<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 33-67854
PROSPECTUS SUPPLEMENT NO. 1 DATED AUGUST 26, 1996
TO PROSPECTUS DATED JUNE 27, 1996
$125,000,000
CMI INDUSTRIES, INC.
9-1/2% SENIOR SUBORDINATED NOTES DUE 2003
This Prospectus Supplement is intended to be read in conjunction with the
Prospectus dated June 27, 1996.
________________
RECENT OPERATING RESULTS. Attached hereto is Part I to CMI Industries,
Inc.'s Quarterly Report on Form 10-Q for the period ended June 29, 1996, which
includes, among other things, the unaudited consolidated financial statements of
the Company for the three months and six months ended June 29, 1996 and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three months and six months ended June 29, 1996.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________
<PAGE> 2
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
(000's Omitted Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ -----------------------
JULY 1, JUNE 29, JULY 1, JUNE 29,
1995 1996 1995 1996
------- --------- ------- -------
<S> <C> <C> <C> <C>
Net sales $96,685 $89,539 $206,006 $178,119
Cost of sales 86,453 83,720 181,654 167,092
------- ------- -------- --------
Gross profit 10,232 5,819 24,352 11,027
Selling, general and administrative expenses 7,884 7,305 16,745 15,065
------- ------- -------- --------
Operating income (loss) 2,348 (1,486) 7,607 (4,038)
Other income (expenses):
Interest expense (4,410) (3,971) (8,806) (7,910)
Other, net 547 424 903 799
------- ------- -------- --------
(3,863) (3,547) (7,903) (7,111)
Loss before income taxes (1,515) (5,033) (296) (11,149)
Income tax benefit (571) (1,986) (96) (4,124)
------- ------- -------- --------
Net loss $ (944) $(3,047) $ (200) $ (7,025)
======= ======= ======== ========
Average shares outstanding during period 1,773 1,690 1,773 1,690
Net loss per share $ (0.53) $ (1.80) $ (0.11) $ (4.16)
Depreciation and amortization included in
the above costs and expenses $ 5,694 $ 6,040 $ 11,485 $ 12,186
</TABLE>
See Accompanying Notes.
2
<PAGE> 3
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 30, 1995 and June 29, 1996
(000's Omitted)
<TABLE>
<CAPTION>
DECEMBER 30, JUNE 29,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 227 $ 1,050
Receivables, less allowance for doubtful
accounts of $1,729 and $1,312 50,684 50,514
Inventories: (note 3)
Raw materials 9,872 12,130
Work-in-process 22,295 22,588
Finished goods 29,603 25,074
Supplies 5,281 6,221
------------ -----------
67,051 66,013
Tax benefit -- 1,029
Other current assets 5,319 1,246
------------ -----------
Total current assets 123,281 119,852
Property, plant and equipment: (note 4)
Land and land improvements 3,813 3,697
Buildings 39,455 39,402
Machinery and equipment 203,648 203,399
Construction in progress 1,346 5,850
------------ -----------
248,262 252,348
Less accumulated depreciation and
amortization (122,488) (134,039)
------------ -----------
125,774 118,309
Other assets:
Cash value of life insurance, intangibles,
deferred charges, and other assets 8,053 8,067
------------ -----------
$ 257,108 $ 246,228
========= =========
</TABLE>
See Accompanying Notes.
3
<PAGE> 4
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 30, 1995 and June 29, 1996
(000's Omitted)
<TABLE>
<CAPTION>
DECEMBER 30, JUNE 29,
1995 1996
----------- --------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Payable - book overdraft $ 13,226 $ 4,602
Current portion of long-term debt (note 2) 853 3,158
Accounts payable 13,471 16,203
Accrued expenses 15,189 13,532
-------- --------
Total current liabilities 42,739 37,495
Long-term debt (note 2) 154,245 159,293
Deferred income taxes 3,352 --
Other liabilities 14,264 13,958
Stockholders' equity:
Common stock of $1 par value per share;
2,100,000 shares authorized,
1,690,318 shares issued 1,690 1,690
Paid-in capital 11,350 11,350
Retained earnings (note 2) 29,468 22,442
-------- --------
Total stockholders' equity 42,508 35,482
-------- --------
$257,108 $246,228
======== ========
</TABLE>
See Accompanying Notes.
