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 June 30, 1998
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 of (IRS Employer
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 28,579,062 shares of common stock outstanding as of
July 24, 1998.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ACX TECHNOLOGIES, INC.
CONSOLIDATED INCOME STATEMENT
(In thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
Net sales $257,326 $186,777 $494,059 $360,235
Costs and expenses:
Cost of goods sold 204,334 140,370 392,399 272,230
Selling, general and
administrative 25,347 23,969 51,266 46,748
Research and development 1,739 4,499 3,690 8,416
Asset impairment and
restructuring charges -- -- 7,238 2,280
-------- -------- -------- --------
Total operating expenses 231,420 168,838 454,593 329,674
-------- -------- -------- --------
Operating income 25,906 17,939 39,466 30,561
Other income - net 207 260 60 286
Interest expense - net (5,258) (610) (9,632) (1,765)
-------- -------- -------- --------
Income before income taxes 20,855 17,589 29,894 29,082
Income tax expense 8,300 7,150 11,900 11,850
-------- -------- -------- --------
Net income $12,555 $10,439 $17,994 $17,232
======== ======== ======== ========
Total comprehensive income
(See Note 4) $10,565 $10,244 $16,280 $15,722
======== ======== ======== ========
Net income per basic share $0.44 $0.37 $0.63 $0.62
======== ======== ======== ========
Net income per diluted share $0.43 $0.36 $0.62 $0.60
======== ======== ======== ========
Weighted average shares
outstanding - basic 28,552 28,007 28,489 27,985
======== ======== ======== ========
Weighted average shares
outstanding - diluted 29,222 28,704 29,179 28,649
======== ======== ======== ========
See Notes to Consolidated Financial Statements
ACX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
June 30, December 31,
1998 1997
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $35,585 $49,355
Accounts receivable 106,435 81,359
Inventories:
Finished 61,482 48,607
In process 40,792 34,754
Raw materials 50,997 30,431
-------- --------
Total inventories 153,271 113,792
Note receivable 58,165 --
Other assets 24,871 25,506
-------- --------
Total current assets 378,327 270,012
Properties at cost less accumulated
depreciation of $344,876 in 1998
and $267,625 in 1997 378,813 249,624
Note receivable 3,358 56,549
Goodwill, net 213,226 56,883
Other assets 24,923 68,128
-------- --------
Total assets $998,647 $701,196
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt $168,500 $ --
Other current liabilities 137,623 111,461
-------- --------
Total current liabilities 306,123 111,461
Long-term debt 183,000 100,000
Other long-term liabilities 46,684 46,291
-------- --------
Total liabilities 535,807 257,752
Minority interest 13,384 12,913
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 28,577,000 and
28,373,000 shares issued and outstanding
at June 30, 1998 and December 31, 1997 286 284
Paid-in capital 454,036 451,336
Retained deficit (1,561) (19,555)
Cumulative translation adjustment and other (3,305) (1,534)
-------- --------
Total shareholders' equity 449,456 430,531
-------- --------
Total liabilities and shareholders' equity $998,647 $701,196
======== ========
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Six months ended June 30,
1998 1997
-------- --------
Cash flows from operating activities:
Net income $17,994 $17,232
Adjustments to reconcile net income
to net cash provided by operating
activities:
Asset impairment and
restructuring charges 7,238 2,280
Depreciation and amortization 28,713 21,089
Change in deferred income taxes (49) 19,523
Change in current assets and
liabilities and other (22,611) 9,587
Net cash provided by operating -------- --------
activities 31,285 69,711
-------- --------
Cash flows used in investing activities:
Acquisitions, net of cash acquired (293,394) --
Proceeds from sales of assets 127,559 11,049
Capital expenditures (36,993) (27,203)
Other (3,755) (3,778)
-------- --------
Net cash used in investing activities (206,583) (19,932)
-------- --------
Cash flows provided by financing
activities:
Proceeds from issuance of debt
and other 161,528 1,839
--------- --------
Cash and cash equivalents:
Net increase (decrease) in cash and
cash equivalents (13,770) 51,618
Balance at beginning of period 49,355 15,671
--------- --------
Balance at end of period $35,585 $67,289
========= ========
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Acquisition
On January 14, 1998, ACX Technologies, Inc. (the Company)
acquired Britton Group plc (Britton) pursuant to a cash tender
offer for $420 million. Britton was an international packaging
group operating through two principal divisions: folding cartons
and plastics. The folding cartons division, Universal Packaging
Corporation (Universal Packaging), is a nonintegrated
manufacturer of folding cartons in the United States, with
capabilities in design, printing and manufacturing of multicolor
folding cartons. The plastics division of Britton (Plastics
Division) operates in the United Kingdom and includes the
extrusion, conversion and printing of polyethylene into films and
bags for industrial customers.
