FORM 10-Q
UNITED STATES
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, 1999
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 (I.R.S. 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 28,440,291 shares of common stock outstanding as of
May 1, 1999.
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,
--------------------
1999 1998
-------- --------
Net sales $242,555 $236,733
Cost of goods sold 194,046 188,065
-------- --------
Gross profit 48,509 48,668
Selling, general and
administrative 27,075 27,870
Asset impairment charges --- 7,238
-------- --------
Operating income 21,434 13,560
Other income (expense) - net 93 (147)
Interest expense - net (5,209) (4,374)
-------- --------
Income before income taxes 16,318 9,039
Income tax expense 6,600 3,600
-------- --------
Net income $9,718 $5,439
======== ========
Comprehensive income $9,568 $5,810
======== ========
Net income per basic share $0.34 $0.19
======== ========
Net income per diluted share $0.34 $0.19
======== ========
Weighted average shares
outstanding - basic 28,427 28,425
======== ========
Weighted average shares
outstanding - diluted 28,721 29,134
======== ========
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
March 31, December 31,
1999 1998
ASSETS ----------- ------------
Current assets:
Cash and cash equivalents $32,747 $26,196
Accounts receivable 106,118 92,763
Inventories:
Finished 72,507 62,484
In process 40,458 37,458
Raw materials 44,173 48,610
---------- --------
Total inventories 157,138 148,552
Notes receivable 60,438 60,568
Other assets 30,542 30,076
---------- --------
Total current assets 386,983 358,155
Properties at cost less accumulated
depreciation of $305,838 in 1999
and $286,204 in 1998 395,742 373,691
Goodwill, net 228,165 206,583
Other assets 23,598 22,776
---------- --------
Total assets $1,034,488 $961,205
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $105,129 $86,300
Other current liabilities 126,807 119,311
---------- --------
Total current liabilities 231,936 205,611
Long-term debt 274,071 233,000
Other long-term liabilities 57,477 61,260
---------- --------
Total liabilities 563,484 499,871
Minority interest 13,181 13,379
Shareholders' equity
Preferred stock, nonvoting, $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 28,436,000 and
28,373,000 issued and outstanding at
March 31, 1999, and December 31, 1998 284 284
Paid-in capital 451,700 451,401
Retained earnings 11,428 1,710
Accumulated other comprehensive loss (5,589) (5,440)
---------- --------
Total shareholders' equity 457,823 447,955
---------- --------
Total liabilities and shareholders' equity $1,034,488 $961,205
========== ========
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Three months ended
March 31,
--------------------
1999 1998
-------- --------
Cash flows from operating
activities:
Net income $9,718 $5,439
Adjustments to reconcile net
income to net cash provided
by operating activities:
Asset impairment charges --- 7,238
Depreciation and amortization 14,452 13,772
Change in current assets and
current liabilities and other (9,643) (17,674)
------ -------
Net cash provided by operating
activities 14,527 8,775
------ -------
Cash flows from investing
activities:
Capital expenditures (19,285) (19,216)
Acquisitions, net of cash
acquired (48,854) (294,435)
------ -------
Net cash used in investing
activities (68,139) (313,651)
------ -------
Cash flows from financing
activities:
Proceeds from the issuance
of debt 69,663 282,690
Repayment of debt (9,500) ---
------ -------
Net cash provided by financing
activities 60,163 282,690
------ -------
Cash and cash equivalents:
Net increase (decrease) in cash
and cash equivalents 6,551 (22,186)
Balance at beginning of period 26,196 15,671
------ -------
Balance at end of period $32,747 ($6,515)
======= =======
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. 1999 Acquisitions
On March 12, 1999, the Company acquired the net assets of
Precision Technologies (Precision) for approximately $22 million
in cash and 300,000 warrants to receive shares of the Company's
common stock at an exercise price equal to the fair market value
at the date of closing. These warrants vest only upon the
achievement of certain revenue goals within three years. The
Precision acquisition has been accounted for under the purchase
method. Accordingly, the estimated excess of the purchase price
over the fair value of net assets acquired of approximately $19
million is being amortized using the straight-line method over 20
years. Precision Technologies, located in Livermore, California,
manufactures precision-machined parts for the semiconductor,
medical, and aircraft industries.
