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): July 18, 1996
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.)
1009 Lenox Drive, Building Four West
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.
A) - Second Quarter 1996 Results
In a press release dated July 18, 1996, the Registrant
reported results of operations for the second quarter
ended June 30, 1996.
The information set forth in this Item 5 - A is
qualified in its entirety by reference to the
Registrant's press release announcing such information,
which is filed herewith as an exhibit.
B) - Legal Update
LILCO Litigation
In June 1992, the Registrant filed an action
subsequently transferred to the U.S. District Court,
Southern District of New York, that is currently pending
against Granite State Insurance Co. ("Granite Sate") in
an attempt to collect amounts for defense costs paid to
counsel retained by the Registrant in defense of a
lawsuit brought against the Registrant by the Long
Island Lighting Company ("LILCO"). Additional
information with respect to the LILCO litigation was
previously reported in the Registrant's Form 10-K Report
for the year ended December 31, 1995 ("1995 10-K"). On
May 3, 1996, the Registrant and Granite State reached an
agreement in principle which will result in the
dismissal of all claims and counterclaims and the
elimination of all issues concerning the $20 million
payment previously made on behalf of the Registrant
under the terms of the Granite State policy. This
agreement preserves the Registrant's ability to seek
reimbursement of $8.5 million of defense costs
previously paid by the Registrant in connection with the
LILCO litigation from persons other than Granite State.
Ni-Tec Investigation
The activities of certain employees of the Ni-Tec
Division of the Registrant's Varo Inc. subsidiary ("Ni-
Tec"), headquartered in Garland, Texas, were the focus
of an investigation by the Office of the Inspector
General of the U.S. Department of Defense and the
Department of Justice (Criminal Division). Additional
information with respect to the Ni-Tec litigation was
previously reported in the Registrant's 1995 10-K. On
July 15, 1996 the Registrant reached an agreement with
the U.S. government to settle all claims related to this
investigation and a related qui tam Civil Action brought
in the U.S. District Court for the Northern District of
Texas by a former Varo employee who has consented to the
settlement. The U.S. government had recently notified
the Registrant that it intended to intervene in this
civil action which had been under seal. The settlement
involves the payment by Varo of approximately $2.0
million in consideration of, among other things,
dismissal of all civil and administrative claims under
the False Claims Act, 31 USC 3929 et seq., and the
Contract Disputes Act, 41 USC 601 et seq., and claims of
common law fraud and breach of contract. As a result of
the settlement, Varo will receive approximately $400,000
in contract payments which were being held by a prime
contractor pending resolution of Varo's dispute with the
government.
Item 7. Exhibits.
The following exhibit is being filed with this report:
Exhibit No. Exhibit
____________ ___________________
99 Press release dated
July 18, 1996 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: July 24, 1996 By: /s/ DONALD K. FARRAR
Donald K. Farrar
Chairman and Chief
Executive Officer
For additional information, contact:
R.A. Derr II
Vice President & Treasurer
Director, Investor Relations
(609) 896-7632
News Release
FOR IMMEDIATE RELEASE
IMO INDUSTRIES REPORTS SECOND QUARTER RESULTS
LAWRENCEVILLE, NJ (JULY 18, 1996) -- Imo Industries
Inc. (NYSE-IMD) today reported earnings of 12 cents a
share from continuing operations for the second quarter
ended June 30, 1996, compared with 17 cents a share for
the second quarter of last year.
Second quarter net income was adversely affected by an
extraordinary charge of $8.5 million or 49 cents a
share, representing non-recurring expenses related to a
recently completed debt restructuring. In late April,
Imo refinanced its senior domestic debt and all $220
million of its remaining subordinated debentures as
part of a program designed to strengthen the Company's
balance sheet and eliminate near-term debt maturities.
Costs incurred in connection with the early retirement
of this debt and the write-off of previously deferred
loan costs resulted in a net loss of $6.4 million or 37
cents a share for the second quarter, compared to net
income of $3.4 million or 20 cents a share in 1995.
Sales of $97.7 million were approximately the same as
last year's second quarter. Operating income slipped
7.5% below 1995, due primarily to lower sales and
earnings in the Power Transmission segment, whose
distributors appear to be reducing their inventory
levels in anticipation of a softening U.S. economy.
Bookings for the company as a whole continued to be
strong, with pump orders up significantly over last
year. Total bookings were 7% ahead of last year's
second quarter. The backlog at June 30 was 11% higher
than last year's comparable period.
For the first half of the year, earnings from
continuing operations were 28 cents a share, compared
with 33 cents a share a year earlier. Year-to-date
sales of $197 million were slightly ahead of the 1995
level for the comparable period. Operating income was
about the same as last year's mid-year performance.
"Imo made solid progress in the second quarter, despite
weakness in market demand for power transmission
products in the U.S. and the persistently weak economy
in Germany," said Donald K. Farrar, chairman and chief
executive officer.
"Our pump business continued its strong performance in
the second quarter, driven by a high level of global
capital spending, " Farrar said. "Year-to-date sales
are 15% higher than last year's mid-point and operating
income more than 35% ahead of last year. Incoming
orders are at the highest level in the Company's
history, up more than 25% over the 1995 total at mid-
year. Although this pace may not be sustainable for the
year as a whole, 1996 should be a very good year for
pumps," he said.
