<PAGE> 1
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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 October 4, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
- -----
For the transition period from _________________ to ______________________
Commission File Number 33-67854
CMI INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified on its charter)
Delaware 57-0836097
- --------------------------------------------- ------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1301 Gervais Street, Suite 700, Columbia, South Carolina 29201
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code: (803)771-4434
------------------------------
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
----- -----
As of October 4, 1997 there were 1,690,318 shares of $1 Par Value Common Stock
outstanding.
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PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
(000s omitted except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
(13 WEEKS) (14 WEEKS) (39 WEEKS) (40 WEEKS)
SEPT. 28, OCT. 4, SEPT. 28, OCT. 4,
1996 1997 1996 1997
-------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales $ 98,969 $ 120,253 $ 277,088 $ 317,009
Cost of sales 91,824 102,628 258,916 274,636
-------- --------- --------- ---------
Gross profit 7,145 17,625 18,172 42,373
Selling, general and administrative expenses 7,433 8,535 22,498 24,833
-------- --------- --------- ---------
Operating income/(loss) (288) 9,090 (4,326) 17,540
Other income (expenses):
Interest expense (3,949) (3,678) (11,859) (11,133)
Other, net 523 541 1,323 2,946
-------- --------- --------- ---------
Total other expenses, net (3,426) (3,137) (10,536) (8,187)
Income/(loss) before income taxes (3,714) 5,953 (14,862) 9,353
Income tax provision/(benefit) (1,485) 2,323 (5,609) 3,648
-------- --------- --------- ---------
Net income/(loss) $ (2,229) $ 3,630 $ (9,253) $ 5,705
======== ========= ========= =========
Average shares outstanding during period 1,690 1,690 1,690 1,690
Net income/(loss) per share $ (1.32) $ 2.15 $ (5.48) $ 3.38
Depreciation and amortization included in
the above costs and expenses: $ 5,553 $ 4,765 $ 17,739 $ 13,894
</TABLE>
See Accompanying Notes
2
<PAGE> 3
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 28, 1996 and October 4, 1997
(000s omitted)
<TABLE>
<CAPTION>
DECEMBER 28, OCTOBER 4,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,244 $ 3,225
Receivables, less allowance for doubtful
accounts of $2,000 and $1,350 47,509 62,722
Inventories: (note 3)
Raw materials 10,484 12,396
Work-in-process 21,234 22,084
Finished goods 21,576 17,648
Supplies 4,849 4,832
--------- ---------
58,143 56,960
Deferred income tax 3,139 --
Other current assets 1,588 1,594
--------- ---------
Total current assets 112,623 124,501
Property, plant and equipment: (note 4)
Land and land improvements 3,521 3,332
Buildings 38,039 38,109
Machinery and equipment 199,811 200,789
Construction in progress 1,277 3,212
--------- ---------
242,648 245,442
Less accumulated depreciation and amortization (130,103) (142,894)
--------- ---------
112,545 102,548
Other assets:
Cash value of life insurance, intangibles,
deferred charges, and other assets 8,366 8,852
--------- ---------
$ 233,534 $ 235,901
========= =========
</TABLE>
See Accompanying Notes
3
<PAGE> 4
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 28, 1996 and October 4, 1997
(000s omitted)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 28, OCTOBER 4,
1996 1997
------------ ----------
(unaudited)
<S> <C> <C>
Current liabilities:
Payable - book overdraft $ 11,500 $ 3,401
Current portion of long-term debt (note 2) 4,000 4,000
Accounts payable 15,528 19,293
Accrued expenses 13,089 15,184
-------- --------
Total current liabilities 44,117 41,878
Long-term debt (note 2) 143,749 142,980
Deferred income tax -- 226
Other liabilities 13,823 13,267
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) 18,805 24,510
-------- --------
Total stockholders' equity 31,845 37,550
-------- --------
$233,534 $235,901
======== ========
</TABLE>
See Accompanying Notes.
4
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CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended September 28, 1996 and October 4, 1997
(000s omitted)
<TABLE>
<CAPTION>
SEPTEMBER 28, OCTOBER 4,
1996 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities: (unaudited) (unaudited)
Net income/(loss) $ (9,253) $ 5,705
Adjustments to reconcile net income/(loss) to
net cash provided by operating activities:
Depreciation and amortization 17,739 13,894
Changes in assets and liabilities:
Receivables (5,184) (15,213)
Inventories 7,328 1,183
Other current assets 4,705 (6)
Other assets (529) (898)
Accounts payable 3,494 3,765
Accrued expenses 2,403 2,095
Tax benefit (2,532) --
Deferred income taxes (3,352) 3,365
Other liabilities (242) (556)
-------- --------
Net cash provided by operating activities 14,577 13,334
-------- --------
Cash flows from investing activities:
Capital expenditures, net (6,026) (3,411)
-------- --------
Net cash used in investing activities (6,026) (3,411)
-------- --------
Cash flows from financing activities:
Net borrowings on revolving credit facilities 467 (843)
Decrease in payable-book overdraft (8,137) (8,099)
-------- --------
Net cash used in financing activities (7,670) (8,942)
-------- --------
Net increase in cash 881 981
Cash and cash equivalents at beginning of year 227 2,244
-------- --------
Cash and cash equivalents at end of period $ 1,108 $ 3,225
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 8,659 $ 13,665
======== ========
Income taxes $ -- $ --
======== ========
</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
October 4, 1997, the Consolidated Statements of Cash Flows for the nine months
ended September 28, 1996 and October 4, 1997, and the Consolidated Statements
of Income for the three months and nine months then ended. All dollar amounts
are rounded to thousands. The Consolidated Balance Sheet as of December 28,
1996 has been audited, but the auditor's 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. Interest on the Notes is payable
semiannually, and the Notes 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 $124,415 at October 4,
1997, is presented net of $585 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 $125,000 at October 4, 1997. 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 provided for a revolving credit facility of
up to $80,000, including a letter of credit facility of up to $5,000.
