<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1995
--------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------ -----------------
Commission file number 0-13940
---------------------
CENTRAL SPRINKLER CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2328106
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
451 North Cannon Avenue, Lansdale, PA 19446
-------------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 362-0700
----------------
(Registrant's telephone number, including area code)
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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at September 6, 1995
----- --------------------------------
Common Stock, $.01 Par Value 3,741,697
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTRAL SPRINKLER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
July 31, October 31,
1995 1994
-------- ----------
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,133 $ 2,188
Short-term investments 9,215 18,334
Accounts receivable, less allowance
for doubtful receivables of $4,107
in 1995 and $3,737 in 1994, respectively 30,029 24,907
Inventories 31,948 28,653
Deferred income taxes 5,476 4,686
Prepaid expenses and other assets 423 902
--------- ---------
Total current assets 81,224 79,670
--------- ---------
Property, Plant and Equipment 39,538 27,546
Less - Accumulated depreciation 14,651 12,298
--------- ---------
24,887 15,248
--------- ---------
Goodwill, less accumulated amortization of
$2,949 in 1995 and $2,761 in 1994, respectively 3,073 3,261
--------- ---------
Other Assets 909 882
--------- ---------
$ 110,093 $ 99,061
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings and current portion
of long-term debt $ 24,757 $ 11,564
Accounts payable 12,809 7,731
Accrued expenses 6,255 5,301
Accrued income taxes 1,514 1,906
--------- ---------
Total current liabilities 45,335 26,502
--------- ---------
Long-Term Debt 16,832 19,391
--------- ---------
Other Noncurrent Liabilities 608 699
--------- ---------
Deferred Income Taxes 1,361 1,368
--------- ---------
Shareholders' Equity:
Common stock, $.01 par value; shares
authorized - 15,000,000; issued -
5,422,070 in 1995 and 1994 54 54
Additional paid-in capital 28,203 27,674
Retained earnings 40,241 34,481
Cumulative translation adjustments (2) (76)
Deferred cost - Employee Stock Ownership
Plan ("ESOP") (6,442) (6,679)
Unrealized investment holding gains, net 6 --
--------- ---------
62,060 55,454
Less - Common stock in treasury, at
cost - 1,680,373 shares in 1995 and
443,540 in 1994 16,103 4,353
--------- ---------
45,957 51,101
--------- ---------
$ 110,093 $ 99,061
========= =========
See accompanying notes to financial statements.
2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1995 1994 1995 1994
-------- -------- -------- ---------
(Dollars in thousands,
except per share amounts)
<S> <C> <C> <C> <C>
Net Sales $ 42,758 $ 30,831 $ 114,462 $ 81,060
Cost of Sales 28,752 21,782 77,586 56,234
--------- --------- --------- ---------
Gross profit 14,006 9,049 36,876 24,826
--------- --------- --------- ---------
Operating Expenses:
Selling, general
and administrative 8,587 6,144 22,751 17,875
Research and development 1,234 888 3,712 3,059
Other income, net (113) (60) (240) (171)
--------- --------- --------- ---------
9,708 6,972 26,223 20,763
--------- --------- --------- ---------
Operating income 4,298 2,077 10,653 4,063
Interest(Income)Expense, Net 500 231 1,412 407
--------- --------- --------- ---------
Income before income taxes 3,798 1,846 9,241 3,656
Income Taxes 1,409 658 3,481 1,275
--------- --------- --------- ---------
Income Before Cumulative
Effect of Accounting Change 2,389 1,188 5,760 2,381
Cumulative Effect of Accounting
Change to SFAS No. 109-
Income Taxes -- -- -- 238
--------- --------- --------- ---------
Net Income $ 2,389 $ 1,188 $ 5,760 $ 2,619
========= ========= ========= =========
Earnings Per Common Share:
Before cumulative effect of
accounting change $ .73 $ .24 $ 1.68 $ .47
Cumulative effect of accounting
change to SFAS No. 109-
Income Taxes -- -- -- .05
--------- --------- --------- ---------
After cumulative effect of
accounting change $ .73 $ .24 $ 1.68 $ .52
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
July 31,
1995 1994
-------- --------
(Dollars in thousands)