"We are beginning to see the benefit of last year's
restructuring of our European instrumentation
business," Farrar said. "We have completed a series of
initiatives to reduce costs and improve deliveries to
our customers, which should produce a higher level of
bookings and help to improve profitability in Europe by
year-end."
"Similarly, the restructuring of Morse Controls'
operation in Germany should begin to produce positive
results later in the year, providing relative
improvement in the face of a weak German economy,"
Farrar said.
"The planned divestiture of Roltra-Morse, an Italian-
based supplier of components to the European auto
industry, is continuing as scheduled," Farrar said.
"Proceeds from the sale, which we expect to complete
before year-end, will be used to repay debt."
"Continued strong emphasis on cost control and
productivity improvement helped results for the
quarter," Farrar said. "We are managing our businesses
aggressively and investing for growth as cash flow
permits."
"Looking ahead, we expect the last half of the year to
resemble the first six months, although the results may
be somewhat skewed to the fourth quarter, since Europe
is generally closed for vacation for the month of
August," Farrar said.
"Our operations remain strong. We expect the steps that
we have taken this year to expand our business and
improve profitability will be of significant benefit to
Imo shareholders longer term," Farrar concluded.
Pumps: Total sales were up 10% to $27.4 million and
segment operating income was up 30% to $3.5 million in
the second quarter, compared with the second quarter of
1995. A record level of bookings in the power
generation, crude oil, and general industrial market
segments more than offset weak performance in the pulp
and paper and chemical markets. Federal marine bookings
were also up significantly, aided by a $3.5 million
pump order for a new amphibious assault ship being
built for the U.S. Navy by Ingalls Shipyards. In the
face of increasing global competition, the Pumps
segment enjoyed solid growth in all its regional
markets around the world. In North America, the
consolidation of the Imo Pump and Warren Pumps
operations into a single business unit is moving ahead
as planned, offering increased sales efficiency and
reduced operating costs. Recently acquired Imo Pompes
S.A. has expanded the segment's product portfolio and
sales coverage throughout France. A new office has been
opened in Venezuela to offer better sales coverage and
aftermarket service in Latin America.
Power Transmission: Sales of $21.2 million in the
second quarter were 12% below last year's high sales
level as major customers were adjusting their inventory
levels and served markets softened. The lower level of
sales and resultant margin erosion from higher
unabsorbed costs pushed segment operating income down
to $1.7 million, off 39% from last year's comparable
period. The American gear market has turned down
sharply in 1996, after a relatively strong 1995. The
industry-wide decline in bookings appears to have
bottomed out, however. Boston Gear believes it is
gaining market share during this period, based on its
ability to offer same-day shipment of popular speed
reducer products at a time when distributors are
hesitant to build inventory. The number of same-day
orders increased sharply during the second quarter. The
segment is reporting increasing sales of a new variable
speed drive for controlling refrigeration equipment in
supermarkets and other food stores. These drives
modulate the electric motors that power refrigeration
compressors, pumps and air handlers in a way that
reduces energy consumption by one-third or more,
thereby offering significant savings in utility costs.
Instrumentation: Total sales of $19.4 million for the
second quarter were down approximately 7% from last
year's second quarter, due primarily to lower sales
volume in Europe which more than offset a 10% increase
in the U.S. Although there have been dramatic
operating improvements at the segment's production
facility in the U.K., there has been some softening of
the European market in general. Segment operating
income of $2.5 million for the quarter was down 8% from
1995's second quarter.
Morse Controls: Total sales of $29.6 million in the
second quarter were up modestly over last year's
comparable period, but operating income declined
slightly, due to intense price pressure which inhibited
the company's ability to raise prices in the U.S., and
to delays related to the restructuring of the German
operation. Worldwide, bookings were up 13% for the
quarter. Weather problems and the late arrival of
spring has dampened consumer interest in leisure
boating, adversely affecting both OEM sales and
aftermarket parts sales. The market in the Pacific Rim
appears to be softening.
Imo Industries is a diversified manufacturer of
industrial products engineered for niche markets
worldwide. Its business units are Imo Pump, the global
leader in rotary screw pumps; Boston Gear, a leading
manufacturer of motion control equipment; Gems Sensors,
a leader in the production of level, flow and pressure
sensors; and Morse Controls, the industry's largest
producer of remote control systems for boats,
agricultural equipment and industrial vehicles. Imo's
1995 sales from continuing operations were $373
million, about one-third of which came from markets
outside the U.S. Its shares are traded on the NYSE as
IMD (ImoInd).
