SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1994
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 1-5034
CORE INDUSTRIES INC
(Exact name of registrant as specified in its charter)
Nevada 38-1052434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 2000, Bloomfield Hills, Michigan 48304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 642-3400
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
Common Stock outstanding at March 31, 1994 - 9,799,398 shares.
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<CAPTION>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
For the Second Quarter Ended
1994 1993
<S> <C> <C>
Net sales $49,594,000 $46,875,000
Cost of sales, exclusive
of depreciation
and amortization $34,565,000 $32,271,000
Depreciation and amortization 1,278,000 1,278,000
Selling, general and
administrative expenses 9,631,000 9,671,000
Interest expense 1,124,000 1,321,000
Other income (357,000) (447,000)
$46,241,000 $44,094,000
Earnings before taxes
on income $3,353,000 $2,781,000
Taxes on income 1,210,000 1,020,000
Net earnings $2,143,000 $1,761,000
Net earnings per share $.22 $.18
Dividends per share $.06 $.06
Average shares of
stock outstanding 9,799,000 9,776,000
<FN>
See notes to financial statements
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<CAPTION>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
For the Six Months Ended
1994 1993
<S> <C> <C>
Net sales $103,602,000 $92,959,000
Cost of sales, exclusive
of depreciation
and amortization $72,853,000 $63,808,000
Depreciation and amortization 2,544,000 2,585,000
Selling, general and
administrative expenses 19,855,000 19,178,000
Interest expense 2,266,000 2,701,000
Other income (1,887,000) (660,000)
$95,631,000 $87,612,000
Earnings before taxes
on income $7,971,000 $5,347,000
Taxes on income 2,920,000 1,960,000
Net earnings $5,051,000 $3,387,000
Net earnings per share $.52 $.35
Dividends per share $.12 $.12
Average shares of
stock outstanding 9,799,000 9,775,000
<FN>
See notes to financial statements
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<TABLE>
<CAPTION>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
Feb. 28. 1994
(Unaudited) Aug. 31, 1993
<S> <C> <C>
CURRENT ASSETS:
Cash and short-term
investments $6,266,000 $651,000
Accounts receivable, less
collection allowances of
$910,000 in February
and $970,000 in August 49,315,000 50,558,000
Inventories 51,495,000 54,092,000
Prepaid expenses 990,000 1,337,000
Deferred taxes on income 2,557,000 2,776,000
TOTAL CURRENT ASSETS $110,623,000 $109,414,000
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements $1,197,000 $1,374,000
Buildings 17,115,000 18,672,000
Machinery and equipment 50,112,000 50,145,000
Total $68,424,000 $70,191,000
Less accumulated depreciation 41,193,000 41,304,000
TOTAL PROPERTY, PLANT
AND EQUIPMENT $27,231,000 $28,887,000
OTHER ASSETS:
Excess of cost over net
assets of companies acquired $7,028,000 $7,269,000
Investment in real estate
partnership 1,338,000 1,432,000
Prepaid pensions and other 5,018,000 4,275,000
TOTAL OTHER ASSETS $13,384,000 $12,976,000
$151,238,000 $151,277,000
<FN>
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY
Feb. 28. 1994
(Unaudited) Aug. 31, 1993
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to bank -- $900,000
Accounts payable $10,801,000 12,521,000
Accrued payroll and other exp. 11,386,000 12,899,000
Dividends payable 588,000 587,000
Taxes on income 91,000 --
Long-term debt due within 1 yr. 1,500,000 1,500,000
TOTAL CURRENT LIABILITIES $24,366,000 $28,407,000
LONG-TERM DEBT,
less amount due within one year 47,130,000 47,134,000
DEFERRED TAXES ON INCOME 1,970,000 1,580,000
ACCRUED POSTRETIREMENT BENEFITS 2,923,000 3,190,000
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1:
Authorized - 100,000 shares
Issued - none
Common stock, par value $1:
Authorized - 100,000 shares
Issued - 11,209,558 shares $11,210,000 $11,208,000
Additional paid-in capital 734,000 728,000
Retained earnings 69,247,000 65,372,000
Cumulative translation
adjustments 356,000 356,000
Treasury stock (1,410,160
shares) - at cost (6,698,000) (6,698,000)
TOTAL STOCKHOLDERS' EQUITY $74,849,000 $70,966,000
$151,238,000 $151,277,000
<FN>
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended February 28
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $5,051,000 $3,387,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation $2,404,000 $2,455,000
Amortization 140,000 130,000
