SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
_____ Exchange Act of 1934.
For the quarterly period ended June 30, 1996
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 0-21828
GREENFIELD INDUSTRIES, INC.
470 Old Evans Road
Evans, Georgia 30809
706/863-7708
I.R.S. Employment I.D. 04-2917072
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 twelve months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
Yes X No
___________ ___________
The number of shares of common stock outstanding at August 9, 1996 is
16,345,550 shares.
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<PAGE>
GREENFIELD INDUSTRIES, INC.
INDEX
Page
Number
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statement of Operations -
three months and six months ended
June 30, 1996 and 1995 (Unaudited) 3
Consolidated Balance Sheet -
June 30, 1996 (Unaudited) and
December 31, 1995 4
Consolidated Statement of Cash Flows -
six months ended June 30, 1996 and
1995 (Unaudited) 5
Consolidated Statement of Changes in
Stockholders' Equity for the six months
ended June 30, 1996 (Unaudited) 6
Notes to Consolidated Financial Statements 7 - 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 21
Part II - Other Information
Item 4. Results of votes of security holders 22 - 23
Item 6. Exhibits and Reports on Form 8-K 23
(a) Exhibits
(b) Reports on Form 8-K
Signature 24
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<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in thousands except per share data)
Three months ended Six months ended
June 30, June 30,
<S> <C> <C> <C> <C>
1996 1995 1996 1995
Net sales $ 130,021 $ 104,799 $ 262,719 $ 211,218
Cost of sales 88,336 73,330 180,464 145,742
---------------- ---------------- ---------------- ----------------
Gross profit 41,685 31,469 82,255 65,476
Selling, general and
administrative expenses 23,696 16,186 46,322 36,116
---------------- ---------------- ---------------- ----------------
Operating income 17,989 15,283 35,933 29,360
Interest expense 2,649 2,013 6,162 4,130
Dividends on company-obligated,
mandatorily redeemable
convertible preferred securities
of subsidiary Greenfield Capital
Trust at 6% per annum 1,284 -- 1,284 --
---------------- ---------------- --------------- ----------------
Income before provision for
income taxes 14,056 13,270 28,487 25,230
Provision for income taxes 5,699 5,355 11,561 10,260
---------------- ---------------- --------------- ----------------
Net income $ 8,357 $ 7,915 $ 16,926 $ 14,970
================ ================ =============== ================
Earnings per share:
Primary $ 0.51 $ 0.49 $ 1.04 $ 0.92
================ ================ =============== ================
Fully diluted $ 0.50 $ 0.49 $ 1.02 $ 0.92
================ ================ =============== ================
Weighted average shares outstanding:
Primary 16,308,057 16,250,002 16,290,014 16,250,002
================ ================ =============== ================
Fully diluted 18,391,306 16,250,002 17,331,639 16,250,002
================ ================ =============== ================
Dividends per common share $ 0.04 $ 0.03 $ 0.08 $ 0.06
================ ================ =============== ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<S> <C> <C>
June 30, December 31,
1996 1995
____ ____
(UNAUDITED)
ASSETS
Current assets:
Cash $ -- $ 5,258
Accounts receivable, net of allowance for
doubtful accounts of $3,580 and $2,624,
respectively 83,877 63,618
Inventories, net 147,668 109,769
Prepaid expenses and other 6,945 4,069
__________ _____________
Total current assets 238,490 182,714
Property, plant and equipment, net 133,141 109,022
Goodwill, net 158,894 98,795
Other assets, net 1,683 7,932
__________ _____________
Total assets $ 532,208 $ 398,463
========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 632 $ 633
Accounts payable 27,238 24,586
Accrued liabilities 40,645 33,688
__________ _____________
Total current liabilities 68,515 58,907
Long-term debt 135,617 140,198
Deferred taxes 4,523 4,207
Other long-term liabilities 16,689 15,891
Commitments and contingencies (See note 9)
__________ _____________
Total liabilities 225,344 219,203
__________ _____________
Company-obligated, mandatorily redeemable
convertible preferred securities of subsidiary
Greenfield Capital Trust holding solely parent's
convertible subordinated debentures 115,000 --
__________ _____________
Stockholders' equity:
Preferred stock; $0.01 par value; 1,500,000 shares
authorized; no shares issued and outstanding
Common stock; $0.01 par value; 100,000,000
shares authorized; 16,337,300 and 16,260,377
shares issued and outstanding, respectively 163 163
Additional paid-in capital and other 108,836 111,615
Retained earnings 84,636 69,014
Cumulative translation adjustment (1,771) (1,532)
__________ _____________
Total stockholders' equity 191,864 179,260
__________ _____________
Total liabilities and stockholders' equity $ 532,208 $ 398,463
========== =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
Six months ended
June 30,
<S> <C> <C>
1996 1995
____ ____
Cash flows from operating activities:
Net income $ 16,926 $ 14,970
Adjustments to reconcile net income to net
cash (used in) provided by operating activities
excluding the effects of the acquisitions:
Depreciation 7,071 6,371
Amortization 2,167 1,364
Deferred income taxes 779 (61)
Tax benefits relating to exercise of stock options 154 602
Other 129 (407)
Changes in operating assets and liabilities:
Accounts receivable, net (5,404) (8,303)
Inventories, net (14,256) (9,937)
Prepaid expenses and other (2,091) (242)
Accounts payable (12,536) 1,506
Accrued liabilities (522) (1,741)
_____________ __________
Net cash (used in) provided by operating activities (7,583) 4,122
_____________ __________
Cash flows from investing activities:
Capital expenditures (14,979) (9,632)
Purchase of Rule Industries, Inc. and the net assets
of Boride Products, Inc. (91,632) --
Purchase of net assets of the American Mine Tool
Division of Valenite, Inc. and Van Keuren, Inc. -- (17,176)
Other 1,318 656
_____________ __________
Net cash used in investing activities (105,293) (26,152)
_____________ __________
Cash flows from financing activities:
Proceeds from borrowings 111,365 23,799
Payments on borrowings (115,129) (3,114)
Net proceeds from issuance of 6% company-obligated,
mandatorily redeemable convertible preferred
securities of subsidiary Greenfield Capital Trust 110,864 --
Dividends paid on common stock (1,304) (962)
Other 2,607 (573)
_____________ __________
Net cash provided by financing activities 108,403 19,150
_____________ __________
Effect of exchange rate changes on cash (785) (1,116)
