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 March 31, 1997
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: 0-20704
ACX TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1208699
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
16000 Table Mountain Parkway, Golden, Colorado 80403
(Address of principal executive offices) (Zip Code)
(303) 271-7000
(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 [ ]
There were 27,994,301 shares of common stock outstanding as of
May 8, 1997.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ACX TECHNOLOGIES, INC.
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
Three months ended
March 31,
1997 1996
Net sales $173,458 $177,138
Costs and expenses:
Cost of goods sold 131,860 138,478
Marketing, general and
administrative 22,779 19,588
Research and development 3,917 3,623
Restructuring 2,280 ---
Total operating expenses 160,836 161,689
Operating income 12,622 15,449
Other income - net 26 17
Interest expense - net (1,155) (1,606)
Income from continuing operations
before income taxes 11,493 13,860
Income tax expense 4,700 5,700
Income from continuing operations 6,793 8,160
Discontinued operations:
Loss from discontinued operations
of Golden Aluminum Company --- (5,033)
Loss on disposal of Golden
Aluminum Company --- (70,000)
Net income (loss) $6,793 ($66,873)
Net income (loss) per share of
common stock:
Continuing operations $0.24 $0.29
Discontinued operations --- (2.64)
Net income (loss) per share $0.24 ($2.35)
Weighted average shares
outstanding 28,785 28,477
See Notes to Consolidated Financial Statements
ACX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
March 31, December 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $26,170 $15,671
Accounts receivable 81,974 71,886
Inventories:
Finished 50,308 46,312
In process 30,848 28,837
Raw materials 27,495 26,371
Total inventories 108,651 101,520
Deferred tax asset 11,614 18,218
Other assets 25,222 11,571
Net current assets of discontinued
operations 35,532 53,052
Total current assets 289,163 271,918
Properties at cost less accumulated
depreciation and amortization of
$243,946 in 1997 and $234,248 in 1996 250,515 244,615
Note receivable 53,771 ---
Goodwill, net 47,888 46,799
Other assets 36,883 49,860
Noncurrent assets of discontinued
operations --- 63,500
Total assets $678,220 $676,692
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities $113,476 $117,292
Long-term debt 100,000 100,000
Accrued postretirement benefits 28,539 27,890
Other long-term liabilities 18,841 19,002
Total liabilities 260,856 264,184
Minority interest 13,129 14,605
Shareholders' equity
Preferred stock, non-voting, $0.01 par
value, 20,000,000 shares authorized
and no shares issued or outstanding --- ---
Common stock, $0.01 par value
100,000,000 shares authorized and
27,974,000 and 27,934,000 issued and
outstanding at March 31, 1997, and
December 31, 1996 280 279
Paid-in capital 444,106 443,302
Retained earnings (deficit) (40,478) (47,271)
Cumulative translation adjustment and
other 327 1,593
Total shareholders' equity 404,235 397,903
Total liabilities and shareholders'
equity $678,220 $676,692
See Notes to Consolidated Financial Statements
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Three months ended
March 31,
1997 1996
Cash flows from operating activities:
Net income (loss) $6,793 ($66,873)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Loss on disposal of discontinued
operations, net of tax --- 70,000
Depreciation and amortization 10,482 13,015
Change in deferred income taxes 16,137 116
Change in accrued postretirement
benefits 649 229
Change in current assets and
current liabilities (20,214) (28,724)
Change in deferred items and
other 1,205 (529)
Net cash provided by (used in)
operating activities 15,052 (12,766)
Cash flows used in investing
activities: (5,285) (23,298)
Cash flows provided by financing
activities: 732 394
Cash and cash equivalents:
Net increase (decrease) in cash and
cash equivalents 10,499 (35,670)
Balance at beginning of period 15,671 52,686
Balance at end of period $26,170 $17,016
See Notes to Consolidated Financial Statements
ACX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Discontinued Aluminum Operations
On March 1, 1997, the sale of Golden Aluminum Company (Golden
Aluminum) was completed for $70 million, of which $10 million was
paid at closing and $60 million is due within two years. In
accordance with the purchase agreement, the purchaser has the
right to sell Golden Aluminum back to the Company during the two
year period in discharge of the $60 million obligation. The
initial payment of $10 million is non-refundable. The working
capital, which was not part of the sales agreement, is being
liquidated during the first half of 1997.
