<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 April 30, 1998
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)
(330) 746-8011
--------------------------------------------------
Registrant's telephone number, including area code
Not Applicable
--------------
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--14,255,317 shares as of June 9, 1998
<PAGE> 2
INDEX
COMMERCIAL INTERTECH CORP.
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C> <C>
Consolidated Condensed Statements of Income (unaudited) - Six Months and
Three Months Ended April 30, 1998 and 1997................................................3
Consolidated Condensed Balance Sheets (unaudited) -
April 30, 1998 and October 31, 1997.......................................................4
Statements of Consolidated Condensed Cash Flows (unaudited) - Six Months
Ended April 30, 1998 and 1997.............................................................5
Notes to Consolidated Condensed Financial Statements (unaudited) -
April 30, 1998............................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................................9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......................................13
Item 6. Exhibits and Reports on Form 8-K.........................................................13
SIGNATURE...............................................................................................14
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
(Thousands of dollars, except per share data) April 30, April 30,
--------------------------- ---------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ...................................... $ 274,616 $ 246,608 $ 146,086 $ 129,892
Less costs and expenses:
Cost of products sold ...................... 207,819 184,771 110,015 96,368
Selling, administrative and general expenses 44,564 45,502 22,811 22,758
--------- --------- --------- ---------
252,383 230,273 132,826 119,126
--------- --------- --------- ---------
Operating income ............................... 22,233 16,335 13,260 10,766
Nonoperating income (expense):
Interest income ............................ 294 363 140 162
Interest expense ........................... (5,098) (5,210) (2,565) (2,575)
Foreign currency gains (losses) ............ (514) 450 (339) (44)
Other ...................................... 437 1,819 484 1,285
--------- --------- --------- ---------
(4,881) (2,578) (2,280) (1,172)
--------- --------- --------- ---------
Income before income taxes ..................... 17,352 13,757 10,980 9,594
Income taxes ................................... 6,474 5,065 4,010 3,854
--------- --------- --------- ---------
Net income ..................................... $ 10,878 $ 8,692 $ 6,970 $ 5,740
========= ========= ========= =========
Preferred stock dividends ...................... (927) (963) (462) (450)
--------- --------- --------- ---------
Net income applicable to common stock .......... $ 9,951 $ 7,729 $ 6,508 $ 5,290
========= ========= ========= =========
Earnings per share of common stock:
Net income:
Basic ...................................... $ 0.72 $ 0.57 $ 0.47 $ 0.39
Diluted .................................... $ 0.63 $ 0.51 $ 0.40 $ 0.34
Dividends per common share ..................... $ 0.285 $ 0.270 $ 0.150 $ 0.135
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE> 4
COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
(Thousands of dollars) April 30, October 31,
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 20,694 $ 27,630
Accounts receivable, less allowance (1998 - $3,183; 1997 - $2,456) ..... 83,180 81,886
Inventories ............................................................ 62,024 60,944
Deferred income tax benefits ........................................... 14,097 15,281
Prepaid expenses and other current assets .............................. 3,324 4,255
--------- ---------
TOTAL CURRENT ASSETS ....... 183,319 189,996
PROPERTY, PLANT AND EQUIPMENT .............................................. 221,495 216,030
Less allowance for depreciation ........................................ 118,079 112,604
--------- ---------
103,416 103,426
NONCURRENT ASSETS:
Intangible assets ...................................................... 43,534 44,460
Pension assets ......................................................... 44,660 42,961
Other assets ........................................................... 2,551 3,955
--------- ---------
TOTAL NONCURRENT ASSETS .......... 90,745 91,376
--------- ---------
TOTAL ASSETS .......... $ 377,480 $ 384,798
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Bank loans ............................................................. $ 492 $ 140
Accounts payable ....................................................... 45,814 52,382
Accrued expenses ....................................................... 53,437 56,525
Accrued income taxes ................................................... 10,274 11,085
Dividends payable ...................................................... 2,697 2,592
Current portion of long-term debt ...................................... 3,186 4,621
--------- ---------
TOTAL CURRENT LIABILITIES ........ 115,900 127,345
NONCURRENT LIABILITIES:
Long-term debt ......................................................... 111,565 111,342
Deferred income taxes .................................................. 18,795 18,274
Postretirement benefits ................................................ 25,257 25,007
--------- ---------
TOTAL NONCURRENT LIABILITIES ........... 155,617 154,623
