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 September 30, 1996
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 1-8973
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 requirement 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
October 28, 1996:
5,870,865
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 or nine months ended
September 30, 1996, nor was there a change in independent accountants during
the period.
<TABLE>
KYSOR INDUSTRIAL CORPORATION
Consolidated Statement of Income
(Unaudited , amounts in thousands except for per share data)
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
SALES AND REVENUES
Net sales 102,817 90,019 289,637 274,819
Interest and other revenues 470 976 2,178 2,066
TOTAL SALES AND REVENUES 103,287 90,995 291,815 276,885
COSTS AND EXPENSES
Cost of sales 78,588 69,108 221,791 211,055
Selling and administrative expenses 15,748 13,553 45,926 41,751
Interest expense 634 398 1,649 1,320
Other expenses 268 307 491 898
TOTAL COSTS AND EXPENSES 95,238 83,366 269,857 255,024
INCOME BEFORE INCOME TAXES FROM
CONSOLIDATED OPERATIONS 8,049 7,629 21,958 21,861
INCOME TAXES 3,075 2,995 8,125 9,285
INCOME FROM CONSOLIDATED OPERATIONS 4,974 4,634 13,833 12,576
EQUITY IN NET INCOME OF AFFILIATE 786 - 1,092 -
NET INCOME 5,760 4,634 14,925 12,576
DIVIDENDS ON PREFERRED STOCK
(Net of income tax benefit) 246 243 726 730
EARNINGS APPLICABLE TO COMMON STOCK 5,514 4,391 14,199 11,846
PRIMARY EARNINGS PER COMMON SHARE $ .90 $ .75 $ 2.34 $ 2.01
FULLY DILUTED EARNINGS PER COMMON SHARE $ .79 $ .66 $ 2.06 $ 1.76
Primary weighted average common shares and
equivalents 6,085 5,835 6,057 5,900
Dividends declared per common share $ .165 $ .15 $ .48 $ .45
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION
Consolidated Balance Sheet
(Dollars in thousands)
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents 11,715 16,942
Accounts receivable less $2,500 and $2,211
allowance for doubtful accounts 62,194 45,733
Finished goods inventory 6,392 5,391
Work in process inventory 11,050 9,404
Raw material inventory 21,308 19,621
Prepaid expenses 1,854 2,485
Deferred income taxes 9,144 8,860
TOTAL CURRENT ASSETS 123,657 108,436
PROPERTY, PLANT AND EQUIPMENT
Land 3,266 3,243
Buildings 33,459 32,042
Machinery and equipment 85,839 75,794
122,564 111,079
Less accumulated depreciation 66,899 62,518
TOTAL PROPERTY, PLANT AND EQUIPMENT 55,665 48,561
INVESTMENT IN AFFILIATE 19,111 0
OTHER ASSETS
Goodwill, patents and other intangibles (net of
amortization of $3,852 and $3,169) 8,800 5,327
Cash value of officers' life insurance 11,871 11,644
Deferred income taxes 7,759 6,576
Miscellaneous receivables and other assets 5,725 6,429
TOTAL OTHER ASSETS 34,155 29,976
TOTAL ASSETS 232,588 186,973
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt 6,681 4,931
Accounts payable 22,927 21,150
Accrued income taxes payable 4,279 0
Accrued expenses and contingent liabilities 32,698 29,715
TOTAL CURRENT LIABILITIES 66,585 55,796
Long-term debt, less current maturities 43,075 26,028
Accumulated postretirement benefit obligation 14,295 13,729
Other long-term liabilities 12,532 11,185
TOTAL LIABILITIES AND DEFERRED CREDITS 136,487 106,738
PREFERRED SHAREHOLDERS' EQUITY
Employee Stock Ownership Plan Preferred Stock, shares
authorized, 5,000,000; outstanding 789,992 and
797,517, stated value $24.375 19,256 19,440
Unearned deferred compensation under employee stock
ownership plan (13,313) (14,447)
TOTAL PREFERRED SHAREHOLDERS' EQUITY 5,943 4,993
COMMON SHAREHOLDERS' EQUITY
Common stock, $1 par value, shares authorized 30,000,000
outstanding 5,843,739 and 5,639,028 5,844 5,639
Additional paid-in capital 7,021 3,645
Retained earnings 77,945 66,531
Translation adjustment 398 483
Notes receivable-common stock 77,529 and 78,009 shares (1,050) (1,056)
TOTAL COMMON SHAREHOLDERS' EQUITY 90,158 75,242
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 232,588 186,973
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, amounts in thousands)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income $14,925 $12,576
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 7,511 6,777
Provision for losses on accounts receivable 418 362
(Gain) Loss on sales of fixed assets 35 (53)
Undistributed earnings of affiliate (1,092) -
Deferred compensation (ESOP) 1,134 998
