<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For period ended January 31, 1994 Commission file number 0-588
---------------- -----
COMMERCIAL INTERTECH CORP.
- --------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0159880
- ---------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1775 Logan Avenue, Youngstown, Ohio 44501-0239
- ------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(216) 746-8011
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Registrant's telephone number, including area code
Not Applicable
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Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter periods 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 practical date.
Common Stock, $1 Par Value--10,074,630 shares as of January 31, 1994.
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<PAGE> 2
INDEX
COMMERCIAL INTERTECH CORP.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated condensed balance sheets - January 31, 1994 and
October 31, 1993
Consolidated condensed statements of income - Three months ended
January 31, 1994 and 1993
Statements of consolidated cash flows - Three months ended
January 31, 1994 and 1993
Notes to consolidated condensed financial statements -
January 31, 1994
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE> 3
PART I. FINANCIAL INFORMATION
COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
(Thousands of dollars) January 31, October 31,
1994 1993
----------- -----------
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . $ 17,244 $ 25,066
Accounts receivable, less allowance
(1994-$1,875,000; 1993-$1,765,000). . . . 72,096 78,484
Inventories . . . . . . . . . . . . . . . . . 52,341 49,883
Deferred income tax benefits. . . . . . . . . 13,329 12,889
Prepaid expenses. . . . . . . . . . . . . . . 3,365 4,643
-------- --------
TOTAL CURRENT ASSETS 158,375 170,965
PROPERTY, PLANT AND EQUIPMENT. . . . . . . . . . 239,406 235,715
Less allowance for depreciation . . . . . . . 124,542 120,734
-------- --------
114,864 114,981
NONCURRENT ASSETS:
Intangible assets . . . . . . . . . . . . . . 29,029 29,822
Pension assets. . . . . . . . . . . . . . . . 27,416 26,645
Other assets. . . . . . . . . . . . . . . . . 3,745 4,922
-------- --------
TOTAL NONCURRENT ASSETS 60,190 61,389
-------- --------
TOTAL ASSETS $333,429 $347,335
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts and notes payable. . . . . . . . . . $ 80,149 $ 93,143
Accrued income taxes. . . . . . . . . . . . . 10,776 14,786
Dividends payable . . . . . . . . . . . . . . 2,286 2,270
-------- --------
TOTAL CURRENT LIABILITIES 93,211 110,199
NONCURRENT LIABILITIES:
Long-term debt. . . . . . . . . . . . . . . . 77,051 78,059
Deferred income taxes . . . . . . . . . . . . 16,653 16,273
Postretirement benefit. . . . . . . . . . . . 20,265 19,867
-------- --------
TOTAL NONCURRENT LIABILITIES 113,969 114,199
SHAREHOLDERS' EQUITY:
Preferred stock, no par value:
Authorized: 10,000,000 shares
Series A participating preferred shares. . 0 0
Series B ESOP convertible preferred shares
Issued: 1,064,846 shares . . . . . . . 24,758 24,758
Common stock, $1 par value:
Authorized: 30,000,000 shares
Issued: 1994 - 10,074,630 shares (excluding
28,008 in treasury); 1993 - 10,037,686
shares (excluding 42,063 in treasury). . . 10,075 10,038
Capital surplus . . . . . . . . . . . . . . . 39,503 39,034
Retained earnings . . . . . . . . . . . . . . 75,121 75,087
Deferred compensation . . . . . . . . . . . . (20,108) (21,248)
Translation adjustment. . . . . . . . . . . . (3,100) (4,732)
--------- ---------
126,249 122,937
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $333,429 $347,335
======== ========
</TABLE>
<PAGE> 4
<TABLE>
COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<CAPTION>
THREE MONTHS ENDED
(Thousands of dollars) January 31,
------------------
1994 1993
---- ----
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . $104,360 $99,327
Less costs and expenses:
Cost of products sold . . . . . . . . . . 72,659 72,168
Selling, administrative and
general expense. . . . . . . . . . . . 26,423 24,366
-------- -------
99,082 96,534
-------- -------
Operating income . . . . . . . . . . . . . . 5,278 2,793
Nonoperating income (expense):
Interest income . . . . . . . . . . . . . 320 341
Interest expense. . . . . . . . . . . . . (1,530) (1,513)
Other . . . . . . . . . . . . . . . . . . (471) 103