The acquisition has been accounted for under the purchase method.
Accordingly, the estimated excess of purchase price over the fair
value of net assets acquired of approximately $160 million is
being amortized using the straight-line method over 30 years.
Certain balance sheet adjustments or resolutions of issues
between the parties will also affect the ultimate price of the
acquisition and the allocation of the purchase price. The
results of Universal Packaging are reflected in the accounts of
the Company beginning January 14, 1998. In accordance with
management's decision to dispose of the Plastics Division, this
business has been carried as a discontinued operation on the
books of the Company since its acquisition. The sale of the
Plastics Division was completed on April 20, 1998 (see Note 2).
The following pro forma information has been prepared assuming
that this acquisition had occurred on January 1, 1997. In
accordance with the rules regarding the preparation of pro forma
financial statements, the historical results of Britton used to
derive the accompanying pro forma information do not include the
operations of the Plastics Division, which was sold on April 20,
1998. The pro forma information includes adjustments for (1)
amortization of goodwill recorded pursuant to purchase
accounting, (2) increased interest expense related to new
borrowings at applicable rates for the purchase, and (3) the net
tax effect of pro forma adjustments at the statutory rate. The
pro forma financial information is presented for informational
purposes only and may not be indicative of the results of
operations as they would have been had the transaction been
effected on the assumed date nor is it necessarily indicative of
the results of operations which may occur in the future. The
results of Universal Packaging have been included in the
Company's actual results of operations since January 14, 1998.
Three Months Six Months
(In thousands, except per Ended Ended
share data) June 30, 1997 June 30, 1997
------------- -------------
Net sales $237,998 $468,895
============= =============
Income from continuing
operations $9,631 $16,830
============= =============
Net income per basic share of
common stock $0.34 $0.60
============= =============
Net income per diluted share
of common stock $0.34 $0.59
============= =============
Note 2. Discontinued Operations
Britton Group Plastics Division
On April 20, 1998, the Company sold the Plastics Division to CVC
Capital Partners Ltd., a European private equity provider. The
sale price was approximately pounds 82.0 million, or $135.0
million, including pounds 80 million in cash and a pounds 2
million, 5.25% note receivable due in 2007 or upon change in
control. The majority of the sale price, less transaction costs,
was used to pay down debt incurred by the Company for the Britton
acquisition.
Since the acquisition date of Britton, the Company accounted for
the Plastics Division as a discontinued operation held for sale.
Therefore, due to purchase accounting, neither the operation of
the Plastics Division nor its disposition has had an impact on
the Company's results of operations. The Plastics Division had
net sales through the date of disposition for the second quarter
and six months ended June 30, 1998 of $8.1 million and $40.9
million, respectively. The Company allocated $0.8 million and
$1.8 million of interest expense to the Plastics Division during
the second quarter and six months ended June 30, 1998,
respectively.
Golden Aluminum Company
In 1996, the Board of Directors adopted a plan to dispose of the
Company's aluminum rigid container sheet business operated by
Golden Aluminum Company. In March of 1997, the sale of Golden
Aluminum was completed for $70 million, of which $10 million was
paid at closing and $60 million is due on or before March 1,
1999. In accordance with the purchase agreement, the purchaser
has the right to return Golden Aluminum to the Company prior to
March 1, 1999 in discharge of the $60 million obligation. The
initial payment of $10 million is nonrefundable.