Deferred income taxes (1,467) (1,045)
Changes in assets and liabilities providing
(consuming) cash:
Accounts receivable (14,935) (10,901)
Inventories (1,884) (1,167)
Prepaid expenses 658 (716)
Accounts payable (1,692) 1,298
Accrued expenses and contingent liabilities 2,707 2,642
Accrued income taxes payable 5,925 6,097
Other long-term liabilities 1,915 1,638
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,158 18,506
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Additions to property, plant and equipment (13,432) (9,412)
Proceeds from sales of property and equipment 117 72
Acquisitions, net of cash acquired 9 -
Investment in affiliate (18,823) -
Dividends received from foreign affiliate 797
Decrease (Increase) in other long-term assets 483 (424)
Unrealized translation gain (loss) (86) (120)
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (30,935) (9,884)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Current borrowings 22,302 3,200
Principal payments against long-term debt (8,861) (2,666)
Proceeds from issuance of common stock 2,334 2,620
Purchase of common stock - (5,777)
Common stock and preferred stock dividends paid (4,225) (3,975)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 11,550 (6,598)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (5,227) 2,024
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 16,942 15,850
CASH AND EQUIVALENTS AT END OF PERIOD $11,715 $17,874
The accompanying notes are an integral part of the financial statements.
</TABLE>
<F1>
Notes to the financial statements
Note A - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring accruals) considered
necessary for fair presentation have been included. For further information,
refer to the consolidated financial statements and footnotes included in the
Company's annual report on Form 10-K for the fiscal year ended
December 31, 1995.
Note B - Income Taxes
The provision for income taxes resulted in effective tax rates of 38% and 37%
for the quarter and nine months ended September 30, 1996 respectively,
compared to 39% and 43% for the same periods in 1995. All periods presented
include provisions for state income taxes and the statutory Federal rate of
35%. The rates for 1995 was higher than the combined Federal and
state rate due to non-deductible foreign tax losses.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Kysor Industrial Corporation:
We have reviewed the accompanying consolidated balance sheet of
Kysor Industrial Corporation and Subsidiaries as of September 30,
1996, and the related consolidated statements of income and cash
flows for the three-month and nine-month periods ended September 30,
1996 and 1995. 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 taken 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 accompanying financial
statements 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 of
Kysor Industrial Corporation and Subsidiaries as of December 31,
1995 and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended
(none of which are presented herein); and in our report dated
January 30, 1996 we expressed an unqualified opinion on those
consolidated financial statements.
By s/COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
October 16, 1996
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
third quarter 1996 increased to $103.2 million, from the $91.0 million
reported for the same period in 1995. Net income for the third quarter
of 1996 rose 24% to $5.8 million from $4.6 million reported for the same
period last year. This equates to primary earnings per share of $.90 for
the quarter ended September 30, 1996 compared to $.75 for the same
period in 1995.
The Transportation Products Group's net sales were down
11% to $32.8 million for the third quarter of 1996 compared to the $37.0
million reported in the same period a year ago. Operating profit for the
Transportation Products Group for the third quarter 1996 decreased
48% to $2.3 million from the $4.6 million reported for the same period
in 1995. The Transportation Products Group's results continue to
reflect the downturn in Class-8 heavy-duty truck builds. However, while
builds are expected to be down more than 23% in 1996, sales in this
segment are down only 15% due to the increased market penetration
of our fan and fan clutch product lines.
