SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 27, 1994
Imo Industries Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9294 21-0733751
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
3450 Princeton Pike
Lawrenceville, New Jersey 08648
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 609-896-7600
Not Applicable
(Former name or address if changed since last report)
IMO INDUSTRIES INC.
Form 8-K Current Report
Item 5. Other Events.
On January 27, 1994, the Registrant's Board of Directors
announced that the Registrant had recorded for the fourth
quarter of 1993 a loss from discontinued operations of $198
million, unusual items of approximately $24 million, and non-
recurring tax provisions of $15 million. The Registrant
added its Electro-Optical Systems business to its asset
divestiture program, and that business is now being
accounted for as a discontinued operation. The Registrant's
press release announcing such action as well as its
unaudited fourth quarter and full year results is filed
herewith as an exhibit.
On January 28, 1994, the Registrant commenced solicitation
of consents of holders of its 12-1/4 % Senior Subordinated
Debentures Due 1997 to an amendment of the indenture
pursuant to which such Debentures were issued for the
purpose of allowing the Registrant and its subsidiaries to
borrow an additional $35 million above December 31, 1993
senior debt outstandings.
The fourth quarter charges described above resulted in the
Registrant being in non-compliance with certain financial
covenants in its senior lending agreements; however, the
Registrant has obtained agreement from its senior lenders
that the charges will not prohibit the Registrant from
obtaining new letters of credit from these lenders.
Permanent waivers of the defaults from the Registrant's
senior lenders are contingent upon receipt of the forgoing
consent from the holders of the Registrant's 12-1/4 % Senior
Subordinated Debentures Due 1997.
Item 7. Exhibits.
The following exhibit is being filed with this report:
Exhibit No. Exhibit
1 Press release dated
January 27,1994 by
Imo Industries Inc.
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 hereto duly
authorized.
Imo Industries Inc.
(Registrant)
Date: February 1, 1994 By:/s/ WILLIAM M. BROWN
William M. Brown
Executive Vice President
and Chief Financial Officer
Exhibit 1 - Press release dated January 27, 1994 by Imo Industries Inc.
For additional information contact:
Paul B. Lazovick
Director of Investor Relations
609-896-7615
FOR IMMEDIATE RELEASE
IMO INDUSTRIES ANNOUNCES ACTIONS TO STRENGTHEN COMPANY
REPORTS UNAUDITED FOURTH QUARTER AND FULL YEAR 1993 RESULTS
LAWRENCEVILLE, NJ, January 27, 1994 - Donald
K. Farrar, President and Chief Executive Officer
of Imo Industries Inc. (NYSE-IMD), announced today
that Imo's Board of Directors has approved a
series of actions designed to strengthen the
Company and make it a more cost-effective
competitor. As a result of these actions, Imo
recorded for the fourth quarter of 1993 a loss from
discontinued operations of $198 million, unusual
items of approximately $24 million, and non-
recurring tax provisions of $15 million.
Mr. Farrar stated that, "The Board has
approved adding Electro-Optical Systems to the
Company's asset divestiture program, and that
business is now being accounted for as a
discontinued operation. The charges relate to the
anticipated loss on disposal of the Electro-
Optical Systems operations (consisting of Imo's
subsidiaries Varo Inc. and Baird Corporation),
reserves for expenses and related termination
costs to consolidate various plant operations,
reserves for previously recorded future tax
benefits, and provision for anticipated losses on
the sale of certain assets. Most of the charges
are non-cash.
"The anticipated loss of $168 million on
disposal of Electro-Optical Systems assets is
consistent with the impact of the post-cold war
slowdown in defense spending on our Electro-
Optical Systems operations and its recent
performance. The group had a loss from operations
in 1993 of $45 million. Selling the business will
help Imo to reduce its debt, halt further cash
drain, and concentrate the Company's focus on its
non-defense core businesses. We have engaged CS
First Boston to assist us with the sale, which we
expect to accomplish in 1994.
