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 March 31, 1994
( ) 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 1-8973
KYSOR INDUSTRIAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan (State or other jurisdiction of incorporation or
organization)
38-1909000 (I.R.S. Employer Identification Number)
One Madison Avenue, Cadillac, Michigan 49601
(Address of principal executive offices) (Zip code)
(616) 779-2200
(Registrant's telephone number, including area code)
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Common stock, $1.00 par value, number of shares outstanding
as of March 31, 1994:
5,528,363
<TABLE>
KYSOR INDUSTRIAL CORPORATION
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
The interim financial data presented herein is unaudited but, in the opinion of the
management, reflects all adjustments (none of which was other than a normal recurring
adjustment) necessary for a fair presentation of such information. Results for interim
periods should not be considered indicative of results for a full year. There were no
undisclosed material unusual charges or credits to income during the quarter ended
March 31, 1994 nor was there a change in independent accountants during the period.
Consolidated Statement of Income
(Unaudited, amounts in thousands except per share data)
<CAPTION>
Quarter Ended
March 31,
SALES AND REVENUE 1994 1993
_____________ _____________
<S> <C> <C>
Net sales $ 70,030 $ 63,750
Interest and other revenues 280 159
_____________ _____________
TOTAL SALES AND REVENUES 70,310 63,909
_____________ _____________
COSTS AND EXPENSES
Cost of sales 54,404 48,339
Selling and administrative expenses 11,355 11,103
Interest expense 538 491
Other expenses 336 151
_____________ _____________
TOTAL COSTS AND EXPENSES 66,633 60,084
_____________ _____________
INCOME BEFORE INCOME TAXES AND BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 3,677 3,825
INCOME TAXES 1,575 1,720
_____________ _____________
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 2,102 2,105
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR POSTRETIREMENT BENEFITS (Net of income
tax benefit of $4,435) - (7,628)
_____________ _____________
NET INCOME (LOSS) 2,102 (5,523)
DIVIDENDS ON PREFERRED STOCK (Net of tax benefits) 246 250
_____________ _____________
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 1,856 $ (5,773)
_____________ _____________
_____________ _____________
EARNINGS (LOSS) PER COMMON SHARE
PRIMARY - INCOME BEFORE ACCOUNTING CHANGE $ 0.33 $ 0.33
- ACCOUNTING CHANGE - (1.35)
_____________ _____________
- NET EARNINGS (LOSS) $ 0.33 $ (1.02)
_____________ _____________
_____________ _____________
FULLY DILUTED - INCOME BEFORE ACCOUNTING CHANGE $ 0.28 $ 0.28
- ACCOUNTING CHANGE - (1.35)
_____________ _____________
- NET EARNINGS (LOSS) $ 0.28 $ (1.07)
_____________ _____________
_____________ _____________
Primary weighted average common shares and equivalents 5,682 5,640
_____________ _____________
_____________ _____________
Dividends declared per common share $ 0.12 $ 0.10
_____________ _____________
_____________ _____________
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited, dollars in thousands)
<CAPTION>
March 31, December 31,
1994 1993
____________ ____________
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $11,218 $21,339
Accounts receivable less $1,841 and
$1,546 allowance for doubtful accounts 45,394 35,968
Inventories 33,247 28,409
Prepaid expenses 1,466 1,228
Deferred income taxes 6,368 6,266
____________ ____________
TOTAL CURRENT ASSETS 97,693 93,210
____________ ____________
PROPERTY, PLANT AND EQUIPMENT
Land 2,624 2,616
Buildings 30,493 30,155
Machinery and equipment 64,745 61,970
____________ ____________
97,862 94,741
Less accumulated depreciation 54,205 51,918
____________ ____________
TOTAL PROPERTY, PLANT AND EQUIPMENT 43,657 42,823
____________ ____________
OTHER ASSETS
Goodwill, patents and other intangibles 5,014 2,806
Cash value of officers' life insurance 9,720 9,547
Deferred income taxes 4,430 4,031
Miscellaneous receivables and other assets 3,894 4,038
____________ ____________
TOTAL OTHER ASSETS 23,058 20,422
____________ ____________
TOTAL ASSETS $164,408 $156,455
____________ ____________
____________ ____________
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(continued)
(Unaudited, dollars in thousands)
<CAPTION>