--------- --------
(1,681) (1,069)
--------- --------
Income before income taxes . . . . . . . . . 3,597 1,724
Income taxes . . . . . . . . . . . . . . . . 1,529 1,097
--------- --------
Net income . . . . . . . . . . . . . . . . . $ 2,068 $ 627
========= =======
Preferred stock dividend . . . . . . . . . . 526 529
--------- --------
Net income applicable to common stock. . . . $ 1,542 $ 98
========= ========
Earnings per share of common stock:
Net income:
Primary. . . . . . . . . . . . . . . . $ .15 $ .01
Fully diluted. . . . . . . . . . . . . .15 .01
Cash dividends declared . . . . . . . . . $ .17 $ .17
</TABLE>
<PAGE> 5
<TABLE>
COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<CAPTION>
THREE MONTHS ENDED
(Thousands of dollars) January 31,
---------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 2,068 $ 627
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and amortization. . . . 3,914 4,022
Postretirement benefit . . . . . . . . . . . . . . 342 251
Pension plan credits . . . . . . . . . . . . . . . (494) (590)
Change in deferred income taxes. . . . . . . . . . (113) 84
Change in current assets and liabilities:
Decrease in accounts receivable . . . . . . . . 6,788 11,436
(Increase) in inventories . . . . . . . . . . . (1,560) (113)
Decrease in prepaid expenses and
other current assets . . . . . . . . . . . . 1,327 165
(Decrease) in accounts payable and
accrued expenses . . . . . . . . . . . . . . (10,844) (8,306)
(Decrease) in accrued income taxes. . . . . . . (3,887) (1,725)
-------- -------
Net cash (used) provided by operating activities . . (2,459) 5,851
INVESTING ACTIVITIES:
Proceeds from sale of fixed assets. . . . . . . . . . 41 0
Capital expenditures. . . . . . . . . . . . . . . . . (2,315) (1,917)
--------- ---------
Net cash (used) in investing activities . . . . . . . (2,274) (1,917)
FINANCING ACTIVITIES:
Proceeds from long-term debts . . . . . . . . . . . . 0 0
Principal payments on long-term debts . . . . . . . . (1,049) (5,851)
Net borrowings under bank loan agreements . . . . . . (299) 673
Conversion of other assets. . . . . . . . . . . . . . 166 (187)
Dividends paid. . . . . . . . . . . . . . . . . . . . (2,219) (2,215)
-------- --------
Net cash (used) by financing activities . . . . . . . (3,401) (7,580)
Effect of exchange rate changes on cash. . . . . . . . . 312 (874)
-------- --------
Net (decrease) in cash and cash equivalents. . . . . . . (7,822) (4,520)
Cash and cash equivalents at beginning of period . . . . 25,066 19,396
-------- --------
Cash and cash equivalents at end of period . . . . . . . $17,244 $14,876
-------- --------
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . $ 421 $ 434
Income taxes . . . . . . . . . . . . . . . . . . . 5,529 2,737
</TABLE>
<PAGE> 6
COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
January 31, 1994
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
Article 10 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 of normal recurring accruals)
considered necessary for a fair presentation have been
included. Operating results for the three-month period
ended January 31, 1994 are not necessarily indicative
of the results that may be expected for the year ended
October 31, 1994. For further information, refer to the
consolidated financial statements and footnotes thereto
included in Commercial Intertech Corp. and Subsidiaries'
annual report on Form 10-K for the year ended October 31, 1993.
Note B - Per-Share Data
- -----------------------
Per-share data was computed using the weighted average number
of common shares outstanding during the period. The preferred
stock issued in February, 1990 was determined not to be a
common stock equivalent for primary earnings per share. In
computing primary earnings per common share, the Series B and
C preferred dividends and adjustments reduce income available
to common shareholders.
In computing fully diluted earnings per share, dilution is
determined by dividing net earnings by the weighted average
number of common shares outstanding during the period after
giving effect to dilutive preferred stock assumed converted
to common stock. The most dilutive calculation assumes
conversion of Series B preferred stock to common shares and
the subsequent adjustments to net income for Series C
preferred dividends and dividend rate adjustments for Series B
preferred to arrive at income available to common share-
holders.