"The steps we are taking, combined with the
Company's previously announced divestiture and
debt-reduction initiatives, will create a more
efficient and a more competitive Imo, with a
sharper focus on its core businesses. These actions
will lower our cost of doing business and hasten
our earnings improvement. Benefits from these actions
will be realized beginning in 1994, and increased savings
will be realized in subsequent years. As a consequence,
we expect to report a profit for 1994.
"In Imo's third quarter report to shareholders
I noted that Imo's expense structure is too high
for its present size, and that it is configured
with too many small operating units around the world.
Cost-cutting measures to address these issues
include consolidating our four domestic turbo-
machinery aftermarket maintenance divisions into
one TurboCare division, which will allow us to
reduce the number of facilities and to eliminate
duplicative functions; consolidating certain
operations in our European mechanical controls and
automotive components divisions; and revising
operating processes and reducing employment levels
at our turbomachinery, pumps and other operations.
The number of employees company-wide is forecast
to decline by approximately 700, or 11%, between
mid-1993 and mid-1994. Charges related to these
actions amount to approximately $9 million in loss
from continuing operations. The restructurings
are expected to provide net cash benefits of
approximately $4 million in 1994 and $15 million
in 1995.
"As a result of the loss recorded in the
fourth quarter of 1993, the Company provided
reserves of $15 million against previously
recorded future tax benefits. These tax benefits
may be realized in future years.
"Our asset divestiture program, first
announced in the latter part of 1992, has
generally proceeded as planned, with the sale of
six divisions for a total of approximately $91
million. Proceeds from these sales have been used
to reduce senior debt. Total debt at the end of
the year was $408 million, down from $480 million
at the end of 1992. However, based on current
conditions, we believe that certain remaining
assets designated for sale, both operating units
and land, are unlikely to net the sale prices
originally expected. Therefore, we are providing
approximately $10 million in loss from continuing
operations for the loss we now anticipate for that
program as a whole."
While the fourth quarter charges resulted in
the Company being in non-compliance with certain
financial covenants in its senior lending
agreements, the Company has obtained agreement
from its senior lenders that the charges will not
prohibit the Company from obtaining new letters of
credit from these lenders. The Company is seeking
consent of the holders of its 12.25% Senior Subordinated
Debentures due 1997 primarily because the fourth
quarter charges limit the ability of the Company's
subsidiaries to continue to fund their operations.
Permanent waivers of the defaults from the senior
lenders are contingent upon receipt of the requested
consent from the Debenture holders.
FOURTH QUARTER AND FULL-YEAR RESULTS
(unaudited)
Largely as the result of unusual items and tax
reserves, Imo had a loss from continuing operations of
$47.8 million ($2.82 per share) in the fourth quarter of
1993 and $39.1 million ($2.32 per share) for the year.
This compares with a profit of $3.9 million ($0.23 per share)
in the fourth quarter of 1992 and a loss of $22.3 million
($1.32 per share) for the year.
Excluding unusual items and tax reserves, the
loss from continuing operations was $9.0 million in the
fourth quarter of 1993 and $6.4 million for the year. This
compares with a profit of $3.9 million in the fourth quarter of
1992 and a loss of $6.0 million for the year.
Including extraordinary items and discontinued
operations, there was a net loss of $245.6 million in the
fourth quarter and $270.6 million for the year.
Sales from continuing operations in the fourth quarter were
$153.1 million, down 24% from $201.9 million in the fourth quarter
of 1992. Sales from continuing operations for the full year
1993 were $641.7 million, down 13% from $733.6 million the prior
year. Adjusted for divestitures and changes in foreign exchange
rates, fourth quarter and full year sales were down 11% and 4%
respectively.
Backlog for continuing operations at year-end 1993 was $210
million, compared with $242 million at the start of the period
adjusted to give effect to asset sales.