4
<PAGE> 5
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended July 1, 1995 and June 29, 1996
(000's Omitted)
<TABLE>
<CAPTION>
JULY 1, JUNE 29,
1995 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (200) $ (7,025)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 11,485 12,186
Changes in assets and liabilities
Receivables 1,104 170
Inventories (7,264) 1,038
Other current assets 4,219 4,073
Tax benefit -- (1,029)
Other assets (890) (274)
Accounts payable (882) 2,732
Accrued expenses 534 (1,657)
Income taxes (790) --
Deferred income taxes 224 (3,352)
Other liabilities 237 (306)
--------- --------
Net cash provided by operating activities 7,777 6,556
--------- --------
Cash flows from investing activities:
Cost of United Elastic acquisition, net of Chesterfield
disposal and net of cash acquired (20,052) --
Capital expenditures, net (4,033) (4,414)
--------- --------
Net cash used in investing activities (24,085) (4,414)
--------- --------
Cash flows from financing activities:
Net borrowings on revolving credit facilities 19,636 7,305
Decrease in payable-book overdraft (4,764) (8,624)
--------- --------
Net cash provided by (used in) financing activities 14,872 (1,319)
--------- --------
Net (decrease) increase in cash (1,436) 823
Cash and cash equivalents at beginning of year 3,145 227
--------- --------
Cash and cash equivalents at end of period $ 1,709 $ 1,050
========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 7,901 $ 7,712
========= ========
Income taxes $ 345 $ --
========= ========
</TABLE>
See Accompanying Notes.
5
<PAGE> 6
Notes to Consolidated Financial Statements
Note 1:
Basis of Presentation:
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. In the opinion of management, the
accompanying unaudited consolidated financial statements include all
adjustments necessary to present fairly the Consolidated Balance Sheet as of
June 29, 1996, the Consolidated Statements of Cash Flows for the six months
ended July 1, 1995 and June 29, 1996, and the Consolidated Statements of Income
for the three months and six months then ended. All dollar amounts are rounded
to thousands. The Consolidated Balance Sheet as of December 30, 1995 has been
audited, but the auditors' report is not included herein. The disclosures
accompanying these interim financial statements are condensed and should be
read in conjunction with the disclosures in the annual financial statements.
Note 2:
Long-Term Debt:
In October 1993, the Company completed a public offering ("the Offering")
of $125,000 in aggregate principal amount of 9 1/2% Senior Subordinated Notes
("Notes") due October 1, 2003. The Notes are general unsecured obligations of
the Company and are due October 1, 2003. Interest on the Notes is payable
semiannually, and are redeemable at the option of the Company at any time after
October 1, 1998. Redemption prices commence at 104-3/4% of the principal
amount, declining annually to 100% of the principal amount in October 2000,
plus accrued interest. The recorded balance of $124,292 at June 29, 1996, is
presented net of $707 of unamortized bond issue discount that is being
amortized over the period to maturity. The latest information available
indicates the fair value of the Notes was $110,000 at June 29, 1996. The fair
value presented herein is not necessarily indicative of the amounts that the
Company would realize in a current market exchange.
The Company had a credit agreement at December 30, 1995 which provided an
unsecured revolving credit facility of $92,000 due January 15, 1998, and a
credit facility from Wachovia Bank of South Carolina, which provided an
unsecured, uncommitted line of credit of $4,000. Effective March 19, 1996, the
Company replaced the unsecured revolving credit facility with a new credit
agreement. The new credit agreement provides for a revolving credit facility
of up to $80,000, including a letter of credit facility of up to $5,000. The
borrowings under the new credit agreement are secured by all inventories, all
receivables, and certain intangibles. The new credit agreement matures on
January 18, 1998.
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<PAGE> 7
Long-term debt as of December 30, 1995 and June 29, 1996 consisted of:
<TABLE>
<CAPTION>
December 30, 1995 June 29, 1996
----------------- -------------
<S> <C> <C>
Borrowings under credit agreements:
Unsecured revolving credit facility $ 30,000 $ --
Secured revolving credit facility -- 35,000
Unsecured Wachovia Bank of SC facility 853 3,158
Senior subordinated notes, net 124,245 124,293
-------- --------
155,098 162,451
Less current portion 853 3,158
-------- --------
Long-term debt $154,245 $159,293
======== ========
</TABLE>
The new credit agreement requires a commitment fee of 3/8 of 1% per annum
on all unused amounts and as of June 29, 1996, the Company could have borrowed
an additional $32,897 under the facility. Interest on the revolving credit
facility is based on a floating prime rate or an eurodollar rate plus 1 1/2%.
At June 29, 1996, the average interest rate on the revolving credit facility
was 7.0%. The Wachovia Bank of South Carolina facility is unsecured, requires
no commitment fee and may be terminated by the bank with 100 days notice.