Net sales for Golden Aluminum for the six months ended June 30,
1997 were $38.5 million. There was no income or loss from the
operations of Golden Aluminum in 1997. The remaining assets and
liabilities of Golden Aluminum Company at December 31, 1997 are
included in other current assets and consist primarily of
accounts receivable, partially offset by accounts payable. There
are no net assets of Golden Aluminum included in the June 30,
1998 balance sheet. 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 3. Asset Impairment and Restructuring Charges
1998 Asset Impairment Charges
During first quarter of 1998, the Company recorded $7.2 million
in asset impairment charges at Coors Ceramics and the Solar
Electric business unit.
Coors Ceramics recorded a $6.2 million charge related to the
cancellation of its C-4 technology agreement with IBM. Changes
in the market for C-4 applications extended the time frame for
achieving commercial sales beyond original expectations. This
lack of near term commercial sales opportunities, combined with
increasing overhead costs, prompted the Company to negotiate
termination of the agreement. Consequently, the Company wrote
off the long-lived assets associated with this project.
The Solar Electric segment recorded a $1.0 million asset
impairment charge to adjust its long-lived assets associated with
the solar electric systems distributor located in Argentina to an
amount that can be realized through estimated future operating
cash flows.
1997 Restructuring Charges
The Company recorded a total of $5.3 million in restructuring
charges in 1997. The following table summarizes accruals related
to the restructuring charges for 1997:
Corn
Biodegradable Syrup Graphic
Polymers Exit Packaging
(In thousands) Exit Plan Plan Headquarters Total
- ----------------- ------------- ------ ------------ ------
Balance,
December 31, 1997 $438 $882 $1,660 $2,980
Cash paid (345) (290) (1,275) (1,910)
------------- ------ ------------ ------
Balance,
June 30, 1998 $93 $592 $385 $1,070
============= ====== ============ ======
Note 4. Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income," was issued in June 1997 and
adopted by the Company in the first quarter of 1998. This
statement establishes standards for the reporting and display of
comprehensive income in financial statements. Comprehensive
income is generally defined as the change in equity of a business
enterprise during the period from transactions and other events
and circumstances from nonowner sources. The Company's total
comprehensive income consists of net income reported in the
consolidated income statement and certain foreign currency
translation adjustments.
Note 5. Adoption of New Accounting Standards
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998. This statement establishes
accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value.
This statement is effective for the Company's financial
statements for the year ended December 31, 2000 and the adoption
of this standard is not expected to have a material effect on the
Company's financial statements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," was issued in February 1998. This
statement revises the disclosure requirement for pensions and
other postretirement benefits. This statement is effective for
the Company's financial statements for the year ended December
31, 1998 and the adoption of this standard is not expected to
have a material effect on the Company's financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued in June 1997. This statement
establishes standards for the way public business enterprises
report information about operating segments. It also establishes
standards for related disclosure about products and services,
geographical areas and major customers. This statement is
effective for the Company's financial statements for the year
ended December 31, 1998 and 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, Graphic Packaging Corporation
(Graphic Packaging) and Coors Ceramics Company (Coors Ceramics).
Graphic Packaging produces high-value consumer and industrial
flexible packaging and folding cartons while Coors Ceramics
manufactures advanced technical ceramic and other engineered
materials. In addition to its primary business units, the
Company owns a majority interest in a group of solar electric
distribution companies, including Golden Genesis Company, a
publicly traded company on NASDAQ. Prior to 1998, the Company
operated several technology-based developmental business through
Golden Technologies Company, Inc. The Company is in the process
of winding down these developmental businesses.
On January 14, 1998, the Company acquired Britton Group plc
(Britton), an international packaging company operating through
two principal divisions: folding cartons and plastics. The
folding cartons division, Universal Packaging Corporation
(Universal Packaging) is a nonintegrated manufacturer of folding
cartons in the United States. The Plastics Division, which
operates in the United Kingdom, has been accounted for as a
discontinued operation since the acquisition and was sold on
April 20, 1998 for pounds 82 million ($135 million).