The Company and the lenders amended the new credit agreement in
February 1997 to reduce the borrowing limit to $65,000, to contemplate the
realignment of the Company's assets into separate operating entities, which was
completed during the second quarter of 1997, and to extend the maturity of the
new credit agreement by two years to January 2000. The borrowings under the new
credit agreement are secured by all receivables, certain inventories and
certain intangibles.
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Long-term debt at December 28, 1996 and October 4, 1997 consisted of:
<TABLE>
<CAPTION>
DEC. 28, 1996 OCT. 4, 1997
------------- ------------
<S> <C> <C>
Borrowings under credit agreements:
Secured revolving credit facility $ 19,408 $ 18,565
Unsecured Wachovia Bank of SC facility 4,000 4,000
Senior subordinated notes, net 124,341 124,415
--------- ---------
147,749 146,980
Less current portion (4,000) (4,000)
--------- ---------
Long-term debt $ 143,749 $ 142,980
========= =========
</TABLE>
The new credit agreement requires a commitment fee of 3/8 of 1% per
annum on all unused amounts and as of October 4, 1997, the Company could have
borrowed an additional $44,400 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 October 4, 1997, the average interest rate on the revolving credit
facility was 7.16%. 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 7.53% at October 4,
1997.
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 October 4, 1997, the Company had the
ability to authorize $3,000 of cash dividends or capital stock purchases. At
October 4, 1997, 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 $75. The letters of credit expire on
February 10, 1998, June 30, 1998, January 11, 1998 and April 10, 1998,
respectively. At October 4, 1997, no amount had been drawn against these
letters of credit.
Note 3:
Inventories:
Inventories at December 28, 1996 and October 4, 1997 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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<PAGE> 8
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 were completed by December
1996. In the Greige Fabrics Division, the Company closed one of its
manufacturing facilities and is disposing of idle equipment and inventories. In
the Chatham and Elastics Divisions, the Company consolidated certain operations
and is disposing of idle equipment and inventories. The Company also downsized
its corporate operations. The restructuring charges also consisted 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 28, October 4,
Restructuring items: 1996 1997
------ ------
<S> <C> <C>
CRIP early retirement window $1,202 $1,202
Termination of consulting contracts
and other items 497 416
Severance and related benefit costs 795 513
------ ------
2,494 2,131
Other nonrecurring asset write-offs related
to the restructuring:
Inventory write-offs 657 657
Property, plant and equipment write-offs 2,092 2,107
------ ------
$5,243 $4,895
====== ======
</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 early retirement amount from
assets in the Company's defined benefit plan and the balance from operations or
amounts available under the new credit agreement. During the nine months ended
October 4, 1997, the Company funded $363 of cash related restructuring items.
8
<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 the Private Securities Litigation Reform Act of
1995 and Section 21E of the Securities Exchange Act of 1934, as amended. 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 28, 1996, including, but not limited to, the "Overview"
discussion to Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 17 and 18 of the Annual Report.
Results of Operations
In the second quarter of fiscal 1997, the Company realigned two groups
within the Finished Fabrics Division into two separate operating companies,
Chatham Fabrics, LLC and Elastic Fabrics of America LLC, both Delaware limited
liability companies, which have been denominated the Chatham Fabrics Division
and the Elastics Division. The purpose of the alignment was to provide greater
management focus to these groups as separate and independent operating units.
The Company is the sole beneficial owner of the membership interests in these
limited liability companies.
Three Months Ended October 4, 1997
Compared with Three Months Ended September 28, 1996
Sales
Sales for the three months ended October 4, 1997 were $120.3 million,
an increase of $21.3 million or 21.5% from the corresponding period of 1996.
Sales of the Greige Fabrics Division increased $5.5 million, or 13.8%. Sales of
the Elastics Division increased $1.4 million or 5.9%, and sales of the Chatham
Fabrics Division increased $14.4 million or 41.6%.
The increase in sales of the Greige Fabrics Division may be attributed
to stronger market conditions for printcloth fabrics used primarily in the
apparel and home furnishings markets. Average selling prices for these fabrics
during the period increased 10.4% while volume increased 6.0%.