Cash flows from operating activities:
Net income $ 5,760 $ 2,619
Noncash items included in income:
Depreciation and amortization 2,541 2,387
Cumulative effect of accounting change -- (238)
Deferred income taxes (797) (503)
Deferred costs 305 136
Decrease (increase) in -
Accounts receivable, net (5,122) (2,500)
Inventories (3,295) (5,200)
Prepaid expenses and other assets 479 (262)
Increase (decrease) in -
Accounts payable 5,078 606
Accrued expenses 954 276
Accrued income taxes (392) 416
-------- --------
Net cash provided by (used for)
operating activities 5,511 (2,263)
-------- --------
Cash flows from investing activities:
Cash used for acquisition of property, plant
and equipment (11,992) (3,898)
Cash used for acquisitions -- (1,571)
Cash from (used for) short-term investments 9,119 (854)
Other - net (27) (101)
-------- --------
Net cash used for investing activities (2,900) (6,424)
-------- --------
Cash flows from financing activities:
Cash used for treasury stock (11,750) --
Proceeds from exercise of stock options 251 17
Tax benefits from exercised stock options 119 3
Short-term borrowings, net 13,193 12,541
Cash repayments of long-term debt (2,559) (2,771)
Other - net 80 63
-------- --------
Net cash provided by (used for) financing
activities (666) 9,853
-------- --------
Net increase in cash and cash equivalents 1,945 1,166
Cash and cash equivalents at beginning of period 2,188 900
-------- --------
Cash and cash equivalents at end of period $ 4,133 $ 2,066
======== ========
See accompanying notes to financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
Nine Months Ended
July 31,
1995 1994
-------- --------
(Dollars in thousands)
Supplemental disclosures of cash flow
information:-
Cash paid (received) during the period for:
Interest expense $ 1,914 $ 822
======== ========
Income taxes $ 4,670 $ 1,600
======== ========
Interest income $ (677) $ (698)
======== ========
Supplemental schedule of non-cash
financing activities:-
Refinancing of short-term borrowings
with long-term debt $ -- $ 20,000
======== ========
Note payable issued in asset
acquisition $ -- $ 200
======== ========
See accompanying notes to financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation:
The condensed 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
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These statements include all adjustments that, in the
opinion of management, are necessary to provide a fair statement of the results
for the periods covered. These financial statements should be read in
conjunction with the audited financial statements and the notes thereto included
in the Company's Form 10-K for the year ended October 31, 1994. The results of
operations for the interim periods presented are not necessarily indicative of
the results for the full year.
(2) Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consist of the following:
July 31, October 31,
1995 1994
-------- -----------
(Dollars in thousands)
Raw Materials and Work in Process $10,277 $ 9,179
Finished Goods 21,671 19,474
------- -------
$31,948 $28,653
======= =======
(3) Effect of Accounting Change to AICPA Statement of Position
No. 93-6, Employers' Accounting for Employee Stock Ownership
Plans:
The Company has an Employee Stock Ownership Plan ("ESOP") which covers
certain employees not covered by collective bargaining agreements. The ESOP owns
780,000 common shares of the Company, 750,000 of which were acquired in a
leveraged transaction at $9.70 per share in April 1993. The 750,000 common
shares are being allocated to the employees and the related cost is being
amortized over a 15 year period that started in fiscal 1993, in accordance with
the ESOP plan provisions.
In the first quarter of 1995, the Company adopted AICPA Statement of
Position No. 93-6, "Employers' Accounting for Employee Stock Ownership Plans"
("SOP"). The SOP requires recognition of compensation expense for shares
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
allocated to employees based on the fair market value of those shares in the
period in which they are allocated. The difference between cost and fair
market value of such allocated common shares is recorded in additional paid-in
capital. In addition, unallocated ESOP shares are excluded from outstanding
shares for earnings per share ("EPS") calculations.
