<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission file number: 0-5256
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 58-1351398
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 648-5656
(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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
9,196,187 Shares of Common Stock outstanding as of October 20, 1995
<PAGE>
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 1995
INDEX
PART I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income
Condensed Consolidated Statements of Stockholders' Equity
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
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
<PAGE>
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN MILLIONS)
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 46.6 $ 34.9
Trade receivables, net 28.9 29.4
Inventories, net 150.6 126.5
Other current assets 43.1 38.2
Deferred tax assets 25.9 56.1
Net assets of discontinued operations 6.1 32.3
Total current assets 301.2 317.4
Investments accounted for by the equity method 49.9 70.9
Loans receivable and real estate, net 26.5 79.3
Property, plant and equipment, net 187.9 185.1
Goodwill 287.0 290.0
Deferred tax assets 31.0 19.9
Other long-term assets 85.8 124.0
Total assets $ 969.3 $1,086.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt $ 25.8 $ 25.3
Accounts payable 74.8 65.1
Accrued income taxes 20.8 5.0
Accrued liabilities 89.1 110.8
Total current liabilities 210.5 206.2
Long-term debt 307.4 378.0
Accrued employee benefit obligations 71.5 77.1
Other long-term liabilities 132.4 129.5
Total liabilities 721.8 790.8
Redeemable preferred stock of subsidiary -- 46.7
STOCKHOLDERS' EQUITY:
Common stock 0.1 0.1
Additional paid-in capital 195.3 195.1
Retained earnings 146.1 74.4
Cumulative translation adjustment 0.2 (0.9)
Pension liability adjustment (6.4) (6.4)
Common stock in treasury, at cost (87.8) (13.2)
Total stockholders' equity 247.5 249.1
Total liabilities and stockholders' equity $ 969.3 $1,086.6
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(RESTATED) (RESTATED)
Net sales and revenues $ 269.9 $ 267.9 $ 795.2 $ 755.6
Cost of goods sold 216.2 212.9 626.5 593.9
Selling, general and
administrative expenses 35.7 40.8 108.1 123.3
Operating income 18.0 14.2 60.6 38.4
Earnings accounted for by the
equity method 1.4 1.7 17.4 16.3
Gain on sale of investments 53.4 -- 59.9 --
Net interest expense (7.1) (8.4) (21.8) (29.8)
Income from continuing operations
before income taxes 65.7 7.5 116.1 24.9
Income tax expense from
continuing operations 24.7 2.0 42.5 9.2
Income from continuing operations 41.0 5.5 73.6 15.7
Discontinued operations:
Net income (loss) from
discontinued operations -- 0.4 (0.3) (3.6)
Income (loss) on disposal of
business, net of income
tax benefit of $3.9 and $7.9
million for the quarter
and nine months ended
September 1994 -- 3.9 -- (27.2)
Reversal of net loss from
discontinued operations
subsequently retained -- 4.8 -- 9.3
Income (loss) before
extraordinary item 41.0 14.6 73.3 (5.8)
Extraordinary gain (loss) from
early retirement of debt -- 5.0 -- (16.3)
Net income (loss) 41.0 19.6 73.3 (22.1)
Dividends on subsidiary preferred
stock -- 0.8 1.6 2.3
Net income (loss) to common
stockholders $ 41.0 $ 18.8 $ 71.7 $(24.4)
Weighted average common and
common equivalent shares
outstanding 10.4 11.2 10.9 11.2
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Income (loss) per common share:
Continuing operations $ 3.94 $ 0.42 $ 6.59 $ 1.20
Discontinued operations -- 0.81 (0.03) (1.93)
Extraordinary item -- 0.45 -- (1.45)
Net income (loss) $ 3.94 $ 1.68 $ 6.56 $ (2.18)
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
TRANSLATION PENSION COMMON
COMMON PAID-IN RETAINED ADJUSTMENTS LIABILITY STOCK IN
STOCK CAPITAL EARNINGS AND OTHER ADJUSTMENT TREASURY
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 0.1 $ 195.1 $ 74.4 $ (0.9) $ (6.4) $ (13.2)
Net income -- -- 71.7 -- -- --
Purchase of treasury stock -- -- -- -- -- (74.8)
Exercise of stock options -- 0.2 -- -- -- 0.2
Translation adjustment and other -- -- -- 1.1 -- --
Balance at September 30, 1995 $ 0.1 $ 195.3 $ 146.1 $ 0.2 $ (6.4) $ (87.8)
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN MILLIONS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 73.6 $ 15.7
Adjustments to reconcile income from continuing
operations to net cash flow from operations:
Depreciation and amortization 30.1 29.7
Undistributed earnings of investments
accounted for under the equity method (13.9) (12.9)
Accretion of discount on senior subordinated notes 11.9 15.7
Proceeds from sale of accounts receivable -- 110.3
Gain on sale of investments (59.9) --
Litigation settlement -- (24.6)
Cash effects of changes in other working capital
balances, accrued employee benefit obligations,
and other long-term liabilities (excluding the
effects of acquisitions and dispositions of
businesses) 9.4 34.5
Net cash flow from continuing operations 51.2 168.4
Net cash flow used by discontinued operations (2.4) (21.7)
Net cash flow from operating activities 48.8 146.7
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of notes receivable 39.8 --
Proceeds from sale of businesses 33.4 71.7
Loan principal repayments and proceeds from sale of
real estate 6.8 7.1
Purchases of businesses (10.4) --
Capital expenditures (20.8) (18.3)
Other (2.6) (14.5)
Net cash flow from investing activities 46.2 46.0
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of senior subordinated notes (66.2) (13.8)
Repayment of senior subordinated debt -- (234.1)
Repayment of senior credit facilities -- (221.1)
Dividends paid (2.9) --
Proceeds from new credit facility -- 317.9
Payments on long-term debt (34.6) (30.1)
Net borrowings (payments) on revolving credit
facilities 19.9 (41.4)
Other 0.5 0.5
Net cash flow used by financing activities (83.3) (222.1)
CHANGE IN CASH AND CASH EQUIVALENTS 11.7 (29.4)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34.9 78.7
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 46.6 $ 49.3
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements
of Great American Management and Investment, Inc. (the "Company" or
"GAMI") include its wholly owned subsidiary, Eagle Industries, Inc.