March 31, December 31,
1994 1993
____________ ____________
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $6,547 $5,670
Accounts payable 17,648 14,353
Accrued income taxes payable 3,388 2,426
Accrued expenses and contingent liabilities 25,721 25,699
____________ ____________
TOTAL CURRENT LIABILITIES 53,304 48,148
Long-term debt, less current maturities,
plus guarantee of ESOP indebtedness 32,763 33,673
Accumulated postretirement benefit obligation 12,769 12,628
Other long-term liabilities 8,549 7,313
____________ ____________
TOTAL LIABILITIES 107,385 101,762
____________ ____________
PREFERRED SHAREHOLDERS' EQUITY
Employee Stock Ownership Plan Preferred Stock,
shares authorized 5,000,000; outstanding
810,163 and 810,163 stated value of $24.375 19,748 19,748
Unearned deferred compensation under
employee stock ownership plan (15,959) (16,175)
____________ ____________
TOTAL PREFERRED SHAREHOLDERS' EQUITY 3,789 3,573
____________ ____________
COMMON SHAREHOLDERS' EQUITY
Common stock, $1 par value, shares authorized
30,000,000, outstanding 5,528,363
and 5,467,840 5,528 5,468
Additional paid-in capital 3,898 3,386
Retained earnings 45,314 43,997
Translation adjustment 336 286
Notes receivable-common stock
99,143 and 99,116 shares (1,319) (1,319)
Unearned deferred compensation under
employee stock ownership plan (523) (698)
____________ ____________
TOTAL COMMON SHAREHOLDERS' EQUITY 53,234 51,120
____________ ____________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $164,408 $156,455
____________ ____________
____________ ____________
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
(Unaudited, amounts in thousands)
<CAPTION>
1994 1993
_____ _____
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income (loss) $2,102 ($5,523)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Cumulative effect of change in accounting for
Postretirement Benefits (net of tax benefits) - 7,628
Depreciation and amortization 2,271 1,969
Provision for losses on accounts receivable 63 75
(Gain) Loss on sales of fixed assets (5) (3)
Deferred compensation (ESOP) 391 390
Deferred income taxes (501) (1,044)
Changes in assets and liabilities providing
(consuming) cash:
Accounts receivable (6,992) (7,177)
Inventories (3,809) (769)
Prepaid expenses (190) (696)
Accounts payable 2,380 3,080
Accrued expenses and contingent liabilities (196) 2,141
Accrued income taxes payable 1,235 1,916
Other long-term liabilities (57) 305
_______ _______
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (3,308) 2,292
_______ _______
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Additions to property and equipment (2,113) (3,068)
Proceeds from sales of property and equipment 157 21
Acquisitions, net of cash acquired (4,128) -
Decrease (Increase) in other long-term assets 129 (375)
Unrealized translation gain (loss) 50 129
_______ _______
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (5,905) (3,293)
_______ _______
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Current borrowings 891 2,000
Principal payments against long-term debt (924) (434)
Proceeds from issuance of common stock 572 990
Common stock and preferred stock dividends paid (1,447) (1,328)
_______ _______
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (908) 1,228
_______ _______
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (10,121) 227
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 21,339 6,913
_______ _______
CASH AND EQUIVALENTS AT END OF PERIOD $11,218 $7,140
_______ _______
_______ _______
The accompanying notes are an integral part of the financial statements.
</TABLE>
[FN]
Notes to the Financial Statements
The company adopted the provisions of SFAS (Statement of Financial
Accounting Standards) 106 - Employers Accounting for Postretirement
Benefits Other than Pensions in the quarter ended March 31, 1993.
The accumulated postretirement benefit obligation booked as a
one-time cumulative change in accounting amounted to $12,063 less a
deferred tax benefit of $4,435 which equated to $1.35 per share.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Kysor Industrial Corporation:
We have reviewed the consolidated balance sheet of Kysor
Industrial Corporation and Subsidiaries as of March 31, 1994,
and the related consolidated statements of income and cash flows
for the three-month periods ended March 31, 1994 and 1993.