The ESOP shares as of July 31, 1995 are summarized as follows:
Allocated shares 91,000
Committed to be released shares 24,000
Unreleased shares 665,000
-----------
Total ESOP shares 780,000
===========
Fair value of unreleased
shares at July 31, 1995 $19,534,000
===========
The ESOP plan expense for the nine-month periods ended July 31, 1995
and 1994 was $406,000 and $224,000, respectively. Such expense for the
three-month periods ended July 31, 1995 and 1994 was $193,000 and $74,000,
respectively.
(4) Earnings Per Common Share:
Earnings per common share are computed using the weighted average
number of shares of common stock and common stock equivalents outstanding
(dilutive stock options) during the periods (3,288,000 and 4,991,000 for the
three-month periods ended July 31, 1995 and 1994, respectively; 3,422,000 and
5,013,000 for the nine-month periods ended July 31, 1995 and 1994,
respectively).
In the first quarter of 1995, the Company adopted SOP No. 93-6,
"Employers' Accounting for Employee Stock Ownership Plans" as discussed in Note
3. Under the provisions of this new accounting rule, unallocated shares of the
Company's stock in the ESOP are excluded from the average number of common
shares outstanding when computing earnings per share. In accordance with this
new rule, 670,000 unallocated ESOP shares were excluded from the average number
of common shares outstanding in the third quarter of fiscal 1995 and 672,000
were excluded for the nine-month period ending July 31, 1995. As of July 31,
1994, there were 697,000 ESOP common shares outstanding that would not be
considered outstanding for EPS calculations should SOP No. 93-6 have been
adopted in fiscal 1994. As required by the SOP, the restatement of prior
financial statements is not permitted.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(5) Common Stock Repurchase:
On December 21, 1994 the Company repurchased 1,236,833 shares of its
common stock that were under the control of one investment management company
for the beneficial interest of various clients for which it acts as an
investment adviser. The repurchase price was $9.50 per share for an aggregate
purchase price of $11,750,000. These shares are being held in the treasury for
possible future issuance.
(6) Capitalized Interest:
The interest cost incurred by the Company for the third quarter of
fiscal 1995 and 1994 amounted to $711,000 and $380,000, respectively. Interest
cost incurred for the nine-month periods ended July 31, 1995 and 1994 amounted
to $1,956,000 and $867,000, respectively. The Company capitalized $115,000 of
interest cost in the third quarter of fiscal 1995 and $200,000 for the nine
months ended July 31, 1995 in accordance with Statement of Financial Accounting
Standards No. 34 Capitalization of Interest Cost. No interest was capitalized in
the prior year. As the Company expands and improves its manufacturing facilities
or equipment, it includes in the cost of these assets a portion of the interest
payments it makes related to borrowings for the assets during the construction
phase. All of the interest capitalized in the period is related to the
manufacturing facility for piping system components.
(7) Effect of Accounting Change to Statement of Financial
Accounting Standards No. 115 - Accounting for Certain
Investments in Debt and Equity Securities:
In the first quarter of fiscal 1995, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115 Accounting for Certain
Investments in Debt and Equity Securities. The Company classifies its investment
holdings as available-for-sale, uses the specific identification method of
determining cost, and all investments are classified as current assets. For the
three-month and nine-month periods ended July 31, 1995, gross realized and
unrealized investment gains and losses were not material and net unrealized
investment holding gains of $6,000 have been recorded as a separate component of
shareholders' equity as of July 31, 1995. The gross proceeds on sales and
maturities of investments for the three months ended July 31, 1995 were
$3,080,000 and were $19,500,000 for the nine months ended July 31, 1995.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(8) Cumulative Effect of Accounting Change to Statement of
Financial Accounting Standards No. 109-Income Taxes:
In the first quarter of 1994, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109-Accounting for Income Taxes. The
Company elected to record the cumulative effect of this accounting change by the
recognition of a one-time
gain of $238,000 or $.05 per common share.