("Eagle") and have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the opinion
of management, all adjustments considered necessary, consisting only of
normal recurring adjustments, are included for fair presentation.
Operating results for the quarter and nine months ended September 30,
1995 are not necessarily indicative of results that may be expected for
the full year. The unaudited Condensed Consolidated Financial
Statements for the quarters and nine months ended September 30, 1995 and
1994 should be read in conjunction with the audited Consolidated
Financial Statements of the Company for the year ended December 31, 1994
contained in its Annual Report on Form 10-K. Information for the
quarter and nine months ended September 30, 1994 has been restated for
businesses reported as discontinued operations at December 31, 1994.
(2) INVENTORIES
Inventories consist of the following (in millions):
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
Raw materials and supplies $ 50.9 $ 46.4
Work in process 28.0 25.2
Finished goods 71.7 54.9
$ 150.6 $ 126.5
(3) LONG-TERM DEBT
Components of long-term debt were as follows (in millions):
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
Senior Debt:
GAMI $ -- $ 10.1
Eagle 201.0 202.0
201.0 212.1
Subordinated Debt - Eagle 124.7 180.4
Other Debt:
GAMI 1.3 1.5
Eagle 6.2 9.3
7.5 10.8
Total debt 333.2 403.3
Less current portion (25.8) (25.3)
Total long-term debt $ 307.4 $ 378.0
On June 30, 1995 Eagle's subsidiary, Falcon Building Products, Inc.
("Falcon"), amended and restated its existing senior credit facility,
increasing it to a $250 million credit facility (the "Falcon Credit
Facility") with its existing group of banks. The Falcon Credit Facility
consists of a six-year $100 million term loan, maturing in June 2001,
due in quarterly installments increasing in amount from $2.5 million at
September 30, 1995 to $6.25 million per quarter beginning in September
2000, and a $150 million revolving credit facility (the "Revolver") that
expires in 2001. Borrowings under the Falcon Credit Facility bear
interest, at management's option, at rates equal to London Interbank
Offered Rates ("LIBOR") plus a margin (currently 0.75 percent) or at the
prime rate. The Falcon Credit Facility is secured by substantially all
of the inventory, intangibles, property, plant, equipment and stock of
the Falcon subsidiaries. The Falcon Credit Facility also allows for $25
million to be used in the form of letters of credit. Outstanding
letters of credit reduce the availability of funds under the Revolver.
The Falcon Credit Facility contains various covenants pertaining to the
maintenance of certain cash flow and expense coverage ratios, the
incurrence of additional indebtedness and restrictions on the payment of
dividends.
In May 1995, Falcon entered into a five-year interest rate swap
agreement. This agreement, covering $100 million of Falcon's floating
rate debt, fixed the interest rate at 6.52 percent per annum, plus an
applicable margin (0.75 percent at September 30, 1995).
The Company and its subsidiaries complied with all covenants of their
respective debt agreements at September 30, 1995. For a more detailed
description of all of the Company's credit facilities, please refer to
the Company's December 31, 1994 annual report on Form 10-K.
During the nine months ended September 30, 1995, Eagle retired $78.2
million face value ($56.4 million accreted value) of its senior
subordinated notes. In addition, GAMI purchased $15.0 million face
value ($11.1 million accreted value) of Eagle's senior subordinated
notes. This transaction has been reflected as a retirement of the
senior subordinated notes in the Condensed Consolidated Financial
Statements. No gain or loss was recorded on the repurchases.
During the quarter ended Sepember 30, 1995, the Company entered into a
swap agreement related to $39 million face amount (approximately $28
million accreted value) of Eagle's senior subordinated notes. The
agreement allows for GAMI to receive changes in the market value of the
$39 million senior subordinated notes in exchange for interest on the
$28 million, calculated on six month LIBOR plus 2.0 percent (8.0 percent
at September 30, 1995). No payments are required until the termination
of the agreement in July 1998. GAMI collaterized the swap agreement
with a $5.6 million cash deposit. The swap agreement resulted in a $0.2
million reduction in net interest expense in the three months ended
September 30, 1995.
(4) STOCKHOLDERS' EQUITY
In August 1995, the Company repurchased 2.0 million shares of its common
stock held by Hellman & Friedman Capital Partners and its affiliates, in
exchange for 1.76 million shares of The Vigoro Corporation ("Vigoro")
common stock held by GAMI. The transaction resulted in an increase in
treasury stock of $74.8 million and a reduction in GAMI's ownership of
Vigoro to 20.5 percent. A pretax gain of $53.4 million was recorded in
connection with this transaction.
In July 1995, GAI Partners Limited Partnership ("GAI Partners")
defaulted on its secured promissory note held by GAMI. The note was
valued at $48.3 million, including accrued interest. GAI Partners
secured the note with Redeemable Preferred Stock ("Preferred Stock") of
a GAMI subsidiary valued at $48.3 million. Pursuant to a pledge
agreement, GAMI has foreclosed on the collateral, thereby transferring
title to the Preferred Stock to GAMI. As a result of the default on the
note and the foreclosure on the Preferred Stock, GAMI has reflected the
redemption of the Preferred Stock and the settlement of its note
receivable. No gain or loss was recorded in connection with this
transaction.
(5) SUBSEQUENT EVENTS
In October 1995, Eagle sold its subsidiary Clevaflex, Inc. ("Clevaflex")
for total proceeds of $5.5 million, including a note receivable of $1.7
million. Eagle expects to record a pretax loss of $2.2 million ($3.3
million after taxes) in connection with the sale. Net sales and
operating income of Clevaflex for the nine months ended September 30,
1995 were $4.0 million and $1.1 million, respectively.
Also in October 1995, Eagle sold its remaining 1.8 million stock
appreciation rights in Robbins & Myers, Inc. ("Robbins & Myers") stock
for $17.6 million. The stock appreciation rights were received from
Robbins & Myers in conjunction with the sale of certain businesses in
1994. Eagle expects to records a pretax gain of approximately $17
million in connection with this transaction.
In November 1995, Eagle entered into an agreement to sell the Amerace
Corporation and its subsidiaries ("Amerace") for approximately $220
million. The sale is subject to approval under the Hart-Scott Rodino Act
and certain other conditions. Amerace is comprised of all the entities
in Eagle's Electrical Products Group except for Lapp Insulator Company.