The sales increase for the Elastics Division included a $2.3 million
increase in wide elastic sales. The sales for the Chatham Fabrics Division
included increases in all of the division's businesses, including increases in
automotive sales of 86%, increases in consumer products sales of 24.7% and
increases in furniture fabric sales of 11.7%. Overall, the improvement in sales
may be attributed to improved market conditions and increased demand for many
of the Company's products. Additionally, the Company benefited from an
additional week of sales in the three month period ended October 4, 1997.
9
<PAGE> 10
Earnings
Operating income for the three month period ended October 4, 1997
increased $9.4 million from an operating loss of $0.3 million in the
corresponding period of 1996 to operating income of $9.1 million. The increase
in profitability may be primarily attributed to the Greige Fabrics Division as
higher average selling prices, increased volumes, lower raw material costs and
improved operating efficiencies all combined to significantly improve margins.
The Elastics Division reported increased earnings due to the operating
improvements at its Greensboro plant and increased sales of wide elastic
fabrics while the Chatham Fabrics Division reported improved levels of
profitability due to operating improvements at its Elkin, NC facility and the
increased level of sales.
Interest expense for the three months ended October 4, 1997 was $3.7
million, a decrease of $0.3 million from the same period in 1996. The decrease
reflects the Company's effort to reduce its debt balances and lower interest
rates as compared to the same period a year ago.
The income tax provision (benefit) increased approximately $3.8
million. This increase is due to a $9.7 million increase in income before
taxes. The foregoing resulted in net income increasing by $5.9 million from a
net loss of $2.2 million in the third quarter of fiscal 1996 to net income of
$3.6 million for the third quarter of 1997.
Nine Months Ended October 4, 1997
Compared with Nine Months Ended September 28, 1996
Sales
Sales for the nine months ended October 4, 1997 were $317 million, an
increase of $39.9 million or 14.4%, from the corresponding period of 1996.
Sales of the Greige Fabrics Division increased $13.8 million or 11.8%, while
sales of the Elastics Division increased $3.8 million or 5.7%, and sales of the
Chatham Fabrics Division increased $22.3 million or 24.2%.
The increase in sales of the Greige Fabrics Division may be attributed
to improved market conditions for lightweight apparel and home furnishings
fabrics. Average selling prices for these fabrics during the period increased
9.4% while volume increased 2.3%. The sales increase in the Elastics Division
may be attributed to increased sales of wide elastic fabrics. The sales
increase in the Chatham Fabrics Division included a $17.6 million increase in
automotive upholstery sales. Overall, the increase in sales may be attributed
to improved market conditions and stronger product demand for many of the
Company's products. Additionally, the Company benefited from an additional week
of sales in the nine month period ended October 4, 1997.
Earnings
Operating income for the nine month period ended October 4, 1997
increased $21.8 million from an operating loss of $4.3 million in the first
nine months of 1996 to operating income of $17.5
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million. The increase in profitability may be primarily attributed to the
Greige Fabrics Division as higher average selling prices, increased volumes,
lower raw material costs and improved operating efficiencies combined to
significantly increase margins. The Elastics Division has experienced improved
levels of profitability due to operating improvements at its Greensboro plant
and the increased sales levels of wide elastic products. The Chatham Division
also experienced better earnings which may be attributed to both the higher
sales levels and operating improvements at its Elkin, NC facility in the second
and third quarters.
Interest expense for the nine months ended October 4, 1997 was $11.1
million, a decrease of $0.7 million over the corresponding period in 1996. The
decrease reflects the Company's effort to reduce its debt balances as compared
to the same period a year ago.
Other income, net, for the nine months ended October 4, 1997 was $2.9
million, an increase of $1.6 million over the corresponding period in 1996.
This increase is due to income received from certain life insurance contracts
in the first quarter and the sale of nonoperating real estate in the second
quarter.
The provision (benefit) for income taxes increased approximately $9.3
million as a result of the income before income taxes increasing $24.2 million.
The foregoing resulted in net income for the nine months ending October 4, 1997
increasing by $15.0 million from a net loss of $9.3 million in the first nine
months of 1996 to net income of $5.7 million for the first nine months of this
year.
Financial Condition
For the nine months ended October 4, 1997, the Company generated cash
from operations of $13.3 million and decreased its net borrowings by $0.8
million. These funds were primarily used to finance $3.4 million of capital
expenditures and reduce its payable-book overdraft by $8.1 million.
At October 4, 1997, working capital was approximately $82.6 million as
compared to approximately $68.5 million at December 28, 1996. Management is not
aware of any present or potential impairments to the Company's liquidity.
At October 4, 1997, long-term debt of approximately $143 million
represented 79% of total capital, compared to 82% at December 28, 1996.
The Company believes that funds from operations and amounts available
under the loan agreements (see note 2 to consolidated financial statements) are
adequate to finance the Company's anticipated capital expenditures, 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).
11
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None Reportable
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.25- Amendment No. 1 to Amended and Restated Employment
Agreement between CMI Industries, Inc. and Joseph L.
Gorga dated September 30, 1997
10.26- Amendment No. 1 to Amended and Restated Employment
Agreement between CMI Industries, Inc. and James A.