(9) Acquisition:
The Company purchased effective July 15, 1994, substantially all of the
business assets of a southeastern company primarily engaged in manufacturing
components for piping systems for a purchase price of approximately $1.8
million. The assets consist primarily of property, plant and equipment and were
subject to the assumption of certain obligations which reduced the $1.8 million
cash payment of the purchase price. The Company is currently engaged in a
substantial expansion of such facility to accommodate the production of new
products. This expansion is expected to cost a total of approximately
$13,500,000 and be completed in January 1996.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net Sales. Net sales for the third quarter of fiscal 1995 increased 38.7% to
$42,758,000 from the same period of fiscal 1994. Such sales were $11,927,000
greater than the $30,831,000 recorded in the third quarter of fiscal 1994. Net
sales for the first nine months of fiscal 1995 were $114,462,000, 41.2% greater
than the sales for the comparable nine-month period of fiscal 1994. The increase
in sales for both the three-month and nine-month periods of fiscal 1995 are
primarily the result of continuing strong market demand for fire sprinklers and
related products. Growth in the new construction market and higher levels of
product usage in the retrofit market continue to bolster strong market demand
for the Company's range of products. The Company continued to experience sales
gains in virtually all major product groups. The Company's major product line of
fire sprinklers experienced strong sales gains particularly for its Optima (TM)
and Glass Bulb models. The Optima (TM) fire sprinkler model set a new sales
record in the quarter ended July 31, 1995. Significant sales gains continued to
be experienced in other product lines including CPVC plastic, steel pipe and
pipe fittings. The Company's programs to develop and expand the production and
marketing of pipe and fittings products continued to significantly increase
sales of these products.
Cost of Sales and Gross Profit. Cost of sales, in terms of dollars of expense
increased 32.0% and 38.0% for the three-month and nine-month periods ended July
31, 1995, respectively, over the same periods for fiscal 1994. The Company's
cost of sales for the third quarter of fiscal 1995 was 67.2% of net sales and
70.6% for the third quarter of fiscal 1994. This resulted in a gross margin
percentage of 32.8% in the third quarter of fiscal 1995 compared to 29.4% in the
third fiscal quarter of 1994. For the first nine-months of fiscal 1995, the
gross profit margin percentage was 32.2% of net sales compared to 30.6% for the
same period of fiscal 1994. The gross profit margin percentage for the third
quarter of fiscal 1995 improved to 32.8% from the 31.9% experienced in the first
six months of fiscal 1995. The gross profit margin increases in the three-month
and nine-month periods of fiscal 1995 as compared to the same periods of fiscal
1994 and from the first six months of fiscal 1995 are due primarily to a
stronger sales mix of higher margin product lines. Other factors include
additional contributions from new products, certain price increases that were
put into effect in fiscal 1995, and lower costs of certain products. The
increase in production of manufactured fire sprinkler products to meet market
demand has increased utilization of the Company's production capacity. This has
resulted in a lower unit product cost for certain products due primarily to
10
<PAGE>
certain production efficiencies and absorption of fixed production costs over a
greater number of units. The gross profit margin percentage for the three-month
and nine-month periods ended July 31, 1995 was somewhat lower than expected due
to costs related to the continuing expansion and startup of the manufacturing
facility for piping products acquired in late fiscal 1994. The gross profit
margin was also negatively impacted by price increases to the Company from
suppliers of certain materials in fiscal 1995.