Sales and operating income of Amerace for the nine months ended September
30, 1995 were $166.5 million and $23.1 million, respectively. The
Company does not expect the loss resulting from the sale to be
significant.
<PAGE>
GREAT AMERICAN MANAGEMENT AND INVESTMENT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
The following is a discussion of the results of operations of Great
American Management and Investment, Inc., ("GAMI") and subsidiaries for
the quarter and nine months ended September 30, 1995 as compared to the
quarter and nine months ended September 30, 1994 and should be read in
conjunction with the Condensed Consolidated Financial Statements
included herein and the Company's Annual Report on Form 10-K for the
year ended December 31, 1994 and the audited Consolidated Financial
Statements of the Company for the year ended December 31, 1994 included
therein.
The following tables show net sales and revenues and operating income
for GAMI's manufacturing operations consisting of its wholly owned
subsidiary, Eagle Industries, Inc., ("Eagle") and GAMI's other
operations. A complete discussion of the Eagle results is included in
the Eagle Industries, Inc., Form 10-Q for the quarter ended September
30, 1995, which is included as an exhibit hereto and incorporated herein
by reference.
QUARTER ENDED SEPTEMBER 30, 1995 COMPARED TO THE QUARTER ENDED SEPTEMBER
30, 1994
NET SALES AND REVENUES OPERATING INCOME
QUARTER ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(IN MILLIONS)
Eagle $ 267.5 $ 264.1 $ 17.4 $ 13.0
Financial Services Group 2.4 3.8 1.4 2.1
Corporate and Other -- -- (0.8) (0.9)
Total $ 269.9 $ 267.9 $ 18.0 $ 14.2
Net sales and revenues of $269.9 million for the third quarter of 1995
were $2.0 million or 0.7% higher than the third quarter of 1994,
primarily due to increased sales volume at Eagle. Operating income of
$18.0 million for the third quarter of 1995 was $3.8 million or 26.8%
higher than the third quarter of 1994 primarily due to higher sales
volume and improved pricing at Eagle.
Earnings accounted for by the equity method were $1.4 million and $1.7
million for the quarters ended September 30, 1995 and 1994,
respectively. The decrease resulted primarily from the sale of GAMI's
interest in The Commodore Corporation ("Commodore") in March 1995. In
addition, in August 1995, the Company repurchased 2.0 million shares of
its common stock held by Hellman & Friedman Capital Partners and its
affiliates, in exchange for 1.8 million shares of The Vigoro Corporation
("Vigoro") common stock held by GAMI. The transaction resulted in an
increase in treasury stock of $74.8 million and a reduction in GAMI's
ownership of Vigoro to 20.5 percent. A pretax gain of $53.4 million was
recorded in connection with this transaction.
Net interest expense was $7.1 million for the quarter ended September
30, 1995 compared to $8.4 million for the comparable 1994 period. The
decrease was primarily due to the overall decline in the level of debt.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
NET SALES AND REVENUES OPERATING INCOME
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(IN MILLIONS)
Eagle $786.1 $743.8 $ 57.2 $ 35.8
Financial Services 9.1 11.8 6.0 6.5
Corporate and Other -- -- (2.6) (3.9)
Total $795.2 $755.6 $ 60.6 $ 38.4
Net sales and revenues of $795.2 million for the nine months ended
September 30, 1995 were $39.6 million or 5.3% higher than the comparable
1994 period due to higher sales volume at Eagle. Operating income of
$60.6 million was $22.2 million or 57.8% higher than the comparable 1994
period. The improvement in operating income was due primarily to $8.7
million of charges recorded by Eagle for self-insurance reserves and a
$4.9 million charge for the sale of one of Eagle's product lines in the
1994 period and higher sales volume and improved pricing at Eagle. In
addition, a reduction in GAMI's corporate expenses contributed to the
improvement in operating income.
Earnings accounted for by the equity method were $17.4 million and $16.3
million for the nine months ended September 30, 1995 and 1994,
respectively. The increase reflects higher earnings by Vigoro,
partially offset by reduced equity in earnings of Commodore due to the
sale of GAMI's interest in the first quarter of 1995. Total proceeds
from the sale of Commodore were $20.4 million, including a $3.0 million
note, which resulted in a pretax gain of $6.5 million. In addition,
GAMI's previously noted sale of Vigoro stock in the third quarter
resulted in a pretax gain of $53.4 million.
Net interest expense was $21.8 million for the nine months ended
September 30, 1995 compared to $29.8 million for the comparable 1994
period. The decrease was due to the decrease in the level of debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its debt service, capital expenditure
requirements and operating needs through a combination of operating cash
flow and external financing. Excluding the effects of the initial
proceeds from Eagle's asset securitization program in the 1994 period,
cash flow from continuing operations was $65.3 million for the nine
months ended September 30, 1995 compared to $58.1 million in the
comparable 1994 period. The increase in 1995 was primarily due to an
increase in income offset by higher working capital requirements.
During the quarter ended June 30, 1995, Eagle sold the note receivable
and 200,000 stock appreciation rights received from Robbins & Myers,
Inc. in conjunction with the sale of certain businesses in 1994. Total
cash proceeds received for the note and stock appreciation rights were
$39.8 million. During the nine months ended September 30, 1995, GAMI
repaid its outstanding bank debt and Eagle retired $78.2 million face
value ($56.4 million accreted value) of its senior subordinated notes
using available cash. In the third quarter, GAMI purchased $15.0
million face value ($11.1 million accreted value) of Eagle's senior
subordinated notes. In addition, in the nine months ended September 30,
1995, GAMI sold its interest in Commodore and Equality Specialties, Inc.
for total cash proceeds of $33.4 million and notes receivable of $7.0
million.
Management believes that cash flow from continuing operations along with
availability under its credit facilities will be sufficient to pay
interest on outstanding debt, meet current maturities, pay income taxes,
fund capital expenditures and meet operating needs.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 Stock Purchase Agreement dated August 25, 1995 among Great
American Management and Investment, Inc. and Hellman &
Friedman Capital Partners, Hellman & Friedman Capital
Partners International (BVI) and H & F Redwood Partners, L.P.
20.1 Eagle Industries, Inc. Form 10-Q for the quarter ended
September 30, 1995.
b) Reports on Form 8-K
None.
