<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1993
-----------------
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 0-10023
---------
SUDBURY, INC.
-----------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
DELAWARE 34-1546292
- ------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30100 CHAGRIN BOULEVARD, SUITE 203
CLEVELAND, OHIO 44124
- -------------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (216) 464-7026
--------------
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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO (See below)
----- -----
ON JANUARY 10, 1992, THE REGISTRANT FILED A PETITION FOR REORGANIZATION
UNDER CHAPTER 11 OF THE UNITED STATES CODE IN THE UNITED STATES BANKRUPTCY
COURT FOR THE NORTHERN DISTRICT OF OHIO (THE "BANKRUPTCY COURT"). ON AUGUST
18, 1992, THE BANKRUPTCY COURT CONFIRMED THE THIRD AMENDED PLAN OF
REORGANIZATION (THE "PLAN") OF THE REGISTRANT. THE PLAN BECAME EFFECTIVE ON
SEPTEMBER 1, 1992 AND DISTRIBUTIONS UNDER THE PLAN COMMENCED ON OCTOBER 15,
1992.
PURSUANT TO THE PLAN, 10,000,000 SHARES OF NEW COMMON STOCK, $0.01 PAR
VALUE, ARE ISSUABLE IN SATISFACTION OF THE ALLOWED CLAIMS OF THE CREDITORS AND
STOCKHOLDERS OF THE REGISTRANT. AS OF JANUARY 6, 1994, 9,478,945 SHARES HAVE
BEEN ISSUED AND ARE OUTSTANDING.
Total Pages - 19 Exhibit Index - Page 16
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<TABLE>
<CAPTION>
INDEX
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SUDBURY, INC. AND SUBSIDIARIES
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of November 30, 1993 and May 31, 1993 3 - 4
Condensed Consolidated Statements of
Operations for the three-month periods
ended November 30, 1993 and November 30,
1992 5
Condensed Consolidated Statements of
Operations for the six-month periods
ended November 30, 1993 and November 30,
1992 6
Condensed Consolidated Statements of
Cash Flows for the six-month periods
ended November 30, 1993 and November 30,
1992 7
Notes to Condensed Consolidated
Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11 - 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
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<TABLE>
<CAPTION>
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
SUDBURY, INC. AND SUBSIDIARIES
ASSETS
NOVEMBER 30, MAY 31,
1993 1993
(UNAUDITED) (AUDITED)
----------- ---------
(Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,136 $ 5,284
Accounts receivable, net of allowance 33,795 32,902
Inventories 20,040 19,853
Net assets of businesses held for sale - 500
Prepaid expenses and other 3,163 4,183
-------- --------
TOTAL CURRENT ASSETS 59,134 62,722
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 2,191 2,222
Buildings 15,556 15,421
Machinery and equipment 36,929 33,830
-------- --------
54,676 51,473
Less accumulated depreciation 8,356 4,991
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 46,320 46,482
OTHER ASSETS
Notes receivable 521 2,770
Net assets of businesses held for sale 2,000 2,000
Intangible pension asset 758 758
Other assets 1,413 1,724
-------- --------
TOTAL OTHER ASSETS 4,692 7,252
-------- --------
$110,146 $116,456
======== ========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS - (CONTINUED)
SUDBURY, INC. AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
NOVEMBER 30, MAY 31,
1993 1993
(UNAUDITED) (AUDITED)
----------- ---------
(Dollars in thousands)
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable $ 18,976 $ 19,665
Accrued compensation and employee benefits 10,880 11,712
Income taxes 711 609
Environmental reserves 1,444 1,550
Other accrued expenses 9,279 9,817
Current maturities of long-term debt 2,468 3,088
