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Previous: KEMPER CORP, DEFA14A, 1994-05-04 |
Next: LENNAR CORP, S-3/A, 1994-05-04 |
<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994
COMMISSION FILE NUMBER 0-2115
KEYSTONE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1058689
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9600 WEST GULF BANK DRIVE, HOUSTON, TEXAS 77040
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 466-1176
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ___
As of April 26, 1994, the number of shares of common stock outstanding
was 35,189,522 excluding 604,920 treasury shares.
================================================================================
<PAGE> 2
PART I
FINANCIAL INFORMATION
KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1994 1993
-------- --------
<S> <C> <C>
Net Sales $121,662 $127,980
-------- --------
Cost and Operating Expenses:
Cost of sales 71,117 73,969
Selling, general and administrative 36,981 35,866
-------- --------
Operating Income 13,564 18,145
Other (Income) Expenses:
Interest expense 1,244 1,442
Interest income (279) (566)
Translation loss 326 440
Other, net 609 1,150
-------- --------
Income before Income Taxes and
Change in Accounting Principle 11,664 15,679
Provision for Income Taxes 4,432 5,958
-------- --------
Income before Change in
Accounting Principle 7,232 9,721
Cumulative Effect of Change
in Accounting Principle -- 1,879
-------- --------
Net Income $ 7,232 $ 11,600
======== ========
Weighted Average Outstanding
and Equivalent Shares 35,183 34,995
======== ========
Earnings Per Share:
Continuing Operations $ .21 $ .28
Cumulative Effect of Change
in Accounting Principle - .05
-------- --------
Total $ .21 $ .33
======== ========
Cash Dividends Per Share $ .185 $ .18
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
----------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 12,131 $ 19,873
Receivables 119,190 119,750
Inventories 142,681 134,608
Prepayments and other 7,207 5,513
-------- --------
281,209 279,744
-------- --------
Property, Plant and Equipment,
at cost 285,034 274,890
Less - Accumulated Depreciation 145,194 140,037
-------- --------
139,840 134,853
-------- --------
Other Assets 39,270 41,903
-------- --------
$460,319 $456,500
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Current maturities and short-term
bank borrowings $ 11,014 $ 9,160
Accounts payable and accrued
liabilities 87,170 89,719
Income taxes payable 6,918 9,038
-------- --------
105,102 107,917
-------- --------
Long-Term Debt 63,222 62,300
-------- --------
Deferred Income Taxes 1,161 -
Other Long-Term Liabilities 16,033 15,651
-------- --------
17,194 15,651
-------- --------
Shareholders' Investment:
Common stock, $1.00 par value
50 million shares authorized 35,793 35,777
Additional paid-in capital 110,505 110,231
Retained earnings 139,276 138,550
Treasury stock, at cost (9,543) (9,535)
Unamortized restricted stock
grant expense (3,819) (4,209)
Foreign currency translation
adjustments 2,589 (182)
-------- --------
274,801 270,632
-------- --------
$460,319 $456,500
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1994 1993
------- ------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 7,232 $11,600
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 4,709 4,333
Amortization 1,439 1,516
Increase in deferred taxes 3,070 798
Loss (gain) on sale of property, plant
and equipment, net (1,149) 39
Cumulative effect of change in
accounting principle -- (1,879)
Decrease (increase) in receivables 2,846 (8,390)
Increase in prepayments and other assets (1,993) (240)
Decrease (increase) in inventories (6,275) 1,098
Increase (decrease) in accounts payable
and other liabilities (4,399) 583
Increase (decrease) in income taxes payable (2,409) 1,818
------- -------
Net Cash Provided by Operating Activities 3,071 11,276
------- -------
Cash Flows From Investing Activities:
Purchases of property, plant and equipment (8,251) (4,991)
Proceeds from sale of property, plant
and equipment 2,110 314
------ -------
Net Cash Used by Investing Activities (6,141) (4,677)
------ -------
Cash Flows From Financing Activities:
Increase in short-term borrowings 1,424 71
Payments of long-term debt (389) (351)
Proceeds from long-term borrowings 372 -
Cash dividends paid (6,327) (5,957)
Proceeds from stock plans and other 279 422
------- -------
Net Cash Used by Financing Activities (4,641) (5,815)
------- -------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (31) 68
------- -------
Increase (Decrease) in Cash and Cash
Equivalents (7,742) 852
------- -------
Cash and Cash Equivalents at Beginning
of Period 19,873 29,390
------- -------
Cash and Cash Equivalents at End of Period $12,131 $30,242
======= =======
Supplemental Disclosures:
Cash payments for income taxes $ 5,469 $ 3,901
Cash payments for interest 376 344
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
MARCH 31, 1994 AND 1993
(1) BASIS FOR PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures, including significant accounting policies normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted. All adjustments which are in the
opinion of management necessary to present a fair statement of the results of
the interim periods have been included. It is suggested these consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest Form 10-K.
