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 May 31, 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 May 31, 1994 - 9,802,398 shares.<PAGE>
<PAGE>
<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
For the Third Quarter Ended
May 31, 1994 May 31, 1993
<S> <C> <C>
Net sales $60,578,000 $56,484,000
Cost of sales, exclusive
of depreciation
and amortization $43,187,000 $40,262,000
Depreciation and amortization 1,266,000 1,278,000
Selling, general and
administrative expenses 11,348,000 10,613,000
Interest expense 1,156,000 1,176,000
Other income (215,000) (380,000)
$56,742,000 $52,949,000
Earnings before taxes
on income $3,836,000 $3,535,000
Taxes on income 1,390,000 1,290,000
Net earnings $2,446,000 $2,245,000
Net earnings per share $.25 $.23
Dividends per share $.06 $.06
Average shares of
stock outstanding 9,801,000 9,777,000
<FN>
See notes to financial statements
</TABLE>
<PAGE> -2-<PAGE>
<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
For the Nine Months Ended
May 31, 1994 May 31, 1993
<S> <C> <C>
Net sales $164,180,000 $149,443,000
Cost of sales, exclusive
of depreciation
and amortization $116,040,000 $104,070,000
Depreciation and amortization 3,810,000 3,863,000
Selling, general and
administrative expenses 31,203,000 29,791,000
Interest expense 3,422,000 3,877,000
Other income (2,102,000) (1,040,000)
$152,373,000 $140,561,000
Earnings before taxes
on income $11,807,000 $8,882,000
Taxes on income 4,310,000 3,250,000
Net earnings $7,497,000 $5,632,000
Net earnings per share $.77 $.58
Dividends per share $.18 $.18
Average shares of
stock outstanding 9,799,000 9,776,000
<FN>
See notes to financial statements
</TABLE>
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<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<CAPTION> May 31, 1994
(Unaudited) Aug. 31, 1993
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $10,252,000 $651,000
Accounts receivable, less
collection allowances of
$950,000 in May
and $970,000 in August 50,854,000 50,558,000
Inventories 50,998,000 54,092,000
Prepaid expenses 1,320,000 1,337,000
Deferred taxes on income 2,597,000 2,776,000
TOTAL CURRENT ASSETS $110,623,000 $109,414,000
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements $1,278,000 $1,374,000
Buildings 17,607,000 18,672,000
Machinery and equipment 51,294,000 50,145,000
Total $70,179,000 $70,191,000
Less accumulated depreciation 42,417,000 41,304,000
TOTAL PROPERTY, PLANT
AND EQUIPMENT $27,762,000 $28,887,000
OTHER ASSETS:
Excess of cost over net
assets of companies acquired $7,203,000 $7,269,000
Investment in real estate
partnership 1,531,000 1,432,000
Prepaid pensions and other 5,357,000 4,275,000
TOTAL OTHER ASSETS $14,091,000 $12,976,000
$157,874,000 $151,277,000
<FN>
See notes to financial statements
</TABLE>
<PAGE> -4-<PAGE>
<TABLE>
LIABILITIES & STOCKHOLDERS' EQUITY
<CAPTION>
May 31, 1994
(Unaudited) Aug. 31, 1993
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to bank -- $900,000
Accounts payable $12,879,000 12,521,000
Accrued payroll and other
expenses 12,209,000 12,899,000
Dividends payable 588,000 587,000
Taxes on income 1,342,000 --
Long-term debt due within
one year 1,610,000 1,500,000
TOTAL CURRENT LIABILITIES $28,628,000 $28,407,000
LONG-TERM DEBT,
less amount due within
one year 47,568,000 47,134,000
DEFERRED TAXES ON INCOME 1,990,000 1,580,000
ACCRUED EMPLOYEE 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 - 20,000,000 shares
Issued - 11,212,558 shares $11,213,000 $11,208,000
Additional paid-in capital 747,000 728,000
Retained earnings 71,105,000 63,372,000
Cumulative translation
adjustments 398,000 356,000
Treasury stock (1,410,160
shares) - at cost (6,698,000) (6,698,000)
TOTAL STOCKHOLDERS' EQUITY $76,765,000 $70,966,000
$157,874,000 $151,277,000
<FN>
See notes to financial statements
</TABLE>
<PAGE> -5-<PAGE>
<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended May 31
<S> <C> 1994 <C> 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $7,497,000 $5,632,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation $3,593,000 $3,689,000
Amortization 217,000 174,000
Gain on sale of division (915,000) --
(Increase) decrease in assets:
Accounts receivable (639,000) (3,435,000)
Inventories 957,000 (4,962,000)
Prepaid expenses (28,000) (221,000)
Taxes on income 899,000 3,176,000
Deferred taxes on income 450,000 3,606,000
Increase (decrease) in
liabilities:
Accounts payable (86,000) 4,203,000
Accrued payroll and
other expenses (182,000) (99,000)
TOTAL ADJUSTMENTS $4,266,000 $6,131,000
NET CASH PROVIDED BY
OPERATING ACTIVITIES $11,763,000 $11,763,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($3,145,000) ($3,334,000)
Proceeds from sale of division 5,898,000 --
Acquisition of businesses (2,232,000) --
Proceeds from disc. operations -- 7,651,000
Other (20,000) 184,000
NET CASH FROM INVESTING
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on short-term
bank loans ($900,000) ($15,900,000)
Cash dividends paid (1,763,000) (1,760,000)
NET CASH USED IN FINANCING
ACTIVITIES ($2,663,000) ($17,660,000)
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS 9,601,000 (1,396,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 651,000 1,917,000
CASH AND CASH EQUIVALENTS,
END OF PERIOD $10,252,000 $521,000
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $3,820,000 $4,201,000
Income taxes paid (refunded) $2,236,000 ($4,073,000)
<FN>See notes to financial statements
</TABLE>
<PAGE> -6-<PAGE>
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.