-------- --------
TOTAL CURRENT LIABILITIES 43,758 46,441
LONG-TERM DEBT 37,860 45,984
OTHER LONG-TERM LIABILITIES 6,826 6,673
DEFERRED INCOME TAXES 550 550
STOCKHOLDERS' EQUITY
Common Stock - par value $0.01 per
share; authorized 20,000,000 shares;
10,007,534 (10,000,000 at May 31,
1993) shares issuable and deemed
outstanding 100 100
Additional paid-in capital 13,930 13,900
Retained earnings 7,122 2,808
-------- --------
TOTAL STOCKHOLDERS' EQUITY 21,152 16,808
-------- --------
$110,146 $116,456
======== ========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
-------------------------------------
NOVEMBER 30, NOVEMBER 30,
(In thousands, except per share amounts) 1993 1992
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Net sales:
Ongoing operations $ 60,584 $ 55,255
Businesses held for sale - 16,667
-------- --------
Total 60,584 71,922
Costs and expenses:
Costs of products sold:
Ongoing operations 51,508 46,736
Businesses held for sale - 14,199
-------- --------
Total 51,508 60,935
Selling and administrative expenses:
Ongoing operations 5,496 5,308
Businesses held for sale - 1,984
-------- --------
Total 5,496 7,292
Special charges - 494
-------- --------
OPERATING INCOME 3,580 3,201
Interest expense (986) (1,628)
Interest income 18 58
Other income (expense) 162 (357)
-------- --------
Income before income taxes 2,774 1,274
Income tax (benefit) expense (458) 110
-------- --------
NET INCOME $ 3,232 $ 1,164
======== ========
Net income per share:
Primary $ .26 $ .10
======== ========
Fully diluted $ .26 $ .10
======== ========
Common shares and common share equivalents:
Primary 12,217 11,751
======== ========
Fully diluted 12,258 11,753
======== ========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
SIX MONTHS ENDED
-------------------------------------
NOVEMBER 30, || NOVEMBER 30,
(In thousands, except per share amounts) 1993 || 1992
(UNAUDITED) || (UNAUDITED)
----------- || -----------
<S> <C> || <C>
Net sales: ||
Ongoing operations $115,028 || $107,355
Businesses held for sale 315 || 47,560
-------- || --------
Total 115,343 || 154,915
||
Costs and expenses: ||
Costs of products sold: ||
Ongoing operations 98,711 || 91,130
Businesses held for sale 151 || 40,878
-------- || --------
Total 98,862 || 132,008
||
Selling and administrative expenses: ||
Ongoing operations 10,952 || 10,732
Businesses held for sale 164 || 5,507
-------- || --------
Total 11,116 || 16,239
||
Special charges - || 1,589
-------- || --------
||
OPERATING INCOME 5,365 || 5,079
||
Interest expense (Contractual interest for the ||
period ended November 30, 1992, $4,870) (1,978) || (3,181)
Interest income 73 || 91
Other income (expense) 439 || (365)
-------- || --------
||
Income before income taxes 3,899 || 1,624
Income tax (benefit) expense (415) || 160
-------- || --------
||
INCOME BEFORE EXTRAORDINARY GAIN 4,314 || 1,464
||
Extraordinary gain - forgiveness of ||
pre-petition liabilities - || 78,805
-------- || --------
||
NET INCOME $ 4,314 || $ 80,269
======== || ========
||
Net income per share: ||
Primary $ .36 ||
======== ||
Fully diluted $ .35 ||
======== ||
Common shares and common share equivalents: ||
Primary 12,148 ||
======== ||
Fully diluted 12,270 ||
======== ||
</TABLE>
See notes to condensed consolidated financial statements. As discussed in Note
B, the amounts presented for the six months ended November 30, 1993 are not
comparable to those for the six months ended November 30, 1992, and as such a
solid double line has been placed between the amounts. Also, net income per
share amounts for the six months ended November 30, 1992 are not presented as
they are irrelevant as a result of the reorganization.
