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 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
July 23, 1996:
5,806,039
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 six months ended
June 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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
SALES AND REVENUES
Net sales 104,955 94,746 186,820 184,800
Interest and other revenues 390 518 1,708 1,090
TOTAL SALES AND REVENUES 105,345 95,264 188,528 185,890
COSTS AND EXPENSES
Cost of sales 79,661 72,781 143,203 141,947
Selling and administrative expenses 16,568 13,489 30,178 28,198
Interest expense 540 435 1,015 922
Other expenses 299 276 223 591
TOTAL COSTS AND EXPENSES 97,068 86,981 174,619 171,658
INCOME BEFORE INCOME TAXES FROM
CONSOLIDATED OPERATIONS 8,277 8,283 13,909 14,232
INCOME TAXES 3,000 3,650 5,050 6,290
INCOME FROM CONSOLIDATED OPERATIONS 5,277 4,633 8,859 7,942
EQUITY IN NET INCOME OF AFFILIATE 306 - 306 -
NET INCOME 5,583 4,633 9,165 7,942
DIVIDENDS ON PREFERRED STOCK
(Net of income tax benefit) 241 245 480 487
EARNINGS APPLICABLE TO COMMON STOCK 5,342 4,388 8,685 7,455
PRIMARY EARNINGS PER COMMON SHARE $.88 $.75 $1.44 $1.26
FULLY DILUTED EARNINGS PER COMMON SHARE $.78 $.65 $1.27 $1.10
Primary weighted average common shares
and equivalents 6,075 5,849 6,039 5,912
Dividends declared per common share $.165 $.15 $.315 $.30
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
KYSOR INDUSTRIAL CORPORATION
Consolidated Balance Sheet
(Dollars in thousands)
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents 2,321 16,942
Accounts receivable less $2,583 and $2,211
allowance for doubtful accounts 66,225 45,733
Finished goods inventory 5,979 5,391
Work in process inventory 11,606 9,404
Raw material inventory 22,160 19,621
Prepaid expenses 2,758 2,485
Deferred income taxes 8,622 8,860
TOTAL CURRENT ASSETS 119,671 108,436
PROPERTY, PLANT AND EQUIPMENT
Land 3,266 3,243
Buildings 33,075 32,042
Machinery and equipment 84,176 75,794
120,517 111,079
Less accumulated depreciation 65,670 62,518
TOTAL PROPERTY, PLANT AND EQUIPMENT 54,847 48,561
INVESTMENT IN AFFILIATE 18,324 0
OTHER ASSETS
Goodwill, patents and other intangibles (net of
amortization of 3,610 and 3,169 9,042 5,327
Cash value of officers' life insurance 11,795 11,644
Deferred income taxes 7,375 6,576
Miscellaneous receivables and other assets 5,823 6,429
TOTAL OTHER ASSETS 34,035 29,976
TOTAL ASSETS 226,877 186,973
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt 6,382 4,931
Accounts payable 26,370 21,150
Accrued income taxes payable 4,440 0
Accrued expenses and contingent liabilities 30,651 29,715
TOTAL CURRENT LIABILITIES 67,843 55,796
Long-term debt, less current maturities 42,459 26,028
Accumulated postretirement benefit obligation 14,105 13,729
Other long-term liabilities 12,075 11,185
TOTAL LIABILITIES AND DEFERRED CREDITS 136,482 106,738
PREFERRED SHAREHOLDERS' EQUITY
Employee Stock Ownership Plan Preferred Stock, shares
authorized 5,000,000 outstanding 795,595 and 797,517 19,393 19,440
Unearned deferred compensation under employee stock
ownership plan (13,691) (14,447)
TOTAL PREFERRED SHAREHOLDERS' EQUITY 5,702 4,993
COMMON SHAREHOLDERS' EQUITY
Common stock, $1 par value, shares authorized 30,000,000
outstanding 5,799,017 and 5,639,028 5,799 5,639
Additional paid-in capital 6,153 3,645
Retained earnings 73,396 66,531
Translation adjustment 398 483
Notes receivable-common stock 77,747 and 78,009 shares (1,053) (1,056)
TOTAL COMMON SHAREHOLDERS' EQUITY 84,693 75,242
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 226,877 186,973
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>
Six Months Ended June
1996 1995
<S> <C> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income $9,165 $7,942
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 4,986 4,526
Provision for losses on accounts receivable 239 227
(Gain) Loss on sales of fixed assets (2) (27)
Deferred compensation (ESOP) 755 608
Deferred income taxes (561) (464)
Changes in assets and liabilities providing
(consuming) cash:
Accounts receivable (18,787) (6,574)
Inventories (2,879) (1,241)
Prepaid expenses (246) (1,097)
Accounts payable 1,370 3,211
Accrued expenses and contingent liabilities 660 1,255
Accrued income taxes payable 5,766 2,570
Other long-term liabilities 1,268 1,056
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,734 11,992
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Additions to property, plant and equipment (10,332) (6,036)
Proceeds from sales of property and equipment 157 61
Acquisitions, net of cash acquired 9 -
Investment in affiliate (18,823) -
Decrease (Increase) in other long-term assets 953 323