Summarized results of discontinued operations are as follows:
Three months ended
March 31,
1997 1996
(In thousands, except
per share amounts)
Net sales $38,526 $32,693
Loss from operations before
income taxes --- ($8,033)
Income tax benefit --- 3,000
Net loss from operations --- ($5,033)
Loss per common share --- ($0.18)
Loss on disposal before
income taxes --- ($92,000)
Loss on operations during
disposition period before
income taxes --- (18,000)
Income tax benefit --- 40,000
Net loss on disposal of
discontinued operations --- ($70,000)
Loss per common share --- ($2.46)
The historical operating results and the loss on the sale of this
business have been segregated as discontinued operations for all
periods presented in the consolidated income statement. The
remaining assets and liabilities held for sale have been
separately identified as net current assets of discontinued
operations, which consist primarily of accounts receivable and
inventory, partially offset by accounts payable. The noncurrent
assets reported in the December 31, 1996 balance sheet are
composed primarily of the fixed assets of Golden Aluminum which
were subsequently sold on March 1, 1997. The consolidated
statement of cash flows has not been restated for the
discontinued operation and, therefore, includes sources and uses
of cash for Golden Aluminum's operations.
Note 2. Restructuring Charges
During the first quarter of 1997, the Company adopted a plan to
exit the high-fructose corn syrup business and recorded severance
and exit costs of $2.3 million in conjunction with this plan.
Severance and outplacement costs of $0.8 million will be paid in
the second quarter of 1997 to eliminate approximately 70
positions held primarily by manufacturing and administrative
employees. The remaining charge of $1.5 million relates to
various exit costs which the Company expects to pay during the
remainder of 1997.
During the fourth quarter of 1996, the Company recorded
restructuring charges of $2.4 million related to operations at
Golden Technologies. During the 1997 first quarter,
approximately $0.2 million was paid in cash with respect to this
charge. Of the remaining expected cash outlay of $1.8 million,
approximately $1.4 million is expected to be paid in the second
quarter of 1997 with the remainder to be paid during the balance
of 1997.
Note 3. Adoption of New Accounting Standards
Financial Accounting Standards No. 128, "Earnings per Share", was
issued in February, 1997. The adoption of this new accounting
standard, which is required on December 31, 1997, will result in
the restatement of earnings per share for all periods presented.
Based on management's estimates, the adoption of this standard is
not expected to have a material effect on the Company's financial
statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General Business Overview
The operations of ACX Technologies, Inc. (the Company) consist of
two primary business segments conducted by Coors Ceramics Company
(Coors Ceramics) and Graphic Packaging Corporation (Graphic
Packaging). Coors Ceramics manufactures advanced technical
ceramic products while Graphic Packaging produces high-value
consumer and industrial flexible packaging and folding cartons.
In addition to its primary business units, the Company operates
Golden Technologies Company, Inc. (Golden Technologies), which
includes operations that assemble and distribute solar electric
systems, operations which are developing biodegradable polymers
and operations that produce corn starch and other food
ingredients. Prior to 1997, Golden Technologies' operations
included the manufacture of high-fructose corn syrup but in early
1997, the Company adopted a plan to exit this business.
Effective March 31, 1997, operations at the corn-wet-milling
facility have been converted to producing corn starch only.
Until early 1996, the Company operated Golden Aluminum Company
(Golden Aluminum) which produced aluminum flat rolled products
primarily for the aluminum can industry. In 1996, the Company's
Board of Directors adopted a plan to dispose of this business.
Effective March 1, 1997, the Company sold Golden Aluminum for $70
million, of which $10 million was paid at closing and $60 million
is due within two years. In accordance with the purchase
agreement, the purchaser has the right to sell Golden Aluminum to
the Company during the two year period in discharge of the $60
million obligation. The initial payment of $10 million is non-
refundable. The working capital, which was not part of the sales
agreement, is being liquidated during the first half of 1997.
The operating results of Golden Aluminum have been classified as
discontinued operations for all periods presented and,
consequently, the following discussion excludes any analysis of
the discontinued operations.
Results from Continuing Operations
Consolidated net sales for the three months ended March 31, 1997,
decreased $3.7 million or 2.1% to $173.5 million when compared to
the same period in 1996. Declines in volume and price for high-
fructose corn syrup and lower volumes of ceramic components sold
to the semiconductor processing industry caused the lower sales
in 1997. Partially offsetting these declines were increased
volumes of folding cartons sold to the tobacco industry.
Consolidated gross margin (gross profit as a percent of net
sales) was 24.0% for first quarter 1997 which represents an
increase from the gross margin of 21.8% reported for first
quarter 1996. The 1997 first quarter consolidated margin
improved due to the exit of the low margin high-fructose corn
syrup business as well as small improvements in gross margin at
Coors Ceramics and at Graphic Packaging.