<PAGE> 7
Note C - Inventories
- --------------------
<TABLE>
Inventories consisted of the following:
<CAPTION>
January 31, October 31,
1994 1993
----------- -----------
<S> <C> <C>
Raw materials $11,770 $11,412
Work-in-process 25,702 24,067
Finished goods 14,869 14,404
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$52,341 $49,883
------- -------
</TABLE>
Note D - Employee Stock Ownership Plan Loan (ESOP) - Guaranteed Debt
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During the third quarter of fiscal 1993, the Company's ESOP
completed a refinancing program by issuing $23,231,000 of
7.08 percent senior notes due December 31, 2009 privately
placed with a group of insurance companies. The senior notes
replace the $25 million variable interest rate loan. Since
the debt is guaranteed by the Company, it is recorded in the
long-term debt section of the Consolidated Balance Sheet with
an offset shown as a reduction of shareholders' equity as
Deferred Compensation. As Company contributions and dividends
on the Senior B ESOP convertible preferred shares held by the
ESOP are used to meet interest and principal payments, shares
are released for allocation to eligible employees.
The refinancing program is not reflected in the Company's cash
flow statement because the ESOP's master trust handled all cash
transactions.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Quarter 1994 Compared To First Quarter 1993
- -------------------------------------------------
Consolidated net revenues of $104,360,000 during the first three
months of fiscal 1994, the highest first quarter sales recorded in the
Company's history, were $5,033,000 or 5 percent higher than the same
period last year. On the strength of this record performance, net
income of $2,068,000 was $1,441,000 higher than the first quarter,
fiscal 1993.
Record first quarter revenues from operations in the United States
of $62,946,000 were $10,938,000 or 21 percent higher than the first
three months of last year as gains in sales were realized in virtually
all market segments served by the Company. All of the Company's
business units recorded domestic revenue percentage gains exceeding
9 percent, capitalizing on the continuing economic recovery in
the United States. Meanwhile, first quarter sales reported by foreign
operating units of $41,414,000 were $5,905,000 or 13 percent lower
than the same period last year. The global recession continues to
impact markets in Europe and the United Kingdom as double-digit
percentage declines were realized by both the Hydraulic Components group
and the Building Systems Division. Meanwhile, overseas sales recorded
by the Fluid Purification Systems group were 15 percent higher than
the first quarter of fiscal 1993, reflecting improvements in the
economies of Japan and the Pacific Rim. Adjusted for changes in foreign
currency exchange rates and due to a stronger U.S. dollar, foreign
revenues would have been $1,845,000 or 5 percent higher at last year's
exchange rates. On a parity adjusted basis, foreign market segment
performance is mixed, with total foreign sales volume down 8 percent
from last year's levels.
Consolidated gross profit of $31,701,000 was $4,542,000 or
17 percent higher than last year, due generally to increased sales
volume and vigilant cost control systems, as gross profit margins
increased over three percentage points. Both domestic and foreign
operations were able to realize similar gross margin gains since last
year by responding to ever-changing global economic challenges.
Operating income during the current period of $5,278,000 was
$2,485,000 higher than the first three months of last year. All three
of the Company's business units recognized significant year-over-year
gains in operating income, despite lagging business conditions in Europe
and the United Kingdom. Selling and administrative expenses during the
current three month period of $26,423,000 were 8 percent higher than
last year due principally to adjustments for foreign currency exchange
rate differences and severance expenses recorded by the Fluid
Purification Systems and Hydraulic Components groups.
<PAGE> 9
Nonoperating expenses of $1,681,000 during the current quarter were
$612,000 higher than the same period last year, due principally to foreign
currency losses incurred as a result of fluctuating exchange rates, incurred
primarily by the Company's Brazilian subsidiary. Meanwhile, interest expense
of $1,530,000 remained relatively the same as the first three months of last
year.
The effective income tax rate of 43 percent during the first quarter of
fiscal 1994 is lower than the same period last year, due principally to higher
income in the United States where income tax rates are lower than those
recorded by the Company's foreign operations.