Ovenden dated September 30, 1997
10.27- Agreement Regarding Restriction of Shares of CMI
Industries, Inc. Common Stock between CMI
Industries, Inc. and Joseph L. Gorga dated October
21, 1997
27.1- Financial Data Schedule (for SEC use only)
b) Reports on Form 8-K
None
12
<PAGE> 13
SIGNATURE OF REGISTRANT
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.
CMI INDUSTRIES, INC.
Date: November 11, 1997 By /s/ JOSEPH L. GORGA
--------------------
Joseph L. Gorga
President and Chief Executive Officer
Date: November 11, 1997 By /s/ JAMES A. OVENDEN
---------------------
James A. Ovenden
Executive Vice President and
Chief Financial Officer
13
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PART III. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
----------- ----------- --------
<S> <C> <C>
10.25 Amendment No. 1 to Amended and Restated Employment Agreement
between CMI Industries, Inc. and Joseph L. Gorga dated
September 30, 1997
10.26 Amendment No. 1 to Amended and Restated Employment Agreement
between CMI Industries, Inc. and James A. Ovenden dated
September 30, 1997
10.27 Agreement Regarding Restriction of Shares of CMI Industries,
Inc. Common Stock between CMI Industries, Inc. and by Joseph
L. Gorga dated October 21, 1997
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
14
<PAGE> 1
EXHIBIT 10.25
AMENDMENT NO. 1
TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amendment is made and entered into this ___ day of
September, 1997 as of the Amendment Date (as defined below) by and between CMI
INDUSTRIES, INC., a Delaware corporation (the "Company"), and JOSEPH L. GORGA
(the "Executive").
BACKGROUND STATEMENT
Executive is the President and Chief Executive Officer of the
Company. The parties hereto are parties to an Amended and Restated Employment
Agreement dated as of January 1, 1996 (the "Existing Employment Agreement," and
as amended hereby, the "Employment Agreement," the terms defined therein being
used herein as therein defined unless otherwise defined herein). The Existing
Employment Agreement provides that it will expire on December 31, 1997 if either
Executive or the Company gives notice of nonrenewal on or before October 1,
1997. The parties desire to enter into this Amendment to provide for an
extension of the term of, and to otherwise modify in certain respects, the
Existing Employment Agreement.
AGREEMENT
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Amendments. The Existing Employment Agreement is hereby
amended effective as of October 1, 1997 (the "Amendment Date") as follows:
a. Paragraph 3 is hereby amended to delete
therefrom each reference to the Effective Date and to substitute in
lieu of each such reference the phrase "Amendment Date", so that the
Initial Period shall be for a period of two years commencing on the
Amendment Date.
b. Paragraph 4(a) is hereby amended to delete
therefrom the reference "$325,000" and to substitute in lieu thereof
"$395,000".
c. Paragraph 4(b) is hereby amended to delete
therefrom the second sentence thereof in its entirety and to substitute
in lieu thereof the following:
"So long as the current plan is in effect and has not been
modified,
1
<PAGE> 2
the maximum amount of incentive compensation that Executive
shall be entitled to receive, as a percentage of Base Salary,
shall be the greater of 75% or the maximum specified in the
plan."
d. Paragraph 4 is hereby amended to include
therein the following subparagraph 4(e), which shall appear immediately
following subparagraph 4(d):
"(e) Special Compensation. (i) If during the Period (or
within 6 months after the expiration thereof while Executive
is employed by the Company) a Change of Control (as defined in
SUBPARAGRAPH 6(E) below) occurs, then Executive shall be
entitled to receive an amount equal to the applicable amount
shown below for the Transaction Value (as defined below) of
the Change of Control per share of Common Stock outstanding
immediately prior to the occurrence of the Change of Control:
Per Share Amount to
Shareholders of
Transaction Value Amount of Special Compensation
Greater than $40 but less $39,000 for each $1.00 of Transaction Value in excess
than or equal to $45 of $40, plus, if the Transaction Value is not a whole
dollar, a proportionate amount of $39,000 to reflect
the fraction of a $1.00 included in the Transaction
Value
Greater than $45 but less $195,000, plus $65,000 for each $1.00 of Transaction
than or equal to $50 Value in excess of $45, plus, if the Transaction
Value is not a whole dollar, a proportionate amount
of $65,000 to reflect the fraction of a $1.00
included in the Transaction Value
Greater than $50 $520,000, plus $91,000 for each $1.00 of Transaction
Value in excess of $50, plus, if the Transaction
Value is not a whole dollar, a proportionate amount
of $91,000 to reflect the fraction of a $1.00
included in the Transaction Value
"Transaction Value" shall mean an amount equal to the sum of
the aggregate fair market value of any securities issued and
any other non-cash consideration delivered, and any cash
consideration paid, to the Company or its security holders in
connection with the Change of Control, as reasonably
determined by the Compensation Committee of the Board of
Directors at the time. The Transaction Value per share shall
be appropriately adjusted to account for stock dividends,
stock
2
<PAGE> 3
splits, reverse stock splits and like changes to Common Stock.
Compensation shall be payable under this SUBPARAGRAPH 4(E)
within seven business days of the occurrence of the Change of
Control but, in the case of a Change of Control based upon a
vote of the Company's stockholders, in no event earlier than
the occurrence of the underlying event upon which the
stockholders vote.