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: 1998 - 926,186 shares; 1997 - 942,552 shares ......... 21,534 21,914
Common stock, $1 par value:
Authorized: 30,000,000 shares
Issued: 1998 - 14,249,283 shares (excluding 1,943,566 in
treasury); 1997 - 14,125,175 shares (excluding
1,945,995 in treasury) ........................................ 14,249 14,125
Capital surplus ........................................................ 3,733 5,264
Retained earnings ...................................................... 92,168 85,884
Deferred compensation .................................................. (15,080) (16,337)
Translation adjustment ................................................. (10,641) (8,020)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ............ 105,963 102,830
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............ $ 377,480 $ 384,798
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
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COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CONDENSED CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Six Months Ended
(Thousands of dollars) April 30,
------------------------
1998 1997
------ ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................................... $ 10,878 $ 8,692
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for depreciation and amortization ................... 7,995 7,280
Amortization of deferred credit ............................... (709) (796)
Postretirement benefit ........................................ 376 179
Pension plan credits .......................................... (1,826) (1,368)
Change in deferred income taxes ............................... 1,732 1,651
Change in current assets and liabilities:
(Increase) in accounts receivable ......................... (2,483) (2,951)
(Increase) in inventories ................................. (2,077) (622)
Decrease (increase) in prepaid expenses and other
current assets ........................................ 851 (1,885)
Decrease in receivable from discontinued operations ....... 0 6,771
(Decrease) in accounts payable and accrued expenses ....... (7,592) (5,496)
(Decrease) increase in accrued income taxes ............... (323) 159
-------- --------
Net cash provided by operating activities ...... 6,822 11,614
INVESTING ACTIVITIES:
Proceeds from sale of fixed assets .................................. 1,519 756
Business acquisition ................................................ 0 (39,359)
Investment in intangibles ........................................... 0 (896)
Capital expenditures ................................................ (8,952) (3,798)
Operating subsidies ................................................. 0 3,016
-------- --------
Net cash (used) by investing activities ........ (7,433) (40,281)
FINANCING ACTIVITIES:
Proceeds from long-term debt ........................................ 11,507 57,876
Principal payments on long-term debt ................................ (12,756) (22,295)
Net borrowings under bank loan agreements ........................... 361 (4,889)
Proceeds from reserve contracts ..................................... 516 0
Conversion of other assets .......................................... (680) (1,674)
Dividends from discontinued operations .............................. 0 4,612
Dividends paid ...................................................... (4,786) (4,654)
-------- --------
Net cash (used) provided by financing activities (5,838) 28,976
Effect of exchange rate changes on cash ................................. (487) (3,014)
-------- --------
Net (decrease) in cash and cash equivalents ............................. (6,936) (2,705)
Cash and cash equivalents at beginning of period ........................ 27,630 27,552
-------- --------
Cash and cash equivalents at end of period .............................. $ 20,694 $ 24,847
======== ========
Supplemental disclosures:
Cash paid during the period for:
Interest ......................................................... $ 4,640 $ 5,406
Income taxes ..................................................... 5,066 3,255
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE> 6
COMMERCIAL INTERTECH CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
April 30, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Commercial Intertech Corp. and Subsidiaries (the "Company" or "Commercial
Intertech") 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. 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, 1997. Operating results for the six-month and three-month periods
ended April 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended October 31, 1998.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share." Statement No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of stock options and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to
Statement No. 128 requirements.
Effective November 1, 1997, the Company adopted American Institute of
Certified Public Accountants Statement of Position ("SOP") 96-1, "Environmental
Remediation Liabilities." The SOP does not change existing accounting rules, but
clarifies how existing authoritative guidance on loss contingencies should be
applied in determining environmental liabilities. The adoption of the SOP did
not have a material impact on the Company's operations.
Effective for the quarter ended January 31, 1998, the Company changed its
foreign currency translation procedures for its Brazilian operations reflecting
a change in its economy to a non-hyperinflationary status.