IMO INDUSTRIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Amounts in thousands, except per share data)
Three Months Ended December 31
(Unaudited)
1993 1992(a)
Net Sales (a) $153,067 $201,871
Gross Profit 39,810 56,505
Unusual Items (a)(b) (23,726) ---
Segment Operating Income (Loss) (a)(b) (15,226) 20,485
Income (Loss) From Continuing
Operations Before Income Taxes,
Minority Interest, Extraordinary
Item and Cumulative Effect of
Accounting Change (b) (32,697) 5,635
Income Taxes (c) 15,000 1,809
Minority Interest 58 (66)
Income (Loss) From Continuing
Operations Before Extraordinary
Item and Accounting Change (47,755) 3,892
Discontinued Operation, Net of Taxes:(a)
Loss from Operations (29,789) (3,559)
Estimated Loss on Disposal (168,014) ---
(197,803) (3,559)
Income (Loss) Before Extraordinary
Item and Accounting Change (245,558) 333
Extraordinary Item --- ---
Cumulative Effect of Change
in Accounting Principle --- ---
Net Income (Loss) ($245,558) $333
Earnings (Loss) Per Share:
Before Extraordinary Item
and Accounting Change:
Continuing Operations ($2.82) $0.23
Discontinued Operation ($11.70) ($0.21)
Net Income (Loss) ($14.52) $0.02
Average Shares Outstanding 16,911 16,874
Bookings: (a)
Core Operations $121,515 $126,993
Divestiture Businesses 8,539 22,241
Total Bookings $130,054 $149,234
See attached notes.
Twelve Months Ended December 31
(Unaudited)
1993 1992(a)
Net Sales (a) $641,709 $733,603
Gross Profit 182,940 187,807
Unusual Items (a)(b) (17,726) (24,000)
Segment Operating Income (a)(b) 32,512 21,486
Income (Loss) From Continuing
Operations Before Income Taxes,
Minority Interest, Extraordinary
Item and Cumulative Effect of
Accounting Change (b) (23,977) (32,168)
Income Taxes (c) 15,000 (10,326)
Minority Interest 164 418
Income (Loss) From Continuing
Operations Before Extraordinary
Item and Accounting Change (39,141) (22,260)
Discontinued Operation, Net of Taxes:(a)
Loss from Operations (45,316) (32,740)
Estimated Loss on Disposal (168,014) ---
(213,330) (32,740)
Income (Loss) Before Extraordinary
Item and Accounting Change (252,471) (55,000)
Extraordinary Item (d) (18,095) ---
Cumulative Effect of Change
in Accounting Principle (e) --- (27,590)
Net Income (Loss) ($270,566) ($82,590)
Earnings (Loss) Per Share:
Before Extraordinary Item
and Accounting Change:
Continuing Operations ($2.32) ($1.32)
Discontinued Operation ($12.63) ($1.94)
Net Income (Loss) ($16.02) ($4.90)
Average Shares Outstanding 16,891 16,869
Bookings: (a)
Core Operations $530,361 $612,699
Divestiture Businesses 78,568 100,296
Total Bookings $608,929 $712,995
Backlog $210,024 $277,698
See attached notes.
IMO INDUSTRIES INC. AND SUBSIDIARIES
Financial Highlights
Excludes Discontinued Operations
(Dollars in thousands)
Three Months Ended December 31
(Unaudited)
1993 1992(a)
Net Sales: (a)
Core Operations $144,311 $172,330
Divestiture Businesses 8,756 29,541
Total Net Sales 153,067 201,871
Gross Profit: (a)
Core Operations 37,156 46,499
Divestiture Businesses 2,654 10,006
Total Gross Profit 39,810 56,505
Segment Operating Income (Loss): (a)
Core Operations (5,418) 16,452
Divestiture Businesses (9,808) 4,033
Total Segment Operating Income (Loss) (15,226) 20,485
Unallocated Items, Net (f) (7,175) (2,290)
Net Interest Expense (g) (10,296) (12,560)
Income (Loss) From Continuing
Operations Before Income Taxes,
Minority Interest, Extraordinary
Item and Cumulative Effect of
Accounting Change ($32,697) $5,635
Memo:
Unusual Items: (b)
Core Operations ($7,416) ---
Divestiture Businesses (10,100) ---
Unallocated Items, Net (6,210) ---
Total Unusual Items ($23,726) ---
Memo:
See attached notes.