_____________ __________
Net decrease in cash (5,258) (3,996)
Cash at beginning of period 5,258 3,996
_____________ __________
Cash at end of period $ 0 $ 0
============= ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Additional Cumulative
Common Paid-In Retained Translation
Stock Capital & Other Earnings Adjustment Total
______ _______________ ________ ___________ _____
Balance, December 31, 1995 $ 163 $ 111,615 $ 69,014 $ (1,532) $ 179,260
Net income for the six months
ended June 30, 1996 16,926 16,926
Exercise of stock options and
tax benefits related thereto 560 560
Dividends declared and paid
($0.08 per common share) (1,304) (1,304)
Partial repayment of stock
subscriptions receivable 36 36
Executive stock awards 761 761
Issuance costs of company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary
Greenfield Capital Trust (4,136) (4,136)
Cumulative translation
adjustment (239) (239)
________ _____________ _________ ___________ __________
Balance, June 30, 1996 $ 163 $ 108,836 $ 84,636 $ (1,771) $ 191,864
======== ============= ========= =========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
GREENFIELD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands except per share data)
1. Unaudited consolidated financial statements
The accompanying unaudited consolidated financial statements of
Greenfield Industries, Inc. (Company or Greenfield) have been prepared in
accordance with the instructions for Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. However, in the opinion of management, such
information includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for
the periods presented. Operating results for any quarter are not necessarily
indicative of the results for any other quarter or for the full year. These
statements should be read in conjunction with the consolidated financial
statements and notes to the consolidated financial statements thereto included
in the Company's Form 10-K for the year ended December 31, 1995.
2. Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries: Rogers Tool Works, Inc. and subsidiaries (RTW),
Rule Industries, Inc. and subsidiaries (Rule), The Cleveland Twist Drill
Company and subsidiaries (CTD), Carbidie Corporation (Carbidie), Cirbo Limited
and subsidiary (Cirbo), Kemmer International, Inc. and subsidiaries (Kemmer),
Greenfield Capital Trust and Greenfield Industries Foreign Sales Corporation.
All significant intercompany transactions and balances are eliminated.
3. Acquisitions
The following table summarizes certain information regarding the
Company's acquisitions since December 31, 1995:
Net Cash
Date Business Purchase Price
____ ________ ______________
January 1996 Rule Industries, Inc. $83,300
June 1996 Boride Products, Inc. (Boride) $8,300
These acquisitions were each accounted for under the purchase method of
accounting and financed primarily through bank borrowings, resulting in an
increase in the Company's outstanding debt. Results of operations of each
acquired company have been included in the Company's consolidated financial
statements from the date of acquisition. The
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purchase price of each acquisition was allocated to the assets acquired and
liabilities assumed based on their estimated fair value at the date of
acquisition. The excess of purchase price over the estimated fair value of net
assets acquired was, in each instance, recorded as goodwill. Except for Rule,
the pro forma effects, individually and collectively, of the acquisitions on the
Company's consolidated results of operations and financial position are not
material.
The following table sets forth pro forma information for the Company
for the three and six month periods ended June 30, 1995 as if the acquisition of
Rule had taken place on January 1, 1995. This information is unaudited and does
not purport to represent actual revenue, net income and primary earnings per
share had the acquisition actually taken place on January 1, 1995:
Three months ended Six months ended
June 30, 1995 June 30, 1995
(Pro forma - unaudited) (Pro forma - unaudited)
Net sales $122,825 $246,450
======= =======
Net income $ 8,743 $ 16,332
===== ======
Primary earnings per share $ 0.54 $ 1.01
==== ====
4. Financing
In February 1996, in connection with the acquisition of Rule, the
Company amended its unsecured acquisition facility, increasing its availability
from $20,000 to $60,000. Such amount was reduced to $20,000 on April 24, 1996
pursuant to the Company's completion of a private placement as discussed
immediately below. As of June 30, 1996 there were no borrowings under the
acquisition facility.
The Company also maintains unsecured revolving credit facilities with a
group of financial institutions which expire in November 1999 and March 2000.
The total amounts available under such agreements are $130,000, 9,500 pound
sterling and DM 25,000 of which $32,000, 7,100 pound sterling and DM 9,000,
respectively, was outstanding at June 30, 1996 at interest rates ranging from
4.3% to 7.0% per annum.
5. Convertible Preferred Securities
On April 24, 1996, the Company completed a $115,000 private placement
to institutional investors of 2.3 million 6% Convertible Preferred Securities
(liquidation preference $50 per Convertible Preferred Security). The placement
was made through Greenfield Capital Trust (Trust), a newly-formed Delaware
business trust. The securities represent undivided beneficial ownership
interests in the Trust and are fully, irrevocably and unconditionally guaranteed
by Greenfield. Greenfield owns all of the common
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securities of the Trust. The assets of the Trust consist solely of Greenfield's
6% Convertible Junior Subordinated Deferrable Interest Debentures Due 2016 which
were acquired with the proceeds from the offering. The Convertible Preferred
Securities are convertible at the option of the holders at any time into the
common stock of Greenfield at an effective conversion price of $41.25 per share
and are redeemable at Greenfield's option after April 15, 1999. The net
proceeds of the offering of approximately $110,864 were used by Greenfield to
retire indebtedness.
6. Dividends
On March 29 and June 28, 1996, the Company paid a cash dividend of
$0.04 per share to common stockholders of record on March 8 and June 10, 1996,
respectively. Total dividends paid for the six months ended June 30, 1996
approximated $1,304.
On July 1, 1996, the Company, through the Trust, paid dividends on the
Convertible Preferred Securities of approximately $1,284 which were charged to
the accompanying consolidated statement of operations.