The change did not substantially impact the Company's financial statements.
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NOTE B - PER SHARE DATA
The computation of basic and diluted earnings per share is shown below:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
April 30, April 30,
------------------------- -------------------------
1998 1997 1998 1997
-------- -------- -------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator:
Net income ....................................... $ 10,878 $ 8,692 $ 6,970 $ 5,740
Series B preferred stock dividends ............... (927) (963) (462) (450)
-------- -------- -------- --------
Numerator for basic earnings per share -
net income applicable to common stock ........ 9,951 7,729 6,508 5,290
Effect of dilutive securities - Series B preferred
stock dividends and adjustments resulting from
assumed conversion ........................... 802 796 418 371
-------- -------- -------- --------
Numerator for diluted earnings per share -
net income applicable to common stock after
assumed conversion ........................... $ 10,753 $ 8,525 $ 6,926 $ 5,661
======== ======== ======== ========
Denominator:
Denominator for basic earnings per share -
weighted average shares outstanding .......... 13,806 13,459 13,869 13,647
Effect of dilutive securities:
Series B convertible preferred stock ......... 2,824 2,996 2,800 2,849
Assumed issuance of stock under stock option
and award plans based on treasury stock
method .................................... 469 350 438 348
-------- -------- -------- --------
Denominator for diluted earnings per share -
weighted average shares outstanding and
impact of dilutive securities ................ 17,099 16,805 17,107 16,844
======== ======== ======== ========
Basic earnings per share ......................... $ 0.72 $ 0.57 $ 0.47 $ 0.39
======== ======== ======== ========
Diluted earnings per share ....................... $ 0.63 $ 0.51 $ 0.40 $ 0.34
======== ======== ======== ========
</TABLE>
Options to purchase 6,750 shares of common stock at $22.94 per share were
outstanding during the period ended April 30, 1998 but were not included in the
computation of diluted earnings per share because the exercise price of the
options was greater than the average market price of the common shares and,
therefore, the effect would be antidilutive.
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<PAGE> 8
NOTE C - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
----------- -----------
(in thousands)
<S> <C> <C>
Raw materials ........................$ 21,804 $ 20,899
Work-in-process ...................... 30,254 30,161
Finished goods........................ 9,966 9,884
----------- -----------
$ 62,024 $ 60,944
=========== ===========
</TABLE>
NOTE D - SEGMENT REPORTING
The Company is engaged in the design, manufacture and sale of products in
two segments:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
April 30, April 30,
------------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- ------
(in thousands)
<S> <C> <C> <C> <C>
Hydraulic Systems
Net sales.............................$ 192,340 $ 168,311 $ 102,617 $ 90,104
Operating income...................... 14,340 11,290 8,798 7,859
Percent to sales................... 7.5% 6.7% 8.6% 8.7%
Building Systems and Metal Products
Net sales.............................$ 82,276 $ 78,297 $ 43,469 $ 39,788
Operating income...................... 7,893 5,045 4,462 2,907
Percent to sales................... 9.6% 6.4% 10.3% 7.3%
TOTAL
Net sales.............................$ 274,616 $ 246,608 $ 146,086 $ 129,892
Operating income...................... 22,233 16,335 13,260 10,766
Percent to sales................... 8.1% 6.6% 9.1% 8.3%
</TABLE>
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<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Second Quarter 1998 Compared With Second Quarter 1997
Quarterly net sales of $146,086,000 established a new record for the
Company. Net sales during the current quarter increased by $16,194,000 which is
13 percent higher, 15 percent higher on a currency adjusted basis, than the
second quarter of fiscal 1997. Net income increased by 21 percent to $6,970,000
during the second quarter of fiscal 1998 which primarily reflects the impact of
increased sales and the results of a previously implemented program to reduce
fixed costs.
Net sales recorded by domestic operations totaled $87,053,000 during
the current quarter which was $14,666,000 or 20 percent higher than net sales of
the second quarter of the prior fiscal year. The domestic Hydraulics Systems
group recorded net sales for the quarter of $72,247,000, a 25 percent increase
over the second quarter of last year, as a number of domestic operations
achieved record performances for a second quarter. Net sales of the domestic
Metal Products group were flat compared with net sales of the same quarter last
year as demand slowed somewhat in the container and truck equipment markets.