- 6 -
<PAGE> 7
<TABLE>
<CAPTION>
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SUDBURY, INC. AND SUBSIDIARIES
SIX MONTHS ENDED
------------------------------------
NOVEMBER 30, || NOVEMBER 30,
(Dollars in thousands) 1993 || 1992
(UNAUDITED) || (UNAUDITED)
----------- || -----------
<S> <C> || <C>
OPERATING ACTIVITIES: ||
Income before extraordinary gain $ 4,314 || $ 1,464
Items included not affecting cash: ||
Depreciation and amortization: ||
Ongoing operations 4,109 || 3,876
Businesses held for sale 47 || 1,845
Other 131 || (60)
Changes in operating assets and liabilities: ||
Ongoing operations (2,215) || (5,077)
Businesses held for sale (28) || (2,106)
-------- || --------
NET CASH PROVIDED (USED IN) BY OPERATING ||
ACTIVITIES 6,358 || (58)
||
INVESTING ACTIVITIES: ||
Purchases of property, plant and equipment: ||
Ongoing operations (3,466) || (1,189)
Businesses held for sale - || (187)
Proceeds from collection of notes receivable 2,249 || -
Proceeds from sale of businesses 666 || 24,400
Contingent payments to former owners ||
of acquired businesses (188) || (678)
Proceeds from sale of property, plant, ||
equipment and other - net 134 || 35
-------- || --------
NET CASH (USED IN) PROVIDED BY INVESTING ||
ACTIVITIES (605) || 22,381
||
FINANCING ACTIVITIES: ||
Borrowings, refinancings and repayments: ||
Short and long-term borrowings 117,175 || 21
Reductions of debt: ||
Ongoing operations (126,106) || (25,894)
Businesses held for sale - || (633)
Common stock issued 30 || -
-------- || --------
NET CASH USED IN FINANCING ACTIVITIES (8,901) || (26,506)
-------- || --------
||
DECREASE IN CASH (3,148) || (4,183)
||
Cash at beginning of period 5,284 || 12,386
-------- || --------
||
CASH AT END OF PERIOD $ 2,136 || $ 8,203
======== || ========
</TABLE>
See notes to consolidated financial statements. As discussed in Note B, the
amounts presented for the six months ended November 30, 1993 are not comparable
to those for the six month period ended November 30, 1992, and as such a solid
double line has been placed between the amounts.
- 7 -
<PAGE> 8
PART I, ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUDBURY, INC. AND SUBSIDIARIES
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three and
six month periods ended November 30, 1993 are not necessarily indicative of the
results that may be expected for the fiscal year ending May 31, 1994. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended May 31, 1993.
NOTE B -- PROCEEDINGS UNDER CHAPTER 11 AND RESTRUCTURING
On January 10, 1992, Sudbury, Inc. (the "Company") filed a petition
(relative only to Sudbury, Inc. and not to its subsidiaries) under Chapter 11
of the United States Bankruptcy Code. The Chapter 11 filing was made to
implement an agreement in principle which had been reached with the Company's
major creditor groups regarding a restructuring plan and the related sales of a
substantial number of its business units.
The Company's amended Plan of Reorganization (the "Plan") was confirmed
by the Bankruptcy Court by Order dated August 18, 1992 and became effective on
September 1, 1992 (the "Effective Date"). Distributions under the Plan
commenced on October 15, 1992.
The Plan implemented a restructuring of the Company by providing for a
new amortization schedule for the repayment of the indebtedness owed to its
secured lender banks and a significant reduction of the Company's indebtedness
to subordinated debtholders and certain other unsecured creditors.
In order to repay the indebtedness owed to the secured lender banks as
provided by the Plan, the Company implemented a business plan with an asset
disposition program involving the sale of a substantial number of its
subsidiaries. Through November 30, 1993 the asset disposition program
generated aggregate net cash proceeds of approximately $37.6 million.
In February 1993 the Company proceeded with a plan to refinance its
existing bank debt and on May 28, 1993 the Company successfully completed the
refinancing by obtaining a three-year asset-based $48,000,000 Credit Facility
("Credit Facility") with a new secured lender group. This new Credit Facility
allowed the Company to retain six core businesses and cease the previous asset
sale process except for the 35% investment in General Products Delaware
Corporation which is still held for sale.