Interest on the Wachovia Bank of South Carolina facility accrues at an amount
based on the daily Federal Funds rate, which was 7.4% at June 29, 1996.
The credit agreements contain various restrictive covenants and conditions
requiring, among other things, minimum levels of net worth, certain interest
coverage ratios, prohibitions against certain borrowings and advances, and a
negative covenant limiting the Company's right to grant security interests or
other liens on its assets. In addition, the credit agreements and the
indenture pursuant to which the Notes were issued contain restrictions on the
Company's ability to pay cash dividends or purchase its capital stock. Under
the most restrictive covenant, as of June 29, 1996, the Company was not
authorized to pay any cash dividends or purchase its capital stock. At June
29, 1996, the Company was in compliance with all covenants under all credit
agreements.
As part of the Company's workers' compensation insurance agreements in
South Carolina, Alabama, Georgia and Virginia, the Company has obtained letters
of credit for $750, $200, $250 and $50. The letters of credit expire on
February 10, 1997, June 30, 1996, January 11, 1997 and April 10, 1997,
respectively. At June 29, 1996, no amounts had been drawn under these letters
of credit.
Note 3:
Inventories:
Inventories at December 30, 1995 and June 29, 1996 are stated at the lower
of cost (first-in, first-out) or market, and include the costs of raw
materials, direct labor, and manufacturing overhead.
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Note 4:
Property, Plant and Equipment:
All additions to property, plant and equipment are stated at cost.
Depreciation is calculated for financial reporting purposes by the
straight-line method over the estimated useful lives of the respective assets.
Note 5:
Restructuring Charges and Other Nonrecurring Items:
In December 1995, the Company approved a plan to pursue restructuring
initiatives in all divisions. These initiatives are expected to be completed
by the end of the 1996 fiscal year. In the Greige Fabrics Division, the
Company will close one of its manufacturing facilities and dispose of idle
equipment and inventories. In the Finished Fabrics Division, the Company will
consolidate certain operations and also dispose of idle equipment and
inventories. The Company also downsized its corporate operations. The
restructuring charges also consist of costs for the severance and retirement of
approximately 700 associates, including the termination of consulting
contracts, insurance, vacation and related expenses. Related to this decision,
the Company reported a $12,900 charge to earnings in 1995 and has reserved for
the following items:
<TABLE>
<CAPTION>
December 30, June 29,
1995 1996
------------ --------
<S> <C> <C>
Restructuring items:
CRIP early retirement window $ 1,299 $1,299
Termination of consulting contracts
and other items 1,345 1,176
Severance and related benefit costs 2,404 1,354
------- ------
5,048 3,829
Other nonrecurring asset write-offs related
to the restructuring:
Inventory write-offs 2,915 853
Property, plant and equipment write-offs 4,937 4,712
------- ------
$12,900 $9,394
======= ======
</TABLE>
Included in the $12,900 of restructuring and related nonrecurring amounts
at December 30, 1995, were approximately $5,048 of incremental cash
expenditures. The Company expects to fund the $1,299 early retirement amount
from the Company's defined benefit plan and the balance, $3,749, from
operations or amounts available under the new credit agreement. During the six
months ended June 29, 1996, the Company funded $1,219 of cash related
restructuring items and disposed of $2,287 of assets related to the
restructuring.
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<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains statements which to the extent that they are not
recitations of historical fact, may constitute "forward looking statements"
within the meaning of applicable federal securities laws. All forward looking
statements contained in this report are intended to be subject to the safe
harbor protection provided by applicable federal securities laws. For a
discussion identifying some important factors that could cause actual results
to vary materially from those anticipated in the forward looking statements
made by the Company, see the Company's Annual Report on Form 10-K for the year
ended December 30, 1995, including, but not limited to , the "Overview"
discussion to Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 18 and 19 of the Annual Report.
Results of Operations
Three Months Ended June 29, 1996
Compared with Three Months Ended July 1, 1995
Sales
Sales for the three months ended June 29, 1996, decreased $7.2 million, or
7%, from $96.7 million to $89.5 million as compared to the corresponding period
of 1995. Sales of the Greige Fabrics Division decreased $6.7 million, or 15%.
Sales of the Finished Fabrics Division decreased $0.4 million or 1.0%. The
decrease in sales of the Greige Fabrics Division may be attributed to poor
market conditions for lightweight apparel and home furnishings fabrics.
Average selling prices for these fabrics during the period decreased 12.6%
while volume decreased 7.4%.