The Commercial Products Group's net sales increased
32% to $69.9 million for the third quarter of 1996 compared to $53.0
million reported for the same period a year ago. Operating profit for the
Commercial Products Group for the third quarter of 1996 increased
53% to $9.6 million from the $6.3 million reported for the same period
in 1995. This outstanding progress was driven by increased
refrigerated display case sales, significant growth in the refrigeration
systems business, and the introduction of several new products. Also
enhancing the current year's operating profit improvement was the sale
of Kysor's German operation in late 1995.
The Company is presently involved in certain
environmental proceedings with respect to soil and groundwater
contamination in Cadillac, Michigan, as described in Note 10,
Contingent Liabilities, to the Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended December
31, 1995 ("the Form 10-K"). In addition, as disclosed in Note 10 and
under the heading "legal Proceedings" in the Form 10-K and below, the
Company is also involved in various other legal proceedings including
certain proceedings involving allegedly contaminated sites to which the
Company has been named a potentially responsible party ("PRP")
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 in Note 10, management does
not believe, based on information presently available to it, that the
ultimate aggregate cost to the Company of such proceedings would
have a material adverse effect on its financial condition, results of
operations, or liquidity.
Liquidity and Capital Resources
At September 30, 1996, the Company had cash and
equivalents of $11.7 million compared to $16.9 million at December 31,
1995. Additions to property, plant and equipment for the nine-month
period ended September 30,1 996, totaled $13.4 million compared to
$9.4 million during the same period in 1995. Management believes
working capital is sufficient for current requirements.
At September 30, 1996, the Company had borrowed
$22.0 million on its $30.0 million revolving line of credit.
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION BY SEGMENT
(Unaudited, amounts in thousands)
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES
Commercial Products
United States 69,979 49,329 183,790 137,890
Europe - 3,665 - 13,082
Total Commercial Products 69,979 52,994 183,790 150,972
Transportation Products
United States 30,003 33,725 95,778 113,496
Europe 2,835 3,300 10,069 10,351
Total Transportation Products 32,838 37,025 105,847 123,847
NET SALES 102,817 90,019 289,637 274,819
OPERATING PROFIT
Commercial Products
United States 9,604 6,961 23,128 17,846
Europe - (700) - (2,745)
Total Commercial Products 9,604 6,261 23,128 15,101
Transportation Products
United States 2,228 4,281 8,765 16,023
Europe 138 276 819 680
Total Transportation Products 2,366 4,557 9,584 16,703
TOTAL OPERATING PROFIT 11,970 10,818 32,712 31,804
Corporate Administrative Expense (Net) (3,287) (2,791) (9,105) (8,623)
Interest Expense (634) (398) (1,649) (1,320)
INCOME BEFORE INCOME TAXES FROM
CONSOLIDATED OPERATIONS 8,049 7,629 21,958 21,861
</TABLE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is presently involved in various legal
proceedings, including certain environmental proceedings, as described
in Note 10, Contingent Liabilities, to the Financial Statements included
in the Form 10-K and under the heading "Legal Proceedings" in the
Form 10-K. During the quarter ended March 31, 1996, the Company
completed the groundwater remedial design work with respect to
contamination at the Cadillac Industrial Park in Cadillac, Michigan (the
"Site"). The remedial action has begun in compliance with the
unilateral administrative order issued by the U.S. EPA with respect to
the Site. Except as described in this paragraph, there have been no
material changes in the legal proceedings described in the Form 10-K.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report.
11 Computation of Consolidated Earnings Per Share
15 Coopers & Lybrand L.L.P. letter regarding
unaudited Financial Statements
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed by the registrant
during the quarter ended September 30, 1996.
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 by
the undersigned thereunto duly authorized.
KYSOR INDUSTRIAL CORPORATION
Date: November 12, 1996 By s\Terry M. Murphy
Terry M. Murphy
Vice President,
Chief Financial Officer
(principal financial officer and duly
authorized signatory for registrant)
Date: November 12, 1996 By s\Robert L. Joseph
Robert L. Joseph
Comptroller
(Chief Accounting Officer)
EXHIBIT INDEX
DESCRIPTION EXHIBIT NO.
