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): November 11, 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.
In a press release dated November 11, 1996, the Registrant
reported that it has withdrawn its Roltra-Morse business
from sale and restated results of operations for the third
quarter ended September 30, 1996, to reflect Roltra-Morse as
a continuing operation.
The information set forth in this Item 5 is qualified in its
entirety by reference to the Registrant's press release
announcing such information, which is filed herewith as an
exhibit.
Item 7. Exhibits.
The following exhibit is being filed with this report:
Exhibit No. Exhibit
____________ ___________________
99 Press release dated
November 11, 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: November 11, 1996 By: /s/ WILLIAM M. BROWN
William M. Brown
Executive Vice President,
Chief Financial Officer and
Corporate Controller
For further information contact:
R.A. Derr II
Vice President & Treasurer
Director of Investor Relations
(609) 896-7632
FOR IMMEDIATE RELEASE
IMO WITHDRAWS ITALIAN UNIT FROM DIVESTITURE, SAYING IT
INTENDS TO SUE GERMAN FIRM FOR BLOCKING SALE; RE-STATES
THIRD QUARTER RESULTS
LAWRENCEVILLE, NJ (November 11, 1996) -- Imo Industries Inc.
(NYSE: IMD) announced today that it is withdrawing its
Roltra-Morse subsidiary from potential sale due to
interference in the sale process by Kiekert AG, an
unsuccessful bidder that has threatened to revoke certain
license agreements now held by Roltra if the business is
sold to any of its competitors. Imo said it intends to
commence litigation against Kiekert and to vigorously pursue
this matter.
The Company said it had received attractive purchase offers
for Roltra-Morse, a manufacturer of components for the
automobile industry with plants in Italy and Poland and
joint ventures in Turkey and Brazil. However, Imo said it is
unable to complete the sale due to Kiekert's interference.
"Kiekert's tactics have jeopardized our ability to receive
fair value for Roltra, and we intend to seek full
restitution," said Imo Chairman and Chief Executive Officer
Donald K. Farrar.
Imo is evaluating other alternatives to meet its
deleveraging objectives, including the possible sale of
other assets.
As a result of Imo's withdrawal of the Roltra business from
the sale process, the Company has reclassified Roltra as a
continuing operation, from its previous status as a
discontinued operation, and is restating its third quarter
earnings to reflect this change. Accounting for the unit as
a continuing operation results in the reversal of a
favorable $10 million tax benefit based on the anticipated
gain on the sale and recognition of $4.8 million in
previously deferred 1996 losses related to Roltra.
Additionally, the Company recognized $7.4 million related to
changes in estimates on legal and other reserve requirements
of other previously discontinued operations. The result of
these largely non-cash charges is a loss of 73 cents a share
from continuing operations for the third quarter, compared
to income of 14 cents a share in the comparable period of
1995. For the nine months ended September 30, the Company
is now reporting a loss of 57 cents a share from continuing
operations, compared with earnings of 55 cents a share last
year. Earnings for the first and second quarters of 1996
have been restated to reflect Roltra-Morse as a continuing
operation.
Net income for the third quarter was a loss of $1.16 a
share, compared with a net loss of 28 cents a share in
1995's comparable period.
During the fourth quarter we will be completing our
evaluation of the Roltra operations to determine what
structural or other changes may be necessary to position
this business for profitable future growth. The fourth
quarter results will be adversely affected by Roltra-Morse
and the actions necessary to restructure this business.
Consequently, the company expects an overall loss in the
fourth quarter.
The restated results place the Company in technical default
of certain financial covenants of its revolving credit
agreements. However, the Company is currently negotiating
with the banks that are party to the credit agreement to
secure a waiver of the covenant defaults, which it expects
will be granted.
Pumps
Sales of pump products were up 16% for the third quarter,
including the effect of acquiring a French pump company at the
end of the first quarter. Operating income was down 27% due
to lower margins, higher selling expenses, and increased
warranty costs. Year-to-date earnings are up 12% and sales up
15% over the comparable period of 1995. Total bookings year-to-
date at September 30 were 11% ahead of the comparable period
of last year. Export markets are showing vigorous growth for
pumps used in power generation and crude oil transfer and
processing. The US market for hydraulic pumps used in low
rise elevators is currently enjoying a double-digit rate of
growth. Imo dominates this market segment, with more than
200,000 pumps currently in service. The sale of lube oil pumps
used in industrial machinery is also up sharply.