Net sales of foreign operations totaled $59,033,000 which was
$1,528,000 or 3 percent higher than the second quarter of last year. Net sales
of foreign operations would have been $3,608,000 or 6 percent higher if exchange
rates remained unchanged for the period. The foreign Hydraulic Systems group
reported shipments of $30,370,000, a 4 percent decline in the current quarter
adjusted for the effects of exchange rate differences which primarily reflects a
sales decline in the United Kingdom. Net sales of the Company's Astron Division
located in Europe increased 15 percent over the second quarter of last year.
Consolidated gross profit of $36,071,000 was $2,547,000 or 8 percent
higher than the second quarter of fiscal 1997 which primarily reflects the
impact of increased sales during the current quarter. Gross profit margins for
the current quarter declined slightly compared with the second quarter of fiscal
1997; due, in part, to weaker sales for metal stampings in the United States and
hydraulic operations in the United Kingdom.
Selling, general and administrative expenses of $22,811,000 were
approximately equal to expenses recorded in the same quarter last year. Selling,
general and administrative expenses declined as a percent of sales to 16 percent
in the current quarter from 18 percent of sales last year reflecting the impact
of the Company's previously implemented program to reduce its cost structure.
Operating income of $13,260,000 in the current quarter was
$2,494,000 or 23 percent higher than the same quarter last year. Operating
income of the Hydraulic Systems group of $8,798,000 was 12 percent higher than
the same quarter last year as the domestic operations reported significantly
increased operating income. Operating income of the foreign operations of the
Hydraulic Systems group declined due to the lower earnings of the United Kingdom
operations which is primarily the result of distressed conditions associated
with export business caused by the strong local currency, continuing
difficulties caused by unreliable delivery of purchased components, and reduced
demand for industrial and specialty hydraulic products. The Building Systems and
Metal Products group recorded operating income of $4,462,000 which was 54
percent higher than operating income of the second quarter of last year. The
Company's Astron Division located in Europe recorded a significant increase in
operating income reflecting favorable climate and business conditions in the
current quarter. Operating income of the domestic Metal Products group
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<PAGE> 10
declined which primarily reflects the impact of decreased demand for certain
products during the current quarter.
During the second quarter of fiscal 1998, nonoperating expenses of
$2,280,000 were $1,108,000 higher than the same quarter last year. Interest
expense declined slightly to $2,565,000 in the current quarter primarily due to
lower levels of debt partially offset by slightly higher average interest rates.
Foreign currency exchange and translation losses totaled $339,000 in the second
quarter of fiscal 1998 compared with a loss of $44,000 in the second quarter of
the prior year. Nonoperating income for the current quarter includes a gain on
the disposal of idle property located in Europe. In addition, nonoperating
income for the second quarter of the prior fiscal year includes a gain of $1.0
million realized on transfer of Astron Building Systems marketing and
manufacturing to a new Korean licensee.
The Company's effective income tax rate amounted to 37 percent
during the second quarter of fiscal 1998 and 40 percent during the second
quarter of the prior fiscal year.
First Six Months of 1998 Compared With First Six Months of 1997
The Company recorded net sales of $274,616,000 for the six months
ended April 30, 1998, surpassing the sales recorded for the prior year period by
11 percent, or 15 percent on a currency adjusted basis. Net income increased by
25 percent to $10,878,000 during the first six months of fiscal 1998 which
primarily reflects the impact of increased sales and the results of a previously
implemented program to reduce fixed costs.
Net sales recorded by domestic operations totaled $161,927,000
during the current period which was $24,894,000 or 18 percent higher than net
sales of the prior year period. The domestic Hydraulics Systems group recorded
net sales for the period of $131,985,000, a 22 percent increase over the same
period of last year reflecting continued strength for operations in the United
States. The domestic Metal Products group reported a 3 percent increase in
revenues over the same period last year.