Results from Continuing Operations
Consolidated net sales for the three months ended June 30, 1998
were $257.3 million, an increase of $70.5 million, or 37.8%,
compared to the similar 1997 period. Consolidated net sales for
the six months ended June 30, 1998 were $494.1 million, an
increase of $133.8 million, or 37.1%, compared to the similar
1997 period. Both period increases are primarily attributable to
the additional sales related to the January 14, 1998 acquisition
of Universal Packaging. Increased sales at Coors Ceramics
resulting from the acquisition of Tetrafluor, Inc. in August
1997, along with stronger sales to the beverage valve,
petrochemical, and automotive industries also contributed to the
increases in consolidated net sales. Increased sales in both
periods of the Solar Electric segment were mostly offset by
decreased sales in the Other segment as a result of the Company's
1997 decision to exit its developmental businesses.
Consolidated gross margin was 20.6% for the second quarter and
six months ended June 30, 1998 compared to 24.8% and 24.4% for
the similar 1997 periods, respectively. The lower consolidated
gross margins resulted from margin declines at both Coors
Ceramics and Graphic Packaging, primarily due to increased price
competition and lower comparative margins at Universal Packaging,
which was acquired in January 1998.
For the second quarter of 1998, consolidated operating income was
$25.9 million, an increase of $8.0 million compared to the
similar 1997 period. This improvement primarily resulted from
the January 1998 acquisition of Universal Packaging and reduced
losses in both the Solar Electric and Other segments. These
increases were offset by a decline in operating income at Coors
Ceramics due primarily to currency-influenced pricing pressures
and reduced sales to the semiconductor industry.
For the six months ended June 30, 1998 operating income was $39.5
million, an increase of $8.9 million compared to the similar 1997
period. Again, this improvement primarily resulted from the
January 1998 acquisition of Universal Packaging and reduced
losses in both the Solar Electric and Other segments, offset by
$7.2 million in asset impairment charges recorded in the first
quarter of 1998, primarily related to Coors Ceramics' termination
of its C-4 technology agreement with IBM.
Net interest expense was $5.3 million for the second quarter of
1998, compared to $0.6 million for the second quarter of 1997.
Net interest expense was $9.6 million for the six month period
ended June 30, 1998, compared to $1.8 million for the similar
1997 period. The increases are the result of acquisition
financing and debt assumed in the Britton purchase.
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. The Company has
access to an unsecured $150 million revolving credit facility
that expires on January 8, 1999 and a $175 million unsecured
revolving credit facility that expires on November 30, 1998.
During the first quarter of 1998, the Company borrowed
approximately $276 million under its credit facilities to finance
the Britton acquisition. In conjunction with that transaction,
the Company also assumed an additional $92.5 million in debt. On
April 20, 1998, the Company completed the sale of Britton's
Plastics Division for approximately $135 million. The majority
of the proceeds of this sale were used to pay down debt. The
Company is in the process of reviewing its debt structure and
believes it has adequate sources of funds to refinance its short-
term debt under reasonable terms and interest rates prior to the
expiration of its credit facilities. In addition, the Company
has entered into contracts to hedge the underlying interest rate
on $175 million of anticipated long-term borrowings at an average
risk-free rate of approximately 5.78%. The hedges expire on
November 1, 1999. The Company has accounted for the contracts as
hedges of an anticipatory borrowing and as such, the contracts
are not marked to market and any gain or loss upon settlement
will be netted with the underlying cost of borrowing.
Net cash generated from operations for the six months ended June
30, 1998 was $31.3 million compared to $69.7 million generated in
the six months ended June 30, 1997. The 1997 period included the
partial liquidation of the working capital of Golden Aluminum
Company.