- 8 -
<PAGE> 9
PART I, ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUDBURY, INC. AND SUBSIDIARIES
NOTE B -- PROCEEDINGS UNDER CHAPTER 11 AND RESTRUCTURING - CONTINUED
As a result of the Company's emergence from Chapter 11, certain amounts
presented on the statements of operations for the six month period ended
November 30, 1992, principally for interest expense, and on the statements of
cash flows for the six months ended November 30, 1992 are not comparable to the
current period and therefore a solid double line has been placed between the
amounts. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended May 31, 1993.
NOTE C -- CASH
As of November 30, 1993 and May 31, 1993, $1,599,000 and $6,339,000 of
the cash balances, respectively, consisted of funds restricted as to their use.
$1,599,000 and $1,503,000 of the restricted amounts, respectively, reflected
funds set aside to pay prospective property and casualty insurance claims at
the Company's captive insurance company. The balance of restricted amounts at
May 31, 1993 was used to reduce bank debt subsequent to the end of the fiscal
year.
<TABLE>
<CAPTION>
NOTE D -- INVENTORIES
The components of inventories are summarized as follows (in thousands):
November 30, May 31,
1993 1993
----------- --------
<S> <C> <C>
Raw materials and supplies $ 7,981 $ 7,619
Work in process 7,870 8,275
Finished products 4,407 4,202
------- -------
Total at FIFO 20,258 20,096
Less excess of FIFO cost over LIFO values 218 243
------- -------
$20,040 $19,853
======= =======
</TABLE>
NOTE E -- SPECIAL CHARGES
Special charges of $494,000 and $1,589,000 related to consulting and
other expenses were incurred under the Company's restructuring program for the
three and six month periods ended November 30, 1992, respectively. No special
charges were incurred in the six months ended November 30, 1993.
NOTE F -- CONTINGENCIES
The Company is party to a number of lawsuits and claims arising out of
the conduct of its business, including those relating to commercial
transactions, product liability and environmental, safety and health matters.
- 9 -
<PAGE> 10
PART I, ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUDBURY, INC. AND SUBSIDIARIES
NOTE F -- CONTINGENCIES - CONTINUED
As a general matter, the confirmation of the Plan by the Bankruptcy
Court precludes plaintiffs in pending litigation from prosecuting their claims
against the Company. To the extent any such plaintiffs filed claims in the
Company's bankruptcy proceeding, such claims will be treated in such bankruptcy
proceeding. Any distributions on account of such claims will be made in the
form of securities of the Company rather than in cash. Under the terms of the
Plan, the Company has limited indemnification obligations with respect to
certain of its officers and directors for actions and omissions prior to
confirmation of the Plan. The Company's liability under such indemnification
obligations is limited to an aggregate of $2,000,000 (subject to certain
conditions). The Company has fully reserved the $2,000,000, of which
$1,000,000 has been deposited in trust.
The Company has been named as a potentially responsible party for
cleanup costs by the United States Environmental Protection Agency with respect
to several sites. The Company has initiated corrective action and/or
preventative environmental projects to ensure the safe and lawful operation of
its facilities. All operating locations acquired by the Company since 1984
operate in a variety of locations and industries where environmental situations
could exist based on past practices. For known environmental situations, the
Company, with the assistance of environmental engineers and consultants, has
accrued amounts to cover estimated future environmental expenditures. There
could exist, however, current environmental situations for which the future
cost is not known or accrued at November 30, 1993.
While the ultimate result of the above contingencies cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the consolidated financial position or results of
operations of the Company.