These financial statements are the responsibility of the
company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an
opinion regarding the financial statements takes as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet as
of December 31, 1993 and the related consolidated statements of
income, stockholders' equity and cash flows for the year then
ended (not presented herein); and in our report dated February
14, 1994 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance
sheet as of December 31, 1993 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from
which it has been derived.
Coopers and Lybrand
April 15, 1994
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Kysor Industrial Corporation's sales and revenues for the
first quarter 1994 were $70.3 million, up 10.0% from the
$63.9 million reported in the same period in 1993. Income
before the cumulative effect of the accounting change for
SFAS 106 was $2.1 million compared to $2.1 million for the
same period last year. This equates to earnings per common
share of $.33 for both 1994 and 1993, before taking into
effect the accounting change for SFAS 106.
The Transportation Products Group net sales increased 19% to
$34.3 million for the quarter compared to the $28.9 million
reported in the same period a year ago. Operating profit
for the Transportation Products Group increased 44% to $4.3
million from the $3.0 million reported in 1993, reflecting
the improved heavy-duty truck market and Kysor's increased
penetration into that market. Segment results for
1993 have been restated to include the Kysor/Westran
Division which was previously reported in the Commercial
Products Group.
The Commercial Products Group reported net sales of $35.7
million for the quarter compared to $34.8 million reported
in the same period a year ago. Operating profit decreased
to $2.3 million from the $3.9 million reported in 1993
reflecting the continued trimming of expansion plans by a
major high-volume customer and the impact of the
introduction of model revisions to the product line.
Commercial Product Group segment results for
1993 have been restated to exclude the Kysor/Westran
Division and 1994 results include the addition of Kalt
Manufacturing Co., acquired in February 1994.
In international operations, Kysor's commercial
refrigeration operations in Germany experienced lower sales
in a soft European economy. The European truck and off-
highway markets have improved somewhat and the
transportation products operation's sales have increased by
5.5% from the same quarter last year, primarily due to new
product introductions.
The Company is presently involved in certain environmental
proceedings with respect to soil and groundwater
contamination in Cadillac, Michigan, as described below
under the heading "Legal Proceedings" and in Note 11,
Contingent Liabilities, to the Financial Statements included
in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993. Discovery in the lawsuit involving
the Michigan Attorney General and Department of Natural
Resources was completed during the quarter. In addition, as
disclosed in Note 11, the Company is involved in various
other legal proceedings including certain proceedings
involving allegedly contaminated sites with respect to which
the Company has been named a potentially responsible party
under the Federal Superfund law or comparable state laws.
Although discovery in certain of these proceedings has not
been completed, subject to the contingencies discussed below
and in Note 11 to the Company's 1993 Annual Report, the
information presently available to management does not cause
management to believe that the ultimate aggregate cost to
the Company of such proceedings will result in a material
adverse effect on its future financial condition or results
of operation.
Liquidity and Capital Resources
At March 31, 1994, the Company had cash and cash equivalents
of $11.2 million compared to $21.3 million at December 31,
1993. Cash provided from operating activities was a
negative $3.3 million for the three-month period ended March
31, 1994 compared to a positive $2.3 million for the same
period in 1993, primarily due to increases in inventory as
the Company is traditionally at its lowest working capital
requirement at December 31.
Additions to property, plant and equipment for the three-
month period ended March 31, 1994 were $2.1 million compared
to $3.1 million during the same period in 1993. It is
anticipated that capital expenditures will slightly exceed
depreciation and amortization for the current year. The
acquisition of Kalt Manufacturing Co. in February, 1994 was
the greatest use of cash from investing activities in 1994.
At March 31, 1994, the Company had no outstanding borrowings
on its $20.0 million revolving line of credit.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As previously reported in the Company's 1993 Annual Report
on Form 10-K filed with the Commission on March 30, 1994,
the Company is involved in an environmental proceeding with
respect to a site in Cadillac, Michigan. The description of
such proceeding is set forth in Part I, Item 2 of this
report and Note 11, Contingent Liabilities, to the Company's
1993 Financial Statements set forth in Part II, Item 8 of
the Company's Form 10-K filed with the Commission on March
30, 1994.