For the first quarter of 1997, consolidated operating income
decreased $2.8 million, or 18.3% to $12.6 million when compared
to the same period in 1996. Over $2.2 million of this decrease
relates to severance and exit costs incurred during the first
quarter of 1997 to execute the plan designed to exit the high-
fructose corn syrup business. The remaining decline is the
result of reduced sales of semiconductor processing components at
Coors Ceramics.
First quarter 1997 interest expense - net declined $0.5 million
to $1.2 million primarily due to increased interest income in
1997 from investments and from imputed interest on the note
receivable obtained in the sale of Golden Aluminum. Cash
generated from the sale of Golden Aluminum and the ensuing
working capital liquidation have helped fund the Company's
increase in short-term, interest bearing investments.
The consolidated effective tax rate for the first quarter of 1997
and 1996 was 41%. The primary difference between the 1997 first
quarter effective tax rate and the statutory rate of 35% relates
to state and foreign taxes, as well as the impact of charges that
are not deductible for tax purposes such as the amortization of
goodwill.
Liquidity and Capital Resources
The Company's liquidity is generated from both internal and
external sources and is used to fund short-term working capital
needs, capital expenditures and acquisitions. Internally
generated liquidity is measured by net cash from operations as
discussed below and working capital. At March 31, 1997, the
Company's working capital (excluding the net current assets of
the discontinued operation) was $140.2 million with a current
ratio of 2.2 to 1. The Company considers its working capital
sufficient to meet its anticipated short-term requirements. For
long-term requirements, the Company has access to a $125 million
unsecured, committed revolving credit facility which was unused
during the first quarter.
Net cash generated by operations for first quarter 1997 was $15.1
million compared to cash used during the 1996 first quarter of
$12.8 million. Contributing to the improved cash position was
the partial liquidation of Golden Aluminum's working capital,
offset in part by the additional cash used to fund the operations
of Golden Aluminum through the date of sale. First quarter 1997
capital expenditures of $13.5 million net of $10.0 million in
proceeds from the Golden Aluminum sale accounted for the majority
of the net cash used in investing activities.
Segment Information
Net sales and operating income for the first quarter 1997 and
1996 are summarized by segment below:
FIRST QUARTER SEGMENT INFORMATION
(in thousands)
Operating
Net Sales Income (Loss)
1997 1996 1997 1996
Coors Ceramics $71,416 $74,388 $11,448 $12,652
Graphic Packaging 85,837 82,365 7,948 7,556
Golden Technologies 16,205 20,385 (4,781) (2,670)
Corporate --- --- (1,993) (2,089)
Total $173,458 $177,138 $12,622 $15,449
COORS CERAMICS
Coors Ceramics' first quarter 1997 net sales were $71.4 million,
a decline of $3.0 million or 4.0% compared to first quarter 1996
net sales of $74.4 million. Coors Ceramics' first quarter
operating income declined 9.5% from first quarter 1996 to $11.4
million primarily as a result of the lower sales. Operating
margins declined 1% from first quarter 1996 to first quarter
1997, but improved 1% from the fourth quarter of 1996. The 1997
decrease in sales and operating income was primarily attributable
to the continued softness in the semiconductor market. Coors
Ceramics' sales to the semiconductor market declined severely
beginning in the second quarter of 1996. By the fourth quarter
of 1996, sales to this market segment had started to trend
upward. This upward trend continued as first quarter 1997 sales
exceeded fourth quarter 1996 sales, but fell short of the strong
first quarter of 1996. First quarter 1997 sales to the
telecommunications markets also declined when compared to the
first quarter of 1996. However, growth in sales to the pulp and
paper, power generation and the petrochemical markets partially
offset the declines in the semiconductor and telecommunications
markets for the same periods. Coors Ceramics continues to manage
the changing marketplace by focusing its product development in
areas that are expected to outperform the overall economy and
anticipates improved asset and capacity utilization due to its
recent consolidation of the structural and electronic product
groups.
GRAPHIC PACKAGING
Graphic Packaging's net sales for first quarter 1997 were $85.8
million compared to first quarter 1996 when sales were $82.4
million, an increase of 4.2%. Operating income increased to $7.9
million, a 5.2% increase from operating income reported in first
quarter 1996. The sales increase primarily results from stronger
folding carton sales to the tobacco, detergent, bakery and
beverage industries. The increase in operating income is
attributable to increased sales volume partially offset by
increased costs associated with the scale-up of new equipment.