The sales decrease for the Finished Fabrics Division included a $1.9
million decrease in narrow elastic sales and a $1.7 million decrease in
furniture upholstery sales which were partially offset by stronger automotive
upholstery sales. The sales reductions at both divisions may be attributed to
weak product demand and excess inventory levels in these market segments.
Earnings
Operating income (loss) for the three month period ended June 29, 1996
decreased $3.8 million, or 165%, from $2.3 million to an operating loss of $1.5
million. The decline in profitability may be attributed to the Greige Fabrics
Division as lower average selling prices, reduced volumes, higher raw material
costs and inefficiencies associated with shutting down its Lydia facility all
combined to significantly reduce margins. Despite lower sales volume, the
Finished Fabrics Division reported improved levels of profitability due to
operating improvements which, coupled with lower corporate overhead costs,
helped to partially offset the reduction in earnings from the Greige Fabrics
Division. The Company's restructuring initiatives have not had a favorable
impact on operating income for the three months ended June 29, 1996.
Interest expense for the three months ended June 29, 1996 was $4.0
million, down $0.4 million from the same period in 1995. The decrease reflects
the Company's lower debt balances, and lower interest rates as compared to the
same period a year ago.
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<PAGE> 10
The provision (benefit) for income taxes decreased approximately $1.4
million. This decrease is due to a $3.5 million decrease in earnings before
taxes. The foregoing resulted in the net loss increasing by $2.1 million or
233% from $0.9 million to a net loss of $3.0 million.
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<PAGE> 11
Six Months Ended June 29, 1996
Compared with Six Months Ended July 1, 1995
Sales
Sales for the six months ended June 29, 1996 decreased $27.9 million, or
14%, from $206 million to $178.1 million as compared to the corresponding
period in 1995. Sales of the Greige Fabrics Division decreased $18.4 million
or 19%, while sales of the Finished Fabrics Division decreased $9.5 million or
9%. The decrease in sales of the Greige Fabrics Division may be attributed to
poor market conditions for lightweight apparel and home furnishings fabrics.
Average selling price for these fabrics during the period decreased 8.5% while
volume decreased 15%.
The sales decrease for the Finished Fabrics Division included a $7.2
million decrease in narrow elastic sales and a $4.7 decrease in furniture
upholstery sales which were partially offset by a $3.7 million increase in
automotive upholstery sales. The sales reductions at both divisions may be
attributed to weak product demand and excess inventory levels that are
negatively affecting market conditions in these market segments.
Earnings
Operating income for the six month period ended June 29, 1996 decreased
$11.6 million, or 158%, from $7.6 million to an operating loss of $4.0 million
over the corresponding period of 1995. The decline in profitability may be
attributed to the Greige Fabrics Division as lower average selling prices,
reduced volumes, higher raw material costs and inefficiencies associated with
shutting down the Division's Lydia facility all combined to significantly
reduce margins. Despite lower sales volume, the Finished Fabrics Division
reported improved levels of profitability due to operating improvements which,
coupled with lower corporate overhead costs, helped to partially offset the
reduction in earnings from the Greige Fabrics Division. The Company's
restructuring initiatives have not had a favorable impact on operating income
for the six months ended June 19, 1996.
Interest expense for the six months ended June 29, 1996 was $7.9 million,
a decrease of $0.9 million over the same period in 1995.
The provision for income taxes decreased approximately $4.0 million as a
result of the increase in the loss before income taxes of $10.9 million. The
foregoing resulted in a net loss of $7.0 million.
Financial Condition
For the six months ended June 29, 1996, the Company generated cash from
operations of $6.6 million and increased its net borrowings by $7.3 million.
These funds were primarily used to finance $4.4 million of capital expenditures
and reduce its payable-book overdraft by $8.6 million.
At June 29, 1996, working capital was approximately $82.4 million as
compared to approximately $80.5 million at December 30, 1995. Management is
not aware of any present or potential impairments to the Company's liquidity.
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<PAGE> 12
At June 29, 1996, long-term debt of approximately $159.3 million
represented 82% of total capital, compared to 78.0% at December 30, 1995.
The Company believes that funds from operations during the balance of
fiscal 1996 and amounts available under the loan agreements (see note 2 to
consolidated financial statements) are adequate to finance capital expenditures
of approximately $10 million during the remainder of 1996, in addition to
meeting working capital requirements, scheduled debt service payments and
amounts to be paid pursuant to the Company's restructuring initiatives (see
note 5 to consolidated financial statements) for the same period.
12