Year 2000
Management has initiated an enterprise-wide program to prepare
the Company's financial, manufacturing and other critical systems
and applications for the year 2000. The program involves the
Company's upper management as well as project leaders from each
of the Company's business segments. The focus of the program is
to identify affected software and hardware, develop a plan to
correct that software or hardware in the most effective manner
and implement and monitor that plan. The program also includes
communications with the Company's significant suppliers and
customers to determine the extent to which the Company is
vulnerable to any failures by them to address the Year 2000
issue. Although the Company's Year 2000 program is in various
stages of completion across its business segments, the Company
anticipates it will have all modifications and replacements in
place before the end of 1999. However, at this time, the Company
is not able to determine the estimated impact on the operations
of the Company should it or one of its suppliers or customers be
unable to successfully address the Year 2000 issue.
The Company expects to incur internal staff costs as well as
consulting and other expenses related to the year 2000 project.
In addition, the Company will replace certain older software with
new programs and systems. Some of these upgrades will be in
response to the Year 2000 issue, however, many upgrades are part
of the Company's normal business plan. Given the information
available at this time, management currently anticipates that the
cost to address the Year 2000 issue should not have a material
adverse effect on the Company's liquidity or results of
operations. However, the Company continues to gather information
regarding the total estimated costs and there can be no
assurances that these costs will not be material.
Segment Information
Second Quarter Only
(In thousands)
Operating
Net Sales Income (Loss)
1998 1997 1998 1997
-------- -------- -------- --------
Coors Ceramics $ 79,422 $ 75,011 $ 11,596 $ 12,789
Graphic Packaging 162,497 97,247 17,478 11,211
Solar Electric 11,838 9,453 (553) (1,490)
Other 3,569 5,066 (2,615) (4,571)
--------- -------- -------- --------
$257,326 $186,777 $ 25,906 $ 17,939
========= ======== ======== ========
Second Quarter - Year to Date
(In thousands)
Operating
Net Sales Income (Loss)
1998 1997 1998 1997
-------- -------- -------- --------
Coors Ceramics $160,367 $146,427 $ 17,173 $ 24,237
Graphic Packaging 302,033 183,084 30,831 19,159
Solar Electric 23,855 17,292 (3,207) (2,817)
Other 7,804 13,432 (5,331) (10,018)
-------- -------- -------- --------
$494,059 $360,235 $ 39,466 $ 30,561
======== ======== ======== ========
COORS CERAMICS
Coors Ceramics' second quarter 1998 net sales were $79.4 million,
an increase of $4.4 million, or 5.9%, compared to the similar
1997 period. Net sales for the first six months of 1998 were
$160.4 million, an increase of $13.9 million, or 9.5%, compared
to the similar 1997 period. Increased sales resulting from the
acquisition of Tetrafluor, Inc. in August 1997, along with
stronger sales to the beverage valve, petrochemical, and
automotive industries were the primary contributors to the
increases in net sales for both periods.
Second quarter 1998 operating income was $11.6 million, a
decrease of $1.2 million, or 9.3%, compared to the similar 1997
period. Operating margin was 14.6% for the second quarter 1998,
compared to 17.0% for the second quarter of 1997. The decreases
in operating income and operating margin are primarily
attributable to currency-influenced price competition and a less-
favorable product mix.
Operating income for the first six months of 1998 was $17.2
million, a decrease of $7.1 million compared to the similar 1997
period. The first half of 1998 included a $6.2 million asset
impairment charge related to the termination of the Company's C-4
technology agreement with IBM. The lack of near-term commercial
sales opportunities for this technology, combined with increased
overhead costs, prompted the Company to negotiate the termination
of the agreement and write off the long-lived assets related to
this project. Excluding the impact of this charge, operating
income decreased $831,000, or 3.4%, over the first half of 1997.
Operating margins, excluding the asset impairment charge, were
14.6% compared to 16.6% in the first half of 1997. The decrease
in operating income and operating margin is attributable to
currency-influenced price competition and product mix.