# # #
<TABLE>
IMO INDUSTRIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Amounts in thousands, except per share data)
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
(Unaudited) (Unaudited)
1996 1995 (a) 1996 1995 (a)
<S> <C> <C> <C> <C>
Net Sales (a) $ 97,659 $ 98,576 $197,071 $194,460
Gross Profit 31,289 30,943 63,171 61,837
Segment Operating Income (a) 10,281 11,116 21,391 21,416
Income From Continuing Operations Before
Income Taxes and Extraordinary Item (a) 2,763 3,639 6,094 7,106
Income Taxes 681 677 1,308 1,558
Income From Continuing Operations
Before Extraordinary Item 2,082 2,962 4,786 5,548
Discontinued Operations, Net of Taxes: (a)(b)
Income from Operations --- 448 --- 1,412
Estimated Gain on Disposal --- --- --- 39,613
--- 448 --- 41,025
Extraordinary Item (c) (8,455) --- (8,455) (4,140)
Net Income (Loss) $ (6,373) $ 3,410 $ (3,669) $ 42,433
Earnings Per Share:
Continuing Operations
Before Extraordinary Item $ 0.12 $ 0.17 $ 0.28 $ 0.33
Discontinued Operations $ --- $ 0.03 $ --- $ 2.40
Extraordinary Item $ (0.49) $ --- $ (0.49) $ (0.24)
Net Income (Loss) $ (0.37) $ 0.20 $ (0.21) $ 2.49
Average Shares Outstanding 17,086 17,031 17,086 17,022
Bookings: (a)
Power Transmission $ 21,098 $ 24,014 $ 45,766 $ 50,573
Pumps 30,581 23,624 58,958 46,763
Instrumentation 19,497 20,364 42,465 41,881
Morse Controls 29,624 26,122 57,997 56,290
$100,800 $ 94,124 $205,186 $195,507
Backlog $ 90,555 $ 81,526
</TABLE>
See attached notes.
<TABLE>
IMO INDUSTRIES INC. AND SUBSIDIARIES
Segment Information and Financial Highlights
Excludes Discontinued Operations
(Dollars in thousands)
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
(Unaudited) (Unaudited)
1996 1995 (a) 1996 1995 (a)
<S> <C> <C> <C> <C>
Net Sales: (a)
Power Transmission $ 21,222 $ 24,178 $ 44,919 $ 50,293
Pumps 27,430 24,824 53,776 46,886
Instrumentation 19,360 20,908 38,710 39,387
Morse Controls 29,647 28,666 59,666 57,894
Total Net Sales 97,659 98,576 197,071 194,460
Segment Operating Income : (a)
Power Transmission 1,694 2,781 4,460 6,389
Pumps 3,515 2,704 6,981 5,128
Instrumentation 2,529 2,758 4,674 4,476
Morse Controls 2,543 2,873 5,276 5,423
Total Segment Operating Income 10,281 11,116 21,391 21,416
Equity in Income of
Unconsolidated Companies 25 227 50 252
Corporate Expense (1,287) (1,764) (2,518) (2,856)
Net Interest Expense (b) (6,256) (5,940) (12,829) (11,706)
Income From Continuing Operations Before
Income Taxes and Extraordinary Item(a)(b)$ 2,763 $ 3,639 $ 6,094 $ 7,106
Memo:
Income Before Interest, Taxes, Depreciation
and Amortization (EBITDA):
Income From Continuing Operations Before
Income Taxes and Extraordinary Item $ 2,763 $ 3,639 $ 6,094 $ 7,106
Add Back: Interest Expense (b) 6,551 6,415 13,521 12,986
Depreciation and Amortization 3,371 3,595 6,888 7,326
EBITDA $ 12,685 $ 13,649 $ 26,503 $ 27,418
</TABLE>
See attached notes.
IMO INDUSTRIES INC. AND SUBSIDIARIES
(a) As shown on the Segment Information and Financial
Highlights, the Company's Continuing Operations
are comprised of the Power Transmission, Pumps,
Instrumentation and Morse Controls business
segments.
The Company sold substantially all of its Electro-
Optical Systems business segment and its
Turbomachinery business segment in 1995. These
business segments have been accounted for as
discontinued operations and, accordingly, their
operations are shown in the Condensed Consolidated
Statements of Income as Discontinued Operations.
On February 7, 1996, the Company announced a plan
to sell its Roltra-Morse business. The sale of
this business is expected to be completed in 1996.
The sale of this business is being accounted for
as a discontinued operation. Accordingly, its
operations have been shown as Discontinued
Operations. The 1995 amounts have been
reclassified to conform to this presentation.
(b) Interest amounts included in income from
continuing operations exclude interest allocated
to the Discontinued Operations of $1.9 million and
$2.8 million for the three months ended June 30,
1996 and 1995, respectively, and $3.7 million and
$6.5 million for the six months ended June 30,
1996 and 1995, respectively. The amounts allocated
are included in income from operations of
discontinued operations, net of taxes.
Amounts indicated as net are net of interest
income of $.3 million and $.5 million for the
three months ended June 30, 1996 and 1995,
respectively, and $.7 million and $1.3 million for
the six months ended June 30, 1996 and 1995,
respectively.
(c) The three months ended June 30, 1996 include
an extraordinary charge of $8.5 million ($.49 per
share), representing the costs incurred in
connection with the early extinguishment of debt
as well as the write-off of previously deferred
loan costs. The six months ended June 30, 1995
include an extraordinary charge of $4.1 million
($.24 per share), representing the non-cash write-
off of previously deferred loan costs in
connection with the early extinguishment of debt.
