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 the quarter ended: June 30, 1995
Commission file number: 1- 448
MESTEK,INC.
Pennsylvania Corporation
I.R.S. Employer Identification No.
25 - 0661650
260 North Elm Street
Westfield, Massachusetts 01085
Telephone: (413) 568-9571
The Registrant 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 has
been subject to such filing requirements for the past 90 days.
The number of shares of Common Stock outstanding as of July 26, 1995 was
9,015,271.
<PAGE>
MESTEK, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1994
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets at June 30, 1995
and December 31, 1994 Pages 3 - 4
Condensed consolidated statements of income for the three months ended
June 30, 1995 and 1994 and the six months ended June 30, 1995 and 1994
Page 5
Condensed consolidated statements of cash flows for the six
months ended June 30, 1995 and 1994 Page 6
Condensed consolidated statement of changes in shareholders' equity for
the period from January 1, 1994 through June 30, 1995 Page 7
Notes to the condensed consolidated financial
statements Pages 8 - 10
Management's Discussion and Analysis of Financial Condition
and Results of Operations Page 10
PART II - OTHER INFORMATION Page 11
Item 6 - Exhibits and Reports on Form 8-K
Item 7 - Submission of Matters to a Vote of Security Holders
Statement of Computation of Per share Earnings Page 12
SIGNATURE Page 12
In the opinion of management, the information contained herein reflects
all adjustments necessary to make the results of operations for the interim
periods a fair statement of such operations. All such adjustments are of a
normal recurring nature.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MESTEK,INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, Dec. 31,
1995 1994
(Dollars in thousands)
ASSETS
Current Assets
Cash and Cash Equivalents $ 2,218 $ 4,201
Accounts Receivable - less allowances of
$1,844,000 and $1,440,000 respectively 34,897 35,306
Unbilled Accounts Receivable 197 124
Inventories 41,738 32,102
Other Current Assets 4,783 4,357
Total Current Assets 83,833 76,090
Property and Equipment (Net) 18,176 18,483
Equity Investments 8,760 8,643
Property held for sale 5,646 5,870
Other Assets and Deferred Charges - Net 11,297 11,344
Total Assets $ 127,712 $ 120,430
See the Notes to Condensed Consolidated Financial Statements.
Continued on next page
<PAGE>
MESTEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
June 30, Dec., 31
1995 1994
(Dollars in thousands)
LIABILITIES, AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt $ 1,034 $ 5,337
Short-Term Debt 13,525 -
Accounts Payable 9,560 14,117
Accrued Salaries and Bonus 1,503 3,008
Accrued Commissions 1,657 1,833
Progress Billings in Excess of Cost and
Estimated Earnings 2,825 2,721
Other Accrued Liabilities 12,200 12,446
Total Current Liabilities 42,304 39,462
Long-Term Debt 195 211
Deferred Compensation 23 25
Total Liabilities 42,522 39,698
Shareholders' Equity
Common Stock - no par, stated value $0.05
per share, 9,610,135 shares 479 479
Paid in Capital 15,434 15,434
Retained Earnings 75,142 70,559
Treasury Shares, at cost, 594,864 and 574,424
common shares, respectively ( 5,009) ( 4,808)
Cumulative Translation Adjustment ( 856) ( 932)
Total Shareholders' Equity 85,190 80,732
Total Liabilities, and Shareholders' Equity
$127,712 $120,430
See the Notes to Condensed Consolidated Financial Statements.