Foreign operations recorded revenues of $112,689,000 which was
$3,114,000 or 3 percent higher than the same period of last year. Net sales of
foreign operations would have been $8,883,000 or 8 percent higher if exchange
rates remained unchanged for the period. The foreign Hydraulic Systems group
recorded net sales of $60,355,000 which were approximately equal to sales of the
prior period although up by 5 percent adjusted for the effects of exchange rate
differences. Net sales of the Company's Astron Division located in Europe
increased 6 percent over the same period last year (up 19 percent on a parity-
adjusted basis).
Consolidated gross profit of $66,797,000 was $4,960,000 or 8 percent
higher than the same period of fiscal 1997 which primarily reflects the impact
of increased sales during the current period. Gross profit margins for the
current period declined slightly compared with the same period of fiscal 1997;
however, operating profit margins improved in the current period due to
declining operating expenses.
Selling, general and administrative expenses of $44,564,000 declined
by $938,000 or 2 percent compared with the same period last year. Selling,
general and administrative expenses also declined as a percent of sales to 16
percent in the current period from 18 percent of sales in the same period last
year reflecting the impact of the Company's previously implemented program to
reduce its cost structure.
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<PAGE> 11
Operating income of $22,233,000 in the current period was $5,898,000
or 36 percent higher than the same period last year. Operating income of the
Hydraulic Systems group of $14,340,000 was 27 percent higher than the same
period last year as the domestic operations reported significantly increased
operating income. Operating income of the foreign operations of the Hydraulic
Systems group declined due to lower earnings of the United Kingdom operations
which is primarily the result of distressed conditions associated with export
business caused by the strong local currency, continuing difficulties caused by
unreliable delivery of purchased components, and reduced demand for industrial
and specialty hydraulic products. The Building Systems and Metal Products group
recorded operating income of $7,893,000 which was 57 percent higher than
operating income of the same period of last year. Operating income of the
Company's Astron Division located in Europe increased significantly reflecting
favorable climate and business conditions during the current period. The
domestic Metal Products group recorded a slight increase in operating income
during the current period.
During the first six months of fiscal 1998 nonoperating expenses of
$4,881,000 were $2,303,000 higher than the same period last year. Interest
expense declined by $112,000 to $5,098,000 in the current period primarily due
to lower levels of debt partially offset by slightly higher average interest
rates in the current period. Foreign currency exchange and translation losses
totaled $514,000 in the current period compared with gains of $450,000 in the
first six months of the prior year. Nonoperating income for the current period
includes a gain on the disposal of idle property. In addition, nonoperating
income for the same period of the prior fiscal year includes a gain of $1.0
million realized on transfer of Astron Building Systems marketing and
manufacturing to a new Korean licensee.
The Company's effective income tax rate was 37 percent during the
first six months of both fiscal 1998 and fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects that sufficient financial resources, generated
from both internal and external sources, will be available to meet operating
needs, to meet scheduled debt repayments and to fund capital expenditure
programs during the upcoming year. Cash and cash equivalents declined by
$6,936,000 during the first six months of fiscal 1998 and totaled $20,694,000 at
period end. Cash provided by operating activities during the current period was
$6,822,000 compared with cash provided of $11,614,000 in the first six months of
last year. The decrease is primarily attributable to the decrease of $6,771,000
in receivables from discontinued operations in the prior period.
Cash used in investing activities was $7,433,000 in the first six
months of fiscal 1998 compared with $40,281,000 in the first six months of last
year which primarily reflects the use of cash totaling $39,359,000 to acquire
the common stock of Ultra Hydraulics Limited in the prior year. Capital
expenditures of $8,952,000 in the current period were $5,154,000 greater than
capital expenditures for the first six months of the prior year.
Cash used by financing activities in the current period was
$5,838,000 compared with cash provided of $28,976,000 last year. Cash used in
financing activities in the current period reflects a net pay- down of long-term
debt of $1,249,000 in addition to dividends paid of $4,786,000. During the
current period quarterly cash dividends declared on the Company's common stock
was increased to $.15 per share which is 11 percent greater than the previous
rate of $.135 per share. The increased dividend is payable on June 15, 1998.