On March 1, 1999, the Company acquired all of the
outstanding shares of Edwards Enterprises (Edwards) for
approximately $18 million in cash. The Edwards acquisition has
been accounted for under the purchase method. Accordingly, the
estimated excess of the purchase price over the fair value of net
assets acquired of approximately $4 million is being amortized
using the straight-line method over 20 years. Edwards
Enterprises, located in Newark, California, manufactures
precision-machined parts for the semiconductor industry.
Note 2. Asset Impairment Charges
During the 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 business unit recorded a $1.0 million
asset impairment charge to write down the long-lived assets of
Solartec, S.A., a solar electric systems distributor located in
Argentina. Since acquiring Solartec in November 1996, operating
cash flows were below original expectations. As a result, the
Company recorded this impairment to the asset value of Solartec
to an amount that could be realized through estimated future
operating cash flows.
Note 3. Segment Information
The Company's reportable segments (Packaging and Ceramics)
are based on its method of internal reporting, which is based on
product category. In addition, as of March 31, 1999, the Company
owns a majority interest in a group of solar electric
distribution companies and a real estate developmental
partnership, which are included in the Other Segment. The Other
Segment also includes, prior to January 31, 1999, a corn-wet
milling facility, and prior to March 1998, a biodegradable
polymer developmental business.
The Company evaluates the performance of its segments and
allocates resources to them based primarily on operating income.
The table below summarizes information about reported
segments as of and for the three months ended March 31:
Operating Depreciation
Net Income and Capital
(In thousands) Sales (Loss) Amortization Assets Expenditures
-------- --------- ------------ ---------- ------------
1999
Packaging $150,726 $12,839 $8,566 $564,350 $17,271
Ceramics 76,579 10,517 5,388 313,020 1,548
Other 15,250 425 430 54,148 466
-------- --------- ---------- ---------- -----------
Segment total 242,555 23,781 14,384 931,518 19,285
Corporate --- (2,347) 68 102,970 ---
-------- --------- ---------- ---------- -----------
Consolidated
total $242,555 $21,434 $14,452 $1,034,488 $19,285
======== ========= ========== ========== ===========
1998
Packaging $139,536 $13,353 $8,417 $558,729 $10,146
Ceramics 80,945 5,577 4,816 270,184 7,873
Other 16,252 (2,965) 459 77,029 1,154
-------- --------- ---------- -------- -----------
Segment total 236,733 15,965 13,692 905,942 19,173
Corporate --- (2,405) 80 80,016 43
Discontinued
operations --- --- --- 126,049 ---
-------- --------- ---------- ---------- -----------
Consolidated
total $236,733 $13,560 $13,772 $1,112,007 $19,216
======== ========= ========== ========== ===========
Note 4. Subsequent Event
On April 25, 1999, the Company entered into a definitive
purchase agreement with Fort James Corporation (Fort James) to
acquire the net assets of Fort James' folding carton business for
$830 million in cash. The folding carton business of Fort James
is a major supplier of folding cartons to leading consumer
product companies. The Fort James folding carton business is
comprised of 12 carton plants and a paper mill. The agreement
has been approved by the Boards of Directors of both the Company
and Fort James and is still subject to regulatory approvals. The
Company expects to finance the acquisition with a combination of
short-term and long-term credit facilities with Bank of America
and to close the transaction by July 1999.
In April 1999, the Company decided to seek a strategic buyer
for its flexible packaging business.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General Business Overview
ACX Technologies, Inc. (the Company), together with its
subsidiaries, is a diversified, value added manufacturing
organization focused on pioneering differentiated customer
solutions. Two business segments comprise the majority of the
Company's results from operations: the packaging business,
operated through Graphic Packaging Corporation (Graphic
Packaging), and the ceramics business, operated through Coors
Ceramics Company (Coors Ceramics).