Operating Expenses. Operating expenses for the third quarter of fiscal 1995
increased 39.2% from the third quarter of fiscal 1994. The overall increase in
operating expenses was primarily comprised of an increase in Selling, General
and Administrative expenses of 39.8% and an increase in Research and Development
expenses of 39.0%. Selling and Marketing costs also comprised the majority of
the increase in operating expenses in both the three-month and nine-month
periods. For the first nine months of fiscal 1995, operating expenses increased
26.3% from the amount for the first nine months of fiscal 1994. The overall
increase for the first nine months of fiscal 1995 was primarily comprised of an
increase in Selling, General and Administrative expenses of 27.3% and an
increase in Research and Development expenses of 21.3%. For both the three-month
period and nine-month period ended July 31, 1995 as compared to the same periods
of fiscal 1994, the majority of the increase in the Selling, General and
Administrative expenses is directly due to the increased sales volume. The cost
increases included higher sales personnel costs, commissions, travel and
entertainment and certain marketing costs. Distribution facility costs increased
due to increased personnel, freight and other costs necessary to handle the
increased sales volume. Distribution costs also increased due to certain space
expansions and the opening of three new distribution centers in late 1994 in
Salt Lake City, Utah, Greensboro, North Carolina and Portland, Oregon. In July
1995, the Company also opened a new distribution center in Singapore. During the
third quarter, the Company also started a project to increase the efficiency of
its distribution centers and to increase service to its customers.
Administrative expenses also increased for the three- and nine-month periods of
fiscal 1995 due in part to higher personnel costs, fringe benefits and legal
costs. Higher legal costs were incurred in our Optima (TM) patent defense
litigation. Higher fringe benefits include costs of the Employee Stock Ownership
Plan (ESOP) due to the increase in the Company's stock price. ESOP expense is
recorded based upon the shares allocated to the employees each month using the
Company's average stock price for the period. In fiscal 1995 as compared to
fiscal 1994, increased numbers of general and administrative personnel were also
required to provide necessary services to support the Company's growth. The
Company continues its emphasis on research and development to develop new and
improved products. The research and development expense increases for the third
11
<PAGE>
quarter and nine-month period of fiscal 1995 were primarily due to the higher
number of personnel, fringe benefits and in developing and testing of new and
improved products.
Interest (Income) Expense, Net. Net interest expense of $500,000 and $1,412,000
was incurred in the three-month and nine-month periods of 1995, respectively,
compared to net interest expense of $231,000 and $407,000 for the third quarter
and nine months ended July 31, 1994. These changes are due to an increase in
interest expense of $216,000 and a decrease in interest income of $53,000 for
the third quarter of fiscal 1995 and an increase in interest expense of $889,000
and a decrease in interest income of $116,000 for the nine-month period of
fiscal 1995. The higher interest expense was primarily due to an increase in
debt between the periods. For the three-month and nine-month periods ended July
31, 1995, the Company capitalized $115,000 and $200,000, respectively, of
interest costs relating to the increasing debt for the piping products
manufacturing facility expansion. Short and long-term debt totaled $41,589,000
at July 31, 1995 as compared to $28,971,000 at July 31, 1994. The additional
debt was required to repurchase treasury stock, to fund the Company's capital
expenditures in primarily manufacturing and distribution expansions, and to
provide for increased working capital needs. The Company also had increased
interest income due to higher interest rates on its investment portfolio which
were offset by a reduction in interest income due to a lower investment balance.
Income Taxes. The Company's effective tax rate for the third quarter of fiscal
1995 was 37.1% compared to 35.6% in the comparable period of fiscal 1994. For
the nine-month period of fiscal 1995, the effective income tax rate was 37.7%
compared to 34.9% in the comparable period in 1994. The overall effective income
tax rate includes a higher effective state income tax rate due to several
factors that also increased the effective federal income tax rate. One factor is
a substantial reduction in the nontaxable investment income in fiscal 1995
resulting from a lower balance in investments. The Company also expects a higher
level of pretax income and proportionately lower amounts of nontaxable income
and anticipated tax credits in fiscal 1995.
Seasonal Aspects of Business. The Company's sales are affected by seasonal
factors as well as the level of new construction activity, remodeling and
retrofitting of older properties in the industrial, commercial, residential and
institutional real estate markets. The Company's sales tend to increase the most
when there is a high level of new construction activity in all such real estate
markets. In addition, as a result of relatively higher levels of new
construction during the warmer spring and summer months, the demand for
sprinkler system components tends to be greater during the summer and fall than
during other seasons.
