QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarter ended: March 31, 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 May 10, 1995 was
9,021,281.
<PAGE>
MESTEK, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1995
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets at March 31, 1995 and
December 31, 1994 3 - 4
Condensed consolidated statements of income for the three months
ended March 31, 1995 and 1994 5
Condensed consolidated statements of cash flows for the three months
ended March 31, 1995 and 1994 6
Condensed consolidated statement of changes in shareholders' equity
for the period from January 1, 1994 through March 31, 1995 7
Notes to the condensed consolidated financial statements 8 - 10
Management's Discussion and Analysis of Financial Condition and Results
of Operations 10 - 11
PART II - OTHER INFORMATION
Statement of Computation of Per Share Earnings 12
SIGNATURE 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)
March 31, Dec. 31,
1995 1994
---- ----
(Dollars in thousands)
ASSETS
Current Assets
Cash $ 3,734 $ 4,201
Accounts Receivable - less allowance of $1,727,000
and $1,440,000 respectively 31,121 35,306
Unbilled Accounts Receivable 116 124
Inventories 36,131 32,102
Other Current Assets 4,616 4,357
----------- -----------
Total Current Assets $ 75,718 $ 76,090
Property and Equipment - net 18,191 18,483
Equity Investments 8,643 8,643
Property held for sale 5,758 5,870
Other Assets and Deferred Charges - net 11,015 11,344
---------- ----------
Total Assets $119,325 $120,430
======== ========
See the Notes to Condensed Consolidated Financial Statements
Continued on next page
<PAGE>
MESTEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
March 31, Dec. 31,
1995 1994
---- ----
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt $ 4,263 $ 5,337
Accounts Payable 11,686 14,117
Accrued Salaries and Bonus 1,527 3,008
Accrued Commissions 1,701 1,833
Progress Billings in Excess of Cost
and Estimated Earnings 3,013 2,721
Other Accrued Liabilities 13,686 12,446
---------- ----------
Total Current Liabilities 35,876 39,462
Long-Term Debt 204 211
Deferred Compensation 25 25
--------- ----------
Total Liabilities 36,105 39,698
--------- ----------
Shareholders' Equity
Common Stock - no par, stated value $0.05 per share,
9,610,135 shares issued 479 479
Paid in Capital 15,434 15,434
Retained Earnings 73,238 70,559
Treasury Shares, at cost, 587,789 and 574,424 common
shares, respectively ( 4,945) ( 4,808)
Cumulative Translation Adjustment ( 986) ( 932)
----------- -----------
Total Shareholders' Equity 83,220 80,732
----------- -----------
Total Liabilities, and Shareholders' Equity $119,325 $120,430
======== ========
See the Notes to Condensed Consolidated Financial Statements.
<PAGE>
MESTEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
1995 1994
---- ----
(In thousands, except per
share amounts)
Net Sales $ 50,080 $ 46,793
Net Service Revenues 3,679 3,250
------------- ------------
Total Revenues 53,759 50,043
Cost of Goods Sold 35,951 33,543
Cost of Service Revenues 2,273 2,109
------------ ------------
Gross Profit 15,535 14,391
Selling Expense 6,784 6,547
General and Administrative Expense 3,253 2,996
Engineering Expense 1,329 1,334
----------- ------------
Operating Profit 4,169 3,514
Interest Expense ( 57) ( 194)
Amortization Expense ( 13) ( 13)
Other Income (Expense) - net ( 359) ( 407)
Gain on Sale of Investment 850 -
------------ ---------
Income Before Income Taxes 4,590 2,900
Income Taxes 1,911 1,178
----------- -----------
Net Income $ 2,679 $ 1,722
========== ==========
Earnings Per Common Share $ .30 $ .19
=========== ==========
Weighted Average Shares Outstanding 9,030 9,203
=========== ==========
See the Notes to Condensed Consolidated Financial Statements.