<TABLE>
NOTE C - Inventories
<CAPTION> May 31, August 31,
1994 1993
<S> <C> <C>
Raw materials and supplies $25,883,000 $26,762,000
Work in process 12,313,000 13,417,000
Finished goods 12,802,000 13,913,000
$50,998,000 $54,092,000
</TABLE>
NOTE D - Acquisition
In May 1994 the Company's Mueller Steam Specialty unit acquired all of the
capital stock of Hendrix Steel & Fabricating of Houston, Texas. Hendrix is
primarily engaged in fabricating strainers and other specialty flow control
products. The acquisition was accounted for as a purchase.
NOTE E - 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, after tax). 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.
<PAGE> -7-<PAGE>
NOTE F - Product Segment Information
The Company classifies its products and services into three general
segments. Financial information by segment is summarized below.
<TABLE>
<CAPTION> 1994
Earnings
Before
Net Sales Income Taxes
<S> <C> <C>
Third quarter ended May 31:
Electronics $ 26,094,000 $ 1,690,000
Farm equipment 11,956,000 2,032,000
Fluid controls and
construction products 22,528,000 2,116,000
Corporate unallocated - (846,000)
Interest expense - (1,156,000)
Total $ 60,578,000 $ 3,836,000
Nine months ended May 31:
Electronics $ 75,404,000 $ 5,365,000
Farm equipment 29,126,000 5,977,000 (A)
Fluid controls and
construction products 59,650,000 6,402,000
Corporate unallocated - (2,515,000)
Interest expense - (3,422,000)
Total $164,180,000 $11,807,000
1993
Earnings
Before
Net Sales Income Taxes
Third quarter ended May 31:
Electronics $ 24,192,000 $ 1,158,000
Farm equipment 11,972,000 1,767,000
Fluid controls and
construction products 20,320,000 2,562,000
Corporate unallocated - (776,000)
Interest expense - (1,176,000)
Total $ 56,484,000 $ 3,535,000
Nine months ended May 31:
Electronics $ 64,706,000 $ 4,058,000
Farm equipment 30,515,000 4,201,000
Fluid controls and
construction products 54,222,000 6,894,000
Corporate unallocated - (2,394,000)
Interest expense - (3,877,000)
Total $149,443,000 $ 8,882,000
<F1>
Note A: Includes pretax gain of $1,475,000 (total of $.09 per
share) related to the sale of Core's Du-Al division.
</TABLE>
<PAGE> -8-<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the first nine months of fiscal 1994, the Company's net sales
increased 10% to $164,180,000. Net earnings for the first nine months of
fiscal 1994 were $7,497,000, or $.77 per share. Included in this year's
first nine month 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 $.10 per share or 17%.
For the third quarter of fiscal 1994, net sales increased 7% to
$60,578,000 compared to $56,484,000 for the corresponding quarter in the
prior year. This year's third quarter net earnings were $2,446,000, or
$.25 per share, up 9% from last year's net earnings of $2,245,000, or $.23
per share.
For the first nine months of fiscal 1994, the Company's Electronics Group
provided 46% of total sales; the Farm Equipment Group, 18% 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 nine month and third quarter periods with sales increases of 17% and
8%, and earnings increases of 32% and 46%, respectively. New product
introductions and increased market coverage programs in the Electronics Group's
test, measurement and control businesses more than offset continued competitive
margin pressures in its power supply unit. New products such as the acquired
grain drill line and strong market conditions contributed to the Farm Equipment
Group outpacing last year's third quarter results in spite of the first quarter
divestiture of the Du-Al unit. Although sales were up over last year in the
Fluid Controls and Construction Products Group, earnings lagged last year's
third quarter and nine month periods primarily because of much lower return on
sales at the Robert Carter mechanical contracting division because of increased
competitive pressures.
Overall gross profit margins on net sales for the first nine months of
fiscal 1994 decreased to 29.3% from 30.4% last year, primarily due to margin
pressures on the units in the Fluid Controls and Construction Products Group.
Selling, general and administrative expenses decreased to 19.0% of sales
from 19.9% in the prior year's first nine months as the pace of expense growth
trailed sales. Interest expense declined 12% in this year's first nine months
primarily due to reduced borrowings. Other income for the nine months ended
May 31, 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 nine months of fiscal 1994, the Company increased its
cash and short-term investments $9,601,000. The sources of this increase were
$11,763,000 from operating activities, $5,898,000 from the sale of the
Company's
<PAGE> -9-<PAGE>
Du-Al division, offset by capital expenditures, acquisitions, reduction of bank
debt and dividends.
At May 31, 1994, the Company had working capital of $87,393,000 with a
current ratio of 4.1 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 May 31,
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 $76,765,000 or $7.83 per share at May 31,
1994, with total capital employed (total debt and equity) amounting to $126
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 $19 million are available for
dividends, subject to future earnings levels.
<PAGE> -10-<PAGE>
PART II - OTHER INFORMATION
Items 1 through 5 of Part II are omitted because they are not applicable or
because they are not required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) There were no reports on Form 8-K filed for the three months
ended May 31, 1994.
<PAGE> -11-<PAGE>
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: June 28, 1994 /s/ Raymond H. Steben, Jr.
Raymond H. Steben, Jr.
Vice President-Finance
and Chief Financial
Officer
Date: June 28, 1994 /s/ Thomas G. Hooper
Thomas G. Hooper
Treasurer and Controller
-12-<PAGE>