7. Supplemental balance sheet information
Supplemental balance sheet information is detailed below:
June 30, December 31,
1996 1995
____ ____
(Unaudited)
Inventories:
Raw material and component parts $ 46,513 $ 28,248
Work in process 35,665 31,648
Finished goods 65,490 49,873
_______ _______
$ 147,668 $ 109,769
======= =======
Accrued liabilities:
Employee compensation and benefits $ 20,201 $ 18,676
Restructuring costs 2,654 4,919
Interest 1,565 1,544
Income and other taxes 4,382
Other 11,843 8,549
______ ______
$ 40,645 $ 33,688
====== ======
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Activity in the accrual for restructuring costs from January 1, 1996
through June 30, 1996 is as follows:
Amounts
Balance Charged to Cash Payments Balance
at Purchase Applied to at
January 1, 1996 Accounting Accrual Other June 30, 1996
_______________ __________ _______ _____ _____________
CTD $ 4,617 $ -- $ (3,129) $ -- $ 1,488
Rule -- 2,600 (1,551) -- 1,049
Other 302 -- (171) (14) 117
_____ _____ _______ ____ _____
$ 4,919 $ 2,600 $ (4,851) $(14) $ 2,654
===== ===== ======= ==== =====
The CTD restructuring reserve was established in connection with the
acquisition of CTD by the Company in November 1994 and primarily included costs
associated with CTD plant closures and severance and related costs. The Company
expects to complete these restructuring activities and utilize the remaining
amount of the reserve by the end of 1996. The Rule restructuring reserve was
established in connection with the January 1996 acquisition of that entity by
the Company. These restructuring activities primarily relate to the costs of
closing Rule's corporate office and various other severance and related costs
arising from the acquisition, which commenced immediately subsequent to the
acquisition and are expected to be completed by the end of 1996.
8. Stock option and stock incentive plans
Stock options and stock incentive plans consist of the following:
Stock option plans
__________________
The Company has three stock options plans: the Employee Stock Option
Plan (Employee Plan), the 1995 Directors Non-Qualified Stock Option Plan
(Directors Plan) and the 1993 Directors Non-Qualified Stock Option Plan (1993
Directors Plan).
The Employee Plan provides for the granting of options to purchase up
to 1,000,000 shares of common stock to the Company's executive officers and key
employees at prices equal to the fair market value of the stock on the date of
grant.
The Directors Plan provides for the granting of options to purchase up
to 125,000 shares of common stock to the Company's directors who are not
employees of the Company at prices equal to the fair market value of the stock
on the date of grant. Options are granted to each eligible director on the date
such person is first elected to the board of directors of the Company and on
each subsequent re-election date. The Directors Plan was approved in May 1996
by the stockholders.
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The 1993 Directors Plan provides for the granting of options to
purchase up to 100,000 shares of common stock to the Company's directors who are
not employees of the Company at prices equal to the fair market value of the
stock on the date of grant. Options are granted to each eligible director on
the date such person is first elected to the board of directors of the Company.
Subsequent to the May 1996 approval of the Directors Plan, no further grants
will be issued under the 1993 Directors Plan.
A summary of stock option activities for the six months ended June 30,
1996 pursuant to the Employee Plan, Directors Plan and 1993 Directors Plan
follows:
Shares
Average Subject
Price to Option
_____ _________
Summary of stock options:
Beginning of period $21.95 788,175
Options granted 31.06 60,500
Options exercised 16.02 (25,375)
Options cancelled 26.13 (12,000)
________
End of period 22.76 811,300
=======
Exercisable at June 30, 1996 57,375
======
Stock incentive plans
_____________________
The Company has two stock incentive plans: the 1995 Equity Incentive
Plan (Incentive Plan) and the 1995 Restricted Stock Bonus Plan (Ownership Plan).
Both plans were approved in May 1996 by the stockholders of the Company.
The Incentive Plan provides for the granting of up to 273,000 shares of
common stock to certain senior executives of the Company in time-lapse
restricted stock, performance contingent restricted stock and performance
shares. Time-lapse restricted stock vests in one-third increments over a three-
year period. Performance contingent restricted stock is earned when the price
for the Company's stock reaches certain predetermined levels, and then vests
over a three or five year period. Performance shares are earned based on
attainment of a predetermined four-year cumulative earnings per share level.
Attainment of between 50% and 200% of the predetermined objective will entitle
the participants to receive restricted performance shares of between 50% and
200% of the target award, which then vests over a three-year period. No
performance shares are earned if less than 50% of the performance objective is
obtained.
The Ownership Plan provides for the issuance of up to 250,000 shares of
common stock to certain employees, by allowing such employees to elect to defer
up to 50% of their annual cash bonus and receive, in lieu thereof, shares of the
Company's common stock.
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The Company will increase the employees' deferred bonus by either 20% or 35%
(depending on the employees' selection of 3 or 5 years, respectively, for the
restriction period).
Shares issued under the plans are restricted and are subject to
forfeiture upon termination of employment. During the restricted period, award
holders have the right to vote and to receive dividends on such shares.
A summary of transactions pursuant to the Incentive Plan and Ownership
Plan for the six months ended June 30, 1996 follows:
<TABLE>
<CAPTION>
Market Value
Shares at Grant Date Vesting Period
______ _____________ ______________
<S> <C> <C> <C>
Incentive Plan
Time-lapse Restricted Stock 26,000 $30.50 Nov 1996 - Nov 1998
Performance Contingent Restricted Stock 7,700 $37.75 Nov 2000
______
33,700
Ownership Plan 17,848 $30.50 Feb 1997 - Feb 2001
______
51,548
======
</TABLE>
Shares issued but which remain restricted are recorded as deferred
compensation as a reduction to additional paid-in capital. The increase in
additional paid-in capital of $761 for the issuance of executive stock awards
in the six months ended June 30, 1996 is net of this deferred compensation. As
the shares are earned and become unrestricted, additional paid-in capital will
increase. For the six months ended June 30, 1996, the Company recorded $1,500
in compensation expense which is included in selling, general and administrative
expenses in the accompanying consolidated statement of operations.