Unrealized translation gain (loss) (85) (181)
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (28,121) (5,833)
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Current borrowings 19,000 2,247
Principal payments against long-term debt (6,474) (1,714)
Proceeds from issuance of common stock 1,724 1,384
Purchase of common stock - (4,609)
Common stock and preferred stock dividends paid (2,484) (2,365)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 11,766 (5,057)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (14,621) 1,102
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 16,942 15,850
CASH AND EQUIVALENTS AT END OF PERIOD $2,321 $16,952
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 36%
for both the quarter and six months ended June 30, 1996 compared to
44% for the same periods in 1995. All periods presented include
provisions for state income taxes and the statutory Federal rate of
35%. The rate for 1995 was higher than the combined Federal and
state rate due to large 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 June 30,
1996, and the related consolidated statements of income and cash
flows for the three-month and six-month periods ended June 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.
July 17, 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
second quarter 1996 were $105.3 million, up 11 percent from the $95.3
million reported for the same period in 1995. Net income for the second
quarter of 1996 increased 21.0 percent to $5.6 million or $.88 per share
compared to the $4.6 million or $.75 per share reported during the same
period in 1995.
The Commercial Products Group net sales increased 31
percent to $66.9 million for the second quarter of 1996 compared to $51.0
million reported for the same period a year ago. Operating profit for the
Commercial Products Group for the second quarter of 1996 increased 56
percent to $8.8 million from the $5.6 million reported for the same period
in 1995. The Commercial Products Group continues to grow through
market share gains and the sales and earnings contributions from recent
acquisitions.
Sales and earnings in the Transportation Products Group
were adversely impacted by the decline in the heavy-duty truck market.
The Transportation Products Group net sales decreased 13 percent to
$38.0 million for the second quarter of 1996 compared to $43.7 million
reported for the same period a year ago. Operating profit for the
Transportation Products Group for the second quarter 1996 was $4.0
million compared to $6.0 million reported for the same period in 1995. We
continue to experience market share increases in the polymer fan and fan
clutch product lines and anticipate that the earnings performance that this
group has experienced in the past will return when the heavy-duty truck
market recovers.
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 June 30, 1996, the Company had cash and equivalents of
$2.3 million compared to $16.9 million at December 31, 1995. Accounts
receivable and inventories have increased $25.8 million from December
31, 1995, reflecting higher working capital requirements associated with
the higher sales level. Additions to property, plant and equipment for the
six-month period ended June 30, 1996, totaled $10.3 million compared to
$6.0 million during the same period in 1995. Working capital is sufficient
for current requirements.
At June 30, 1996, the Company had $19.0 million
outstanding on its $30.0 million revolving line of credit. The proceeds
from this borrowing was used for the purchase of 24.25% of Austral
Refrigeration, Pty., Ltd. of Australia.
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
From 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"). Initial steps of
the remedial action have 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 4. Submission of Matters to a Vote of Security Holders
On April 26, 1996, the Company held its 1996 Annual Meeting
of Shareholders. The purpose of the meeting was to elect three directors for
three-year terms expiring in 1999 while one director was elected to a one-year
term expiring in 1997. The candidates nominated by management were
elected by the shareholders to serve as directors of the Company at the
meeting. The following sets forth the results of voting with respect to each
candidate:
Name of Candidate Shares Voted
Paul K. Gaston For: 6,051,181
Authority Withheld: 38,896
Grant C. Gentry For: 6,055,719
Authority Withheld: 34,358
Peter W. Gravelle For: 6,052,231
Authority Withheld: 37,847
Robert W. Navarre For: 6,050,821
Authority Withheld: 39,257
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 June 30, 1996.