Graphic Packaging is a nonintegrated manufacturer of both
folding cartons and flexible packages and participates in the
beverage, frozen food, dried food, soap and detergent, bakery,
tobacco, pet food, confectionery, quick service restaurant,
coffee, photographic, and personal care markets. In April 1999,
the Company decided to seek a strategic buyer for its flexible
packaging business in order to concentrate on the folding carton
business.
On April 25, 1999, the Company entered into a definitive
purchase agreement with Fort James Corporation (Fort James) to
acquire the net assets of Fort James' folding carton business for
$830 million in cash. The folding carton business of Fort James
is a major supplier of folding cartons to leading consumer
product companies. The Fort James folding carton business is
comprised of 12 carton plants and a paper mill. The Company
expects to close the acquisition by the end of July 1999.
Coors Ceramics develops, manufactures, and sells advanced
technical ceramic products and other engineered materials across
a wide range of product lines for a variety of custom
applications. Coors Ceramics, which has been in business for
more than 78 years, is the largest U.S.-owned, independent
manufacturer of advanced technical ceramics. The majority of
Coors Ceramics' sales are to the semiconductor equipment,
petrochemical, power generation and mining, automotive,
telecommunications, and pulp and paper industries. In March
1999, the Company acquired Precision Technologies (Precision) and
Edwards Enterprises (Edwards), both manufacturers of precision-
machined parts primarily for the semiconductor equipment
industry.
In addition to the primary operating businesses, the Company
owns other businesses (Other); primarily operating through its
majority owned subsidiary, Golden Genesis Company (Golden
Genesis). Golden Genesis' focus is on assembling and
distributing solar electric systems. The Other businesses also
include a real estate development partnership. Additionally, the
historical results for the Other businesses include the
operations of a biodegradable polymer project and a corn-wet
milling facility. During 1998, the Company exited the
biodegradable polymer project. On January 31, 1999, the Company
sold the corn-wet mill operation. The Company is working toward
exit strategies for all noncore businesses.
Results from Continuing Operations
Consolidated net sales for the three months ended March 31,
1999 were $242.6 million, an increase of $5.8 million, or 2.5%,
compared to the same period in 1998. This increase is primarily
attributable to having a full quarter of sales related to
Universal Packaging, which was acquired on January 14, 1998,
offset by lower comparative sales at Ceramics and the Other
businesses.
Consolidated gross profit was $48.5 million, a decrease of
$0.2 million compared to the same period in 1998. Consolidated
gross margin was 20.0% for the first quarter 1999 compared to
20.6% for the 1998 similar period. The lower 1999 first quarter
consolidated gross profit and gross margin resulted from margin
declines at both Coors Ceramics and Graphic Packaging, primarily
due to competitive price pressures.
For the first quarter of 1999, consolidated operating income
increased $7.9 million to $21.4 million. This increase in
operating income is primarily due to $7.2 million in asset
impairment charges recorded in the first quarter of 1998. Coors
Ceramics recorded a $6.2 million asset impairment charge related
to the termination of its C-4 technology agreement with IBM. The
Solar Electric business unit recorded a $1.0 million asset
impairment charge to write down the long-lived assets of its
Argentinean subsidiary, Solartec. In addition, the elimination
of operating losses from the Other businesses contributed to the
increase in first quarter 1999 operating income. Offsetting
these positive factors were lower operating income at both
Graphic Packaging and Coors Ceramics, due to increased price
pressures in the first quarter 1999 as compared to the similar
period last year.
Net interest expense increased to $5.2 million in the first
quarter of 1999, compared to $4.4 million for the first quarter
of 1998. The increase in interest expense is due to additional
borrowings related to the recent Ceramics' acquisitions and
borrowings related to 1999 and 1998 capital expenditures. This
increase in net interest expense is partially offset by a
decrease in the Company's weighted average interest rate in the
first quarter of 1999 compared to the first quarter of 1998.
The consolidated effective tax rate for the first quarter of
1999 and 1998 was approximately 40%. The primary difference
between the 1999 first quarter effective tax rate and the
statutory rate 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. At March 31,
1999, the Company's working capital was $155.0 million with a
current ratio of 1.67 to 1.