9. Commitments and contingencies
The Company is involved in certain claims and legal proceedings in
which monetary damages are sought. The Company is vigorously contesting these
claims. However, resolution of these claims is not expected to occur quickly
and their ultimate outcome presently cannot be predicted. It is the opinion of
management that any liability of the Company for claims or proceedings will not
materially affect its financial position.
In connection with the acquisition of CTD, the Company recorded a
liability of $2,600 in purchase accounting for certain estimated environmental
clean-up costs to be incurred relative to acquired CTD facilities. This
estimated potential liability, which is included in other accrued liabilities,
has not been reduced for any expected proceeds from other potentially
responsible third parties. Proceeds therefrom are not expected to be material.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The following discussion summarizes the significant factors affecting
the consolidated operating results and financial condition of Greenfield
Industries, Inc. for the three and six months ended June 30, 1996 compared to
the three and six months ended June 30, 1995. This discussion should be read in
conjunction with the consolidated financial statements and notes to the
consolidated financial statements thereto included in the Company's Form 10-K
for the year ended December 31, 1995.
During the fourth quarter of 1995, the Company acquired the outstanding
common stock of Cleveland Europe Limited ("Cleveland Europe") and in the first
six months of 1996, acquired the outstanding common stock of Rule Industries,
Inc. ("Rule") and the net assets of Boride Products, Inc. ("Boride").
Certain statements included herein are forward-looking statements.
Actual results could differ materially from those anticipated as a result of
various factors, including cyclical downturns, the inability to achieve cost
reductions through consolidation and restructuring of acquired companies, and
possible future acquisitions that may not be complementary or additive.
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<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage
of net sales represented by certain items reflected in the Company's
consolidated statement of operations:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
1996 1995 1996 1995
____ ____ ____ ____
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 67.9 70.0 68.7 69.0
____ ____ ____ ____
Gross profit margin 32.1 30.0 31.3 31.0
Selling, general and administrative
expenses 18.3 15.4 17.6 17.1
____ ____ ____ ____
Operating income 13.8 14.6 13.7 13.9
Interest expense 2.0 1.9 2.4 2.0
Dividends on company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary
Greenfield Capital Trust at 6% per annum 1.0 -- 0.5 --
____ ____ ____ ____
Income before provision for income taxes 10.8 12.7 10.8 11.9
Provision for income taxes 4.4 5.1 4.4 4.8
____ ____ ____ ____
Net income 6.4% 7.6% 6.4% 7.1%
==== ==== ==== ====
</TABLE>
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<PAGE>
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED
JUNE 30, 1995
Net sales for the three months ended June 30, 1996 were $130.0 million,
an increase of $25.2 million, or 24.1%, over net sales of $104.8 million for the
three months ended June 30, 1995. Of the $25.2 million increase in sales, $21.3
million was due to the sales of newly acquired businesses, with the remaining
$3.9 million resulting from increased sales from existing businesses. Including
the effect of the newly acquired businesses, net sales of the six product groups
were as follows:
($ in millions)
Three months
ended June 30,
Increase
1996 1995 (Decrease)
____ ____ __________
Industrial Products $ 67.0 $ 57.0 $10.0
Energy & Construction Products 16.4 15.6 0.8
Engineered Products 16.0 14.6 1.4
Electronics Products 14.5 15.1 (0.6)
Consumer Products 8.8 2.5 6.3
Marine Products 7.3 -- 7.3
______ ______ _____
$130.0 $104.8 $25.2
====== ====== =====
The increases in net sales of the industrial, consumer and marine product groups
were primarily attributable to the sales of the newly acquired businesses of
Rule and Cleveland Europe. Net sales of energy and construction products were
affected by strong demand for energy products while sales of engineered products
benefitted from an increase in wear parts sales. Electronics products sales
were down slightly from 1995, primarily driven by a softer market in Europe with
a lesser effect from the U.S., ending an eighteen month upward trend.
Gross profit increased 32.5% to $41.7 million from $31.5 million in the
comparable period in 1995 primarily as a result of the sales increases discussed
above. The gross profit margin increased to 32.1% from 30.0%. The increase in
gross profit margin results primarily from realization of benefits relating to
rationalization programs implemented at both The Cleveland Twist Drill Company
("CTD") and Cleveland Europe. The Company
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continues to evaluate its operations with an intent to streamline operations,
improve productivity and reduce costs, and may implement additional
rationalization programs in the future.
Selling, general and administrative ("SG&A") expenses increased $7.5
million in the three months ended June 30, 1996 and SG&A expenses as a
percentage of net sales increased to 18.3% from 15.4% in the comparable period
in 1995. The increase was primarily a result of the Rule and Cleveland Europe
acquisitions and a $1.5 million stock-based compensation charge.
During the second quarter of 1996, the Company's stockholders approved
stock-based compensation plans for key executives of the Company under which
certain key executives may receive restricted stock awards if certain criteria,
including increases in the Company's stock price and earnings per share, are
achieved over the next several years. Compensation expense charged in the
quarter ended June 30, 1996 pursuant to such plans, was $1.5 million.
Compensation charges attributable to the plans in future quarters
are estimated to be less than the charge for the current quarter; however, such
charges will be based in part on changes in the Company's stock price and
therefore may fluctuate significantly from period to period.
Operating income improved $2.7 million, or 17.7%, to $18.0 million
while operating margins decreased to 13.8% from 14.6% during the three months
ended June 30, 1996 as compared to the three months ended June 30, 1995. The
improved operating profit was due to the acquisitions of Rule and Cleveland
Europe and cost reduction programs throughout the Company. Operating margins
declined due to the lower operating margins of Rule and Cleveland Europe as
compared to the historic margins of the Company and the above-noted stock-based
compensation charge.