<PAGE>
MESTEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(In thousands, except per share amounts)
Net Sales $ 48,604 $ 42,541 $ 98,684 $ 89,334
Net Service Revenues 3,875 3,614 7,554 6,864
Total Revenues 52,479 46,155 106,238 96,198
Cost of Goods Sold 34,718 30,523 70,669 64,066
Cost of Service Revenues 2,286 2,212 4,559 4,321
Gross Profit 15,475 13,420 31,010 27,811
Selling Expense 7,091 6,279 13,875 12,826
General and Administrative
Expense 3,187 2,895 6,440 5,891
Engineering Expense 1,483 1,371 2,812 2,705
Operating Profit 3,714 2,875 7,883 6,389
Interest Expense ( 186) ( 168) ( 243) ( 362)
Amortization Expense ( 17) ( 12) ( 30) ( 25)
Gain on Sale of Investment - - 850 -
Other Income (Expense) - net( 232) ( 146) ( 591) ( 553)
Income Before Income Taxes 3,279 2,549 7,869 5,449
Income Taxes 1,375 954 3,286 2,132
Net Income $ 1,904 $ 1,595 $ 4,583 $ 3,317
Earnings per Common Share $ .21 $ .17 $ .51 $ .36
Weighted Average Shares
Outstanding 9,019 9,189 9,025 9,196
See the Notes to Condensed Consolidated Financial Statements.
<PAGE>
MESTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
6 Months Ended
June 30,
1995 1994
(Dollars in thousands)
Cash Flows from Operating Activities:
Net Income $ 4,583 $ 3,317
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used In) Operating
Activities:
Depreciation and Amortization 1,807 2,407
Provision for Losses on Accounts Receivable 404 507
Change in Assets & Liabilities:
Cash Flows Provided (Used) by Changes In:
Accounts Receivable 5 8,135
Unbilled Accounts Receivable ( 73) ( 398)
Inventories ( 9,636) ( 3,227)
Other Assets ( 525) 2,083
Accounts Payable ( 4,557) ( 1,075)
Progress Billings 104 578
Other Accruals ( 1,927) ( 5,533)
Deferred Compensation ( 2) ( 2)
Net Cash Provided by (Used in) Operating Activities
( 9,817) 6,792
Cash Flows from investing Activities:
Capital Expenditures ( 1,247) ( 1,896)
Net Cash (Used in) Investing Activities ( 1,247) ( 1,896)
Cash Flows from Financing Activities:
Net Borrowings Under Line of Credit
Agreement 8,525 1,285
Proceeds from issuance of Debt (Net) 5,000 -
Principal Payments Under Long Term Debt
Obligations ( 4,319) ( 7,000)
Repurchase of Common Stock ( 201) ( 229)
Redemption of $5.00 Non-Voting Preferred
Stock - ( 6)
Cumulative Translation Adjustments 76 218
Net Cash Provided by (Used in) Financing
Activities 9,081 ( 6,168)
Net Increase (Decrease) in Cash and Cash
Equivalents (1,983) ( 1,272)
Cash and Cash Equivalents - Beginning of
Period 4,201 3,573
Cash and Cash Equivalents - End of Period $ 2,218 $ 2,301
See the Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
MESTEK, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
For the period January 1, 1994 through June 30, 1995
<CAPTION>
$5.00
Cumulative Additional Cumulative
Convertible Common Paid In Retained Treasury Translation
Preferred Stock Capital Earnings Shares Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1994 $ 7,209 $ 387 $ 8,323 $ 61,261 $ (3,203) $ ( 660) $ 73,317
Net Income 9,298 9,298
Cash Dividends:
Common Stock Repurchased (1,605) ( 1,605)
Conversion of $5.00 Convertible Preferred (7,203) 92 7,111 -
Redemption of $5.00 Convertible Preferred ( 6) ( 6)
Cumulative Translation Adjustment ( 272) ( 272)
Balance - December 31, 1994 $ 0 $ 479 $ 15,434 $ 70,559 $ (4,808) $ ( 932) $ 80,732
Net Income 4,583 4,583
Cumulative Translation Adjustment 76 76
Common Stock Repurchased ( 201) ( 201)
Balance - June 30, 1995 $ 0 $ 479 $ 15,434 $ 75,142 $ ( 5,009) $ ( 856) $( 85,190)
</TABLE>
See the Notes to the Condensed Consolidated Financial Statements.