In 1998, the Company established a two-year, unsecured $250
million revolving credit facility. The Company may extend this
facility for two additional one-year periods with the consent of
the participating banks. Amounts borrowed under this facility
bear interest under various pricing alternatives, including (i)
LIBOR plus a spread depending on the Company's debt ratings or
(ii) a competitive money market auction. In addition, the
Company pays a commitment fee on the committed amount. At March
31, 1999, $177 million was outstanding under this line. The
Company intends to replace this facility with longer-term
financing prior to the expiration date of the facility.
The Company has $100 million of senior notes outstanding
under a private placement agreement bearing interest at an
average rate of 8%. Of this amount, $70 million is due November
1, 1999, with the remaining $30 million due in November 2001. In
addition, the Company assumed $92.5 million of senior notes
through its acquisition of Britton, of which $9.5 million was
repaid in the first quarter of 1999. These notes bear interest
at approximately 7.1% and are payable in installments between
1999 and 2006.
The Company has an uncommitted $20 million revolving credit
facility with Wachovia Bank, N.A. As of March 31, 1999, $19.2
million was outstanding under this facility.
The Company expects to finance the acquisition of Fort
James' folding carton businesses with a combination of short-term
and long-term credit facilities with Bank of America. In
conjunction with this acquisition, the Company plans to use these
credit facilities to prepay the $100 million senior note holders
and the $83 million senior note holders remaining from the
Britton acquisition and repay all amounts outstanding under the
two-year, unsecured $250 million revolving credit facility.
The Company has entered into contracts to hedge the
underlying interest rate on $175 million of anticipated long-term
borrowings. These contracts lock in an average risk-free rate of
approximately 5.78% and expire on November 1, 1999. The
anticipated borrowings will be used to refinance a portion of the
Bank of America credit facilities. As of March 31, 1999, the
unrecognized loss associated with these hedge contracts was
approximately $5.3 million.
During 1998, the Company's Board of Directors approved the
repurchase of up to 5% of the outstanding common shares of the
Company. As of March 31, 1999, the Company had repurchased
181,200 shares at an aggregate cost of $2.4 million.
The Company currently expects that cash flows from
operations, the sale of certain assets, borrowings under its
current credit facilities, and anticipated new borrowings will be
adequate to meet the Company's needs for working capital,
temporary financing for capital expenditures, debt repayments,
and acquisitions.
Year 2000 Readiness Disclosure
The Year 2000 issue arose because many existing computer
programs use only the last two digits to refer to a year.
Therefore, these computer programs do not properly recognize a
year that begins with "20" instead of the familiar "19". If not
corrected, many computer applications could fail or create
erroneous results disrupting normal business operations.
Management has implemented an enterprise-wide program to
prepare the Company's financial, manufacturing, and other
critical systems and applications for the year 2000. The program
includes a task force established in March 1998 that has the
support and participation of upper management and includes
individuals with expertise in risk management, legal, and
information technologies. The Board of Directors monitors the
progress of the program on a quarterly basis. The task force's
objective is to ensure an uninterrupted transition to the year
2000 by assessing, testing, and modifying all information
technology (IT) and non-IT systems, interdependent systems, and
third parties such as suppliers and customers.
The Year 2000 task force has taken an inventory of all IT
and non-IT systems. This inventory categorizes potential systems
date failures into three categories: "major" (critical to
production and could be business threatening with no short-term
alternatives available); "limited" (disrupting to the business
operations with short-term solutions available); and "minor"
(inconsequential to the business operations). The task force has
prioritized the program to focus first on "major" systems. It is
the Company's goal to have all systems Year 2000 compliant no
later than September 1, 1999.
IT Systems - The Company is primarily using internal
resources to remediate IT systems. External resources are used
to assist in testing compliance of IT systems. The Company does
not rely on any one IT system. The majority of the IT systems
have been recently purchased from third party vendors. These
systems were already Year 2000 compliant or had Year 2000
compliance upgrades. As of March 31, 1999, approximately 80% of
the Company's IT systems were Year 2000 compliant.