Interest expense increased $0.6 million to $2.6 million for the three
months ended June 30, 1996 from $2.0 million for the three months ended June 30,
1995. The increase in interest expense resulted from the increase in the debt
level of the Company primarily due to acquisitions, partially offset by the
proceeds from the issuance of the convertible preferred securities during April
1996. The net proceeds from such issuance of approximately $110.9 million were
used to repay Company indebtedness.
Dividends on company-obligated, mandatorily redeemable convertible
preferred securities of Greenfield Capital Trust were $1.3 million for the
quarter ended June 30, 1996.
Provision for income taxes increased to $5.7 million for the three
months ended June 30, 1996, an increase of $0.3 million over the three months
ended June 30, 1995, due to the increase in pre-tax income.
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<PAGE>
Net income increased to $8.4 million for the three months ended
June 30, 1996, an increase of $0.4 million, or 5.6%, from the same period in
1995 as a result of the factors noted above. Primary and fully diluted earnings
per share increased to $0.51 and $0.50 from $0.49 and $0.49 for the three months
ended June 30, 1996 and 1995, respectively.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED
JUNE 30, 1995
Net sales for the six months ended June 30, 1996 were $262.7 million,
an increase of $51.5 million, or 24.4%, over net sales of $211.2 million for
the six months ended June 30, 1995. Of the $51.5 million increase in sales,
$42.8 million was due to the sales of newly acquired businesses, with the
remaining $8.7 million resulting from increased sales from existing businesses.
Including the effect of the newly acquired businesses, net sales of the six
product groups were as follows:
($ in millions)
Six months
ended June 30,
Increase
1996 1995 (Decrease)
____ ____ __________
Industrial Products $ 137.7 $ 115.9 $21.8
Engineered Products 32.5 31.7 0.8
Electronics Products 31.5 30.3 1.2
Energy & Construction Products 30.7 27.1 3.6
Consumer Products 17.4 6.2 11.2
Marine Products 12.9 -- 12.9
_______ _______ _____
$ 262.7 $ 211.2 $51.5
======= ======= =====
The increases in net sales of the industrial, consumer and marine product groups
were primarily attributable to the sales of the newly acquired businesses of
Rule and Cleveland Europe. Net sales of the electronics products increased for
the six months but declined for the three months ended June 30, 1996 as compared
to the comparable period in 1995. Net sales of energy and construction products
were affected by strong demand for energy products offset somewhat by lower
construction sales after adjustment for the acquisition of the American Mine
Tool Division of Valenite, Inc. ("AMT") in January 1995. Net sales of
engineered products were up slightly from 1995.
Page 17
<PAGE>
Gross profit increased 25.6% to $82.3 million from $65.5 million in the
comparable period in 1995 primarily as a result of the sales increases discussed
above. The gross profit margin increased to 31.3% from 31.0%. The increase in
gross profit margin results primarily from realization of benefits relating to
rationalization programs implemented at both CTD and Cleveland Europe. The
Company continues to evaluate its operations with an intent to streamline
operations, improve productivity and reduce costs and may implement additional
rationalization programs in the future.
SG&A expenses increased $10.2 million in the six months ended June 30,
1996 and SG&A expenses as a percentage of net sales increased to 17.6% from
17.1% in the comparable period in 1995. The increase was primarily a result of
the Rule and Cleveland Europe acquisitions and a $1.5 million stock-based
compensation charge.
During the second quarter of 1996, the Company's stockholders approved
stock-based compensation plans for key executives of the Company under which
certain key executives may receive restricted stock awards if certain criteria,
including increases in the Company's stock price and earnings per share, are
achieved over the next several years. Compensation expense charged in the six
months ended June 30, 1996 pursuant to such plans, was $1.5 million.
Compensation charges attributable to the plans in future periods are estimated
to be less than the charge for the current period; however, such charges will
be based in part on changes in the Company's stock price and therefore may
fluctuate significantly from period to period.
Operating income improved $6.6 million, or 22.4%, to $35.9 million
while operating margins decreased to 13.7% from 13.9% during the six months
ended June 30, 1996 as compared to the six months ended June 30, 1995. The
improved operating profit was due to the acquisitions of Rule and Cleveland
Europe and cost reduction programs throughout the Company. Operating margins
declined due to the lower operating margins of Rule and Cleveland Europe as
compared to the historic margins of the Company and the above-noted stock-based
compensation charge.
Interest expense increased $2.0 million to $6.2 million for the six
months ended June 30, 1996 from $4.1 million for the six months ended June 30,
1995. The increase in interest expense resulted from the increase in the debt
level of the Company primarily due to acquisitions, partially offset by the
proceeds from the issuance of the convertible preferred securities during April
1996. The net proceeds from such issuance of approximately $110.9 million were
used to repay Company indebtedness.
Dividends on company-obligated, mandatorily redeemable convertible
preferred securities of Greenfield Capital Trust were $1.3 million for the six
months ended June 30, 1996.
Page 18
<PAGE>
Provision for income taxes increased to $11.6 million for the six
months ended June 30, 1996, an increase of $1.3 million over the six months
ended June 30, 1995, due to the increase in pre-tax income.
Net income increased to $16.9 million for the six months ended June 30,
1996, an increase of $2.0 million, or 13.1%, from the six months ended June 30,
1995 as a result of the factors noted above. Primary and fully diluted earnings
per share increased to $1.04 and $1.02 from $0.92 and $0.92 for the six months
ended June 30, 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1996, cash used in operating
activities was approximately $7.6 million while during the six months ended
June 30, 1995, cash provided by operating activities was approximately $4.1
million. Cash used by operating activities in the six months ended June 30,
1996, was primarily used to reduce accounts payable of Rule which were past due
at the time of the acquisition, and to increase inventory levels at Rule in
order to improve customer service and sales.
The purchase prices for the 1996 acquisitions of Rule and Boride
totalled approximately $91.6 million in cash. In addition, the Company assumed
liabilities of the acquired companies totalling approximately $22.7 million,
including $2.1 million in acquisition costs. The Company expects that these
acquisitions will expand sales and product offerings in the industrial,
consumer, marine and engineered product markets.