<PAGE>
MESTEK, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the company
and its wholly-owned subsidiaries. In the opinion of management, the financial
statements include all material adjustments, necessary for a fair presentation
of the Company's financial position, results of operations and cash flows. The
results of this interim period are not necessarily indicative of results for the
entire year.
Inventories
Inventories are valued at the lower of cost or market. Cost of inventories
is determined principally by the last-in, first-out (LIFO) method.
Income Taxes
Provisions for income tax in the amounts of $1,375,000 and $954,000, have
been recorded for the three months ended June 30, 1995 and 1994, respectively.
Property Held for Sale
The condensed consolidated financial statements include, under the heading
Property Held for Sale, manufacturing facilities in Northvale, New Jersey and
Scranton, Pennsylvania. These properties are carried at cost which is less than
estimated net realizable values.
Note 2 - Business Acquisitions
On November 1, 1994, pursuant to a motion approved by the United States
Bankruptcy Court for the District of New Mexico, the Company acquired
substantially all of the inventory, accounts receivable, and fixed tangible and
intangible assets of Aztec Sensible Cooling, Inc. (Aztec) a manufacturer of
evaporative cooling and other customer air handling equipment in Albuquerque,
New Mexico. The purchase price for the assets acquired was $1,372,000. This
acquisition was accounted for as a purchase. Accordingly, the Company has
included the results of this acquired business in its consolidated statement of
operations for the period starting with the acquisition date.
Note 3 - Property and Equipment
June 30, Dec. 31,
1995 1994
Land $ 750,000 $ 750,000
Buildings 11,194,000 10,662,000
Leasehold Improvements 2,966,000 2,873,000
Equipment 35,064,000 34,442,000
49,974,000 48,727,000
Accumulated Depreciation (31,798,000) (30,244,000)
$ 18,176,000 $ 18,483,000
<PAGE>
Note 4 - Debt
June 30, Dec. 31,
1995 1994
Long Term Debt:
Senior Notes $ 1,000,000 $ 1,000,000
Note Payable American Standard, Inc. - 1,903,000
Note Payable Eafco, Inc. - 2,400,000
Other Bonds and Notes Payable 229,000 245,000
1,229,000 5,548,000
Less Current Maturities (1,034,000) (5,337,000)
$ 195,000 $ 211,000
Short Term Debt:
Revolving Loan Agreement $ 8,525,000 $ -
Note Payable - Bank 5,000,000 -
$ 13,525,000 $ -
On January 1, 1992, the Company entered into a Revolving Loan Agreement and
Letter of Credit Facility (the "Agreement") with a commercial bank. The
Agreement, which had been extended through June 30, 1995, was recently extended
through June 30, 1996. It provides $38 million of unsecured revolving credit and
standby letter of credit capacity. Borrowings under the Agreement bear interest
at a floating rate based on the bank's prime rate less 1.25%, or LIBOR plus 1.5%
at the discretion of the borrower, and may be used for working capital or
acquisition purposes, or to retire previously incurred debt.
Note 5 - Earnings Per Common Share
Earnings per share have been computed using the weighted average number of
common shares outstanding. The weighted average number of common shares
outstanding includes shares which would have been issued upon the conversion of
the $5.00 Convertible Preferred Stock for the 1994 periods. As explained in Note
6, the $5 Convertible Preferred Stock was eliminated in 1994.
Note 6 - Shareholders Equity
On April 25, 1994, a Notice of Redemption was sent to all holders of the
Company's $5.00 Convertible Preferred Stock, in accordance with its terms,
announcing a redemption by the Company of all shares of Convertible Preferred
stock outstanding and unconverted on June 24, 1994. Pursuant to the notice, all
but 64 shares were converted into 1,838,259 shares of common shares of common
stock on June 24, 1994.
The remaining 64 shares were redeemed on June 24, 1994.