<PAGE>
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.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By: /s/ Sam A. Cottone
-------------------
Sam A. Cottone
Senior Vice President, Chief
Financial Officer and
Treasurer
Dated: November 6, 1995
Exhibit 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of the 25th day of August, 1995, by and among Great American Management and
Investment, Inc., a Delaware corporation ("GAMI"), and Hellman & Friedman
Capital Partners, a California Limited Partnership ("H&F"), Hellman & Friedman
Capital Partners International (BVI), a British Virgin Islands general
partnership ("H&F Int'l") and H&F Redwood Partners, L.P., a California limited
partnership ("H&F Redwood") (H&F, H&F Int'l and H&F Redwood individually are
referred to herein as a "Purchaser" and collectively as "Purchasers").
W I T N E S S E T H
WHEREAS, GAMI owns the Vigoro Shares (as defined herein) and Purchasers
severally own the GAMI Shares (as defined herein) in the amounts indicated on
Schedule A; and
WHEREAS, Purchasers wish to acquire from GAMI the Vigoro Shares (as
defined herein), and GAMI wishes to acquire from each Purchaser its GAMI
Shares (as defined herein) upon the terms and conditions hereinafter set
forth, in each case in the amounts indicated on Schedule A;
WHEREAS, Purchasers are entering this Agreement in part because Vigoro has
agreed to grant to the Purchasers certain rights regarding the registration of
the Vigoro Shares (as defined herein) under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the meanings set forth
herein for the purposes of the transactions set forth in this Agreement:
"Amerace" shall mean Amerace Corporation, a Delaware corporation.
"Base Price" shall mean $240,000,000, provided, however, that (i) the Base
Price shall be adjusted in the event that the sale of Amerace involves the
transfer or retention of assets and/or liabilities (including the payment of a
dividend) other than those set forth in the Consolidating Balance Sheet, dated
February 28, 1995, attached hereto as Exhibit 1; (ii) the amount of such
adjustment shall be the book value of any assets added and liabilities excluded
less the book value of any assets excluded and liabilities added; and (iii) any
change in working capital resulting from the operation of Amerace in the
ordinary course of business shall result in no adjustment of the Base Price.
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Article VI hereof.
"Closing Date" is defined in Section 6.1.
"Excess Sum" shall mean the amount by which the Sale Price exceeds the
Base Price.
"GAMI" is defined in the Preamble.
"GAMI Shares" shall mean 2,000,000 shares of the common stock of GAMI,
$0.01 par value per share, held of record by Purchasers, in the amounts, as to
each Purchaser, set forth hereto on Schedule A.
"Purchaser" and "Purchasers" are defined in the Preamble.
"Sale Price" shall mean the amount received by GAMI upon a sale of all the
stock of Amerace, net of all Taxes payable by GAMI with respect to such amount.
The tax basis of the stock of Amerace held by GAMI is approximately
$260,000,000.
"Taxes" shall mean all taxes, charges, fees, duties, levies or other
assessments, including (without limitation) income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value-added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, severance and employees' income withholding, unemployment and
Social Security taxes, which are imposed by the United States, or any state,
local or foreign government or subdivision or agency thereof, and such term
shall include any interest, penalties or additions to tax attributable to such
Taxes.
"Vigoro" shall mean The Vigoro Corporation, a Delaware corporation.
"Vigoro Shares" shall mean 1,760,000 shares of the common stock of Vigoro,
$0.01 par value per share, held of record by GAMI.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Shares.
(a) Subject to the terms and conditions set forth in this Agreement,
on the Closing Date GAMI shall sell, assign, transfer, convey and deliver to
each Purchaser, and each Purchaser shall accept, acquire and take assignment
and delivery of, the number of Vigoro Shares set forth opposite such
Purchaser's name on Schedule A.
(b) In consideration for such sale, assignment, transfer, conveyance
and delivery to Purchasers by GAMI of the Vigoro Shares, on the Closing Date
each Purchaser shall sell, assign, transfer, convey and deliver to GAMI, and
GAMI shall accept, acquire and take assignment and delivery of, that number of
GAMI Shares set forth opposite such Purchaser's name on Schedule A.
2.2 Adjustment. In the event GAMI sells Amerace within nine (9) months
of the date of this Agreement, GAMI agrees to pay to Purchasers, pro rata in
accordance with their respective holdings of GAMI Shares subject to this
Agreement, an amount equal to 17.866% of the Excess Sum, payable in cash.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF GAMI
GAMI represents and warrants to Purchasers that:
3.1 Ownership of Vigoro Shares. Each of the Vigoro Shares to be
delivered on the Closing Date is owned by GAMI free and clear of any adverse
claim, and none of the Vigoro Shares is subject to any restriction on
transfer, other than those restrictions set forth on the certificates
evidencing the Vigoro Shares or otherwise imposed by the federal and state
securities laws.
3.2 Due Organization. GAMI is a corporation validly existing and in good
standing under the laws of the State of Delaware with all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted.
3.3 Due Authorization. GAMI has full power and authority to enter into
this Agreement and to perform the transactions contemplated hereby, and this
Agreement has been duly and validly executed and delivered by GAMI, and
constitutes the legal, valid and binding obligation of GAMI, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
from time to time in effect which affect creditors' rights generally, and by
legal and equitable limitations on the availability of specific remedies.
3.4 No Other Agreement. GAMI has no contract, agreement, arrangement or
understanding with respect to the sale or other disposition of the Vigoro
Shares except as set forth in this Agreement.
3.5 Consents. No notice to, filing with, authorization of, exemption by,
or consent of any person, entity, or public or governmental authority is
required in order for GAMI to consummate the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASERS
Each Purchaser, as to itself, represents and warrants to GAMI that:
4.1 Ownership of GAMI Shares. Each of the GAMI Shares to be delivered on
the Closing Date is owned by each Purchaser as set forth on Schedule A free and
clear of any adverse claim, and none of the GAMI Shares is subject to any
restriction on transfer, other than those restrictions set forth on the
certificates evidencing the GAMI Shares or otherwise imposed by the federal and
state securities laws.