Cash was also used during the six months ended June 30, 1996 to finance
capital expenditures of approximately $15.0 million and pay dividends of
approximately $1.3 million on the common stock. Net borrowings of the Company
decreased by approximately $3.8 million in the six months ended June 30, 1996,
primarily due to the repayment of indebtedness from the net proceeds of
approximately $110.9 million from the issuance of the convertible preferred
securities offset by the acquisitions of Rule and Boride of approximately $91.6
million.
During the six months ended June 30, 1995, cash was used to finance
capital expenditures of approximately $9.6 million and pay dividends of
approximately $1.0 million on the common stock. Net borrowings of the Company
increased by approximately $20.7 million in the six months ended June 30, 1995,
primarily due to the acquisitions of AMT and Van Keuren, Inc. ("VK"). The
purchase prices for the 1995 acquisitions of AMT and VK totalled approximately
$17.2 million in cash. In addition, the Company assumed liabilities of the
acquired companies totalling approximately $3.0 million, including $0.3 million
in acquisition costs.
Page 19
<PAGE>
The Company has a $130 million senior unsecured credit facility
provided by five institutions. The domestic facility includes a $110 million
revolving credit line and a $20 million acquisition line. As of June 30, 1996,
the Company had $32.0 million outstanding under the revolving credit line. The
revolving credit line generally bears interest at floating rates based upon the
prime rate or LIBOR, at the option of the Company. As of June 30, 1996, the
interest rate on the revolving credit line was approximately 6.4%. During
February 1996, in connection with the acquisition of Rule described above, the
Company amended its senior unsecured credit facility to temporarily increase the
acquisition line to $60 million from $20 million. The additional $40 million
acquisition line expired upon the issuance of the convertible preferred
securities discussed below. As of June 30, 1996, the Company had no
indebtedness outstanding under the acquisition line.
The Company also has a foreign revolving credit facility which provides
for loans denominated in British pounds or German Deutschemarks (limited to 9.5
pound sterling million and DM 21.0 million, respectively). At June 30, 1996,
the Company had 7.1 pound sterling million and DM9.0 million outstanding under
the foreign revolving credit facility. The foreign revolving credit facility
generally bears interest at floating rates based upon LIBOR. As of June 30,
1996, the interest rates on this facility ranged from approximately 4.3% to
7.0%. As of June 28, 1996, the 3 p.m. buying rates for British pounds and
German Deutschemarks were $1.5520 per British pound and DM 1.5239 per dollar,
respectively.
The senior unsecured domestic credit facility is scheduled to terminate
in November 1999 while the foreign revolving credit facility is scheduled to
terminate in March 2000. The agreements relating to both facilities contain
provisions which, among other things, limit certain additional borrowings and
capital expenditures, require maintenance of certain minimum working capital
ratios and net worth levels and prohibit any material guaranty, endorsement or
contingent liability with respect to the obligation or liability of any other
person. At June 30, 1996 and 1995, the Company was in compliance with such
provisions, or had obtained waivers therefor.
In April 1996, the Company completed a private placement to
institutional investors of 2.3 million, or $115.0 million in aggregate amount,
of 6% convertible preferred securities (liquidation preference $50 per
convertible preferred security). The placement was made through Greenfield
Capital Trust, a newly-formed Delaware business trust. The securities represent
undivided beneficial ownership interests in the Trust and are fully, irrevocably
and unconditionally guaranteed by Greenfield. Greenfield owns all of the common
securities of the Trust. The assets of the Trust consist solely of Greenfield's
6% Convertible Junior Subordinated Deferrable Interest Debentures Due 2016 which
were acquired with the proceeds of the offering. The convertible preferred
securities are convertible at the option of the holders thereof at any time into
the common stock of Greenfield at an effective conversion price of $41.25 per
share and are redeemable at Greenfield's option after April 15, 1999. The
approximately $110.9 million net proceeds of the offering were used by
Greenfield to retire indebtedness.
Page 20
<PAGE>
As of January 1, 1996, the Company had approximately $4.9 million
recorded as a restructuring reserve, relating primarily to reserves established
in connection with the acquisition of CTD by the Company in November 1994 and
primarily included costs associated with CTD plant closures and severance and
related costs. In January 1996 the Company established a restructuring reserve
of approximately $2.6 million in connection with the acquisition of Rule
primarily relating to closing Rule's corporate offices and various other
severance and related costs arising from the acquisition. During the six months
ended June 30, 1996, the Company has applied approximately $4.9 million in cash
payments toward the restructuring reserve. The remaining balance of
approximately $2.6 million relates to both CTD and Rule and the related
restructuring activities are expected to be completed by the end of 1996.
On March 29 and June 28, 1996, the Company paid a quarterly cash
dividend of $0.04 per share to common stockholders of record on March 8 and
June 10, 1996, respectively.
On July 1, 1996, the Company, through Greenfield Capital Trust, paid a
quarterly cash dividend totalling approximately $1.3 million to holders of the
convertible preferred securities.
As of June 30, 1996, the Company had a backlog of $40.3 million, as
compared to $44.3 million as of December 31, 1995. The Company's backlog
consists of firm customer purchase orders which are subject to cancellation by
the customer upon notification. The Company anticipates that approximately 90%
of its backlog at any given time will be shipped within the next three month
period.
Based on its current operating plans, the Company believes that it will
have sufficient cash from operations and its existing credit facilities to meet
its currently anticipated needs for liquidity and capital expenditures.