(2) ESTIMATES INVOLVED IN PREPARING THE CONSOLIDATED FINANCIAL
STATEMENTS
The Company's interim financial statements are prepared in accordance with
the same accounting policies followed at year-end. Certain items in the
financial statements can be determined on an interim basis only by making
accounting estimates. The accuracy of such amounts is dependent upon facts
that will exist and procedures that will be accomplished by the Company later
in the year. Several of the significant accounting estimates related to the
accompanying interim financial statements are set forth below.
Inventories -
The Company performs physical counts of its inventories at various times
during the year. The amounts reflected as raw materials and parts,
work-in-process, and components, sub-assemblies and finished goods as of March
31, 1994 and 1993, and thereby the related amounts for cost of sales, have been
determined using the Company's normal accounting procedures. Past experience
of the Company would indicate that no significant adjustment would be required
should an actual count of the inventories have been made.
The majority of the Company's domestic inventories (approximately 40%
percent of consolidated inventories at December 31, 1993) are priced at cost
using the LIFO (last-in, first-out) method. Since amounts for inventories
under the LIFO method are based upon computations determined at year-end, the
inventory at March 31, 1994 has been based on certain estimates of quantities
and costs at December 31, 1994.
5
<PAGE> 6
Inventories at March 31, 1994 and December 31, 1993 are comprised of
the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1994 1993
--------- ------------
<S> <C> <C>
Raw materials and parts $ 11,936 $ 11,450
Work-in-process 23,936 17,120
Components, sub-assemblies
and finished goods 110,524 109,763
Less: LIFO Adjustment (3,715) (3,725)
-------- --------
$142,681 $134,608
======== ========
</TABLE>
Income Taxes -
The Company provides for income taxes for an interim period by making, at
the end of the interim period, an estimate of the effective tax rate expected
to be applicable for the full year, and applying that rate to the current
year-to-date income before taxes.
(3) FOREIGN CURRENCY TRANSLATION
An analysis of changes in the foreign currency translation adjustments
included in Shareholders' Investment is as follows:
<TABLE>
<S> <C>
Balance as of December 31, 1993 $ (182)
Currency translation adjustments 4,300
Income tax adjustments (1,529)
------
Balance as of March 31, 1994 $2,589
======
</TABLE>
(4) EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding. There is no
significant difference between earnings per share on a primary and a fully
diluted basis.
(5) CHANGE IN ACCOUNTING PRINCIPLE
In the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109 -- "Accounting for Income Taxes." The
impact of the adoption of SFAS No. 109 was to increase earnings by $1,879, or
$.05 per share, and is fully disclosed in Note 5 to the Consolidated Financial
Statements in the Company's First Quarter 1993 Form 10-Q.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
AND ANALYSIS OF FINANCIAL CONDITION
The following table sets forth for the periods indicated (i) percentages
which certain items reflected in the accompanying consolidated statements of
income bear to total net sales of the Company and (ii) the percentage increase
or decrease of amounts of such items as compared to the corresponding prior
year period.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------
PERCENTAGE
OF NET SALES %
--------------- INC.