Statement Regarding Computation of Earnings Per Share 11
Letter from Coopers & Lybrand Regarding Unaudited Financial
Statements 15
Financial Data Schedule 27
<TABLE>
EXHIBIT 11 - S-K Item 601 (b) (11)
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED EARNINGS PER SHARE
<CAPTION>
Nine Months
Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER SHARE CALCULATION
Net Income $14,924,538 $12,575,876
Less dividends on preferred stock 1,168,591 1,175,471
Plus tax benefit from preferred dividends 443,000 446,000
---------- ----------
Earnings applicable to common stock 14,198,947 11,846,405
========== ==========
Weighted average common shares outstanding 5,679,405 5,521,999
Dilutive effect assuming excercise of certain stock
options applying the treasury stock method based
on year to date average price 377,283 377,597
-------- --------
Weighted average common shares and common
equivalent shares outstanding 6,056,688 5,899,596
========= =========
Primary earnings per share $2.34 $2.01
======== ========
FULLY DILUTED EARNINGS PER SHARE CALCULATION
A.
Weighted average common shares outstanding 5,679,405 5,521,999
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 421,277 383,199
-------- --------
Weighted average common shares and common
equivalent shares outstanding 6,100,682 5,905,198
======== ========
Fully diluted earnings per share (A) $2.33 $2.01
======== ========
B.
Assuming preferred stock converted to common
Vested Preferred shares issued 245,906 199,344
Non-vested Preferred shares issued 544,086 599,434
---------- ----------
Total Preferred shares issued 789,992 798,778
Vested Preferred shares issued 245,906 199,344
Guaranteed floor price for involuntary conversions $24.375 $24.375
---------- ----------
Subtotal $5,993,948 $4,859,003
The lower of year to date average or end of period common
stock price (floor of $24.375) $24.3750 $21.5645
-------- --------
Required common shares to be issued assuming involuntary
conversion of vested shares at guaranteed floor price 245,906 225,324
Required common shares to be issued assuming voluntary
conversion of non-vested shares on one-for-one basis 544,086 599,434
Weighted average common shares and common
equivalent shares outstanding for fully diluted Part A. 6,100,682 5,905,198
---------- ----------
Weighted average common shares and common
equivalent shares outstanding for fully diluted Part B. 6,890,674 6,729,956
========== ==========
Net Income $14,924,538 $12,575,876
Additional ESOP expense presently funded by preferred dividend (1,168,591) (1,175,471)
Plus tax benefit on additional ESOP expense 85,912 70,376
Common stock dividends to reduce ESOP expense 379,000 371,000
-------- --------
Adjusted Net Income $14,220,859 $11,841,781
========= =========
Fully diluted earnings per share (B) $2.06 $1.76
======== ========
Fully diluted earnings per share (Lower of (A) or (B)) $2.06 $1.76
======== ========
</TABLE>
To the Board of Directors and Shareholders
Kysor Industrial Corporation
Re: Kysor Industrial Corporation Registration Statement Nos.
2-67607, 2-86346, 2-99855, 33-18438, 33-30463,
33-27360, 33-59412 and 33-71758 on Form S-8
We are aware that our report dated October 16, 1996 on our review
of interim financial information of Kysor Industrial Corporation
and Subsidiaries for the periods ended September 30, 1996 and 1995
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.
By s/COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
October 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated condensed financial statements of Kysor Industrial
Corporation and Subsidiaries for the nine-months ended September 30, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000202356
<NAME> KYSOR INDUSTRIAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 11,715
<SECURITIES> 0
<RECEIVABLES> 64,694
<ALLOWANCES> 2,500
<INVENTORY> 38,750
<CURRENT-ASSETS> 123,657
<PP&E> 122,564
<DEPRECIATION> 66,899
<TOTAL-ASSETS> 232,588
<CURRENT-LIABILITIES> 66,585
<BONDS> 43,075
0
19,256
<COMMON> 5,844
<OTHER-SE> 71,001
<TOTAL-LIABILITY-AND-EQUITY> 232,588
<SALES> 289,637
<TOTAL-REVENUES> 291,815
<CGS> 221,791
<TOTAL-COSTS> 269,857
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 418
<INTEREST-EXPENSE> 1,649
<INCOME-PRETAX> 21,958
<INCOME-TAX> 8,125
<INCOME-CONTINUING> 13,833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,925
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 2.06
</TABLE>