The Company continues its program of selective "open market" purchases of
its common stock in 1995. 6,000 common shares were acquired in this manner in
the three month period ended June 30, 1995, and are accounted for as treasury
shares. On January 2, 1995 the Company announced that its Board of Directors had
authorized a common stock buyback program under which the Company would purchase
common shares from holders of fewer than 100 shares on a direct basis at market
prices. In the second quarter of 1995, 1,075 of such shares were acquired by the
Company under this program, which has now expired, and are accounted for as
treasury shares.
<PAGE>
Note 7 - Other Transactions
On March 3, 1995, the Company, through its Delaware-based subsidiary, West
Homestead Joint Venture Corporation, concluded the sale of its remaining 30%
partnership interest in Mesta International (formerly Mesta Engineering Company)
to Shougang Mechanical Equipment Co. of Pennsylvania, Inc., a U.S. subsidiary of
a Chinese industrial company, for $850,000 in cash and the assumption of all
liabilities of Mesta International. The Company reported a gain on the
transaction in the first quarter of 1995 of $850,000.
Note 8 - Subsequent Events
On July 5, 1995, Mestek's wholly-owned subsidiary The Hydrotherm
Corporation closed the sale of its real property located in Northvale, New
Jersey for $2,450,000, in notes payable over three years secured by the
property, personal and corporate guarantees, and other security. The Company
expects to report a nominal loss on the transaction.
On July 12, 1995, the Company purchased the operating assets of Cox
Manufacturing Co., Inc. of Ridgeville, Indiana for approximately $500,000.00 in
a bulk sales transaction. The Company has leased a portion of the Cox facility
to manufacture the radiant heating and furnace product line of Cox.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operation
Total Revenues in the Company's HVAC segment during the second quarter of
1995 were increased relative to the second quarter of 1994, by $4,674,000, or
11.4%, reflecting the effect of improved economic conditions in the commercial
and industrial construction marketplaces. Gross profit margins for the HVAC
segment were relatively unchanged at 27.7%. Operating income for this segment
was up $431,000, or 21.9%, from the second quarter of 1994, traceable
principally to the increase in volume.
During the second quarter of 1995, Total Revenues, for the Company's
Equipment Handling Segment grew by 74.4% relative to the second quarter of 1994
reflecting this segment's continued success with its new product offerings and
the generally healthy climate affecting this relatively cyclical segment.
For the Company as a whole, Selling, General and Administrative, and
Engineering costs, taken together as a percentage of Total Revenues, were
slightly reduced from 22.8% to 22.4%.
Operating profit for the second quarter of 1995, for the Company as a
whole, was increased by $839,000, or 29.2%, reflecting the effects of increased
HVAC volume and improved performances from the Company's Equipment Handling and
Computer Systems segments.
The Company's total debt increased during the quarter ended June 30, 1995
by $10,287,000, due to the combined effects of a seasonal increase in HVAC
inventories, and a reduction in trade payables. The growth in inventories during
the second quarter which was somewhat more pronounced than in prior years, is
traceable in part to the relocation of certain manufacturing operations in 1995.
<PAGE>
Management regards the Company's current capital structure and banking
relationships as fully adequate to meet foreseeable future needs. As described
in the Notes to the Condensed Consolidated Financial Statements, the Company
recently extended its principal lending arrangement, the Revolving Loan
Agreement and Letter of Credit Facility, which provides $38 million of unsecured
revolving credit and standby letter of credit capacity, through June 30, 1996.
The Company has not paid dividends on its common stock since 1979.
As described in Note 8 to the Condensed Consolidated Financial Statements,
the Company purchased the assets of Cox Manufacturing Co., Inc., on July 12,
1995, for approximately $500,000. The Company believes the products acquired
from Cox, a radiant heating product line and a furnace product line, will
benefit from both manufacturing and distribution synergies with the Company's
existing HVAC product lines.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Statement of Computation of Per Share Earnings ... Page 13
(b) Registrant did not file a Form 8-K during the quarter for which this
report is filed.
Item 7 - Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on May 24, 1995. The
following Directors were re-elected to serve until the next Annual Meeting:
A. Warne Boyce
E. Herbert Burk
William J. Coad
Peter Glynn-Jones
Winston R. Hindle, Jr.