The Company expects continued pricing pressures in certain
product lines, along with continued softness in the semiconductor
industry, to impact Coors Ceramics throughout 1998. Coors
Ceramics continues to focus on growth through new product
development, expanding market share in its current product lines
and the addition of new materials to its product mix. In
addition, Coors Ceramics is in the process of formulating a plan
to improve plant efficiencies and capacity utilization, including
a review of plant consolidation recommendations and a management
realignment. Decisions regarding these proposals are expected to
be made during the 1998 third quarter and could result in charges
to affect any such changes.
GRAPHIC PACKAGING
Graphic Packaging's second quarter 1998 net sales were $162.5
million, an increase of $65.3 million, or 67.1%, compared to the
similar 1997 period. Net sales for the first six months of 1998
were $302.0 million, an increase of $118.9 million, or 65.0%,
compared to the similar 1997 period. Both period increases were
primarily attributable to the acquisition of Universal Packaging
which participates in the dry and frozen food markets. In
addition, increased sales to the snack food and beverage markets
were reported in both periods, offset partially by declines in
the pet food and tobacco industries. Certain sales to the
tobacco industry were lost to offshore suppliers.
Second quarter 1998 operating income was $17.5 million, an
increase of $6.3 million, or 55.9%, compared to the similar 1997
period. This increase was primarily attributable to the addition
of Universal Packaging, cost savings realized by Graphic
Packaging's corporate headquarters relocation to Colorado in the
fourth quarter of 1997 and from increased sales of higher margin
specialty cartons. Operating margin decreased to 10.8% for the
second quarter of 1998, compared to 11.5% for the second quarter
of 1997, primarily related to the anticipated lower margin
business of Universal Packaging and the additional goodwill
amortization associated with the acquisition.
Operating income for the first half of 1998 was $30.8 million, an
increase of $11.7 million, or 60.9%, compared to the similar 1997
period. The increase in operating income was primarily
attributable to the addition of Universal Packaging. In
addition, cost savings realized by Graphic Packaging's corporate
headquarters relocation to Colorado in the fourth quarter of 1997
contributed to the increase in operating income for the first
half of 1998. Operating margin remained relatively flat at 10.2%
for the first half of 1998, compared to 10.5% for the similar
1997 period.
Management continues to work to develop synergies between Graphic
Packaging and Universal Packaging in the areas of sales,
purchasing, and administration and expects to realize additional
financial advantages in the future. In addition, Graphic
Packaging continues to evaluate opportunities to expand its
business with new and existing customers, as well as through
strategic acquisition opportunities.
SOLAR ELECTRIC
The Company's Solar Electric business segment includes its
majority interest in Golden Genesis Company (formerly Photocomm,
Inc.) and its investments in solar electric distributors in
Argentina and Brazil. Solar Electric's net sales for the second
quarter were $11.8 million, an increase of $2.4 million, or
25.2%, compared to the second quarter of 1997. For the first
half of 1998, net sales were $23.9 million, an increase of $6.6
million, or 38.0%, compared to the similar 1997 period. The
completion of large telecommunications and power projects in the
Middle East and Africa, along with Golden Genesis' January 1998
acquisition of Utility Power Group, contributed to the increased
sales in both periods.
Operating loss for the 1998 second quarter was $553 thousand
compared with an operating loss of $1.5 million for the similar
1997 period. The decrease in operating loss is primarily
attributable to settlement charges recorded in 1997, which did
not recur in the current quarter. In addition, the Solar
Electric segment has begun to realize cost savings associated
with Golden Genesis' efforts to consolidate its manufacturing,
marketing, and administrative functions.
Operating loss for the first half of 1998 was $3.2 million,
compared with an operating loss of $2.8 million for the similar
1997 period. The first half of 1998 includes a first quarter
$1.0 million asset impairment charge related to Solartec, S.A., a
solar electric distributor in Argentina. Since acquiring
Solartec in November 1996, operating cash flows have been below
original expectations. As a result, the Company recorded an
impairment charge to reduce the carrying value of its long-lived
assets to an amount that can be realized through estimated future
operating cash flows. In addition, operating income for the
first half of 1998 also includes a $1.1 million write down of
inventories and accounts receivable associated with the Company's
battery charging operations in Brazil. Offsetting these
declines, the Solar Electric segment has begun to realize cost
savings associated with Golden Genesis' efforts to consolidate
its manufacturing, marketing, and administrative functions.