(ii) In addition to the amounts provided for in
SUBPARAGRAPH 4(E)(I) above, the Company shall pay to Executive
the amount, if any, which when added to the other amounts
payable to Executive under this SUBPARAGRAPH 4(E), will place
Executive in the same after-tax position as if the excise tax
penalty of Section 4999 of the Internal Revenue Code of 1986,
as amended, or any successor statute of similar import, did
not apply to any of the amounts payable under this
SUBPARAGRAPH 4(E). Amounts payable under the immediately
preceding sentence shall be paid not less than 14 business
days prior to the date Executive must pay any portion of such
excise tax penalty, whether by estimated tax payment or
otherwise.
(iii) Notwithstanding anything to the contrary
contained herein, all compensation provided for in this
SUBPARAGRAPH 4(E) shall be payable regardless of whether
Executive's employment with the Company is terminated (for any
reason) in connection with or subsequent to the Change of
Control."
e. Subparagraph 6(d) is hereby amended as
follows:
(1) To delete the word "In" which
appears as the first word of the first sentence thereof and to
substitute in lieu thereof the phrase "Except as otherwise provided in
this Subparagraph 6(d), in".
(2) To insert in clause (iii) thereof
the phrase "SUBPARAGRAPH 4(E) and" immediately preceding the phrase
"SUBPARAGRAPH 6(E)".
f. Subparagraph 6(e)(i)(1) is hereby amended to
include the following phrase at the end thereof: "plus any special
compensation payable under SUBPARAGRAPH 4(E) hereof".
g. Subparagraph 6(e)(i)(6) is hereby amended to
delete such subparagraph in its entirety.
h. Paragraph 11 is hereby amended to include in
the second parenthetical
3
<PAGE> 4
thereof the phrase "SUBPARAGRAPH 4(E) or" immediately preceding the
phrase "PARAGRAPH 6(E)."
2. Agreement in Force. Except as amended hereby, all of
the provisions of the Existing Employment Agreement shall be and remain in full
force and effect. Upon the effectiveness hereof, each reference in the Existing
Employment Agreement to "this Agreement," "hereunder," "hereof," or words of
like import referring to the Existing Employment Agreement shall mean and be a
reference to the Employment Agreement.
3. Miscellaneous. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York. This
Amendment shall be binding upon, and shall inure to the benefit of, the parties
hereto, any successors to or assigns of the Company and Executive's heirs and
the personal representatives of Executive's estate. The Existing Employment
Agreement, as amended hereby, constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes any prior or
contemporaneous agreements or understandings to the contrary. Titles and
captions of or in this Amendment are inserted only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Amendment or the intent of any of its provisions. The Employment Agreement
may be further modified or amended only in an instrument executed by the party
against whom the modification or amendment is asserted. This Amendment may be
executed in two or more counterparts, each of which shall constitute an original
but all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered
this Amendment as of the Amendment Date as provided above.
CMI INDUSTRIES, INC.
By: /s/
------------------------------
Title: Director
--------------------------
/s/ Joseph L. Gorga
----------------------------------
Joseph L. Gorga
* * * * *
4
<PAGE> 1
EXHIBIT 10.26
AMENDMENT NO. 1
TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amendment is made and entered into this ___ day of
September, 1997 as of the Amendment Date (as defined below) by and between CMI
Industries, Inc., a Delaware corporation (the "Company"), and James A. Ovenden
(the "Executive").
Background Statement
Executive is the Executive Vice President and Chief Financial
Officer of the Company. The parties hereto are parties to an Amended and
Restated Employment Agreement dated as of January 1, 1996 (the "Existing
Employment Agreement," and as amended hereby, the "Employment Agreement," the
terms defined therein being used herein as therein defined unless otherwise
defined herein). The Existing Employment Agreement provides that it will expire
on December 31, 1997 if either Executive or the Company gives notice of
nonrenewal on or before October 1, 1997. The parties desire to enter into this
Amendment to provide for an extension of the term of, and to otherwise modify in
certain respects, the Existing Employment Agreement.
Agreement
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Amendments. The Existing Employment Agreement is hereby
amended effective as of October 1, 1997 (the "Amendment Date") as follows:
a. Paragraph 3 is hereby amended to delete
therefrom each reference to the Effective Date and to substitute in
lieu of each such reference the phrase "Amendment Date", so that the
Initial Period shall be for a period of two years commencing on the
Amendment Date.
b. Paragraph 4(a) is hereby amended to delete
therefrom the reference "$225,000" and to substitute in lieu thereof
"$250,000".
c. Paragraph 4(b) is hereby amended to delete
therefrom the second sentence thereof in its entirety and to substitute
in lieu thereof the following:
"So long as the current plan is in effect and has not been
modified,
1
<PAGE> 2
the maximum amount of incentive compensation that Executive
shall be entitled to receive, as a percentage of Base Salary,
shall be the greater of 50% or the maximum specified in the
plan."