4.2 Due Organization. H&F is a limited partnership validly existing and
in good standing under the laws of the State of California with all requisite
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted; H&F Int'l is a general partnership
validly existing and in good standing under the laws of the British Virgin
Islands with all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted; H&F Redwood
is a limited partnership validly existing and in good standing under the laws
of the State of California with all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
4.3 Due Authorization. Each Purchaser has full power and authority to
enter into this Agreement and to perform the transactions contemplated hereby,
and this Agreement has been duly and validly executed and delivered by such
Purchaser, and constitutes the legal, valid and binding obligation of such
Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors' rights generally, and by legal and equitable limitations on the
availability of specific remedies.
4.4 No Other Agreement. No Purchaser has any contract, agreement,
arrangement or understanding with respect to the sale or other disposition of
the GAMI Shares except as set forth in this Agreement.
4.5 Consents. No notice to, filing with, authorization of, exemption by,
or consent of any person, entity, or public or governmental authority is
required in order for each Purchaser to consummate the transactions
contemplated hereby.
4.6 Distribution Intention. Each Purchaser is acquiring the Vigoro
Shares for its own account and with no intention of distributing or
re-selling the Vigoro Shares (or any part thereof) in any transaction that
would violate the securities laws of the United States of America or any
state, without prejudice, however, to such Purchaser's right at all times to
sell or otherwise dispose of all (or any part) of the Vigoro Shares pursuant
to a registration statement under the Securities Act of 1933, as amended, or
under applicable state laws, or under an exemption from applicable
registration requirements.
4.7 Sophistication; Ability to Bear Loss; Access to Information. Each
Purchaser acknowledges that (i) it has such knowledge, sophistication and
experience in financial and business matters such that it is capable of
evaluating the risks and merits of its investment in the Vigoro Shares and (ii)
it is able to bear the economic risk of such investment and is able to afford
the complete loss of its investment. Each Purchaser has had the opportunity to
ask questions of and receive answers from Vigoro concerning Vigoro's business,
operations and financial condition and has received from Vigoro all such
information as has been requested in order to evaluate the risks and merits of
the prospective investment contemplated herein.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to Obligations of Purchasers. The obligation of
Purchasers to sell the GAMI Shares and to purchase the Vigoro Shares on the
Closing Date is subject to the satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in this Agreement made by GAMI shall be true and accurate,
in all material respects, as of the Closing Date as if made on the Closing
Date.
(b) Certificates. GAMI shall have furnished Purchasers with
resolutions of its board of directors authorizing the transactions contemplated
by this Agreement.
5.2 Conditions Precedent to Obligations of GAMI. The obligation of GAMI
to sell the Vigoro Shares and to purchase the GAMI Shares on the Closing Date
is subject to the satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in this Agreement made by each Purchaser shall be true and
accurate, in all material respects, as of the Closing Date as if made on the
Closing Date.
(b) Certificates. Each Purchaser shall have furnished GAMI with
resolutions authorizing the transactions contemplated by this Agreement.
ARTICLE VI
CLOSING
6.1 Closing. The Closing shall take place at the offices of GAMI, 2
North Riverside Plaza, 11th Floor, Chicago, Illinois 60606, at 10:00 a.m. on
August 25, 1995, or on such later date to which the parties agree.
6.2 Closing Deliveries. At the Closing, GAMI shall deliver to each
Purchaser the number of Vigoro Shares set forth on Schedule A. At the Closing,
each Purchaser shall deliver to GAMI the number of GAMI Shares set forth on
Schedule A.
ARTICLE VII
MISCELLANEOUS
7.1 Expenses. Each party hereto shall bear its own expenses with respect
to the transactions contemplated by this Agreement.
7.2 Amendment. This Agreement may be amended, modified or supplemented,
but only in writing signed by all of the parties hereto.
7.3 Legend. The certificates evidencing the Vigoro Shares will bear the
following legend:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state and thus may not be transferred unless so registered or unless an
exemption from registration is available."
7.4 Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7.5 Headings. Section and Article headings in this Agreement are for
convenience of reference only, and shall not govern the interpretation of the
provisions of this Agreement.
<PAGE>
7.6 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid and enforceable
provision as similar as possible to the provision at issue.
7.7 Entire Understanding. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior arrangements, agreements and
understandings relating to the subject matter hereof. There have been no
representations or statements, oral or written, that have been relied on by any
party hereto, except those expressly set forth in this Agreement.
7.8 Applicable Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of Illinois,
without regard to conflicts of law principles.
7.9 Assignment. This Agreement and all the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder may be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other parties.
7.10 Termination of Certain Agreements.
(a) The parties agree that the Management Rights Agreement dated May
29, 1991 by and among GAMI, H&F and H&F Int'l (the "Vigoro Management Rights
Agreement") is hereby terminated and shall be of no further force and effect;
provided, however, that the indemnification obligations of GAMI pursuant to
Section 2.5 of the Vigoro Management Rights Agreement shall continue in full
force and effect, but only as such obligations relate to indemnification of
Purchasers' principals elected as directors of Vigoro for actions taken by such
principal as a director of Vigoro.
(b) The parties agree that any and all rights conferred by the Stock
Purchase Agreement dated July 17, 1990 by and among GAMI, H&F, H&F Int'l and
Equity Holdings Limited, an Illinois limited partnership (the "GAMI Stock
Purchase Agreement") (including, but not limited to, rights granted pursuant to
Sections 9.3, 9.5, 9.6 and Article 10 thereof), as well as any such rights
granted to H&F Redwood pursuant to the Transfer and Consent Agreement dated
December 31, 1991, are hereby terminated and shall be of no further force and
effect; provided, however, that the indemnification obligations of GAMI
pursuant to Section 9.3.5 of the GAMI Stock Purchase Agreement shall continue
in full force and effect, but only as such obligations relate to
indemnification of Purchasers' principals elected as directors of GAMI for
actions taken by such principal as a director of GAMI; provided, further,
that the indemnity obligations of GAMI pursuant to Sections 12.1 through 12.4
of the GAMI Stock Purchase Agreement shall also continue in full force and
effect, but only as such obligations relate to indemnification for actions
occurring before the date of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By: /s/ Gus Athas
-------------
Gus Athas
Senior Vice-President and General Counsel
HELLMAN & FRIEDMAN CAPITAL PARTNERS, A CALIFORNIA
LIMITED PARTNERSHIP,
By its General Partner: Hellman & Friedman Capital
Management, A California Limited Partnership,
By its General Partner: Hellman & Friedman Capital
Management, Inc.