12
<PAGE>
FINANCIAL CONDITION
July 31, 1995 Compared to October 31, 1994
Cash, Cash Equivalents and Short-Term Investments. Cash, cash equivalents and
short-term investments totaled $13,348,000 as of July 31, 1995 as compared to
$20,522,000 at October 31, 1994. The $7,174,000 decrease was due principally to
the use of $11,750,000 in December 1994 for the repurchase of 1,236,833 shares
of the Company's common stock for the treasury.
Inventories. Inventories totaled $31,948,000 at July 31, 1995 as compared to
$28,653,000 at October 31, 1994. The $3,295,000 increase in inventories was
comprised of an increase of $1,098,000 in raw materials and work in process and
an increase of $2,197,000 in finished goods. The increase in raw materials and
work in process was primarily due to material requirements to meet the increase
in product demand. The increase in finished goods was due to a continued strong
demand for fire sprinklers and related products and building product inventories
to meet the anticipated demand which is seasonally strong in the summer and
fall. The Company has also increased its inventory levels at three distribution
centers opened in late 1994, has produced additional finished goods to supply
our new distribution center in Singapore, and has introduced new products into
virtually all of its warehouse distribution centers.
Property, Plant and Equipment. The Company's property, plant and equipment rose
by $11,992,000 to $39,538,000 at July 31, 1995. Approximately $9,300,000 of this
increase is due to the continuing expansion of the manufacturing facility for
piping products that was acquired in July 1994. Funds have also been used to
expand research and development facilities and add machinery and equipment to
increase productive capacity.
Total Debt. The Company's total debt increased to $41,589,000 at July 31, 1995
as compared to $30,955,000 at October 31, 1994. The additional borrowings of
$10,634,000 were used primarily to fund the expansion of the piping products
facility and, in part, to finance increases in accounts receivable, inventories
and for other working capital needs resulting from the Company's growth. The
funds were principally borrowed under the Company's lines of credit from banks.
Liquidity and Capital Resources. The Company's primary sources of long-term and
short-term liquidity are its current financial resources, projected cash from
operations and its borrowing capacity. The Company believes that these sources
are sufficient to fund the programs necessary for future growth and expansion.
Cash, cash equivalents and short-term investments decreased $7,174,000 to
$13,348,000 as of July 31, 1995. The Company used cash of $11,750,000 to
repurchase 1,236,833 shares of the Company's common stock for the treasury. Cash
13
<PAGE>
provided by operating activities for the nine months ended July 31, 1995 totaled
$5,511,000. This was an improvement from the nine-month period of fiscal 1994,
when $2,263,000 was used for operating activities. The additional funds were
provided by a greater amount of net income and an increase in accounts payable
in the 1995 period and a smaller increase in inventories in 1995 than in the
1994 period. In fiscal 1995, the Company improved cash flow through enhanced
inventory management, stronger collection efforts and other means. Cash was used
for the purchase of $11,992,000 of property, plant, and equipment during the
nine-month period primarily to expand and enhance manufacturing capacity.
Approximately $9,300,000 has been used on the expansion of the Company's piping
products manufacturing facility acquired in July 1994. The Company's net
short-term borrowings for the nine-month period amounted to $13,193,000 and
long-term debt repayments were $2,559,000 in the period. The Company's cash,
cash equivalents and short-term investments are comprised of funds on deposit
and various government and corporate obligations which, along with the Company's
borrowing capacity, provide adequate liquidity to meet the Company's
obligations.
The Company purchases property, plant and equipment from time to time to
maintain and expand its offices, manufacturing plants, research facilities, and
distribution centers. The Company has expanded and improved its operations over
the years with such purchases and the Company intends to continue this policy.