d. Paragraph 4 is hereby amended to include
therein the following subparagraph 4(e), which shall appear immediately
following subparagraph 4(d):
"(e) Special Compensation. (i) If during the Period (or
within 6 months after the expiration thereof while Executive
is employed by the Company) a Change of Control (as defined in
subparagraph 6(e) below) occurs, then Executive shall be
entitled to receive an amount equal to the applicable amount
shown below for the Transaction Value (as defined below) of
the Change of Control per share of Common Stock outstanding
immediately prior to the occurrence of the Change of Control:
Per Share Amount to
Shareholders of
Transaction Value Amount of Special Compensation
Greater than $40 but less $21,000 for each $1.00 of Transaction Value
than or equal to $45 in excess of $40, plus, if the Transaction
Value is not a whole dollar, a proportionate
amount of $21,000 to reflect the fraction of
a $1.00 included in the Transaction Value
Greater than $45 but less $105,000, plus $35,000 for each $1.00 of
than or equal to $50 Transaction Value in excess of $45, plus,
if the Transaction Value is not a whole
dollar, a proportionate amount of $35,000
to reflect the fraction of a $1.00 included
in the Transaction Value
Greater than $50 $280,000, plus $49,000 for each $1.00 of
Transaction Value in excess of $50, plus,
if the Transaction Value is not a whole
dollar, a proportionate amount of $49,000
to reflect the fraction of a $1.00 included
in the Transaction Value
"Transaction Value" shall mean an amount equal to the sum of
the aggregate fair market value of any securities issued and
any other non-cash consideration delivered, and any cash
consideration paid, to the Company or its security holders in
connection with the Change of Control, as reasonably
determined by the Compensation Committee of the Board of
Directors at the time. The Transaction Value per share shall
be appropriately adjusted to account for stock dividends,
stock
2
<PAGE> 3
splits, reverse stock splits and like changes to Common Stock.
Compensation shall be payable under this SUBPARAGRAPH 4(E)
within seven business days of the occurrence of the Change of
Control but, in the case of a Change of Control based upon a
vote of the Company's stockholders, in no event earlier than
the occurrence of the underlying event upon which the
stockholders vote.
(ii) In addition to the amounts provided for in
SUBPARAGRAPH 4(E)(i) above, the Company shall pay to Executive
the amount, if any, which when added to the other amounts
payable to Executive under this SUBPARAGRAPH 4(E), will place
Executive in the same after-tax position as if the excise tax
penalty of Section 4999 of the Internal Revenue Code of 1986,
as amended, or any successor statute of similar import, did
not apply to any of the amounts payable under this
SUBPARAGRAPH 4(E). Amounts payable under the immediately
preceding sentence shall be paid not less than 14 business
days prior to the date Executive must pay any portion of such
excise tax penalty, whether by estimated tax payment or
otherwise.
(iii) Notwithstanding anything to the contrary
contained herein, all compensation provided for in this
SUBPARAGRAPH 4(E) shall be payable regardless of whether
Executive's employment with the Company is terminated (for any
reason) in connection with or subsequent to the Change of
Control."
e. Subparagraph 6(d) is hereby amended as
follows:
(1) To delete the word "In" which
appears as the first word of the
first sentence thereof and to substitute in lieu thereof the phrase
"Except as otherwise provided in this Subparagraph 6(d), in".
(2) To insert in clause (iii) thereof
the phrase "subparagraph 4(e) and" immediately preceding the phrase
"SUBPARAGRAPH 6(E)".
f. Subparagraph 6(e)(i)(1) is hereby amended to
include the following phrase at the end thereof: "plus any special
compensation payable under SUBPARAGRAPH 4(E) hereof".
g. Subparagraph 6(e)(i)(6) is hereby amended to
delete such subparagraph in its entirety.
h. Paragraph 11 is hereby amended to include in
the second parenthetical
3
<PAGE> 4
thereof the phrase "subparagraph 4(e) or" immediately preceding the
phrase "paragraph 6(e)."
2. Agreement in Force. Except as amended hereby, all of
the provisions of the Existing Employment Agreement shall be and remain in full
force and effect. Upon the effectiveness hereof, each reference in the Existing
Employment Agreement to "this Agreement," "hereunder," "hereof," or words of
like import referring to the Existing Employment Agreement shall mean and be a
reference to the Employment Agreement.
3. Miscellaneous. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York. This
Amendment shall be binding upon, and shall inure to the benefit of, the parties
hereto, any successors to or assigns of the Company and Executive's heirs and
the personal representatives of Executive's estate. The Existing Employment
Agreement, as amended hereby, constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes any prior or
contemporaneous agreements or understanding to the contrary. Titles and caption
of or in this Amendment are inserted only as a matter of convenience and for
reference and in no way define, limit, extend or describe the scope of this
Amendment or the intent of any of its provisions. The Employment Agreement may
be further modified or amended only in an instrument executed by the party
against whom the modification or amendment is asserted. This Amendment may be
executed by the party against whom the modification or amendment is asserted.
This Amendment may be executed in two or more counterparts, each of which shall
constitute an original but all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed and delivered
this Amendment as of the Amendment Date as provided above.
CMI INDUSTRIES, INC.