Gain on sale of division (915,000) -
(Increase) decrease in assets:
Accounts receivable (14,000) (2,115,000)
Inventories (275,000) (1,901,000)
Prepaid expenses 272,000 (26,000)
Taxes on income (330,000) 2,644,000
Deferred taxes on income 470,000 2,626,000
Increase (decrease) in liabilities:
Accounts payable (1,876,000) 1,681,000
Accrued payroll and other expenses (1,102,000) (888,000)
TOTAL ADJUSTMENTS ($1,226,000) $4,606,000
NET CASH PROVIDED BY
OPERATING ACTIVITIES $3,825,000 $7,993,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($2,068,000) ($2,122,000)
Proceeds from sale of division 5,898,000 -
Proceeds from discontinued operations - 6,901,000
Other 35,000 109,000
NET CASH FROM INVESTING ACTIVITIES $3,865,000 $4,888,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on short-term bank loans ($900,000) ($12,700,000)
Cash dividends paid (1,175,000) (1,173,000)
NET CASH USED IN FINANCING
ACTIVITIES ($2,075,000) ($13,873,000)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 5,615,000 (992,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 651,000 1,917,000
CASH AND CASH EQUIVALENTS,
END OF PERIOD $6,266,000 $925,000
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $2,243,000 $2,590,000
Income taxes paid (refunded) $2,111,000 ($550,000)
<FN>
See notes to financial statements
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CORE INDUSTRIES INC AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A
The accompanying consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the information presented therein, and such adjustments are of a
normal recurring nature.
NOTE B
Reference is made to the Company's Annual Report on Form 10-K for the
year ended August 31, 1993, for a description of accounting policies and other
detailed footnote information.
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NOTE C - Inventories
February 28, August 31,
1994 1993
<S> <C> <C>
Raw materials and supplies $ 27,355,000 $ 26,762,000
Work in process 11,579,000 13,417,000
Finished goods 12,561,000 13,913,000
$ 51,495,000 $ 54,092,000
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NOTE D - Sale of Division
On September 23, 1993, the Company sold one of its farm equipment
divisions, Du-Al Manufacturing Company, for a pretax gain of $1,475,000 (total
of $.09 per share). This gain is included in other income on the Statement of
Earnings. Du-Al represented approximately 4% of the Company's total 1993
sales and approximately 4% of the Company's assets as of August 31, 1993.
NOTE E - Product Segment Information
The Company classifies its products and services into three general
segments. Financial information by segment is summarized below.
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1994
Earnings(Loss)
Before
Net Sales Income Taxes
<S> <C> <C>
Second quarter ended Feb. 28:
Electronics $ 23,841,000 $ 2,001,000
Farm equipment 8,359,000 1,310,000
Fluid controls and
construction products 17,394,000 1,925,000
Corporate unallocated - (759,000)
Interest expense - (1,124,000)
Total $ 49,594,000 $ 3,353,000
Six months ended Feb. 28:
Electronics $ 49,310,000 $ 3,675,000
Farm equipment 17,170,000 3,945,000(1)
Fluid controls and
construction products 37,122,000 4,286,000
Corporate unallocated - (1,669,000)
Interest expense - (2,266,000)
Total $103,602,000 $ 7,971,000
1993
Earnings(Loss)
Before
Net Sales Income Taxes
<S> <C> <C>
Second quarter ended Feb. 28:
Electronics $ 20,971,000 $ 1,435,000
Farm equipment 8,923,000 1,133,000
Fluid controls and
construction products 16,981,000 2,325,000
Corporate unallocated - (791,000)
Interest expense - (1,321,000)
Total $ 46,875,000 $ 2,781,000
Six months ended Feb. 28:
Electronics $ 40,514,000 $ 2,900,000
Farm equipment 18,542,000 2,434,000
Fluid controls and
construction products 33,903,000 4,332,000
Corporate unallocated - (1,618,000)
Interest expense - (2,701,000)
Total $ 92,959,000 $ 5,347,000
<F1>
(1)Includes pretax gain of $1,475,000 (total of $.09 per share) related to the
sale of Core's Du-Al Division.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the first six months of fiscal 1994, the Company's net sales
increased 11% to $103,602,000. Net earnings for the first six months of
fiscal 1994 were $5,051,000, or $.52 per share. Included in this year's first
half results was a net favorable $.09 per share related to the sale of the
Company's Du-Al division in the first quarter; excluding this gain, net
earnings were up $.08 per share or 23%.