The Company has commitments in the ordinary course of business for such
expansions of facilities and equipment and for research and other contracts. The
Company expects that such sources of liquidity will be sufficient to fund these
expenditures as they occur. In addition, the Company has made certain
commitments to expand and improve the manufacturing facility for piping system
components bought in late fiscal 1994. Capital expansions and improvements of
the facility have been made through July 31, 1995 that total approximately
$9,300,000. The Company has committed a total of approximately $13,500,000 for
the expansion and improvement of such facility which includes a new assembly and
office building, a manufacturing plant expansion and various machinery and
equipment for existing and new product lines. It is expected that such
improvements will be completed in January 1996. The Company intends to meet
these requirements for funds from cash provided by operations and from further
borrowings.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following document is filed as an Exhibit and attached as follows:
Exhibit 11 -- Computation of Earnings Per Common Share
Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended July 31,
1995.
15
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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.
CENTRAL SPRINKLER CORPORATION
-----------------------------
(Registrant)
/s/ George G. Meyer
------------------------------
George G. Meyer
Chief Executive Officer
DATE: September 12, 1995
----------------------------
/s/ Albert T. Sabol
------------------------------
Albert T. Sabol
Vice President-Finance
(Principal Financial and
Accounting Officer)
16
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Exhibit 11
CENTRAL SPRINKLER CORPORATION
EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
July 31, July 31,
1995 1994 1995 1994
---- ---- ---- ----
(Amounts in thousands,
except per share amounts)
<S> <C> <C> <C> <C>
Income before cumulative effect
of accounting change $ 2,389 $ 1,188 $ 5,760 $ 2,381
Cumulative effect of accounting
change to SFAS No. 109-
Income Taxes -- -- -- 238
------- ------- ------- -------
Net income $ 2,389 $ 1,188 $ 5,760 $ 2,619
======= ======= ======= =======
Average number of common shares
outstanding 3,730 4,953 3,948 4,953
Adjustment to exclude average
unallocated common shares in ESOP (670) -- (672) --
Adjustment for assumed conversion
of stock options 228 38 146 60
------- ------- ------- -------
Average number of common shares 3,288 4,991 3,422 5,013
======= ======= ======= =======
Earnings per common share:
Before cumulative effect of
accounting change $ .73 $ .24 $ 1.68 $ .47
Cumulative effect of accounting
change to SFAS No. 109-
Income Taxes -- -- -- .05
------- ------- ------- -------
After cumulative effect of
accounting change $ .73 $ .24 $ 1.68 $ .52
======= ======= ======= =======
</TABLE>
Note: The total of the quarterly earnings per share may not equal the
year-to-date earnings per share due to changes in the number of shares
outstanding.
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000766041
<NAME> CENTRAL SPRINKLER CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> OCT-31-1995 OCT-31-1995
<PERIOD-START> MAY-01-1995 NOV-01-1994
<PERIOD-END> JUL-31-1995 JUL-31-1995
<CASH> 4,133 4,133
<SECURITIES> 9,215 9,215
<RECEIVABLES> 34,136 34,136
<ALLOWANCES> 4,107 4,107
<INVENTORY> 31,948 31,948
<CURRENT-ASSETS> 81,224 81,224
<PP&E> 39,538 39,538
<DEPRECIATION> 14,651 14,651
<TOTAL-ASSETS> 110,093 110,093
<CURRENT-LIABILITIES> 45,335 45,335
<BONDS> 16,832 16,832
<COMMON> 54 54
0 0
0 0
<OTHER-SE> 45,903 45,903
<TOTAL-LIABILITY-AND-EQUITY> 110,093 110,093
<SALES> 42,758 114,462
<TOTAL-REVENUES> 42,758 114,462
<CGS> 28,752 77,586
<TOTAL-COSTS> 28,752 77,586
<OTHER-EXPENSES> 9,708 26,223
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 500 1,412
<INCOME-PRETAX> 3,798 9,241
<INCOME-TAX> 1,409 3,481
<INCOME-CONTINUING> 2,389 5,760
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,389 5,760
<EPS-PRIMARY> .73 1.68
<EPS-DILUTED> .73 1.68
</TABLE>