On July 3, 1991, the Michigan Attorney General and the
Department of Natural Resources filed a lawsuit against the
Company and various other parties in the United States
Federal District Court for the Western District of Michigan.
The description of such proceeding is set forth in Part I,
Item 2 of this report and Note 11, Contingent Liabilities,
to the Company's 1993 Financial Statements set forth in Part
II, Item 8 of the Company's Form 10-K filed with the
Commission on March 30, 1994.
On December 31, 1991, General Electric filed a third-part
claim against the Company in the United States District
Court for the Western District of Michigan. The description
of such proceeding is set forth in Part I, Item 3 of the
Company's 1993 Annual Report on Form 10-K filed with the
Commission on March 30, 1994.
On December 4, 1992, Kysor was named as a defendant,
together with over 30 other parties, in an action commenced
by the Township of Oshtemo, City of Kalamazoo, Kalamazoo
County and The Upjohn Company with respect to alleged
contamination at the West KL Avenue Landfill site located in
Kalamazoo, Michigan. The litigation is presently pending in
the United States District Court for the Western District of
Michigan. The suit seeks cost recovery and contribution
with respect to funds allegedly expended or to be expended
to investigate and/or remediate certain contamination found
at the site. Liability is alleged to be joint and several
against all named defendants. The Company is vigorously
defending against this lawsuit, and at this juncture the
Company has not engaged in any significant discovery in this
suit.
On March 30, 1993, the Company received a notification from
the Michigan Department of Natural Resources that it has
been named as a potentially responsible party ("PRP") with
respect to a site commonly referred to as the SCA
Independent Landfill Superfund Site, located in Muskegon
County, Michigan. The notice alleges that the Company,
together with numerous other parties, was an owner,
generator or transporter of waste materials deposited at the
site. The PRP notice requests the Company and the other
named PRPs to conduct a Remedial Investigation/Feasibility
Study to determine the extent of contamination at the site,
and seeks recovery of investigative costs expended by the
MDNR to date. No significant discovery has taken place with
respect to this matter.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this
report.
11 - Statement Regarding Computation of Earnings Per
Share
15 - Letter from Coopers & Lybrand regarding unaudited
Financial Statements
(b) There were no reports on Form 8-K filed by the
registrant during the three months ended March 31,
1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf of the undersigned thereunto
duly authorized.
KYSOR INDUSTRIAL CORPORATION
Date: May 12, 1994
By
Terry M. Murphy
Vice President,
Chief Financial Officer (and duly
authorized signatory for registrant)
Date: May 12, 1994
By
Robert L. Joseph
Comptroller
(Chief Accounting Officer)
<TABLE>
KYSOR INDUSTRIAL CORPORATION
FINANCIAL INFORMATION BY SEGMENT
(Unaudited, amounts in thousands)
<CAPTION>
Quarter Ended
March 31,
_____________________
1994 1993
________ ________
<S> <C> <C>
NET SALES
Commercial Products
United States $33,197 31,783
Europe 2,504 3,026
________ ________
Total Commercial Products 35,701 34,809
Transportation Products
United States 32,600 27,303
Europe 1,729 1,638
________ ________
Total Transportation Products 34,329 28,941
________ ________
NET SALES $70,030 $63,750
________ ________
________ ________
OPERATING PROFIT
Commercial Products
United States $3,013 $4,478
Europe (689) (623)
________ ________
Total Commercial Products 2,324 3,855
Transportation Products
United States 4,345 3,033
Europe (81) (65)
________ ________
Total Transportation Products 4,264 2,968
________ ________
TOTAL OPERATING PROFIT 6,588 6,823
Corporate Administrative Expense (Net) (2,373) (2,507)
Interest Expense (538) (491)
________ ________
INCOME BEFORE INCOME TAXES $3,677 $3,825
________ ________
________ ________
</TABLE>
EXHIBIT INDEX
DESCRIPTION EXHIBIT NO.