<TABLE>
KYSOR INDUSTRIAL CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION BY SEGMENT
(Unaudited, amounts in thousands)
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES
Commercial Products
United States 66,898 46,933 113,811 88,561
Europe - 4,094 - 9,417
Total Commercial Products 66,898 51,027 113,811 97,978
Transportation Products
United States 34,377 40,006 65,775 79,771
Europe 3,680 3,713 7,234 7,051
Total Transportation Products 38,057 43,719 73,009 86,822
NET SALES 104,955 94,746 186,820 184,800
OPERATING PROFIT
Commercial Products
United States 8,789 6,407 13,524 10,885
Europe - (773) - (2,045)
Total Commercial Products 8,789 5,634 13,524 8,840
Transportation Products
United States 3,658 5,752 6,537 11,742
Europe 335 249 681 404
Total Transportation Products 3,993 6,001 7,218 12,146
TOTAL OPERATING PROFIT 12,782 11,635 20,742 20,986
Corporate Administrative Expense (Net) (3,965) (2,917) (5,818) (5,832)
Interest Expense (540) (435) (1,015) (922)
INCOME BEFORE INCOME TAXES FROM
CONSOLIDATED OPERATIONS 8,277 8,283 13,909 14,232
</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"). Initial steps of the remedial action
have 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 June 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: August 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: August 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>
Six Months
Ended
June 30,
1996 1995
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER SHARE CALCULATION
Net Income $9,165,322 $7,942,079
Less dividends on preferred stock 773,364 783,785
Plus tax benefit from preferred dividends 293,000 297,000
---------- ----------
Earnings (Loss) applicable to common stock 8,684,958 7,455,294
========== ==========
Weighted average common shares outstanding 5,651,070 5,538,421
Dilutive effect assuming excercise of certain stock
options applying the treasury stock method based
on year to date average price 388,181 373,208
-------- --------
Weighted average common shares and common
equivalent shares outstanding 6,039,251 5,911,629
========= =========
Primary earnings per share $1.44 $1.26
======== ========
FULLY DILUTED EARNINGS PER SHARE CALCULATION
A.
Weighted average common shares outstanding 5,651,070 5,538,421
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 388,181 373,208
-------- --------
Weighted average common shares and common
equivalent shares outstanding 6,039,251 5,911,629
======== ========
Fully diluted earnings per share (A) $1.44 $1.26
======== ========
B.
Assuming preferred stock converted to common
Vested Preferred shares issued 236,015 190,478
Non-vested Preferred shares issued 559,580 610,392
---------- ----------
Total Preferred shares issued 795,595 800,870
Vested Preferred shares issued 236,015 190,478
Guaranteed floor price for involuntary conversions $24.375 $24.375
---------- ----------
Subtotal $5,752,858 $4,642,898
The lower of year to date average or end of period common
stock price $24.2500 $20.7500
-------- --------
Required common shares to be issued assuming involuntary
conversion of vested shares at guaranteed floor price 237,231 223,754
Required common shares to be issued assuming voluntary
conversion of non-vested shares on one-for-one basis 559,580 610,392
Weighted average common shares and common
equivalent shares outstanding for fully diluted Part A. 6,039,251 5,911,629
---------- ----------
Weighted average common shares and common
equivalent shares outstanding for fully diluted Part B. 6,836,062 6,745,775
========== ==========
Net Income $9,165,322 $7,942,079
Additional ESOP expense presently funded by preferred dividend (773,364) (783,785)
Plus tax benefit on additional ESOP expense 54,287 44,476
Common stock dividends to reduce ESOP expense 251,000 250,000
-------- --------
Adjusted Net Income $8,697,245 $7,452,770
========= =========
Fully diluted earnings per share (B) $1.27 $1.10
======== ========
Fully diluted earnings (loss) per share (Lower of (A) or (B)) $1.27 $1.10
======== ========
</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 July 17, 1996 on our review
of interim financial information of Kysor Industrial Corporation
and Subsidiaries for the periods ended June 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.
July 17, 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 six-months ended June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,321
<SECURITIES> 0
<RECEIVABLES> 68,808
<ALLOWANCES> 2,593
<INVENTORY> 39,745
<CURRENT-ASSETS> 119,671
<PP&E> 120,517
<DEPRECIATION> 65,670
<TOTAL-ASSETS> 226,877
<CURRENT-LIABILITIES> 67,843
<BONDS> 42,459
0
19,393
<COMMON> 5,799
<OTHER-SE> 65,203
<TOTAL-LIABILITY-AND-EQUITY> 226,877
<SALES> 104,955
<TOTAL-REVENUES> 105,651
<CGS> 143,203
<TOTAL-COSTS> 173,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 239
<INTEREST-EXPENSE> 1,015
<INCOME-PRETAX> 14,215
<INCOME-TAX> 5,050
<INCOME-CONTINUING> 9,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,165
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.27
</TABLE>