For the second quarter of fiscal 1994, net sales increased 6% to
$49,594,000 compared to $46,875,000 for the corresponding quarter in the prior
year. This year's second quarter net earnings were $2,143,000, or $.22 per
share, up 22% from last year's net earnings of $1,761,000, or $.18 per share.
For the first six months of fiscal 1994, the Company's Electronics Group
provided 48% of total sales; the Farm Equipment Group, 16% of total sales; and
the Fluid Controls and Construction Products Group, 36% of sales. The
Electronics Group reported strong improvement compared with the prior year
comparable six month and second quarter periods with sales increases of 22%
and 14%, and earnings increases of 27% and 39%, respectively. All the major
units in the Electronics Group contributed to the improvement which was
accomplished primarily through operating efficiencies, responsiveness to
customer requirements, and several new product introductions. First half
sales of the Farm Equipment Group fell 7% but earnings rose 1% as compared to
the strong performance of the prior year's first six months. These results
exclude the gain on the sale of Du-Al. The Fluid Controls and Construction
Products Group, compared with the prior year, had a 17% reduction in second
quarter earnings on a nominal sales increase. The Group experienced continued
soft industrial markets and severe winter weather conditions, both of which
contributed to reductions in gross margins.
Overall gross profit margins on net sales for the first six months of
fiscal 1994 decreased to 29.7% from 31.4% last year, primarily due to margin
pressures on the units in the Fluid Controls and Construction Products Group
as noted above.
Selling, general and administrative expenses decreased to 19.2% of sales
from 20.6% in the prior year's first six months as a result of focused cost
reduction programs. Interest expense declined 16% in this year's first half
primarily due to reduced borrowings. Other income for the six months ended
February 28, 1994 includes the $1,475,000 first quarter gain related to the
sale of the Company's Du-Al division.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of fiscal 1994, the Company increased its cash and
short-term investments $5,615,000. The sources of this increase were
$3,825,000 from operating activities, $5,898,000 from the sale of the
Company's Du-Al division, offset by capital expenditures, reduction of bank
debt and dividends.
At February 28, 1994, the Company had working capital of $86,257,000
with a current ratio of 4.5 to 1 compared to working capital of $81,007,000
and a current ratio of 3.9 to 1 at the beginning of the fiscal year. The
improved current ratio reflects the Company's profitable operations and the
sale of the Company's Du-Al division.
The Company's internal sources of funds are supplemented with unsecured
bank credit facilities totaling $15 million (nothing outstanding at
February 28, 1994). Management believes sufficient additional credit is
available from banks and other sources should the need arise. Management also
believes the Company's cash flow is more than sufficient to meet payments on
maturing debt, capital expenditures and dividends.
Stockholders' equity amounted to $74,849,000 or $7.64 per share at
February 28, 1994, with total capital employed (total debt and equity)
amounting to $123 million consisting of 39% debt and 61% equity. At the
Company's current quarterly dividend rate of $.06 per share, annual dividend
payments would approximate $2,350,000. Under the Company's debt agreements
with insurance companies, retained earnings of approximately $17 million are
available for dividends, subject to future earnings levels.
PART II - OTHER INFORMATION
Items 1, 2, 3, and 5 of Part II are omitted because they are not
applicable or because they are not required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A report on the annual meeting of shareholders of the Company held
on January 11, 1994 was published on January 20, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Form 8-K dated January 11, 1994 reported change in Company's
certifying accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORE INDUSTRIES INC
(Registrant)
Date: March 25, 1994 /s/ Raymond H. Steben,Jr.
Raymond H. Steben, Jr.
Vice President-Finance
and Chief Financial
Officer
Date: March 25, 1994 /s/ Thomas G. Hooper
Thomas G. Hooper
Treasurer and Controller