By: /s/
---------------------------
Title: Director
----------------------
/s/ James A. Ovenden
------------------------------
James A. Ovenden
* * * * *
4
<PAGE> 1
EXHIBIT 10.27
AGREEMENT REGARDING RESTRICTION OF
SHARES OF CMI INDUSTRIES, INC. COMMON STOCK
As a condition to the sale and issuance of 5,000 shares (the "Shares")
of the $1.00 par value common stock (the Common Stock") of CMI Industries, Inc.,
a Delaware corporation ("CMI" or the "Corporation"), to the undersigned, the
undersigned hereby acknowledges and agrees as follows:
1. Investment Representation. The undersigned represents that the
undersigned is not acquiring the Shares with a view to, or for resale in
connection with, the distribution of the Shares, and has no present
intention of distributing or reselling any of the Shares. The undersigned
acknowledges that the certificate or certificates representing the Shares
shall bear the legend specified in Article 7 of the Amended and Restated
Stockholders Agreement dated February 14, 1992 among CMI and its
stockholders, as amended (the "Stockholders Agreement"), that the Shares
are not registered under the Securities Act of 1933, as amended (the
"Act"), or under any applicable state securities statute, that the
undersigned may not transfer or otherwise dispose of any of the Shares
except in a transaction which is registered under the Act and any
applicable state securities statute or exempt from registration thereunder,
and that CMI may require an opinion of counsel to the effect that such
transfer is so registered or exempt. The undersigned acknowledges that
except as expressly set forth in the Stockholders Agreement, CMI is under
no obligation to register the Shares or take any action necessary in order
to make compliance with an exemption from registration available. The
undersigned has received no public solicitation or advertisement concerning
an offer to sell the Shares. The undersigned is the President and Chief
Executive Officer of CMI and has the opportunity to seek information about
CMI and the Shares for verification purposes.
2. Stockholders Agreement. The undersigned agrees that the ownership by
the undersigned of the Shares shall be subject to all of the terms and
conditions of, and that the undersigned shall comply with the provisions
of, the Stockholders Agreement, a copy of which have previously been
furnished to the undersigned, as fully as if the undersigned were a
signatory thereto as a "Management Investor" thereunder. All of the
restrictions on transfer, voting and other obligations contained therein
shall apply fully to the undersigned with respect to the Shares even though
the undersigned is not a party thereto. Notwithstanding the foregoing, (x)
any transfer of Shares pursuant hereto shall be deemed to be a transfer
under the Management Subscription Agreement permitted by Section
4.2(a)(iii) of the Stockholders Agreement; and (y) the pledge of the Shares
to CMI pursuant to the Pledge Agreement of near or even date herewith shall
be deemed to be a pledge permitted by Section 4.2(a)(ix) of the
Stockholders Agreement.
<PAGE> 2
3. Put-Call Rights.
a. Termination of Employment other than Upon Death,
Disability or Retirement.
(i) If, prior to a Public Offering of the Common Stock,
the undersigned's employment with the Corporation or a
subsidiary thereof is terminated by the Corporation or such
subsidiary for Cause or without Cause or by the undersigned,
other than upon the undersigned's death, disability (as
determined under the Corporation's disability policies in
effect at such time), or retirement at or after obtaining the
age of 65, the Corporation shall have the option, for a period
of 90 calendar days after the date of termination of
employment, to purchase all or any portion of the Shares owned
by the undersigned. The Corporation may exercise such right by
giving notice thereof to the undersigned prior to the
expiration of such 90-day period. The purchase price for the
Shares shall be the fair market value of such Shares
determined as of the date of termination of employment, as
agreed upon by the undersigned and the Corporation; provided,
that, in the event that the undersigned and the Corporation
cannot agree on such fair market value, a mutually agreed upon
third party shall make the final determination thereof ("Fair
Market Value"). "Public Offering" is defined in the
Stockholders Agreement.
(ii) If, prior to a Public Offering of the Common Stock,
the undersigned's employment with the Corporation or any
subsidiary thereof is terminated for any reason other than for
Cause or the undersigned's resignation, and the Corporation
shall not have exercised its 90-day option to purchase all of
the Option Shares as provided in paragraph 3a(i) above, the
undersigned shall have the option, for a period of 90 calendar
days, commencing at the end of the Corporation's 90-day option
period, to sell to the Corporation all or any portion of the
Shares then owned by the undersigned. The undersigned may
exercise such option by giving notice thereof to the
Corporation prior to the expiration of the undersigned's
90-day option period. The purchase price for the Shares shall
be the Fair Market Value of such Shares.
b. Death, Disability or Retirement.
(iii) If, prior to a Public Offering of the Common Stock,
the undersigned dies while in the employ of the Corporation or
any subsidiary thereof, or the undersigned's employment with
the Corporation or any subsidiary thereof is terminated
because of the undersigned's disability or retirement at or
after obtaining the age of 65, the Corporation shall have the
option, for a period of 90 calendar days
<PAGE> 3
after the date of death or determination of disability or
retirement, as applicable, to purchase all or any portion of
the Shares owned by theundersigned or the undersigned's legal
representative. The Corporation may exercise such Option by
giving notice thereof to the undersigned or the undersigned's
legal representative prior to the expiration of such 90-day
period. The purchase price for the Shares shall be the Fair
Market Value thereof.