Non-IT Systems - The Company has approximately 40
manufacturing facilities with varying degrees of non-IT systems
(such as printing presses, automated kiln systems, statistical
process control systems, ink mixing systems, quality control
systems, and machining equipment). The vast majority of these
facilities are located in North America. To ensure Year 2000
compliance for non-IT systems, the Year 2000 task force has
contacted the suppliers of these non-IT systems and obtained
statements that the systems are Year 2000 compliant and is in the
process of testing Year 2000 compliance. The majority of these
non-IT systems use time intervals instead of dates and are Year
2000 compliant. Thus, the Company believes that potential
disruptions of such systems due to the Year 2000 issue should be
minimal. As of March 31, 1999, approximately 90% of the
Company's "major" and "limited" non-IT systems are Year 2000
compliant. The "minor" non-IT systems are in various stages of
compliance.
Third Parties - The Year 2000 task force has been in contact
with key suppliers and customers to minimize potential business
disruptions related to the Year 2000 issue between the Company
and these third parties. The task force has focused on suppliers
and customers that are classified as "major" and "limited."
While the Company cannot guarantee compliance by third party
suppliers, the Company has developed contingency plans to ensure
the availability of inventory supplies in the event a supplier is
not Year 2000 compliant.
Contingency Plans - The Company is in the process of
finalizing contingency plans in the event there are Year 2000
failures related to the Company's IT and non-IT systems and/or
key third parties. The Company's manufacturing facilities are
not interdependent in terms of non-IT systems, and its facilities
utilize a diverse range of non-IT systems (i.e., printing
presses, kilns, and other manufacturing equipment). In
addition, no one facility accounts for a significant amount of
revenue. Thus, the contingency plan for non-IT systems includes
the transfer of production between facilities and manufacturing
equipment. Currently, the Company believes that there is enough
manufacturing capacity to accommodate the contingency plan.
The Company's IT systems are also not heavily interdependent
between facilities and key third parties and the Company utilizes
a diverse range of IT systems. The contingency plan for IT
systems includes the ability to transfer transaction processing,
record keeping, and compliance work between facilities and
maintaining "hard" copies of critical information.
The Company is not dependent on any one supplier. The
Company has established back-up suppliers and will maintain
adequate inventory levels at December 31, 1999 to minimize the
potential business disruption in the event of a Year 2000 failure
by a supplier.
Costs - Through March 31, 1999, the Company has spent
approximately $0.9 million out of an estimated total $1.8 million
related to the Year 2000 issue. These costs include the costs
incurred for external consultants and professional advisors and
the costs for software and hardware. The Company has not
separately tracked internal costs such as payroll related costs
for its information technologies group and other employees
working on the Year 2000 project. The Company expenses all costs
related to the Year 2000 issue as incurred. These costs are
being funded through operating cash flows.
The Company's current estimate of the time and costs related
to the remediation of the Year 2000 issue are based on the facts
and circumstances existing at this time. New developments could
affect the Company's estimates to remediate the Year 2000 issue.
These developments include, but are not limited to: (i) the
availability and cost of personnel trained in this area; (ii) the
ability to identify and remediate all IT and non-IT systems;
(iii) unanticipated failures in IT and non-IT systems; and (iv)
the planning and Year 2000 compliance success that key customers
and suppliers attain.
Segment Information
Net sales and operating income for the first quarter 1999
and 1998 are summarized by segment below:
Operating
(In thousands) Net Sales Income (Loss)
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
Graphic Packaging $150,726 $139,536 $12,839 $13,353
Coors Ceramics 76,579 80,945 10,517 5,577
Other 15,250 16,252 425 (2,965)
Corporate --- --- (2,347) (2,405)
-------- -------- ------- -------
$242,555 $236,733 $21,434 $13,560
======== ======== ======= =======
Graphic Packaging
Graphic Packaging reported net sales for the first quarter
of 1999 of $150.7 million, an increase of $11.2 million, or 8.0%
over 1998 first quarter net sales. This increase is primarily
attributable to having a full quarter of sales related to
Universal Packaging, which was acquired on January 14, 1998.
