbestos-
related actions. The Company 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, the Company 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 the
Company's subsidiaries and other defendants in asbestos
litigation, the likely sharing of judgments among multiple
responsible defendants, and the substantial amount of
insurance coverage that the Company expects to be available
from its solvent carriers, the Company believes that
pending and reasonably anticipated future actions are not
likely to have a material effect on the Company's
consolidated results of operations and financial condition.
Although the insurance coverage which the Company 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. The
Company's subsidiaries continue to be named as defendants
in new cases, some of which allege initial exposure after
July 1, 1984.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
In addition to claims for personal injury, the Company'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 the Company.
Likewise, the insignificant number of claims remaining to
be resolved are not expected to have a material effect on
the Company's consolidated results of operations and
financial condition.
The Company 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, the
Company 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 Sheets are as follows:
June 29, Dec. 31,
1997 1996
-------- --------
Accounts and notes receivable $56,491 $67,012
Other assets 15,339 18,728
Accrued expenses 50,064 60,659
Other liabilities 6,396 10,879
With respect to environmental proceedings, the Company has
been notified that it is among the Potentially Responsible
Parties under federal environmental laws, or similar state
laws, relative to the costs of investigating and in some
cases remediating contamination by hazardous materials at
several sites. Such laws impose 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 Company's policy is to accrue
environmental remediation costs when it is both probable
that a liability has been incurred and the amount can be
reasonably estimated. While it is often difficult to
reasonably quantify future environmental-related
expenditures, the Company currently estimates its future
non-capital expenditures related to environmental matters
to range between $22,000 and $46,000. In connection with
these expenditures, the Company has accrued $33,000 at
June 29, 1997, representing management's best estimate of
probable non-capital environmental expenditures.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
These non-capital expenditures are estimated to be
incurred over the next 10 to 20 years. In addition,
capital expenditures aggregating $5,000 may be required
during the next two years related to environmental
matters. Although the Company is pursuing insurance
recovery in connection with certain of these matters, no
receivable has been recorded with respect to any potential
recovery of costs in connection with any environmental
matters.
5. Subsequent Events
In April 1997, the Company signed a letter of intent to
acquire AMI Industries Inc. (AMI), a Colorado-based
manufacturer of flight attendant and cockpit seats for
commercial aircraft. The transaction, subject to normal
closing conditions, was closed in July 1997. Sales for 1997
related to this business are expected to approach $20 million.
In July 1997, the Company signed a letter of intent to
acquire the sheet rubber and conveyor belt business of Dana
Corporation's Boston Weatherhead division based in
Paragould, Arkansas. The transaction is scheduled to close
in the fourth quarter of 1997. Annual sales are expected
to approximate $35 million.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
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 June 29,
1997 and June 30, 1996.
Three Months Ended Six Months Ended
-------------------- --------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
-------- -------- --------- --------
(in thousands)
Sales:
Aerospace $128,617 $103,898 $247,757 $197,191
Industrial 193,918 189,411 384,017 377,817
Intersegment elimination (308) (294) (375) (795)
Total $322,227 $ 293,015 $631,399 $574,213
Operating income:
Aerospace $ 20,594 $ 13,447 $ 38,897 $ 9,226
Industrial 39,165 40,633 75,435 77,511
Total segments 59,759 54,080 114,332 86,737
Corporate unallocated (11,005) (9,192) (20,650) (20,518)
Operating income $ 48,754 $ 44,888 $ 93,682 $ 66,219
Operating income for the six months ended June 30, 1996
included a charge of $14.2 million relating to the
bankruptcy of a major aerospace customer (Fokker).
Excluding this charge, operating income for the six months
ended June 30, 1996 for the Aerospace Segment and the
Company would have been $23.4 million and $80.4 million,
respectively.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Results of Operations
Company Review
Net sales for the second quarter of 1997 increased 10.0% to
$322.2 million from $293.0 million for the second quarter
of 1996 primarily driven by increases in the Aerospace
Segment. Gross profit increased to $105.1 million for the
second quarter 1997 from $91.1 million in second quarter
1996. The increase in gross profit margin to 32.6% in the
second quarter 1997 from 31.1% in the second quarter 1996
resulted from higher margins in the Aerospace Segment.
Selling and administrative expenses totaled $56.3 million,
or 17.5% of sales, in second quarter 1997 compared to $46.2
million, or 15.8% of sales, in second quarter 1996.
Net sales for the six months ended June 29, 1997 increased
10.0% to $631.4 million from $574.2 million for the six
months ended June 30, 1996 as a result of continued sales
increases in the Aerospace Segment.