Page 21
<PAGE>
PART II. OTHER INFORMATION
Item 4 Results of votes of security holders
On May 1, 1996, Greenfield Industries, Inc. held its third annual
meeting of stockholders since its initial public offering on July 29, 1993. At
the meeting, the following persons were elected to serve on the Board of
Directors until the next Annual Meeting of Stockholders:
For Withheld Authority
___ __________________
John W. Burge, Jr. 12,342,568 2,390,721
Peter S. Finley 12,342,723 2,390,566
James C. Janning 12,342,723 2,390,566
Paul W. Jones 12,289,353 2,443,936
Robert E. Lefton 12,342,498 2,390,791
Donald E. Nickelson 12,342,648 2,390,641
Robert W. Pratt, Jr. 12,339,188 2,394,101
Julian M. Seeherman 12,339,133 2,394,156
Dennis W. Sheehan 12,342,618 2,390,671
Also at the meeting, the proposal to adopt the Company's 1995 Equity Incentive
Plan was approved by the following votes:
For 14,335,561
Against 395,563
Abstain 2,165
Also at the meeting, the proposal to adopt the Company's 1995 Restricted Stock
Bonus Plan was approved by the following votes:
For 14,084,346
Against 644,841
Abstain 4,102
Also at the meeting, the proposal to adopt the Company's 1995 Directors
Non-Qualified Stock Option Plan was approved by the following votes:
For 12,960,344
Against 1,716,153
Abstain 56,792
Page 22
<PAGE>
Also at the meeting, the selection of Price Waterhouse LLP as independent
auditors of the Company was ratified by the following votes:
For 14,726,310
Against 3,257
Abstain 3,722
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Noncompetition Agreement between Adjita G. Rajendra and Greenfield
Industries, Inc. dated July 15, 1996
(b) REPORTS ON FORM 8-K
On April 8, 1996, the Company filed a report on Form 8-K pertaining to
the announcement of its intention to effect a private offering of convertible
preferred securities to be issued by Greenfield Capital Trust, a Delaware
business trust, organized by the Company exclusively for purposes of the
offering.
On April 24, 1996, the Company filed a report on Form 8-K pertaining to
the announcement of the completion of a private offering of convertible
preferred securities issued by Greenfield Capital Trust, a Delaware business
trust, organized by the Company exclusively for the purposes of the offering.
Page 23
<PAGE>
SIGNATURE
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.
GREENFIELD INDUSTRIES, INC.
Date: August 12, 1996 /S/ Gary L. Weller
____________________________________________
Gary L. Weller
Senior Vice President
Chief Financial Officer
(Principal Accounting and Financial Officer)
Page 24
<PAGE>
CONFIDENTIALITY AND
NONCOMPETITION AGREEMENT
CONFIDENTIALITY AND NONCOMPETITION AGREEMENT dated as of July 15,
1996 ("Agreement") by and between Greenfield Industries, Inc., a Delaware
corporation (the "Corporation"), and Ajita G. Rajendra (the "Executive").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Corporation's 1995 Equity
Incentive Plan, the Executive received an award (the "Award") of the Company's
common stock, $0.01 par value per share the ("Common Stock"), as evidenced by
that certain Award Agreement dated July 15, 1996 by and between the Corporation
and the Executive; and
WHEREAS, in consideration of such Award, the Corporation and the
Executive have agreed to concurrently enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS.
(a) "Affiliate" means any Person now or hereafter
controlling, controlled by, or under common control with
another Person.
(b) "Person" means any individual, corporation, firm,
partnership or other business entity.
(c) "Proprietary Information" means all secret,
confidential or proprietary knowledge, information or data
with respect to the conduct or details of the business of
the Corporation or its Affiliates including, without
limitation, methods of
<PAGE>
operation, customers and customer lists, products,
proposed products, former products, proposed, pending or
completed acquisitions of any company, division, product
line or other business unit, prices, fees, costs, plans,
designs, technology, know-how, software, marketing
methods, policies, plans, personnel, suppliers,
competitors, markets or other specialized information
or proprietary matters of the Corporation or any of its
Affiliates.
(d) "Subsidiary" shall mean any corporation or other
entity of which the Corporation directly or indirectly
owns beneficially or of record fifty percent (50%) or more
of (i) the outstanding shares of capital stock if such
entity is a corporation or (ii) the outstanding ownership
interests if such entity is not a corporation.
2. COVENANT NOT TO DISCLOSE.
a. The Executive covenants and agrees that he will not,
during the period of his employment with the Corporation or at any time
thereafter, except with the express prior written consent of the President and
Chief Executive Officer of the Corporation, directly or indirectly disclose,
communicate or divulge to any Person, or use for the benefit of any Person, any
Proprietary Information. The restriction contained in the preceding sentence
shall not apply to any Proprietary Information that (i) is a matter of public
knowledge (which shall include knowledge in the industries in which the
Corporation or its Subsidiaries are engaged) on the date of this Agreement, (ii)
becomes a matter of public knowledge (which shall include knowledge in the
industries in which the Corporation or its Subsidiaries are engaged) after the
date of this Agreement from another source which is under no obligation of
confidentiality to the Corporation or its Affiliates.
b. All data, designs, drawings, blueprints, tracings,
sketches, plans, layouts, specifications, models, programs, cards, tapes, disks,
printouts, writings, manuals, guides, notes and any and all other memoranda,
including without limitation any and all written information which may be or has
been furnished to the Executive or which may be produced, prepared or designed
by
2
<PAGE>
the Executive in connection with his employment with the Corporation shall
be, become and remain the exclusive property of the Corporation. Upon the
termination of the Executive's employment with the Corporation, all originals,
copies and reprints in the Executive's possession, custody, or control shall be
promptly surrendered and/or delivered to the Corporation, and the Executive
shall thereafter make no further use, either directly or indirectly, of any such
data, designs, drawings, blueprints, tracings, sketches, plans, layouts,
specifications, models, programs, cards, tapes, disks, printouts, writings,
manuals, guides, notes or other memoranda or written information.