- 10 -
<PAGE> 11
PART I, ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS - THREE MONTHS ENDED NOVEMBER 30, 1993 COMPARED TO THREE
MONTHS ENDED NOVEMBER 30, 1992
Sales. The Company's net sales from ongoing operations for the second
quarter of fiscal 1994 increased by 10% to $60.6 million from $55.3 million in
the prior year's quarter. Sales to the automotive industry through the
Company's Wagner Castings Company ("Wagner") and Industrial Powder Coatings,
Inc. ("IPC") subsidiaries increased by $5.4 million over the prior year
period as a result of $2.2 million in net new business and $3.2 million in
increased volumes of existing products.
Sales of businesses held for sale were eliminated to zero from $16.7
million recorded in the prior year period due to the sale of 15 of the
Company's businesses since the beginning of fiscal 1993.
Net Income. Net income for the second quarter of fiscal 1994 was $3.2
million compared to $1.2 million in the prior year period. Principal
variations between the current period net income compared to the prior period
are discussed below.
Operating income of ongoing operations increased by $.4 million,
principally as a result of the increased sales discussed previously. Operating
margins were negatively impacted by $.4 million during the period due to
significant price increases in scrap steel which is the principal raw material
utilized at Wagner. Wagner's commitments with most of its major customers
provide for the passage of the majority of increases or decreases in the cost
of scrap steel on to its customers, however, these adjustments are generally
passed along three to six months subsequent to the time the change occurs. As
a result of this delay in passing along these price increases, third quarter
operating earnings are also expected to be negatively impacted.
Operating income of businesses held for sale decreased by $.5 million
reflecting the impact of their sale during the past year.
Special charges decreased by $.5 million as the Company substantially
completed its restructuring in fiscal 1993.
Interest expense decreased by $.6 million due to (a) reductions in debt
caused by the Company's asset sale program, (b) reductions in debt in
connection with the Company's new Credit Facility which provided the Company
with a revolving line of credit, as the Company's previous credit facility did
not include a revolving line of credit and cash balances could not be applied
against debt, and (c) reductions in debt due to cash flow from increased
profitability.
- 11 -
<PAGE> 12
PART I, ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS - THREE MONTHS ENDED NOVEMBER 30, 1993 COMPARED TO THREE
MONTHS ENDED NOVEMBER 30, 1992 - continued
Income tax expense during the current period benefited from the receipt
of $.5 million in state tax refunds as a result of the successful resolution of
a tax dispute.
As approximately half of the Company's sales are dependent on the
automotive markets in the United States and Europe, related profits will be
dependent on sales of vehicles in these markets for the remainder of the fiscal
year. The Company is also dependent on construction related markets through
its Iowa Mold Tooling ("IMT") subsidiary. IMT has experienced recent
improvements in its order backlog which may help to improve its results for the
remainder of the current fiscal year.
RESULTS OF OPERATIONS - SIX MONTHS ENDED NOVEMBER 30, 1993 COMPARED TO SIX
MONTHS ENDED NOVEMBER 30, 1992
Sales. The Company's net sales from ongoing operations for the
current six month period increased by 7% to $115.0 million from $107.4 million
in the prior year period. Automotive related sales through Wagner and IPC
increased by $8.7 million over the prior year's period as a result of $4.8
million in net new business and $3.9 million in increased volumes of existing
products.
Sales of businesses held for sale decreased to $.3 million from $47.6
million recorded in the prior year period due to the sale of 15 of the
Company's businesses since the beginning of fiscal 1993. In July 1993, the
Company sold RD&D Corporation, the last of its wholly-owned subsidiaries which
was held for sale.
Net Income. Income before extraordinary gain for the current six
month period was $4.3 million compared to $1.5 million in the prior year
period. Principal variations between the current period net income compared to
the prior period are discussed below.
Operating income of ongoing operations decreased by $.1 million despite
the increase in sales due to (a) lower profitability at IMT resulting from
backlog reductions that were experienced during the earlier part of the current
fiscal year, (b) $.6 million of higher raw material costs at Wagner, and (c)
start-up costs and higher fixed costs incurred in the first quarter of the
current fiscal year as a result of the re-opening of Wagner's Havana, Illinois
facility.