(iv) If, prior to a Public Offering of the Common Stock,
the Corporation has not exercised its 90-day option under
paragraph 3b(i) upon the death, disability or retirement of
the undersigned, the undersigned or the undersigned's legal
representative shall have the option, for a period of 90
calendar days (180 calendar days in the case of termination
due to the undersigned's death), commencing at the end of the
Corporation's 90-day option period, to sell to the Corporation
all or any portion of the Shares then owned by the undersigned
or the undersigned's legal representative. The undersigned or
his legal successor may exercise such Option by giving notice
to the Corporation prior to the expiration of the
undersigned's 90-day option period. The purchase price for
such Shares shall be the Fair Market Value thereof.
c. Election, Delivery and Payment Procedures.
(v) Upon any exercise by the Corporation or the
undersigned or the undersigned's legal representative of an
option granted in this paragraph 3, the Corporation shall pay
the purchase price in cash.
(vi) The closing of any exercise of an option granted in
this paragraph 3 shall take place at the offices of the
Corporation not less than 15 nor more than 30 days after the
date such option is exercised or, if the undersigned and the
Corporation cannot reach agreement on fair market value, not
less than 15 nor more than 30 days after such determination is
made by the mutually agreed upon third party. The exact date
and time of closing shall be specified by the party exercising
such option.
(vii) If the Corporation shall have the option to purchase
Shares from the undersigned pursuant to this paragraph 3, it
shall specify to the undersigned in reasonable detail its
calculation of Fair Market Value for the purchase price (A) at
the time of its exercise of its option or, (B) if the
undersigned or the undersigned's legal representative will
have an option to sell pursuant to paragraph 3, prior to the
commencement of the undersigned's 90-day option period.
<PAGE> 4
(viii) At the closing of any exercise of any option granted
pursuant to paragraph 3, the undersigned shall deliver
certificates for the Shares to the Corporation duly endorsed
or accompanied by written instruments of transfer in form
satisfactory to the Corporation, duly executed by the
undersigned, and freeand clear of any liens, against payment
by the Corporation of the purchase price therefor.
(ix) Notwithstanding the provisions contained in this
paragraph 3, the Corporation shall not be obligated to
purchase any Shares, and Optionee shall have no right to sell
such Shares, except to the extent the Corporation shall be
permitted to repurchase its shares under applicable law and
any applicable financing agreements of the Corporation.
4. Miscellaneous.This Agreement is binding upon and inures to the benefit
of the parties hereto and their respective successors and assigns.
References to a party to this Agreement are also references to any
successor or assign of such party. Whenever the context so requires, the
singular number includes the plural, the plural includes the singular, and
the gender of any pronoun includes the other genders. Titles and captions
of or in this Agreement are inserted only as a matter of convenience and
for reference and in no way affect the scope of this Agreement or the
intent of its provisions. This Agreement constitutes the entire agreement
of the parties to it with respect to its subject matter, supersedes all
prior agreements, if any, of the parties to this Agreement with respect to
its subject matter, and may not be amended except in writing signed by the
party to this Agreement against whom the change is being asserted. In
addition, the agreements of the undersigned in paragraph 2 above inure to
the benefit of the other parties to the Stockholders Agreement. The failure
of any party to this Agreement at any time or times to require the
performance of any provisions of this Agreement shall in no manner affect
the right to enforce the same; and no waiver by any party to this Agreement
of any provision (or of a breach of any provision) of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be
deemed or construed either as a further or continuing waiver of any such
provision or breach or as a waiver of any other provision (or of a breach
of any other provision) of this Agreement. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the State of
Delaware. This Agreement may be executed in two or more copies, each of
which shall be deemed an original, and it shall not be necessary in making
proof of this Agreement or its terms to produce or account for more than
one of such copies.
<PAGE> 5
DULY EXECUTED by the undersigned this ___ day of ___________,
1997 as of October 21, 1997.
-------------------------------
Joseph L. Gorga
Accepted and agreed to.
CMI INDUSTRIES, INC.
By:
---------------------------------
Title:
-----------------------------
* * * * *
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CMI INDUSTRIES INC. FOR THE NINE MONTHS ENDED OCTOBER 4,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-28-1996
<PERIOD-END> OCT-04-1997
<CASH> 3,225
<SECURITIES> 0
<RECEIVABLES> 64,072
<ALLOWANCES> 1,350
<INVENTORY> 56,960
<CURRENT-ASSETS> 124,501
<PP&E> 245,442
<DEPRECIATION> 142,894
<TOTAL-ASSETS> 235,901
<CURRENT-LIABILITIES> 41,878
<BONDS> 142,980
0
0
<COMMON> 1,690
<OTHER-SE> 35,860
<TOTAL-LIABILITY-AND-EQUITY> 235,901
<SALES> 317,009
<TOTAL-REVENUES> 317,009
<CGS> 274,636
<TOTAL-COSTS> 299,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,133
<INCOME-PRETAX> 9,353
<INCOME-TAX> 3,648
<INCOME-CONTINUING> 5,705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,705
<EPS-PRIMARY> 3.38
<EPS-DILUTED> 3.38
</TABLE>