OTHER
The Company's remaining developmental business operated by Golden
Technologies, along with the Company's corporate costs, comprise
the Other segment. Net sales for the 1998 second quarter
decreased $1.5 million, compared to the similar 1997 period. Net
sales for the first half of 1998 decreased $5.6 million, compared
to the similar 1997 period. These decreases reflect the
Company's 1997 decision to exit certain activities within the
developmental businesses, primarily the production of high-
fructose corn syrup.
Operating loss for the second quarter of 1998 was $2.6 million,
compared to $4.6 million for the similar 1997 period. Operating
loss for the first half of 1998 was $5.3 million, compared to
$10.0 million for the first half of 1997. The decrease in losses
in both periods is the result of the Company's strategy to exit
the developmental businesses. In addition, the 1997 first half
also includes $2.3 million in restructuring charges related to
the Company's decision to exit the high-fructose corn syrup
business
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," "trends" 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,
food, telecommunications, automotive, semiconductor, pulp and
paper, 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 or metals and competitors
offering products with characteristics similar to the Company's
products; (vi) changes in consumer buying habits; (vii)
governmental regulation including environmental laws; (viii) the
ability of the Company to successfully identify and maximize
efficiencies between Graphic Packaging and the companies it
acquires and successfully merge the corporate cultures; (ix) the
ability of the Company to successfully execute its developmental
business exit strategies; and (x) 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, 1997. 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 three and six month periods ended June 30, 1998, may not be
indicative of results that may be expected for the year ending
December 31, 1998. Certain 1997 information has been
reclassified to conform to the 1998 presentation.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of shareholders of
the Company at the Annual Meeting of Shareholders held May 12,
1998.
a) The following members were elected to the Board of Directors
to hold office for a three year term:
Nominee Shares Voted Shares Term
For Withheld Expires
Jeffrey H. Coors 26,499,717 26,485 2001
John H. Mullin, III 26,499,689 26,513 2001
James K. Peterson 26,499,621 26,581 2001
The terms of office of the Company's other directors
continuing after the Annual Meeting, are as follows:
Term
Expires
Joseph Coors, Jr. 1999
Richard P. Godwin 1999
John Hoyt Stookey 1999
John D. Beckett 2000
John K. Coors 2000
William K. Coors 2000
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Document Description
2.1 Recommended Cash Offers by Baring Brothers
International Limited on behalf of ACX (UK)
Limited, a wholly owned subsidiary of ACX
Technologies, Inc. for Britton Group plc.
(Incorporated by reference to Exhibit 2 to Form
8-K filed on January 29, 1998)
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)
(b) Reports on Form 8-K
A report on Form 8-K was filed on May 1, 1998
announcing that the Company had sold the Plastics
Division of Britton Group on April 20, 1998.
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: August 5, 1998 By /s/Jed J. Burnham
------------------------------
Jed J. Burnham
(Chief Financial Officer and
Treasurer)
Date: August 5, 1998 By /s/Beth A. Parish
------------------------------
Beth A. Parish
(Controller and Principal
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 35,585
<SECURITIES> 0
<RECEIVABLES> 106,435
<ALLOWANCES> 0
<INVENTORY> 153,271
<CURRENT-ASSETS> 378,327
<PP&E> 723,689
<DEPRECIATION> 344,876
<TOTAL-ASSETS> 998,647
<CURRENT-LIABILITIES> 306,123
<BONDS> 0
0
0
<COMMON> 286
<OTHER-SE> 449,170
<TOTAL-LIABILITY-AND-EQUITY> 998,647
<SALES> 257,326
<TOTAL-REVENUES> 257,326
<CGS> 204,334
<TOTAL-COSTS> 231,420
<OTHER-EXPENSES> (207)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,258
<INCOME-PRETAX> 20,855
<INCOME-TAX> 8,300
<INCOME-CONTINUING> 12,555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,555
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.43
</TABLE>