Gross profit increased to $202.6 million for the first six
months of 1997 from $164.3 million for the first six months
of 1996. The increase in gross profit margin to 32.1% for
year to date 1997 from 28.6% for year to date 1996 resulted
from higher margins in the Aerospace Segment and the first
quarter 1996 bankruptcy of Fokker. Although selling and
administrative expenses totaled $108.9 million for year to
date 1997 compared to $98.1 million for year to date 1996,
selling and administrative expenses remained flat as a
percentage of sales, 17.2% for year to date 1997 as
compared to 17.1% for year to date 1996.
Operating income increased to $48.8 million in second
quarter 1997 from $44.9 million in the second quarter of
1996. Operating margin remained relatively consistent at
15.1% for second quarter 1997 as compared to 15.3% for the
second quarter 1996.
Operating income increased to $93.7 million for the first
six months of 1997 from $66.2 million for the first six
months of 1996. The 1996 amount includes the effect of the
$14.2 million charge relating to the Fokker bankruptcy.
Operating margin for year to date 1997 was 14.8% compared
to 11.5% for year to date 1996 (14.0% excluding the effect
of Fokker).
Interest expense decreased 37.6% to $12.7 million in second
quarter 1997 from $20.3 million for second quarter 1996 and
decreased 40.0% to $25.0 million for year to date 1997 as
compared to $41.5 million for year to date 1996. These
decreases were a direct result of significant debt
reduction in June 1996 and the December 1996 refinancing of
substantially all of the Company's high-cost fixed-rate
debt with lower-cost, variable-rate bank debt.
The results of discontinued operations for the three months
and six months ended June 30, 1996 reflect the net earnings
for those periods for the automotive original equipment
components operations which were sold in 1996.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
As a result of the foregoing, earnings from continuing
operations for the three months and six months ended June
29, 1997 were $23.8 million and $45.3 million, respectively,
as compared to $16.2 million and $16.3 million for the three
months and six months ended June 30, 1996, respectively. Net
earnings were $23.8 million in second quarter 1997, or $0.36
per share, compared to net earnings of $59.7 million, or
$0.85 per share, in second quarter 1996. 1997 year to date
net earnings were $45.3 million, or $0.67 per share, as
compared to $65.7 million, or $0.93 per share for 1996. The
decrease in interest expense increased 1997 second quarter
earnings by $0.08 per share and 1997 year to date earnings
by $0.16 per share.
Segment Review - Aerospace
Sales in second quarter 1997 for the Aerospace Segment
totaled $128.6 million increasing 23.8% from $103.9 million
in the second quarter 1996. For the six months ended June
29, 1997 Aerospace sales increased 25.6% to $247.8 million
from $197.2 million for the comparable 1996 period. At
Menasco, sales increased significantly due to rising
commercial aircraft production as well as improved military
sales. Menasco deliveries of main landing gear systems for
the Boeing 737 increased from 9 and 17 shipsets in the three
months and six months ended June 30, 1996, respectively, to
42 and 82 shipsets in the three months and six months ended
June 29, 1997, respectively, while military sales benefited
primarily from higher shipset deliveries for the F-15 and F-
16 programs. At Chandler Evans, significantly higher sales
were primarily due to higher sales of spare parts while
original equipment sales also improved.
Operating income for the Aerospace Segment increased 53.7%
to $20.6 million in second quarter 1997 from $13.4 million
in second quarter of 1996. Operating margin for the second
quarter 1997 increased to 16.0% from 12.9% for second
quarter 1996. Operating income for year to date 1997 was
$38.9 million increasing from $9.2 million for year to date
1996. The year to date 1996 amount includes the effect of
the $14.2 million charge relating to the Fokker bankruptcy.
Excluding such charge, operating margin for year to date
1996 would have been 11.9% compared to 15.7% for year to
date 1997. At Menasco's Aerospace Division, operating
margins for three months and six months ended June 29, 1997
were impacted by a favorable mix of landing gear systems for
certain commercial airline programs as well as improved
manufacturing efficiencies due to higher production.
Chandler Evans realized higher margins due to a higher
profit sales mix and selling price increases for certain
products. The increases were also driven by generally
higher sales volumes and improved margins for the Segment's
other businesses.
Segment Review - Industrial
Industrial sales increased to $193.9 million and $384.0
million in the three months and six months ended June 29,
1997, respectively, from $189.4 and $377.8 million in the
three months and six months ended June 30, 1996,
respectively. The Garlock Bearings, Stemco, Delavan
Commercial, France Compressor Products and Quincy Compressor
Divisions all experienced solid sales volume increases.