Management believes that new products from Graphic Packaging and
increased sales to existing customers will provide continuing
revenue gains in excess of industry averages.
GOLDEN TECHNOLOGIES
Net sales for Golden Technologies declined to $16.2 million in
the first quarter of 1997 compared to $20.4 million in the 1996
same quarter, a decrease of 20.6%. The sales decrease results
primarily from exiting the high-fructose corn syrup business,
offset in part from sales contributed by Photocomm, Inc., which
was acquired in November 1996. Golden Technologies reported
an operating loss of $4.8 million for the 1997 first quarter,
compared to a $2.7 million operating loss for the same period a
year earlier. Included in the 1997 first quarter operating loss
is a $2.3 million restructuring charge associated with the exit
from the high-fructose corn syrup business announced during the
quarter. Additionally, development activities for Chronopol's
biodegradable polymer business increased compared to the first
quarter 1996 due to the scale up of its semi-works facility which
will allow customer testing and market feasibility studies in the
last half of 1997 for its controlled-life lactide and polylactic
acid products. In 1997, Golden Technologies will be evaluating
financing and venturing options to take this business to the
first stage of commercialization.
Forward-Looking Statements
Some of the statements in this Form 10-Q Quarterly Report, as
well as statements by the Company in periodic press releases,
oral statements made by the Company's officials to analysts and
shareholders in the course of presentations about the Company and
conference calls following quarterly earnings releases,
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Words or
phrases denoting the anticipated results of future events such as
"anticipate," "believe," "estimate," "will likely," "are expected
to," "will continue," "project," and similar expressions that
denote uncertainty are intended to identify such forward-looking
statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Such factors include, among other things, (i)
general economic and business conditions; (ii) changes in
industries in which the Company does business, such as beverage,
telecommunications, automotive, semiconductor and tobacco; (iii)
the loss of major customers; (iv) the loss of market share and
increased competition in certain markets; (v) industry shifts to
alternative materials, such as replacement of ceramics by
plastics and competitors offering products with characteristics
similar to the Company's products; (vi) changes in consumer
buying habits; (vii) governmental regulation including
environmental laws; and (viii) other factors over which the
Company has little or no control.
These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K
for the year ended December 31, 1996. The accompanying financial
statements have not been examined by independent accountants in
accordance with generally accepted auditing standards, but in the
opinion of management of ACX Technologies, such financial
statements include all adjustments necessary to summarize fairly
the Company's financial position and results of operations.
Except for certain reclassifications made to consistently report
the information contained in the financial statements, all
adjustments made to the interim financial statements presented
are of a normal recurring nature. The results of operations for
the first quarter ended March 31, 1997, may not be indicative of
results that may be expected for the year ending December 31,
1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Document Description
3.1 Articles of Incorporation of Registrant.
(Incorporated by reference to Exhibit 3.1 to
Form 10 filed on October 6, 1992, file
No. 0-20704)
3.1A Articles of Amendment to Articles of
Incorporation of Registrant. (Incorporated by
reference to Exhibit 3.1A to Form 8 filed on
December 3, 1992, file No. 0-20704)
3.2 Bylaws of Registrant, as amended.
(Incorporated by reference to Exhibit 3.2 to
Form 10-Q filed on November 7, 1996, file
No. 0-20704)
4 Form of Stock Certificate of Common Stock.
(Incorporated by reference to Exhibit 4 to Form
10-K filed on March 7, 1996, file No. 0-20704)
10.1 Stock Purchase Agreement Among Golden
Aluminum Company, Crown Cork & Seal, Inc. and
ACX Technologies, Inc. (Incorporated by
reference to Exhibit 10.1 to 8-K filed on March
14, 1997, file No. 0-20704)
10.2 Supply Agreement between Graphic Packaging
Corporation and Coors Brewing Company, dated
January 1, 1997. (Incorporated by reference to
Exhibit 10.2 to Form 10-K filed on March 29,
1997, file No. 0-20704)
(b) Reports on Form 8-K
A report on Form 8-K was filed on March 14, 1997
reporting the sale of Golden Aluminum Company and
attaching the Stock Purchase Agreement.
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.
Date: May 8, 1997 By /s/ Jed J. Burnham
Jed J. Burnham
(Chief Financial Officer and
Treasurer)
Date: May 8, 1997 By /s/ Gail A. Constancio
Gail A. Constancio
(Controller and Principal
Accounting Officer)
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