3. COVENANTS NOT TO COMPETE.
a. The Executive covenants and agrees that he will not at any
time during his employment with the Corporation and for a period of two (2)
years after the termination of such employment in the case of subsection (i)
below, or three (3) years after the termination of such employment in the case
of subsection (ii) below, except with the express prior written consent of the
President and Chief Executive Officer of the Corporation, directly or
indirectly, whether as employee, owner, partner, agent, director, officer,
consultant, shareholder (except as the holder of not more than one percent (1%)
of the outstanding shares of a corporation whose stock is listed on any national
securities exchange or reported by the National Association of Securities
Dealers Automated Quotation System or any successor thereto) or in any other
capacity, for his own account or for the benefit of any Person in any business
in competition with the Corporation or any of its Subsidiaries,
(i) establish, engage in or be connected with in any manner any
Person that competes with the Corporation or any of its Subsidiaries or proposes
to compete with the Corporation or any of its Subsidiaries. Without limiting the
generality of the preceding clause, the Executive covenants and agrees that he
will not directly or indirectly solicit, divert or accept business from or
otherwise take away or interfere with any customer of the Corporation or any of
its Subsidiaries, including without limitation any Person who was a customer or
whose business was being pursued by the Corporation or any of its Subsidiaries
within (x) the period of the Executive's employment with the Corporation, (y)
one (1) year prior to such employment or (z) one (1) year after the termination
of such employment, including all
3
<PAGE>
customers directly or indirectly produced or generated by the Executive; or
(ii) directly or indirectly solicit, divert or induce any individual
employed by the Corporation or any of its Affiliates during the two (2) year
period prior to the termination of the Executive's employment with the
Corporation to leave the Corporation or any of its Affiliates or to be employed
by, or associated in any business relationship with, the Executive or any Person
by which the Executive is employed, or with which the Executive is associated in
any business relationship. It is agreed, however, that it shall not constitute a
violation of this Paragraph 3 if an otherwise prohibited employment of a former
employee of the Corporation or any of its Affiliates were to occur without the
Executive's knowledge; provided, however, that the Executive shall have the
obligation of due inquiry with respect to the employment of any executive or
managerial employee of the Corporation or any of its Affiliates or former
executive or managerial employee of the Corporation or any of its Affiliates who
served as such during the two year period prior to the termination of the
Executive's employment, by an employer or prospective employer of the Executive
or of any such executive or managerial employee.
b. If any provision of the covenants and agreements set forth above
shall be held invalid or unenforceable because of the scope of the territory or
the actions thereby restricted, or the period of time within which such covenant
or agreement is operative, or for any other reason, it is the intent of the
parties hereto that such provision shall be construed by limiting and reducing
it, or, if necessary, eliminating it so that the provisions hereof be valid and
enforceable to the extent compatible with applicable law as determined by a
court of competent jurisdiction.
4. SPECIFIC PERFORMANCE.
The Executive acknowledges that the services to be rendered by him
are of a special, unique and extraordinary character, and in connection with
rendering such services, he will have access to Proprietary Information. The
parties agree that it is impossible to measure in money the damages that will
accrue to the Corporation by reason of the Executive's failure to perform his
obligations under this Agreement, that such failure
4
<PAGE>
to perform will result in irreparable damage to the Corporation, and that
specific performance of the Executive's obligations may therefore be obtained
by suit in equity. Without limiting the generality of the foregoing sentence,
the Corporation shall be entitled to apply to any court of competent
jurisdiction for an injunction restraining the Executive from committing
or continuing any violation of Paragraphs 2 and/or 3. The Stockholder will not
assert any claim or defense in any action or proceeding to enforce any provision
hereof that the Corporation has or had an adequate remedy at law.
5. WRITTEN NOTICE.
Any and all notices provided for herein shall be given in writing
and delivered by hand, or sent by registered or certified mail, return receipt
requested, with first-class postage prepaid, or by facsimile with answer-back;
and such notices shall be addressed: (i) if to the Corporation, to the President
and Chief Executive Officer of the Corporation at 2743 Perimeter Parkway,
Building One Hundred, Suite 100, Augusta, Georgia 30909; and (ii) if to the
Executive, to his address as reflected in the records of the Corporation; or to
such other address(es) as the parties hereto shall designate by written notice,
furnished to all parties in the manner provided herein. Any notice which is
required to be made within a stated period of time shall be considered timely if
delivered or mailed before midnight of the last day of such period.
6. NO RIGHT TO CONTINUED EMPLOYMENT.
The Executive agrees that no provision of this Agreement shall (i)
give the Executive any right to be retained in the employ of the Corporation or
any Subsidiary, (ii) affect the right of the Corporation or any Subsidiary to
discharge the Executive at any time or (iii) affect the Executive's right to
terminate his employment with the Corporation or any Subsidiary at any time.
7. INVALID OR UNENFORCEABLE PROVISIONS.
The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions
5
<PAGE>
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision had been omitted.
8. BENEFIT AND BURDEN.
This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective personal or legal representatives,
successors and assigns.
9. GENDER.
The use of any gender herein shall be deemed to be and include the
other gender, and the use of the singular herein shall be deemed to be and
include the plural (and vice versa), whenever appropriate.
10. MODIFICATIONS.
No change or modification of this Agreement shall be valid unless
the same is in writing and signed by all the parties hereto. No waiver of any
provision of this Agreement shall be valid unless in writing and signed by the
party against whom it is sought to be enforced. The failure of any party at any
time to insist upon strict performance of any condition, promise, agreement or
understanding set forth herein shall not be construed as a waiver or
relinquishment of the right to insist upon strict performance of the same or
other condition, promise, agreement or understanding at a future time.
11. ENTIRE AGREEMENT.
This Agreement contains all of the promises, agreements, conditions,
understandings, warranties and representations between the parties hereto with
respect to the subject matter hereof. This Agreement is, and is intended by the
parties to be, an integration of any and all prior agreements or understandings,
oral or written, with respect to the subject matter of this Agreement.
6
<PAGE>
12. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with
the laws of State of Delaware (without giving effect to such jurisdiction's
conflict of laws principles).
13. HEADINGS.
The headings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.
14. COUNTERPARTS.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first hereinabove written.
WITNESS: GREENFIELD INDUSTRIES, INC.
/s/ Pamela Hoffman By: /s/ Paul W. Jones
______________________________ ____________________________________
Name: Paul W. Jones
Title: President and Chief
Executive Officer
/s/ Pamela Hoffman /s/ Ajita G. Rajendra
______________________________ ____________________________________
Ajita G. Rajendra
8
<PAGE>