Operating income of businesses held for sale decreased by $1.2 million
reflecting the impact of their sale over the past year.
- 12 -
<PAGE> 13
PART I, ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS - SIX MONTHS ENDED NOVEMBER 30, 1993 COMPARED TO SIX
MONTHS ENDED NOVEMBER 30, 1992 - continued
Special charges decreased by $1.6 million as the Company substantially
completed its restructuring in fiscal 1993.
The Company's interest expense decreased by $1.2 million due
principally to reductions in debt over the past fiscal year. Other income of
$.4 million in the current period principally relates to the receipt of
miscellaneous contingent proceeds and escrows relating to the sale of assets.
LIQUIDITY AND CAPITAL RESOURCES
As previously discussed, effective September 1, 1992, the Company
emerged from reorganization under Chapter 11 of the United States Bankruptcy
Code.
In May 1993, the Company completed the refinancing of its then existing
bank debt with a three year asset-based $48,000,000 credit facility with a new
lender group. The Credit Facility provides the Company with a $33.8 million
revolving credit facility, an $11.2 million term loan and a $3.0 million
capital expenditure facility. As of November 30, 1993, the Company had
borrowed $16.4 million under its revolving credit facility and had $9.6 million
of additional borrowing capacity based on the asset-based advance rate formulas
contained in the Credit Facility agreement. The Company had not borrowed under
the capital expenditure facility as of November 30, 1993. This facility
provides the Company funds for 75% of the cost of eligible capital
expenditures.
For the first six months of fiscal 1994, operating activities provided
cash of $6.4 million compared to a usage of $.1 million in the prior year
period. The increase in cash provided in fiscal 1994 was due to higher income
and a lower increase in working capital.
Capital expenditures for ongoing operations were $3.5 million in fiscal
1994 compared with $1.2 million in the prior year period. The increase in
capital expenditures was mainly due to the Company's improved liquidity and its
ability, under its new Credit Facility, to invest more money in its businesses.
Capital expenditures had been low for the past several years due to constraints
under the Company's credit agreement with its previous bank group and in an
effort to increase liquidity.
- 13 -
<PAGE> 14
PART I, ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES - continued
During the first six months of fiscal 1994, the Company received $2.2
million from the collection of notes receivable related to subsidiaries which
were sold in fiscal 1993. These funds were used by the Company to reduce bank
debt under its Credit Facility.
The Company believes that funds available under the Credit Facility,
funds generated from operations and the utilization of the Company's net
operating loss carryforward to reduce income tax liabilities will be
sufficient to satisfy its anticipated operating needs and capital improvements
for the remainder of fiscal 1994.
- 14 -
<PAGE> 15
PART II OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS
As a general matter, confirmation of the Company's Plan by the
Bankruptcy Court precludes plaintiffs in pre-bankruptcy litigation from
continuing to prosecute their claims against the Company. To the extent any
such plaintiffs have filed claims in the Company's bankruptcy proceeding, such
claims will be determined in such bankruptcy proceeding. Under the terms of
the Company's Plan, distributions on account of such claims will generally be
made in the form of securities of the Company rather than in cash. Under the
terms of the Plan, the Company has limited indemnification obligations with
respect to its officers and directors for actions and omissions prior to
confirmation of the Plan. The Company's liability for such indemnification
obligations is limited to an aggregate of $2,000,000 (subject to certain
conditions). The Company has fully reserved the $2,000,000, of which
$1,000,000 has been deposited in trust.
Certain litigation was described in the Company's annual report on Form
10-K for the year ended May 31, 1993. There have been no material developments
in the described cases for the fiscal quarter ended November 30, 1993.
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company held on October 21,
1993, the stockholders considered and voted on the election of six directors
for one-year terms expiring in 1994 or until their successors have been duly
elected and qualified and a resolution proposed by the Board of Directors that
the stockholders ratify the action of the Board of Directors in selecting and
appointing Ernst & Young as independent auditors for the Company for the year
ending May 31, 1994.