Graphic Packaging's 1999 first quarter base folding carton
business net sales were flat compared to the same period in 1998.
Graphic Packaging's flexible division had lower sales for the
first quarter of 1999 compared to the similar 1998 period due to
competitive price pressures within the industry.
Graphic Packaging's operating income was $12.8 million for
the first quarter of 1999 compared to $13.4 million for the
similar 1998 period. Operating margins decreased to 8.5% for the
first quarter of 1999 from 9.6% for the first quarter of 1998.
The decreases in operating profit and operating margin are
primarily attributable to competitive pricing pressures at both
the base folding carton and flexible packaging businesses. An
increase in volume at the folding carton business and improved
manufacturing efficiencies partially offset the decrease in
operating income from price concessions.
Coors Ceramics
Coors Ceramics' first quarter 1999 net sales were $76.6
million compared to first quarter 1998 net sales of $80.9
million. Increased sales volumes to the semiconductor equipment
and mining and power generation industries were more than offset
by decreased sales to the petrochemical, defense, and
telecommunications industries. The increased sales to the
semiconductor equipment industry were partially attributable to
the March 1999 acquisitions of Precision and Edwards. Coors
Ceramics' continues to see currency influenced price pressures in
several of the industries in which it competes.
Coors Ceramics' operating income was $10.5 million for the
first quarter of 1999 compared to $5.6 million for the first
quarter of 1998. The 1998 quarter was impacted by 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
termination of the agreement and write-off the long-lived assets
related to this project. Excluding the impact of this charge,
operating income decreased $1.3 million compared to the first
quarter 1998. Operating margins decreased to 13.7% for the first
quarter of 1999 compared to 14.6% for the first quarter of 1998,
excluding the 1998 asset impairment charge. The decreases in
operating income and operating margins are primarily attributable
to currency-influenced price competition. Coors Ceramics
continues to focus on growth through new product development,
increasing sales in its current product lines, and the addition
of new materials to its product mix.
Other
As of March 31, 1999, the Company's Other businesses
includes its majority interest in Golden Genesis Company, Inc., a
real estate partnership, and the results of the Company's corn-
wet mill, which was sold on January 31, 1999. For the first
quarter of 1998, the Other businesses also included the results
of the Company's biodegradable polymer project.
Net sales for the Other businesses were $15.3 million for
the first quarter of 1999 compared to $16.3 million for the
similar 1998 period. This decrease is primarily a result of the
sale of the corn-wet mill in January of 1999. Also, contributing
to the decrease in sales was lower sales for the Solar business
due to fewer telecommunications and petrochemical solar power
projects in 1999 compared to 1998.
For the first quarter 1999, the Other businesses had
operating income of $0.4 compared to an operating loss of $3.0
million for the 1998 first quarter. The 1998 operating loss
includes a $1.0 million asset impairment charge related to the
long-lived assets of Solartec, S.A., a solar electric distributor
in Argentina. Since acquiring Solartec in November 1996,
operating cash flows were below original expectations. As a
result, the Company recorded an impairment to reduce the carrying
value of its investment in Solartec to an amount that could be
realized through estimated future operating cash flows.
Operating income for the first quarter 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. Excluding these charges, operating losses totaled $0.6.
Corporate
Corporate costs of $2.3 million for the first quarter were
relatively flat compared to corporate costs of $2.4 million for
the first quarter of 1998.
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,
food, telecommunications, automotive, semiconductor,
petrochemical, 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, a
substitution of flexible packaging for folding cartons, 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 execute its developmental
business exit strategies; and (ix) 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, 1998. 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, 1999,
may not be indicative of results that may be expected for the
year ending December 31, 1999.
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 13, 1999 By/s/Jed J. Burnham
-------------------------------
Jed J. Burnham
(Chief Financial Officer and
Treasurer)
Date: May 13, 1999 By/s/Beth A. Parish
-------------------------------
Beth A. Parish
(Controller and Principal
Accounting Officer)
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