Twelve Months Ended December 31
(Unaudited)
1993 1992(a)
Net Sales: (a)
Core Operations $561,298 $619,736
Divestiture Businesses 80,411 113,867
Total Net Sales 641,709 733,603
Gross Profit: (a)
Core Operations 158,824 153,505
Divestiture Businesses 24,116 34,302
Total Gross Profit 182,940 187,807
Segment Operating Income: (a)
Core Operations 30,408 28,545
Divestiture Businesses 2,104 (7,059)
Total Segment Operating Income 32,512 21,486
Unallocated Items, Net (f) (10,910) (4,236)
Net Interest Expense (g) (45,579) (49,418)
Income (Loss) From Continuing
Operations Before Income Taxes,
Minority Interest, Extraordinary
Item and Cumulative Effect of
Accounting Change ($23,977) ($32,168)
Memo:
Unusual Items: (b)
Core Operations ($7,416) ($8,000)
Divestiture Businesses (4,100) (16,000)
Unallocated Items, Net (6,210) ---
Total Unusual Items ($17,726) ($24,000)
Memo:
Total Indebtedness (h) $453,132 $515,866
See attached notes.
IMO INDUSTRIES INC. AND SUBSIDIARIES
Financial Highlights
(Dollars in thousands)
Three Mos. Ended Twelve Mos.Ended
Dec. 31, 1993 Dec. 31. 1993
(Unaudited) (Unaudited)
Memo:
Continuing Earnings Before Interest
and Taxes, Excluding Divestiture
Businesses, Unusual Items and
Significant Fourth Quarter
Adjustments (a) $9,187 $41,748
Depreciation and Amortization -
Core Businesses (a) 5,627 23,688
Capital Expenditures- (a) 4,499 12,682
Core Businesses
Cash Interest Expense, net (g)(i) 9,497 43,396
Memo:
Net Loss ($245,558) ($270,566)
Add Back: Minority Interest 58 164
(245,500) (270,402)
Add Back:
Extraordinary Item (d) --- 18,095
Unusual Items and Significant
Fourth Quarter Adjustments:
Unusual Items:
Continuing Operations (b) 23,726 17,726
Discontinued Operations:
Estimated Loss on Disposal (a) 168,014 168,014
191,740 185,740
Significant Fourth Quarter
Adjustments:
Non Cash Items:
Continuing Operations (j) 8,046 8,046
Discontinued Operations (j) 23,304 23,304
Tax Adjustments (c) 15,000 15,000
46,350 46,350
Total Unusual Items and
Significant
Fourth Quarter Adjustments 238,090 232,090
Discontinued Operations:
Loss From Operations
Before Unusual Items
and Significant Fourth Quarter
Adjustments (a) 6,485 22,012
Earnings Before Taxes,
Unusual Items,
Significant Fourth Quarter
Adjustments, Discontinued
Operations and Extraordinary Item (925) 1,795
Add Back:
Interest Expense (g) 10,404 46,157
Earnings Before Interest, Taxes,
Unusual Items, Significant
Fourth Quarter Adjustments,
Discontinued Operations and
Extraordinary Item 9,479 47,952
Exclude:
Income of Divestiture Businesses (a) (292) (6,204)
Continuing Earnings Before Interest and Taxes,
Excluding Divestiture Businesses,
Unusual Items and Significant
Fourth Quarter Adjustments $9,187 $41,748
See attached notes.
IMO INDUSTRIES INC. AND SUBSIDIARIES
(a) As shown on the Financial Highlights,
Continuing Operations have been grouped into two
catgories, Core Operations and Divestiture
Businesses. Core Operations represent those
business which are not included as Discontinued
Operations or Divestiture Businesses.
The Company has completed a significant portion
of its previously announced asset divestiture program.
The Company sold its Heim Bearings, Aerospace
and Barksdale Controls operations for proceeds of
approximately $91 million in 1993. Operations
from these businesses as well as businesses
remaining to be sold other than the Electro-
Optical business have been segregated from the
remaining core businesses of the Company and
are classified as Divestiture Businesses.
Pursuant to a plan approved by the Board of
Directors, the Company intends to sell its
Electro-Optical businesses. The sale of these
operations is planned to be consummated within
the year. The sale of this business is being
accounted for as a discontinued operation.