All of management's nominees for directors, as listed in the proxy
statement, were elected by the following votes:
<TABLE>
<S> <C> <C>
Cloyd J. Abruzzo For 5,558,817
Withheld 6,561
Jerry A. Cooper For 5,558,188
Withheld 7,190
Preston Heller, Jr. For 5,556,698
Withheld 8,680
David A. Preiser For 5,555,073
Withheld 10,305
Jacques R. Sardas For 5,553,121
Withheld 12,257
Thomas F. Slater For 5,557,925
Withheld 7,453
</TABLE>
- 15 -
<PAGE> 16
PART II OTHER INFORMATION
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - continued
The proposal to ratify the appointment of Ernst & Young as the Company's
independent auditors was passed by the following vote:
<TABLE>
<S> <C>
Shares Voted For 5,550,560
Shares Voted Against 12,665
Abstentions 346
Broker Non-Votes 1,807
</TABLE>
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three months
ended November 30, 1993.
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT SEQUENTIAL PAGE NUMBER
- ------- ----------------------
<S> <C> <C>
(11) Statement re: Computation of
Per Share Earnings 18 - 19
</TABLE>
- 16 -
<PAGE> 17
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.
<TABLE>
<S> <C>
SUDBURY, INC.
(Registrant)
By: /s/Jacques R. Sardas
---------------------------------------
Jacques R. Sardas
Chairman of the Board
and Chief Executive Officer
By: /s/Mark E. Brody
---------------------------------------
Mark E. Brody
Vice President of Finance and Controller
(Chief Accounting Officer)
</TABLE>
Date: January 13, 1994
- 17 -
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
SUDBURY, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
--------------------------------------
NOVEMBER 30, NOVEMBER 30,
1993 1992
----------- -----------
(Amounts in thousands, except per share data)
<S> <C> <C>
PRIMARY
Average shares outstanding 10,004 10,000
Net effect of dilutive stock
options and other common
stock equivalents - based
on the treasury stock
method using average
market price 2,213 1,751
------- -------
TOTAL 12,217 11,751
======= =======
Net income $ 3,232 $ 1,164
======= =======
Per share amount $ .26 $ .10
======= =======
FULLY DILUTED
Average shares outstanding 10,004 10,000
Net effect of dilutive stock
options and other common
stock equivalents - based
on the treasury stock
method using the quarter end
market price if higher than
average market price 2,254 1,753
------- -------
TOTAL 12,258 11,753
======== =======
Net income $ 3,232 $ 1,164
======= =======
Per share amount $ .26 $ .10
======= =======
</TABLE>
- 18 -
<PAGE> 2
<TABLE>
<CAPTION>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
SUDBURY, INC. AND SUBSIDIARIES
SIX MONTHS ENDED
--------------------------------------
NOVEMBER 30, || NOVEMBER 30,
1993 || 1992
------------ || ------------
||
(Amounts in thousands, except per share data) ||
<S> <C> || <C>
PRIMARY ||
||
Average shares outstanding 10,002 ||
Net effect of dilutive stock ||
options and other common ||
stock equivalents - based ||
on the treasury stock ||
method using average ||
market price 2,146 ||
------- ||
TOTAL 12,148 ||
======= ||
||
Net income $ 4,314 ||
======= ||
Per share amount $ .36 || (A)
======= ||
||
||
FULLY DILUTED ||
||
Average shares outstanding 10,002 ||
Net effect of dilutive stock ||
options and other common ||
stock equivalents - based ||
on the treasury stock ||
method using the quarter end ||
market price if higher than ||
average market price 2,268 ||
------- ||
TOTAL 12,270 ||
======= ||
||
Net income $ 4,314 ||
======= ||
Per share amount $ .35 || (A)
======= ||
<FN>
(A) As a result of the changes in ownership and capital structure from
the Plan, primary and fully diluted net income per share
calculations are not relevant for the six month period ended
November 30, 1992.
</TABLE>
- 19 -