1994 1993 (DEC.)
---- ---- ------
<S> <C> <C> <C>
Net Sales 100.0 100.0 (4.9)
Cost and Operating Expenses:
Cost of sales 58.5 57.8 (3.9)
Selling, general and administrative 30.4 28.0 3.1
Operating income 11.1 14.2 (25.2)
Other (Income) Expenses:
Interest expense 1.0 1.1 (13.7)
Interest income (.3) (.4) (50.7)
Translation loss .3 .3 (25.9)
Other, net .5 .9 (47.0)
Income Before Income Taxes and
Change in Accounting Principle 9.6 12.3 (25.6)
Provision for Income Taxes 3.7 4.7 (25.6)
Income Before Change in
Accounting Principle 5.9 7.6 (25.6)
Cumulative Effect of Change
in Accounting Principle - 1.5 *
Net Income 5.9 9.1 (37.7)
</TABLE>
* not meaningful
7
<PAGE> 8
RESULTS OF OPERATIONS (AMOUNTS IN THOUSANDS)
Net sales for the three-month period ended March 31, 1994 decreased
4.9% over the same period of the prior year. Shown below is an analysis of net
sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1994
--------------
Inc. (Dec.) in Net Sales
------------------------
$ %
----- -----
<S> <C> <C>
Domestic:
Internal Decrease $(6,447) (11.2)
------- -----
International:
Internal Decrease (3,106) (4.4)
Exchange Rate Effect (858) (1.2)
-------
Total International (3,964) (5.6)
-------
Acquisitions 4,093 *
-------
Total Sales Decrease $(6,318) (4.9)
=======
</TABLE>
*Percentage not meaningful
For the three months ended March 31, 1994, cost of sales as a
percentage of net sales increased to 58.5% from 57.8% a year ago. The decrease
in gross profit as a percentage of sales was primarily due to increased price
competition in the industrial valve product line and a decrease in higher
margin sales of certain product lines.
Selling, general and administrative expenses for the three months
ended March 31, 1994 increased 3.1% compared to the same period in 1993. The
increase, as a result of higher selling expenses, is primarily attributable to
additional sales offices and sales personnel in the Asia-Pacific Region.
Interest expense for the three months ended March 31, 1994 decreased
compared to the same period in 1993, primarily due to the effect of lower
interest rates. Interest income for the quarter ended March 31, 1994 decreased
primarily due to a decrease in average funds available for investment.
Other expense represents primarily amortization of intangible assets
and debt costs, as well as exchange gains and losses related to currency
fluctuations. In the three-month period ended March 31, 1994, other expense
also included a gain of $698 related to the disposition of an inoperative
facility in Germany.
The Company's effective income tax rate was 38% for the quarter ended
March 31, 1994, unchanged from the corresponding period a year ago.
8
<PAGE> 9
The Company's restructuring plans are continuing as scheduled. To
date, approximately 80% of the restructuring provision has been utilized. The
Company believes the remaining restructuring reserves, which are expected to be
utilized during 1994, are sufficient to cover the restructuring projects which
are still in process.
LIQUIDITY AND CAPITAL RESOURCES (AMOUNTS IN THOUSANDS)
At March 31, 1994, the Company had working capital of $176,107
compared to $171,827 at December 31, 1993. Management is not aware of any
potential impairments to the Company's liquidity and believes its internal and
external sources of cash will provide the necessary funds with which to meet
its expected obligations.
9
<PAGE> 10
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
10
<PAGE> 11
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.
KEYSTONE INTERNATIONAL, INC.
DATE: MAY 2, 1994 By: /s/ Mark E. Baldwin
---------------------------------
Principal Financial Officer
and Duly Authorized Officer
11
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