By: /s/ John Pasquesi
-----------------
John Pasquesi
Vice-President
HELLMAN & FRIEDMAN CAPITAL PARTNERS
INTERNATIONAL (BVI),
By its General Partner: Hellman & Friedman Capital
Management International, A California Limited Partnership
By its General Partner: H&F Capital Management
International, Inc.
By: /s/ John Pasquesi
-----------------
John Pasquesi
Vice-President
H&F REDWOOD PARTNERS, L.P.
By its General Partner: H&F Redwood Investors, L.P.,
By its General Partner: H&F Redwood Investors, Inc.
By: /s/ John Pasquesi
-----------------
John Pasquesi
Vice-President
EXHIBIT 20.1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-20416
EAGLE INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3384361
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 906-8700
(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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
1,860,000 shares of Common Stock as of October 25, 1995
<PAGE>
EAGLE INDUSTRIES, INC.
FORM 10-Q
SEPTEMBER 30, 1995
INDEX
PART I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 32.4 $ 31.1
Accounts receivable, net 28.9 29.4
Inventories, net 150.6 126.5
Other current assets 61.8 76.6
Net assets of discontinued operations 6.1 9.8
Total current assets 279.8 273.4
Property, plant and equipment, net 187.8 184.9
Goodwill 287.0 290.0
Other long-term assets 81.8 119.7
Total assets $836.4 $868.0
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion long-term debt $ 25.4 $ 24.7
Accounts payable 74.5 64.8
Accrued liabilities 73.1 84.2
Total current liabilities 173.0 173.7
Senior subordinated notes 136.0 180.4
Other long-term debt 181.8 186.6
Accrued employee benefit obligations 71.2 73.6
Other long-term liabilities 88.6 90.2
Total liabilities 650.6 704.5
Stockholder's equity:
Common stock -- --
Additional paid-in capital 188.7 188.7
Accumulated deficit (0.5) (21.7)
Cumulative translation adjustments 2.7 1.6
Pension liability adjustment (5.1) (5.1)
Total stockholder's equity 185.8 163.5
Total liabilities and stockholder's equity $836.4 $868.0
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS)
(UNAUDITED)
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(RESTATED) (RESTATED)
Net sales $267.5 $264.1 $786.1 $743.8
Cost of sales 216.2 212.9 626.5 593.9
Gross earnings 51.3 51.2 159.6 149.9
Selling and administrative
expenses 31.7 36.0 95.8 107.5
Goodwill amortization 2.2 2.2 6.6 6.6
Operating income 17.4 13.0 57.2 35.8
Net interest expense 7.7 8.3 22.6 29.9
Income from continuing operations
before income taxes 9.7 4.7 34.6 5.9
Provision for income taxes from
continuing operations 3.8 2.3 13.4 3.6
Income from continuing operations 5.9 2.4 21.2 2.3
Discontinued Operations:
Loss from discontinued operations,
less income tax benefit
of $1.0 in 1994 -- -- -- (4.1)
Reversal of net loss from
discontinued operations
subsequently retained -- 4.8 -- 9.3
Loss on disposal of businesses, net
of applicable income tax benefit of
$7.9 in 1994 -- -- -- (27.2)
Income (loss) before extraordinary
item 5.9 7.2 21.2 (19.7)
Extraordinary income (loss) from early
retirement of debt, net of income
tax provision (benefit) of $0.2
and $(9.2), respectively, in the
quarter and nine months ended
September 1994 -- 0.3 -- (16.3)
Net income (loss) $ 5.9 $ 7.5 $ 21.2 $(36.0)
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 21.2 $ 2.3
Adjustments to reconcile income from continuing
operations to net cash flow from operations:
Depreciation and amortization 29.9 29.2
Accretion of discount on subordinated debt 12.1 15.7
Proceeds from sales of accounts receivable -- 110.3
Cash effects of changes in other working
capital balances, accrued employee benefit
obligations, and other long-term liabilities
(excluding the effects of acquisitions and
dispositions of businesses) (4.0) 30.5
Net cash flow from continuing operating
activities 59.2 188.0
Net cash flow used in discontinued
operations (4.7) (18.5)
Net cash flow from operations 54.5 169.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses (10.4) --
Proceeds from sale of businesses -- 71.7
Proceeds from sale of notes receivable 39.8 --
Capital expenditures (20.7) (17.6)
Other (2.5) (14.5)
Net cash flow from investing activities 6.2 39.6
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of senior subordinated notes (55.1) (14.1)
Repayment of senior subordinated debt -- (234.1)
Repayment of senior credit facilities -- (221.1)
Capital contribution -- 50.0
Proceeds from new credit facility -- 317.9
Payments on long-term debt (34.3) (33.2)
Net borrowing (payment) on revolving credit
facilities 30.0 (41.4)
Net cash flow used in financing activities (59.4) (176.0)
CHANGE IN CASH AND CASH EQUIVALENTS 1.3 33.1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 31.1 4.8
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32.4 $ 37.9
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements
of Eagle Industries, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for a complete set of financial statements. In the opinion
of management, all adjustments considered necessary, consisting only of
normal recurring adjustments are included for fair presentation.
Operating results for the quarter and nine months ended September 30,
1995 are not necessarily indicative of results that may be expected for
the full year. The unaudited Condensed Consolidated Financial
Statements for the quarters and nine months ended September 30, 1995 and
1994 should be read in conjunction with the audited Consolidated
Financial Statements of the Company for the year ended December 31,
1994. The historical statements of the Company have been restated for
companies being reported as discontinued operations.
(2) INVENTORIES
Inventory consists of the following (in millions):
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
Raw materials and supplies $ 50.9 $ 46.4
Work in process 28.0 25.2
Finished goods 71.7 54.9
$150.6 $126.5
(3) LONG-TERM DEBT
Components of other long-term debt are as follows (in millions):
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
Eagle Industrial Credit Facility $ 73.5 $ 89.5
Falcon Credit Facility 127.5 112.5
Other 6.2 9.3
207.2 211.3
Less current portion (25.4) (24.7)
Total other long-term debt $181.8 $186.6
On June 30, 1995 Eagle's subsidiary, Falcon Building Products, Inc.