FINANCIAL CONDITION
- -------------------
Cash and cash equivalents decreased $7,822,000 during the first three
months of fiscal 1994. Operating performance resulted in cash used by operating
activities of $2,459,000, compared to $5,851,000 of cash provided during the
same period last year. Cash used in investing activities of $2,274,000 was
$357,000 higher than the first quarter of fiscal 1993 partially due to higher
capital expenditures in the current period. In light of current market trends
and economic conditions, the Company continues to actively monitor its capital
spending requirements. Cash used by financing activities of $3,401,000 was
$4,179,000 lower than the same period last year due principally to the
reduction of payments against long-term debt.
The Company expects internal cash flows to generate sufficient resources to
support operating needs and to finance pending capital expenditure programs.
Supplemental borrowings against existing credit facilities will also be used as
required to finance the capitalization programs.
Net trade customer orders received of $117,377,000 during the first three
months of the current fiscal year were 15 percent higher than the same period
last year, adjusted for foreign currency differences, but 3 percent lower than
bookings received during the fourth quarter of fiscal 1993, parity adjusted.
Current period orders received by all three domestic business units exceeded
last year's levels; bookings recorded by the Hydraulic Components and Metal
Products groups were significantly higher than the same period last
year. The foreign Hydraulic Components and Fluid Purification Systems groups
reported gains in customer orders, parity adjusted over the same period last
year, rebounding from the depressed levels experienced in fiscal 1993.
Meanwhile, orders received by the Building Systems Division in Europe fell 20
percent from last year's first quarter levels, parity adjusted, and were 10
percent lower than the last quarter of fiscal 1993, adjusting for changes in
foreign currency exchange rates. The European economy remains soft and
projections for any significant recovery in the short term appear uncertain.
Earnings from the Company's operations based in Europe are expected to be
impacted accordingly. The current trade order backlog of $120,676,000, at its
highest level in 16 months, is 12 percent higher than the backlog at the end of
fiscal 1993, on a parity adjusted basis. Despite record first quarter sales,
the backlog of unshipped orders remains 9 percent higher than the balance at
the end of the first quarter of last year, adjusting for currency exchange rate
differences.
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
<TABLE>
(a) Exhibit I - Computation of per share earnings
(in thousands, except per share data)
<CAPTION> Three Months Ended
January 31,
------------------
1994 1993
---- ----
<S> <C> <C>
Primary
- -------
Average shares outstanding. . . . . . . . . . . . 10,046 9,938
Net effect of dilutive stock options - based
on the treasury stock method using average
market price . . . . . . . . . . . . . . . . . 44 55
-------- --------
10,090 9,993
Total . . . . . . ======== ========
Net income. . . . . . . . . . . . . . . . . . . . $ 2,068 $ 627
Preferred stock dividends and adjustments . . . . (526) (529)
-------- ---------
Income applicable to common stock . . . . . . . . $ 1,542 $ 98
======== =========
Per share amount. . . . . . . . . . . . . . . . . $0.15 $0.01
======== =========
Fully Diluted
- -------------
Average shares outstanding. . . . . . . . . . . . 10,046 9,938
Net effect of dilutive stock options - based
on the treasury stock method using the period
end price, if higher than average market
price. . . . . . . . . . . . . . . . . . . . . 44 55
Common share equivalents:
Series B Preferred . . . . . . . . . . . . . . 876 881
-------- --------
Total . . . . . . 10,966 10,874
======== ========
Net income. . . . . . . . . . . . . . . . . . . . $ 2,068 $ 627
Preferred stock (Series B) dividends and
rate adjustment. . . . . . . . . . . . . . . . (377) (379)
-------- --------
Income applicable to common stock . . . . . . . . $ 1,691 $ 248
======== ========
Per share amount. . . . . . . . . . . . . . . . . $0.15 $0.02 (A)
===== =====
<FN>
(A) Fully diluted earnings per share on net income
is anti-dilutive. Therefore, fully diluted
earnings is the same as primary earnings per share on the
income statement.
</TABLE>
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(b) Reports On Form 8-K
No reports were filed on Form 8-K during the quarter for which
this report is filed.
<PAGE> 12
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.
COMMERCIAL INTERTECH CORP.
Date March 2, 1994 By /S/Philip N. Winkelstern
------------------------ ---------------------------------
Philip N. Winkelstern
Senior Vice President and
Chief Financial Officer