11 Statement Regarding Computation
of Earings Per Share 1
15 Letter from Coopers and Lybrand Regarding Unaudited
Financial Statements 2
<TABLE>
EXHIBIT 11 - S-K Item 601 (b) (11)
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED EARNINGS PER SHARE
<CAPTION>
Three Months
Ended
March 31,
1994 1993
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER SHARE CALCULATION
Income before cumulative effect of accounting change $2,101,886 $2,104,900
Less dividends on preferred stock 394,851 396,364
Plus tax benefit from preferred dividends 149,000 147,000
---------- ----------
Earnings applicable to common stock before accounting change 1,856,035 1,855,536
Cumulative effect of change in accounting 0 (7,628,259)
---------- ----------
Earnings (Loss) applicable to common stock 1,856,035 (5,772,723)
========== ==========
Weighted average common shares outstanding 5,394,126 5,267,694
Dilutive effect assuming excercise of certain stock
options applying the treasury stock method based
on year to date average price 288,311 372,566
-------- --------
Weighted average common shares and common
equivalent shares outstanding 5,682,437 5,640,260
========= =========
Primary earnings (loss) per share
Income before accounting change $0.33 $0.33
Accounting change $0.00 ($1.35)
Net earnings (loss) $0.33 ($1.02)
======== ========
FULLY DILUTED EARNINGS PER SHARE CALCULATION
A.
Weighted average common shares outstanding 5,394,126 5,267,694
Dilutive effect assuming excercise of certain stock
options applying the treasury stock method based on
the greater of year to date average or end of period price 288,311 436,756
-------- --------
Weighted average common shares and common
equivalent shares outstanding 5,682,437 5,704,450
======== ========
Fully diluted earnings (loss) per share (A)
Income before accounting change $0.33 $0.33
Accounting change $0.00 ($1.35)
Net earnings (loss) $0.33 ($1.02)
======== ========
B.
Assuming preferred stock converted to common
Vested Preferred shares issued 155,442 123,148
Non-vested Preferred shares issued 654,722 690,185
---------- ----------
Total Preferred shares issued 810,163 813,333
Vested Preferred shares issued 155,442 123,148
Guaranteed floor price for involuntary conversions $24.375 $24.375
---------- ----------
Subtotal $3,788,894 $3,001,737
The lower of year to date average or end of period common
stock price $16.8750 $18.7325
-------- --------
Required common shares to be issued assuming involuntary
conversion of vested shares at guaranteed floor price 224,527 160,242
Required common shares to be issued assuming voluntary
conversion of non-vested shares on one-for-one basis 654,722 690,185
Weighted average common shares and common
equivalent shares outstanding for fully diluted Part A. 5,682,437 5,704,450
---------- ----------
Weighted average common shares and common
equivalent shares outstanding for fully diluted Part B. 6,561,686 6,554,877
========== ==========
Income before cumulative effect of accounting change $2,101,886 $2,104,900
Additional ESOP expense presently funded by preferred dividend (394,851) (396,364)
Plus tax benefit on additional ESOP expense 18,803 16,050
Common stock dividends to reduce ESOP expense 106,000 85,000
-------- --------
Adjusted Income before cumulative effect of accounting change $1,831,838 $1,809,586
========= =========
Fully diluted earnings (loss) per share (B)
Income before accounting change $0.28 $0.28
Accounting change $0.00 ($1.35)
Net earnings (loss) $0.28 ($1.07)
======== ========
Fully diluted earnings (loss) per share (Lower of (A) or (B)) $0.28 ($1.07)
======== ========
</TABLE>
To the Board of Directors
Kysor Industrial Corporation:
Re: Kysor Industrial Corporation Registration Statement Nos.
2-67607, 2-86346, 2-99855, 33-18438, 33-30463, 33-27360, 33-59420, 33-59412
and 33-71758 on Form S-8
We are aware that our report dated April 15, 1994 on our review
of interim financial information of Kysor Industrial Corporation
and Subsidiaries for the periods ended March 31, 1994 and 1993
and included in the Company's quarterly report on Form 10-Q for
the quarters then ended are incorporated by reference in these
registration statements. Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered a
part of the registration statements prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
Coopers and Lybrand
May 12, 1994