Power Transmission
Boston Gear sales and earnings improved in the third quarter,
but slippage at Fincor Electronics reduced the combined
results for the segment. Third quarter sales of $22.1 million
were about even with last year, but operating income was down
17%. Year-to-date sales for the Power Transmission segment as
a whole totaled $67 million, down 8% from last year.
Operating income for the segment was off 26% year-to-date.
Fincor sales have been impacted by an industry trend away from
DC adjustable speed drives, where it is a market leader,
toward AC drives, where it currently has an incomplete
offering. This will improve as new products come on line. In
August, for example, Fincor introduced a new AC drive in the
popular one-to-five horsepower range that generated more than
$500,000 in new orders in 30 days, making September its best
booking month this year.
Instrumentation
A 18% increase in sales at the US operation more than offset
an essentially flat performance in Europe, giving the
Instrumentation segment a combined 12% sales increase and a
14% income increase for the third quarter, compared with the
same period of 1995. Year-to-date sales for the segment
totaled $59 million, a 3% increase over last year's comparable
period. Operating income is 7% ahead of last year. Several
new marketing initiatives were launched in the third quarter
that are expected to further extend Imo's leadership position
in industrial level and flow sensors in 1997.
Morse Controls
Sales in Europe were up 11% in the third quarter of 1996
compared with the third quarter of 1995, reflecting the
additional sales volume of RMH Controls which was acquired at
the end of 1995. Operating income increased in line with the
sales increase. Worldwide, third quarter sales were up 6% and
income up 21%. Year-to-date sales totaled $87 million, up 4%
over the first nine months of 1995, and segment operating
income totaled $7.4 million, up 3%. Although unusually cold
spring weather in the US dampened consumer interest in boating,
an aggressive promotional effort by Morse's marine products group
turned a lackluster pleasure boating season into a modest
improvement in sales and earnings for this product segment.
Roltra-Morse
Roltra-Morse sales of $17.3 million in the third quarter
were 16% below last year's third quarter. Year-to-date
sales of $61.6 million are 21% behind 1995. Volumes have
been affected by weak auto sales in Italy, where continuing
political and economic uncertainty and the government's
current austerity budget have depressed consumer spending.
The strengthening of the lira has had a detrimental impact
on exports. Roltra incurred a small loss of $149,000 in
segment operating income for the third quarter, compared to
income of $1.6 million for the same quarter of last year.
Year-to-date operating income of $1.3 million is well behind
last year's total of $6 million. A modest improvement in
sales volume is expected in Italy in 1997, with Roltra well
positioned to secure additional business when new auto
models move into production. Roltra is also benefiting from
its geographical diversification. Orders from the new
Brazilian joint venture are now at $1 million per month, and
sales are gaining considerable strength at the Roltra-Morse
subsidiary in Poland.
Imo Industries Inc., with 1995 sales of $472 million from
continuing operations, is a diversified manufacturer of
pumps, fluid sensors, power transmission products, remote
control systems, and automotive components, with operations
worldwide. It is listed 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 Nine Months
Ended Ended
September 30, September 30,
(Unaudited) (Unaudited)
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales (a) $ 113,095 $ 109,428 $ 354,498 $ 361,031
Gross Profit 30,893 31,009 101,033 102,979
Segment Operating Income (a) 8,847 11,289 31,664 37,050
Income (Loss) From
Continuing Operations
Before Income Taxes,
Minority Interest and
Extraordinary Item (a) (1,491) 2,953 3,248 11,954
Income Taxes (a) 10,900 695 12,894 2,630
Minority Interest (a) 26 (69) (25) 37
Income (Loss) From
Continuing Operations
Before Minority Interest
and Extraordinary Item (12,417) 2,327 (9,621) 9,287
Discontinued Operations,
Net of Taxes: (a)(b)
Income from Operations --- --- --- ---
Estimated Gain (Loss) on
Disposal (7,349) (6,750) (7,349) 32,863
(7,349) (6,750) (7,349) 32,863
Extraordinary Item (c) --- (304) (8,455) (4,444)
Net Income (Loss) $ (19,766) $ (4,727) $ (25,425) $ 37,706
Earnings Per Share:
Continuing Operations
Before Extraordinary Item $ (0.73) $ 0.14 $ (0.57) $ 0.55
Discontinued Operations $ (0.43) $ (0.40) $ (0.43) $ 1.92
Extraordinary Item $ --- $ (0.02) $ (0.49) $ (0.26)
Net Income (Loss) $ (1.16) $ (0.28) $ (1.49) $ 2.21
Average Shares Outstanding 17,105 17,068 17,093 17,038
Bookings: (a)
Power Transmission $ 22,772 $ 22,360 $ 68,538 $ 72,933
Pumps 24,181 28,154 83,139 74,917
Instrumentation 18,282 18,948 60,747 60,829
Morse Controls 26,871 24,590 84,868 80,880
Roltra-Morse 25,229 26,764 59,015 74,476
$ 117,335 $ 120,816 $ 356,307 $ 364,035
Backlog $ 112,207 $ 111,139
</TABLE>
See attached notes.