Continued on next page
<PAGE>
MESTEK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1995 1994
---- ----
(Dollars in thousands)
Cash Flows from Operating Activities:
Net Income $ 2,679 $ 1,722
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities:
Depreciation and Amortization 849 1,248
Provision for Losses on Accounts Receivable 287 260
Change in Assets & Liabilities:
Cash Flows Provided by (Used in) Changes In:
Accounts Receivable 3,898 7,441
Unbilled Accounts Receivable 8 97
Inventory ( 4,029) 886
Other Assets 57 1,678
Accounts Payable ( 2,431) ( 1,551)
Accrued Expenses ( 373) ( 5,671)
Progress Billings 292 -
Deferred Compensation - ( 2)
------------- -----------
Net Cash Provided by (Used in) In
Operating Activities 1,237 6,108
------------- ----------
Cash Flows from Investing Activities:
Capital Expenditures ( 432) ( 1,022)
--------- --------
Net Cash (Used In) Investing Activities ( 432) ( 1,022)
--------- --------
Cash Flows from Financing Activities:
Net Borrowings (Repayments) Under Line
of Credit Agreement 3,230 ( 1,220)
Principal Payments Under Long Term Debt
Obligations ( 4,311) ( 5,788)
Purchase of Treasury Stock ( 137) ( 161)
Cumulative Translation Adjustments ( 54) ( 107)
---------- ---------
Net Cash Provided by (Used In) Financing Activities ( 1,272) ( 7,276)
---------- --------
Net Increase in Cash & Cash Equivalents ( 467) ( 2,190)
Cash & Cash Equivalents - Beginning of Period 4,201 3,573
-------- ---------
Cash & Cash Equivalents - End of Period $ 3,734 $ 1,383
======== ========
See the Notes to Condensed Consolidated Financial Statements.
Continued on next page
<PAGE>
<TABLE>
MESTEK, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
For the period January 1, 1994 through March 31, 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
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 2,679 2,679
Cumulative Translation Adjustment ( 54) ( 54)
Common Stock Repurchased ( 137) ( 137)
----------- ---------- ---------- ---------- --------- --------- ---------
Balance - March 31, 1995 $ 0 $ 479 $15,434 $73,238 $(4,945) $( 986) $ 83,220
========= ======= ======= ======= ======= ======== ========
See the Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
MESTEK, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Significant Accounting Policies
Basis of Presentation
The condensed 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, consisting solely of
normal recurring 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 $1,911,000 and $1,178,000
were recorded for the three month periods ended March 31, 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 custom 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.
<PAGE>
Note 3 - Property and Equipment
March 31, Dec. 31,
1995 1994
---- ----
Land $ 750,000 $ 750,000
Buildings 10,774,000 10,662,000
Leasehold Improvements 2,893,000 2,873,000
Equipment 34,742,000 34,442,000
------------- ------------
49,159,000 48,727,000
Accumulated Depreciation (30,968,000) ( 30,244,000)
------------ -------------
$ 18,191,000 $ 18,483,000
============ ============
Note 4 - Long-Term Debt
March 31, Dec. 31,
1995 1994
---- ----
Senior Notes $ 1,000,000 $ 1,000,000
Revolving Loan Agreement 3,230,000 -
Notes Payable American Standard, Inc. - 1,903,000
Note Payable Eafco, Inc. - 2,400,000
Other Bonds and Notes Payable 237,000 245,000
-------------- ---------------
4,467,000 5,548,000
Less Current Maturities ( 4,263,000) ( 5,337,000)
------------ -------------
$ 204,000 $ 211,000
============= ==============
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, originally set to expire on January 1, 1993, has been extended
through June 30, 1995. It provides $38 million of unsecured revolving credit and
standby letter of credit capacity. Borrowing 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. Management expects
to renew the Revolving Loan Agreement and Letter of Credit Facility on a one
year basis prior to June 30, 1995.
Note 5 - Earnings Per Common Share
Earnings per share were computed using the weighted average number of
common shares outstanding. The weighted average number of common shares
outstanding includes shares which would be issued upon conversion of the $5.00
Convertible Preferred Stock for both periods.
<PAGE>
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 stock on June 24,
1994. The remaining 64 shares were redeemed on June 24, 1994.
The Company continued its program of selective "open market" purchases
of its common stock in 1995. 8,900 common shares were acquired in this manner in
the three month period ended March 31, 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. 4,465 of such shares were acquired by the Company in the first quarter
of 1995, and are accounted for as treasury shares.