("Falcon") amended and restated its existing senior credit facility,
increasing it to a $250 million credit facility (the "Falcon Credit
Facility") with its existing group of banks. The Falcon Credit Facility
consists of a six-year $100 million term loan, maturing in June 2001,
due in quarterly installments increasing in amount from $2.5 million at
September 30, 1995 to $6.25 million per quarter beginning in September
2000, and a $150 million revolving credit facility (the "Revolver") that
expires in 2001. Borrowings under the Falcon Credit Facility bear
interest, at management's option, at rates equal to London Interbank
Offered Rates ("LIBOR") plus a margin (currently 0.75 percent) or at the
prime rate. The Falcon Credit Facility is secured by substantially all
of the inventory, intangibles, property, plant, equipment and stock of the
Falcon subsidiaries. The Falcon Credit Facility also allows for $25
million to be used in the form of letters of credit. Outstanding
letters of credit reduce the availability of funds under the Revolver.
The Falcon Credit Facility contains various covenants pertaining to the
maintenance of certain cash flow and expense coverage ratios, the
incurrence of additional indebtedness and restrictions on the payment of
dividends.
In May 1995, Falcon entered into a five-year interest rate swap
agreement. This agreement, covering $100 million of the Falcon's
floating rate debt, fixed the interest rate at 6.52 percent per annum,
plus an applicable margin (currently 0.75 percent).
The Company and its subsidiaries complied with all covenants of their
respective debt agreements at September 30, 1995. For a more detailed
description of all of the Company's other credit facilities, please
refer to the Company's December 31, 1994 annual report on Form 10-K.
During the nine months ended September 30, 1995, the Company retired
$78.2 million face value ($56.4 million accreted value) of its senior
subordinated notes. No gain or loss was recorded on these repurchases.
(4) SUBSEQUENT EVENTS
In October 1995, the Company sold its subsidiary Clevaflex, Inc.
("Clevaflex") for total proceeds of $5.5 million, including a note
receivable of $1.7 million. The Company expects to record a pretax loss
of $2.2 million ($3.3 million after taxes) in connection with the sale.
Net sales and operating income of Clevaflex for the nine months ended
September 30, 1995 were $4.0 million and $1.1 million, respectively.
Also in October 1995, the Company sold its remaining 1.8 million stock
appreciation rights in Robbins & Myers, Inc. ("Robbins & Myers") stock
for $17.6 million. The stock appreciation rights were received from
Robbins & Myers in conjunction with the sale of certain businesses in
1994. The Company expects to records a pretax gain of approximately $17
million in connection with this transaction.
In November 1995, the Company entered into an agreement to sell the
Amerace Corporation and its subsidiaries ("Amerace") for approximately
$220 million. The sale is subject to approval under the Hart-Scott
Rodino Act and certain other conditions. Amerace is comprised of all
the entities in the Company's Electrical Products Group except Lapp
Insulator Company. Sales and operating income of Amerace for the nine
months ended September 30, 1995 were $166.5 million and $23.1 million,
respectively. The Company does not expect the loss resulting from the
sale to be significant.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following is a discussion of the results of operations of Eagle
Industries, Inc. (the "Company") and subsidiaries for the quarter and
nine months ended September 30, 1995 as compared to the quarter and nine
months ended September 30, 1994 and should be read in conjunction with
the Condensed Consolidated Financial Statements included herein and the
Company's Annual Report on Form 10-K for the year ended December 31,
1994 and the audited Consolidated Financial Statements of the Company
for the year ended December 31, 1994 included therein.
QUARTER ENDED SEPTEMBER 30, 1995 COMPARED TO THE QUARTER ENDED SEPTEMBER
30, 1994
The following table shows net sales and operating income by business
group (in millions):
NET SALES OPERATING INCOME
QUARTER ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
Building Products Group $120.0 $117.9 $ 11.7 $ 15.2
Electrical Products Group 71.8 71.6 7.7 0.5
Automotive Products Group 49.9 48.8 2.5 2.5
Corporate and Other 25.8 25.8 (4.5) (5.2)
Total $267.5 $264.1 $ 17.4 $ 13.0
NET SALES
Net sales of $267.5 million for the third quarter of 1995 were $3.4
million or 1.3% higher than net sales for the third quarter of 1994.
Exluding the effect of acquisitions, net sales were $0.6 million lower
than the 1994 period. This decrease was primarily due to decreased
volume in the Building Products Group, partially offset by increased
volume in other businesses.
Net sales of $120.0 million for the Building Products Group were $2.1
million or 1.8% higher than net sales for the 1994 period. Excluding
the effects of acquisitions, net sales were $1.9 million lower than in
the 1994 period. This decrease was primarily due to decreased volume in
bathroom fixtures and air distribution products, partially offset by new
air compressor products and an improvement in pricing.
Net sales of $71.8 million for the Electrical Products Group were $0.2
million higher than net sales for the 1994 period. This increase was
primarily due to increased volume and, to a lesser extent, improved
pricing at most businesses within the group, as well as new products at
Elastimold. These increases were partially offset by decreased volume
of underground cable at Hendrix and decreased volume at Lapp primarily
due to the sale of its polymer product line in 1994.
Net sales of $49.9 million for the Automotive Products Group were $1.1
million or 2.3% higher than net sales for the 1994 period. This
increase was primarily due to increased volume at the automotive parts
distribution businesses as a result of increased market, partially
offset by decreased volume at Denman.
GROSS EARNINGS
Gross earnings were $51.3 million in 1995 and $51.2 million in 1994.
Gross margin decreased to 19.2% in 1995 from 19.4% in 1994, primarily
due to material cost inflation and higher sales of lower margin products
partially offset by increased prices.
OPERATING INCOME
Operating income of $17.4 million for the third quarter of 1995 was $4.4
million or 32.9% higher than operating income for the comparable period
in 1994. This increase is primarily due to increased sales volume in
each of the business groups, improved pricing and equity earnings from
joint ventures, partially offset by increased operating expenses.
Operating income of $11.7 million for the Building Products Group was
$3.5 million or 23.0% lower than in the 1994 period. This decrease was
primarily due to raw material cost inflation, and to a lesser extent,
higher sales of lower margin products.
Operating income of $7.7 million for the Electrical Products Group was
$7.2 million higher than in the 1994 period. The sale of Lapp's polymer
product line resulted in a $4.9 million charge in the third quarter of
1994. In addition, increased sales volume, improved pricing and equity
earnings from Elastimold's joint ventures also contributed to the
increase.