<TABLE>
IMO INDUSTRIES INC. AND SUBSIDIARIES
Segment Information and Financial Highlights
Excludes Discontinued Operations
(Dollars in thousands)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
(Unaudited) (Unaudited)
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales: (a)
Power Tranmission $ 22,141 $ 22,343 $ 67,060 $ 72,636
Pumps 26,251 22,650 80,027 69,536
Instrumentation 20,333 18,122 59,043 57,509
Morse Controls 27,106 25,612 86,772 83,506
Roltra-Morse 17,264 20,701 61,596 77,844
Total Net Sales 113,095 109,428 354,498 361,031
Segment Operating Income : (a)
Power Transmission 2,298 2,768 6,758 9,157
Pumps 2,266 3,119 9,247 8,247
Instrumentation 2,337 2,050 7,011 6,526
Morse Controls 2,095 1,732 7,371 7,155
Roltra-Morse (149) 1,620 1,277 5,965
Total Segment Operating Income 8,847 11,289 31,664 37,050
Equity in Income of
Unconsolidated Companies (107) 25 (57) 277
Corporate Expense (2,347) (921) (4,865) (3,777)
Net Interest Expense (b) (7,884) (7,440) (23,494) (21,596)
Income (Loss) From
Continuing Operations
Before Income Taxes,
Minority Interest and
Extraordinary Item (a)(b) $ (1,491) $ 2,953 $ 3,248 $ 11,954
Memo:
Income Before Interest,
Taxes, Depreciation
and Amortization
(EBITDA):
Income (Loss) From
Continuing Operations
Before Income Taxes,
Minority Interest and
Extraordinary Item $ (1,491) $ 2,953 $ 3,248 $ 11,954
Add Back: Interest Expense (b) 8,179 7,842 24,493 23,290
Depreciation and
Amortization 4,374 4,427 13,745 13,576
EBITDA $ 11,062 $ 15,222 $ 41,486 $ 48,820
</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, Morse Controls, and Roltra-Morse
business segments.
On November 8, 1996, the Company announced that it is
withdrawing its Roltra-Morse business from its
divestiture program because threats made by one of the
bidders has made it impossible for the Company to
receive fair value for the business. Due to the
withdrawal of Roltra-Morse from potential sale, the
Company has restated its nine month and, first and
second quarter earnings of 1996 to reflect Roltra-Morse
as a continuing operation. Prior year amounts have been
reclassified to reflect Roltra-Morse as a continuing
operation. Accounting for the business as a
continuing operation has required the Company to
reverse a favorable $10 million tax benefit which was
based on an anticipated gain on the sale, and to
recognize $4.8 million of previously deferred 1996
losses related to Roltra-Morse. Additionally, the
Company recognized $7.4 million related to changes in
estimates on legal and other unanticipated reserve
requirements of other previously discontinued
operations. The Company had been accounting for its
Roltra-Morse business as a discontinued operation since
its plan to sell the operation was announced on
February 7, 1996.
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.
(b) Interest amounts included in income from
continuing operations exclude interest allocated to the
Discontinued Operations of $.5 million for the three
months ended September 30, 1996 and 1995, respectively,
and $1.3 million and $4.5 million for the nine months
ended September 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 $.4 million for the three months ended
September 30, 1996 and 1995, respectively, and $1.0
million and $1.7 million for the nine months ended
September 30, 1996 and 1995, respectively.
(c) The three months ended September 30, 1995 include
an extraordinary charge of $.3 million ($.02 per
share), representing the non-cash write-off of
previously deferred loan costs in connection with the
early extinguishment of debt. The nine months ended
September 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 nine months ended September 30, 1995
include an extraordinary charge of $4.4 million ($.26
per share), representing the non-cash write-off of
previously deferred loan costs in connection with the
early extinguishment of debt.