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 1995 of $850,000.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Total Revenues in the Company's HVAC segment during the first quarter
of 1995 were increased relative to the first quarter of 1994, by $2,811,000, or
6.3%, reflecting the effect of improved economic conditions on the residential
and commercial construction marketplaces. Gross profit margins for the HVAC
segment were reduced slightly (from 27.86% to 27.30%) from the first quarter of
1994 reflecting the effects of various inflationary pressures on the Company's
labor and material costs. Operating income for this segment was up from
$2,786,000 in the first quarter of 1994 to $3,015,000 in the first quarter of
1995.
During the first quarter of 1995, Total Revenues, Gross Profit Margins
and Operating Income all improved markedly for the Company's Equipment Handling
Segment relative to the first quarter of 1994 reflecting this segment's
continued success with its new product offerings in the area of electronic
feeds. The Company's Computer Systems segment also reported improved Revenues,
Gross Profit Margins and Operating income figures.
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 21.73% to 21.14%..
Operating income for the first quarter of 1994, for the Company as a
whole, was increased by $655,000, or 18.6%, reflecting the effects of increased
HVAC volume and improved performances, as mentioned above, from the Company's
Equipment Handling and Computer Systems Segments.
<PAGE>
Pretax income for the quarter ended March 31, 1995 included $850,000
from the sale of the Company's remaining 30% interest in Mesta International, as
more fully described in Note 7 to the condensed consolidated financial
statements. This "one time" event increased earnings per share, on a net of tax
basis, by $.06. Absent this transaction, earnings per share would have been
$.24, for the quarter ended March 31, 1995, an increase of $.05, or 26%, over
the first quarter of 1994.
The Company's total debt (long-term debt plus current portion of
long-term debt) was reduced during the quarter ended March 31, 1995 by
$1,081,000, principally due to the combined effects of seasonal accounts
receivable collections, increased investment in inventories, and reductions in
trade payables. The Company's long-term debt to equity ratio (including deferred
compensation as long-term debt) remained relatively unchanged from December 31,
1994, to March 31, 1995 at .003, reflecting the Company's presently
underleveraged condition. Management regards the Company's current capital
structure and banking relationships as fully adequate to meet foreseeable future
needs. The Company has not paid dividends on its common stock since 1979.
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Statement of Computation of Per Share Earnings . . . . Page 12
(b) Registrant did not file a Form 8-K during the quarter for which
this report is filed.
MESTEK, INC.
Schedule of Computation of Earnings Per Common Share
Three Months Ended March 31,
1995 1994
---- ----
(Amounts in thousands, except earnings
per common share)
Net Income $2,679 $1,722
Less: Dividends on Preferred Stock - -
------ -----
Net Income for earnings per share $2,679 $1,722
====== ======
Weighted average number of common
shares outstanding 9,030 7,357
Common share equivalents resulting
from conversion of the $5.00
Convertible Preferred Stock - 1,846
------ ------
Total common shares and common
share equivalents 9,030 9,203
====== ======
Earnings per common share $ 0.30 $ 0.19
====== ======
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.
MESTEK, INC.
(Registrant)
Date: May 10, 1995 By: STEPHEN M. SHEA
Stephen M. Shea, Vice President - Finance
and (Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,734
<SECURITIES> 0
<RECEIVABLES> 32,964
<ALLOWANCES> 1,727
<INVENTORY> 36,131
<CURRENT-ASSETS> 4,616
<PP&E> 49,159
<DEPRECIATION> 30,968
<TOTAL-ASSETS> 119,325
<CURRENT-LIABILITIES> 35,462
<BONDS> 0
<COMMON> 479
0
0
<OTHER-SE> 82,741
<TOTAL-LIABILITY-AND-EQUITY> 119,325
<SALES> 50,080
<TOTAL-REVENUES> 53,759
<CGS> 35,951
<TOTAL-COSTS> 38,224
<OTHER-EXPENSES> 359
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 4,590
<INCOME-TAX> 1,911
<INCOME-CONTINUING> 2,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,679
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