Sales for Garlock Sealing Technologies increased primarily
due to selling price increases and new product sales.
Fairbanks Morse Engine sales decreased due to large
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
nonrecurring engine orders in the first and second quarters
of 1996. Holley Performance Products sales also decreased
due to curtailed orders by two major customers.
Operating income for the Industrial Segment decreased
slightly to $39.2 million and $75.4 million in the three
months and six months ended June 29, 1997, respectively,
from $40.6 million and 77.5 million in the three and six
months ended June 30, 1996, respectively. Operating income
increased for the Stemco, Delavan Commercial and Quincy
Compressor Divisions due to higher sales volumes.
Operating results at Holley Performance Products were lower
due to decreased sales volumes while Garlock Sealing
Technologies was negatively impacted by increased costs
related to various international initiatives.
Liquidity and Capital Resources
The Company generated $22.4 million of operating cash flows
for the six months ended June 29, 1997 compared with $11.6
million for the six months ended June 30, 1996. The higher
operating cash flows in 1997 were primarily due to
increased cash flow from earnings from continuing
operations partially offset by increased payments related
to liabilities of discontinued operations and payments
related to asbestos claims.
The current ratio of current assets to current liabilities
at June 29, 1997 was 2.11 increasing from 1.99 at December
31, 1996. Cash and cash equivalents decreased to $8.5
million at June 29, 1997 from $15.0 million at December 31,
1996.
In the first six months of 1997 the Company invested $29.3
million in capital expenditures compared to $16.0 million
during the same prior year period. Debt increased by $44.3
million at June 29, 1997 compared to December 31, 1996
through additional borrowings under the Company's revolving
credit facility. The increased borrowings were used to
repurchase 2,124,300 shares of the Company's common stock
at a cost of $41.9 million.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of its subsidiaries are defendants
in various lawsuits involving asbestos-containing
products. In addition, the Company has been notified that
it is among Potentially Responsible Parties under federal
environmental laws, or similar state laws, relative to the
costs of investigating and in some cases remediating
contamination by hazardous materials at several sites.
See note 4 to consolidated 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 May 8, 1997.
(b) At the annual meeting of shareholders held on May
8, 1997,shareholders voted for:
1. The election of Board Directors consisting of seven
members.
2. Approval of the 1997 Restricted Stock Plan for Outside
Directors.
3. Appointment of Arthur Anderson LLP as the independent
public accountants for 1997.
There were 66,469,666 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 59,451,790 2,366,227
William H. Grigg 59,509,688 2,308,329
John W. Guffey, Jr. 59,460,438 2,357,579
David I. Margolis 59,496,176 2,321,841
David D. Harrison 59,454,290 2,363,727
Joel Moses 59,520,723 2,297,294
Richard A. Stuckey 59,520,282 2,297,735
<PAGE>
2. Approval of 1997 Restricted Stock Plan for
Outside Directors.
For Against Abstain
56,828,983 2,119,149 2,253,486
3. Appointment of Arthur Andersen LLP as the
independent public accountants for 1997.
For Against Abstain
59,564,613 29,652 2,223,752
Item 6. Exhibits and Reports on Form 8-K.
(a) 27.1 Consolidated Financial Data Schedule.
(b) No reports on Form 8-K were filed by the
Company during the quarter ended June 29, 1997.
<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 David D. Harrison
David D. Harrison
Executive Vice President
and Chief Financial Officer
Date: August 13, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
JUNE 29, 1997 CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
EARNINGS FOR THE SIX MONTHS ENDED JUNE 29, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-29-1997
<CASH> 8,532
<SECURITIES> 0
<RECEIVABLES> 196,256
<ALLOWANCES> (2,053)
<INVENTORY> 222,257
<CURRENT-ASSETS> 442,017
<PP&E> 613,679
<DEPRECIATION> (384,789)
<TOTAL-ASSETS> 862,351
<CURRENT-LIABILITIES> 209,431
<BONDS> 27,429
0
0
<COMMON> 704
<OTHER-SE> (412,899)
<TOTAL-LIABILITY-AND-EQUITY> 862,351
<SALES> 631,399
<TOTAL-REVENUES> 631,399
<CGS> 428,812
<TOTAL-COSTS> 537,717
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,046
<INCOME-PRETAX> 68,636
<INCOME-TAX> 23,336
<INCOME-CONTINUING> 45,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,300
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
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