David W. Hunter
David R. Macdonald
John E. Reed
Stewart B. Reed
The shareholders voted to affirm the appointment of Grant Thornton as
independent auditors for the Company for the fiscal year ending December 31,
1995.
<PAGE>
The shareholders voted to amend the Articles of Incorporation as follows:
The current text of Article 5 of the Company's Articles of Incorporation
shall be deleted in its entirety and be amended to read in full as follows:
"The authorized Capital Stock of the Corporation is 20,000,000 shares
of common stock without part value (the "Common Stock") and
10,000,000 shares of preferred stock without par value (the
"Preferred Stock").
A description of each class of Capital Stock which the Corporation
shall have the authority to issue and a statement of the
designations, powers, preferences, qualifications, limitations,
restrictions and special or relative rights in respect of each class
or series of any class are as follows:
I. THE PREFERRED STOCK
The shares of Preferred Stock may be issued from time to time in one
or more series or classes. The Board of Directors of the Corporation
is hereby authorized to fix the designations and powers, preferences
and relative, participating, optional, special or other rights, if
any, and qualifications, limitations or other restrictions thereof,
including, without limitation, dividend rights and preferences over
dividends on Common Stock or any series or classes of Preferred
Stock, the dividend rate (and whether dividends are cumulative),
conversion rights, if any, voting rights, rights and terms of
redemption, if any, (including sinking fund provisions, if any)
redemption price and liquidation preferences of any wholly unissued
series or class of Preferred Stock and the number of shares
constituting any such series or class and the designation thereof,
or any of them; and to increase or decrease the number of shares of
any series or class subsequent to the issue of shares of that series
or class, but not below the number of shares of such series or class
then outstanding.
II.THE COMMON STOCK
Except for and subject to those rights expressly granted to the
holders of any series or class of the Preferred Stock pursuant to
Section I of this Article 5th and except as may be provided by
applicable law, the holders of Common Stock shall have exclusively
all other rights of shareholders."
Such amendment became effective when filed in the Commonwealth of Pennsylvania
on June 23, 1995.
<PAGE>
MESTEK, INC.
SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE
3 Months Ended 6 Months Ended
June 30, June 30,
1995 1994 1995 1994
(Amounts in thousands, except
earnings per common shares)
Net income $ 1,904 $ 1,595 $ 4,583 $ 3,317
Less: dividends on
Preferred Stock - - - -
Net income for earnings
per share $ 1,904 $ 1,595 $ 4,583 $ 3,317
Weighted average number
of common shares
outstanding 9,019 7,451 9,025 7,404
Common share equivalents
resulting from
conversion of the
$5.00 Convertible
Preferred Stock - 1,738 - 1,792
Total Common shares and
common share
equivalents 9,019 9,189 9,025 9,196
Earnings per common
share $ .21 $ .17 $ .51 $ .36
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.
MESTEK,INC.
(Registrant)
Date: July 26, 1995
Stephen M. Shea
Stephen M. Shea
Senior Vice President - Finance
(Chief Financial Officer)
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,218
<SECURITIES> 0
<RECEIVABLES> 36,741
<ALLOWANCES> 1,844
<INVENTORY> 41,738
<CURRENT-ASSETS> 4,783
<PP&E> 49,974
<DEPRECIATION> 31,798
<TOTAL-ASSETS> 127,712
<CURRENT-LIABILITIES> 42,304
<BONDS> 0
<COMMON> 479
0
0
<OTHER-SE> 85,190
<TOTAL-LIABILITY-AND-EQUITY> 127,712
<SALES> 48,604
<TOTAL-REVENUES> 52,479
<CGS> 34,718
<TOTAL-COSTS> 37,004
<OTHER-EXPENSES> 232
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186
<INCOME-PRETAX> 3,279
<INCOME-TAX> 1,375
<INCOME-CONTINUING> 1,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,904
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
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