Cash provided by investing activities in the prior year period primarily
reflects the issuance of long-term debt to finance the acquisition of Ultra
Hydraulics Limited.
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<PAGE> 12
BUSINESS OUTLOOK
Incoming customer orders received of $298,386,000 during the first
six months of fiscal 1998 is an all-time Company record. Current period orders
are 11 percent higher than orders received twelve months ago, parity adjusted.
Bookings for the first six months of fiscal 1998 for the Hydraulic Systems group
totaled $208,481,000, a 13 percent increase above the level recorded during the
same period last year. Bookings of $89,905,000 for the Building Systems and
Metal Products group were 5 percent greater than the amount recorded in the
first six months of the prior year.
The worldwide backlog of unshipped orders amount to $217,855,000 at
April 30, 1998. The amount of unshipped orders is 11 percent higher than the
balance at the end of fiscal 1997 and 22 percent higher than the ending order
backlog twelve months ago, both adjusted for foreign currency exchange rate
differences.
Management believes that the prospects for continued growth by the
Company remain excellent, however, some potentially limiting factors temper this
optimism including the possibility of slower growth for some hydraulic market
segments in the United States, sluggish performance for operations based in the
United Kingdom, and uncertainty regarding demand from customers in the metal
stampings industry. Therefore, quarter-over-quarter increases in income for the
second half of 1998 may not be as robust as reported for the first six months of
fiscal 1998. However, sustained year-over-year growth in bookings, expectations
for strong annual performance by Astron Building Systems, ongoing improvements
by the hydraulic operations in Germany, and expanded efforts to improve margins
in all units should more than offset these concerns.
FORWARD-LOOKING INFORMATION
Forward-looking statements contained in this Form 10-Q government
filing are made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. The Company cautions that a number of important
factors could cause the Company's actual results for 1998 and beyond to differ
materially from those expressed in any forward-looking statements made by or on
behalf of the Company. These important factors include, without limitation,
demand for the Company's products; the Company's ability to manufacture
commercial quantities of its products on an efficient and cost effective basis;
competition by rival developers of hydraulic systems and building systems and
metal products; changes in technology; customer preferences; growth in the
hydraulic systems and building systems and metal products industries; and
general economic and business conditions. These important factors and other
factors which could affect the Company's results are detailed in the Company's
filings with the Securities and Exchange Commission and are included herein by
reference. The Company assumes no obligation to update the information in this
filing.
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<PAGE> 13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held on March 25, 1998;
however, no matters were voted on which require disclosure under this item.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.44 - First Amendment to Distribution and Interim
Services Agreement by and between Commercial Intertech Corp. and
CUNO Incorporated (filed herewith)
Exhibit 11 - Statement re: Computation of Per Share Earnings
(omitted - inapplicable)
The information with respect to the computation of both
basic and diluted earnings per share is presented in Note B
to the financial statements included in PART I, Item 1.
Exhibit 27.1 - Financial Data Schedule for the six months ended
April 30, 1998 (filed herewith)
Exhibit 27.2 - Restated Financial Data Schedules for the three
months, six months, nine months and year ended January 31, April
30, July 31 and October 31, 1997, respectively, submitted pursuant
to Item 601(c)(2)(iii) of Regulation S-K (filed herewith)
Exhibit 27.3 - Restated Financial Data Schedule for the year ended
October 31, 1996 submitted pursuant to Item 601(c)(2)(iii) of
Regulation S-K (filed herewith)
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter for which this
report is filed.
-13-
<PAGE> 14
SIGNATURE
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 June 9, 1998 By /s/Steven J. Hewitt
-------------------------------- -------------------------------
Steven J. Hewitt
Senior Vice President and
Principal Financial Officer
-14-
<PAGE> 15
Commercial Intertech Corp.
Index To Exhibits Filed Herewith
Exhibit No. Description
- ----------- -----------
Exhibit 10.44 - First Amendment to Distribution and Interim Services
Agreement by and between Commercial Intertech Corp. and
CUNO Incorporated.