Accordingly, its operations have been shown in
the Condensed Consolidated Statements of Income
as Discontinued Operations and are not included
in Divestiture Businesses. The 1992 amounts have
been reclassified to conform to this presentation.
(b) The three months ended December 31, 1993
include unusual charges of $23.7 million in loss
from continuing operations. These charges
include $8.6 million related to the
restructuring and consolidation of certain of
the Company's operating units ($7.4 million
related to Core Operations and $1.2 million
included in Unallocated Items, Net), $10.1
million related to an expected loss, based
on current conditions, related to the
Company's asset divestiture program (included in
Divestiture Businesses), and $5 million in other
costs (included in Unallocated Items, Net).
The twelve months ended December 31, 1993 include
unusual charges of $17.7 million in loss from continuing
operations. These charges, as described above,
are net of unusual income of $6.0 million
(included in Divestiture Businesses), incurred
in the third quarter of 1993, as a result of a
change in estimate related to legal costs
associated with pending litigation.
The twelve months ended December 31, 1992 include
unusual charges of $24.0 million in loss from continuing
operations. These charges are principally provisions for
the estimated costs associated with pending litigation and
certain warranty and claim settlements ($8.0 million related
to Core Operations and $16.0 million related to Divestiture
Businesses).
(c) As a result of the loss recorded in the fourth quarter of 1993,
the Company provided reserves of $15.0 million against previously
recorded future tax benefits. These tax benefits may be realized
in future years.
(d) The twelve months ended December 31, 1993
includes an extraordinary charge of $18.1 million
representing fees and charges related to the restructuring of
the Company's senior credit facilities.
(e) The twelve months ended December 31, 1992 includes a charge
related to the adoption of Financial Accounting Standards Board
Statement No. 106 Employer's Accounting for Postretirement Benefits
Other Than Pensions. This charge has been reported as a cumulative
effect of a change in accounting principle and was adopted and
retroactively applied as of January 1, 1992.
(f) Unallocated items consists of corporate expenses not
specifically attributable to a segment of the business as well
as equity in income of unconsolidated subsidiary companies. The
fourth quarter of 1993 includes unusual charges of $6.2 million
related to unusual fees and restructuring charges. Equity in the
income of unconsolidated subsidiaries was $3.7 million less in 1993
than in 1992.
(g) Interest amounts included in income (loss) from continuing
operations for the three and twelve month periods ended December 31,
1993 and 1992, exclude interest allocated to the Discontinued
Operations of the Company. The amounts allocated are included in loss
from operations of discontinued operations, net of taxes.
Amounts indicated as net are net of interest income of $.1 million,
$.3 million, $.6 million and $.7 million for the three month periods
ended December 31, 1993 and 1992 and the twelve month periods
ended December 31, 1993 and 1992, respectively.
(h) In addition to notes payable to banks and long-term debt
(both current and long-term portions) totaling $408.3 million and
$479.7 million as of December 31, 1993 and 1992, respectively. Total
Indebtedness includes contingent obligations, principally letters of
credit and guarantees, totaling $44.8 million and $36.2 million as
of December 31, 1993 and 1992, respectively.
(i) Cash interest expense represents interest expense excluding
amortization of deferred debt issuance cost and interest allocated
to discontinued operations and includes interest income. Interest
allocated to Discontinued Operations for the three and twelve months
ended December 31, 1993 were $2.6 million and $10.2 million, respectively.
(j) The three and twelve month periods ended December 31, 1993
include significant non-cash adjustments of $8.0 million in loss
from continuing operations. These charges are principally related to
estimated costs associated with settlements of pending claims and
litigation of $5.0 million, and other costs of $3.0 related principally
to valuation of assets. While these charges are operational in nature,
it is not expected that they will reoccur at this level of magnitude
in the future.
The three and twelve month periods ended December 31, 1993 include
significant non-cash adjustments of $23.3 million, in loss from
operations of discontinued operations. These charges are
principally provisions for revised estimates-to-complete on current
contracts of $13.9 million, other costs of $5.6 million related
to the write-down of assets to net realizable value, $1.9 million
of estimated costs associated with settlements of pending
litigation and other costs of $1.9 million.