Corporate and other expenses of $4.5 million were $0.7 million lower
than in the 1994 period. This decrease was primarily due to an
inventory adjustment of $2.6 million recorded in the 1994 period,
partially offset by increased costs at Burns Aerospace and higher
corporate expenses.
INTEREST EXPENSE
Net interest expense was $7.7 million for the quarter ended September
30, 1995 compared to $8.3 million for the comparable 1994 period, a
decrease of $0.6 million or 7.9%. This decrease was primarily due to
the overall decrease in the level of debt.
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
The following table shows net sales and operating income by business
group (in millions):
NET SALES OPERATING INCOME
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
Building Products Group $349.6 $330.5 $ 39.7 $ 39.8
Electrical Products Group 217.9 209.8 24.7 3.9
Automotive Products Group 144.5 136.3 7.2 6.2
Corporate and Other 74.1 67.2 (14.4) (14.1)
Total $786.1 $743.8 $ 57.2 $ 35.8
NET SALES
Net sales of $786.1 million for the nine months ended September 30, 1995
were $42.3 million or 5.7% higher than net sales for the comparable
period in 1994. This increase was primarily due to increased volume.
Net sales of $349.6 million for the Building Products Group were $19.1
million or 5.8% higher for the first nine months of 1995 compared to the
first nine months of 1994. Excluding the effects of acquisitions, net
sales were $11.4 million or 3.4% higher than in 1994. This increase was
primarily due to increased volume and improved pricing.
Net sales of $217.9 million for the Electrical Products Group were $8.1
million or 3.9% higher in the first nine months of 1995 compared to the
first nine months of 1994. This increase was primarily due to increased
volume and improved pricing at most companies within the group, as well
as new products at Elastimold. These increases were partially offset by
decreased volume at Lapp due to the sale of its polymer product line in
1994.
Net sales of $144.5 million for the Automotive Products Group were $8.2
million or 6.0% higher in the first nine months of 1995 compared to the
first nine months of 1994. This increase was primarily due to increased
sales volume at Denman and the automotive parts distribution businesses
as a result of market penetration.
Other net sales increased $6.9 million or 10.3% compared to 1994. This
increase was primarily due to shipments under a major order from a
customer of Burns Aerospace.
GROSS EARNINGS
Gross earnings of $159.6 million were $9.7 million or 6.5% higher than
gross earnings for the first nine months of 1994. This increase was
primarily due to the increased volume in the 1995 period. Gross margin
increased to 20.3% in the first nine months of 1995 compared to 20.2% in
the comparable 1994 period due to the increased volume and increased
prices, paritally offset by increased raw material costs principally in
the Building Products Group.
OPERATING INCOME
Operating income of $57.2 million for the nine months ended September
30, 1995 was $21.4 million or 59.8% higher than operating income for the
comparable period in 1994. Excluding charges to establish self-
insurance reserves recorded in 1994 of $8.7 million, operating income
increased $12.7 million or 28.5%. This increase was due to increased
volume at each of the Company's business groups, improved pricing and
equity earnings from joint ventures.
Operating income of $39.7 million for the Building Products Group was
$0.1 million lower than in the 1994 period. Excluding the effects of
acquisitions in 1995 and charges recorded to establish self-insurance
reserves in 1994, operating income decreased $4.6 million. This
decrease was primarily due to increased raw material costs, partially
offset by improved pricing and increased volume.
Operating income of $24.7 million for the Electrical Products Group was
$20.8 million higher than in the 1994 period. Excluding charges to
establish self-insurance reserves of $2.7 million recorded in 1994,
operating income increased $18.1 million. The increase was primarily
due to the restructuring of Lapp's porcelain operations and the sale of
its polymer product line which resulted in a $4.9 million charge in the
third quarter of 1994. In addition, increased sales volume, improved
pricing, and equity earnings from Elastimold's joint ventures
contributed to the increase.
Operating income of $7.2 million for the Automotive Products Group was
$1.0 million or 16.1% higher than in the 1994 period. Excluding charges
to establish self-insurance reserves of $0.5 million, operating income
increased $0.5 million primarily due to increased volume.
Corporate and other expenses of $14.4 million were $0.3 million higher
than in the 1994 period. Excluding charges to establish self-insurance
reserves of $1.6 million, other expenses increased $1.9 million. This
was primarily due to an increase in expense associated with the
Company's asset securitization program and increased administrative
expense, as well as increased costs at Burns Aerospace.
INTEREST EXPENSE
Net interest expense was $22.6 million for the nine months ended
September 30, 1995 compared to $29.9 million for the comparable 1994
period. This decrease was primarily due to the overall decrease in the
level of debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its debt service, capital expenditure
requirements and operating needs through a combination of operating cash
flow and external financing. Excluding the effects of the initial
proceeds from the asset securitization program in the 1994 period, cash
flow from continuing operations activities was $59.2 million for the
nine months ended September 30, 1995 and $77.7 million in the comparable
1994 period. The decrease in 1995 was primarily due to an increase in
working capital requirements, partially offset by the increased income.
In addition, during the quarter ended June 30, 1995, the Company sold
the note receivable and 200,000 stock appreciation rights received from
Robbins & Myers, Inc. in conjunction with the sale of certain businesses
in 1994. Total cash proceeds received for the note and the stock
appreciation rights were $39.8 million. During the nine months ended
September 30, 1995, the Company retired $78.2 million face value ($56.4
million accreted value) of its senior subordinated notes using available
cash.
On June 30, 1995, Falcon amended and restated its senior credit facility,
increasing it to a $250 million credit facility. See Note 3 to the
Company's Condensed Consolidated Financial Statements for a further
description of the agreement.
Management believes that cash flow from continuing operations along with
availability under the credit facilities will be sufficient to pay
interest on outstanding debt, meet current maturities, pay income taxes,
fund capital expenditures and meet other operating needs.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
None.
b) Reports on Form 8-K
None.
<PAGE>
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.
EAGLE INDUSTRIES, INC.
By: /s/ Sam A. Cottone
-------------------
Sam A. Cottone
Senior Vice President and
Chief Financial Officer
Dated: November 6, 1995
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1995 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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