Exhibit 27.1 - Financial Data Schedule for the six months ended April 30,
1998
Exhibit 27.2 - Restated Financial Data Schedules for the three months, six
months, nine months and year ended January 31, April 30,
July 31 and October 31, 1997, respectively, submitted
pursuant to Item 601(c)(2)(iii) of Regulation S-K
Exhibit 27.3 - Restated Financial Data Schedule for the year ended October
31, 1996 submitted pursuant to Item 601(c)(2)(iii) of
Regulation S-K
-15-
<PAGE> 1
EXHIBIT 10.44
FIRST AMENDMENT TO DISTRIBUTION
AND INTERIM SERVICES AGREEMENT
THIS FIRST AMENDMENT TO DISTRIBUTION AND INTERIM SERVICES AGREEMENT
(this "Amendment") is made and entered into as of January 27, 1998 by and
between COMMERCIAL INTERTECH CORP., an Ohio corporation ("Commercial Intertech")
and CUNO INCORPORATED, a Delaware corporation ("CUNO").
W I T N E S S E T H:
WHEREAS, Commercial Intertech and CUNO are parties to that certain
Distribution and Interim Services Agreement (the "Agreement") dated as of
September 10, 1996, entered into in connection with the distribution of CUNO
Common Stock (as defined in the Agreement) to the holders of Commercial
Intertech Common Stock (as defined in the Agreement) as part of the spin-off of
CUNO;
WHEREAS, the Agreement sets forth certain agreements relating to the
transactions necessary to effect such distribution of CUNO Common Stock and the
spin-off of CUNO, and certain agreements between the parties in connection with
the conduct of business (and sharing of services) thereafter; and
WHEREAS, Commercial Intertech and CUNO desire to amend the Agreement to
provide that corporate opportunities relating to the Cuno Business (as defined
in the Agreement) shall be the property of CUNO.
NOW, THEREFORE, for the good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Corporate Opportunities. Section 3.09 of the Agreement shall be
amended to provide that corporate opportunities relating to the
CUNO Business shall be the property or corporate opportunity of
CUNO, and as such, Section 3.09 shall be deleted in its entirety
and replaced with the following:
"SECTION 3.09 Corporate Opportunities. The parties hereto
acknowledge that certain of the director and officers of CUNO
or a CUNO Subsidiary may also be a director or officer of
Commercial Intertech or a Commercial Intertech Subsidiary
following the Distribution Date. In connection with the
foregoing, the parties hereto agree that following the
Distribution Date, no opportunity, transaction, agreement or
other arrangement of which an officer or director of
Commercial Intertech, a Commercial Intertech Subsidiary or any
other Person in which Commercial Intertech or any Commercial
Intertech Subsidiary acquires a financial interest, is a party
or has knowledge, shall be the property or corporate
opportunity of CUNO or any CUNO Subsidiary, unless such
opportunity, transaction, agreement or other arrangement
relates to the ownership of interests in or the management and
operation of the CUNO Business, in which case such
opportunity, transaction, agreement or other arrangement shall
be the property of CUNO or such CUNO Subsidiary, as
appropriate."
-16-
<PAGE> 2
2. Definition of CUNO Business. The definition of CUNO Business for
purposes of this Amendment shall be the definition contained in
the Agreement, restated as follows:
"CUNO Business: the fluid purification business conducted, as
of the date of the Agreement, by Commercial Intertech, CUNO
and their respective Subsidiaries through the use of the CUNO
Assets, and after the Distribution Date to be conducted by
CUNO and the CUNO Subsidiaries."
3. Terms: Effect of Amendment. All capitalized terms used in this
Amendment but not otherwise defined herein shall have the meanings
given to them in the Agreement. All other terms and provisions of
the Agreement not modified by this Amendment shall remain in full
force and effect.
4. Strict Construction. The language used in this Amendment will be
deemed to the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction will be
applied against any party hereto.
5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.
COMMERCIAL INTERTECH CORP. CUNO INCORPORATED
By: /s/ Gilbert M. Manchester By: /s/ Mark G. Kachur
------------------------------------- ---------------------------
Gilbert M. Manchester Mark G. Kachur
Vice President, General Counsel and Chief Executive Officer
Assistant Secretary
-17-
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<TOTAL-ASSETS> 337,116
<CURRENT-LIABILITIES> 116,223
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