SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 December 1, 1995
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 Identification No.)
incorporation or organization)
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 December 31, 1995 - 10,684,464 shares.
<PAGE>
<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<CAPTION>
First Quarter Ended
Nov. 30, 1994 Dec. 1, 1995
<S> <C> <C>
Net sales $43,187,000 $46,437,000
Cost of sales, exclusive of depreciation and amortization $27,724,000 $29,999,000
Depreciation and amortization 992,000 1,210,000
Selling, general and administrative expenses 10,369,000 10,760,000
Interest expense 896,000 805,000
Other income (294,000) (127,000)
----------- -----------
$39,687,000 $42,647,000
Earnings from continuing operations before taxes on income $3,500,000 $3,790,000
Taxes on income 1,250,000 1,380,000
----------- -----------
Earnings from continuing operations $2,250,000 $2,410,000
Income (loss) from discontinued operations (net of income tax) (229,000) --
----------- -----------
Net earnings $2,021,000 $2,410,000
=========== ===========
Net earnings (loss) per share:
Continuing operations $.23 $.25
Discontinued operations (.02) --
----------- -----------
Net earnings $.21 $.25
=========== ===========
Dividends per share $.06 $.06
=========== ===========
Average shares of stock outstanding 9,809,000 9,827,000
=========== ===========
<FN>
See notes to financial statements
</FN>
</TABLE>
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<PAGE>
<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<CAPTION>
Dec. 1, 1995
Aug. 31, 1995 (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,135,000 $537,000
Accounts receivable, less collection allowances of
$1,020,000 at August 31 and $1,062,000 at December 1 44,214,000 43,941,000
Inventories 41,276,000 41,913,000
Prepaid expenses 157,000 504,000
Deferred taxes on income 5,447,000 5,487,000
Net assets held for disposition 16,089,000 16,780,000
------------ ------------
TOTAL CURRENT ASSETS $108,318,000 $109,162,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements $896,000 $896,000
Buildings 17,746,000 17,778,000
Machinery and equipment 36,532,000 37,035,000
------------ ------------
Total $55,174,000 $55,709,000
Less accumulated depreciation 32,332,000 33,371,000
------------ ------------
TOTAL PROPERTY, PLANT AND EQUIPMENT $22,842,000 $22,338,000
------------ ------------
OTHER ASSETS:
Excess of cost over net assets of companies acquired $6,774,000 $6,701,000
Investment in real estate partnership 1,323,000 1,319,000
Note receivable 1,500,000 1,500,000
Prepaid pensions and other 5,490,000 5,764,000
------------ ------------
TOTAL OTHER ASSETS $15,087,000 $15,284,000
------------ ------------
$146,247,000 $146,784,000
<FN>
See notes to financial statements
</FN>
</TABLE>
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<PAGE>
<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (continued)
LIABILITIES & STOCKHOLDERS' EQUITY
<CAPTION>
Dec. 1, 1995
Aug. 31, 1995 (Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $787,000 $1,487,000
Accounts payable 7,581,000 8,468,000
Accrued payroll and other expenses 12,385,000 9,556,000
Dividends payable 589,000 590,000
Taxes on income 2,041,000 1,966,000
Long-term debt due within one year 4,610,000 4,610,000
------------ ------------
TOTAL CURRENT LIABILITIES $27,993,000 $26,677,000
------------ ------------
LONG-TERM DEBT, less amount due within one year 32,609,000 32,499,000
DEFERRED TAXES ON INCOME 1,690,000 1,810,000
ACCRUED EMPLOYEE BENEFITS 2,942,000 2,962,000
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1:
Authorized - 100,000 shares
Issued - none
Common stock, par value $1:
Authorized - 20,000,000 shares
Issued - 11,237,341 shares $11,237,000 $11,237,000
Additional paid-in capital 999,000 1,001,000
Retained earnings 74,499,000 76,320,000
Cumulative translation adjustments 976,000 976,000
Treasury stock (1,410,160 shares) - at cost (6,698,000) (6,698,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY $81,013,000 $82,836,000
------------ ------------
$146,247,000 $146,784,000
<FN>
See notes to financial statements
</FN>
</TABLE>
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<PAGE>
<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
First Quarter Ended
Nov. 30, 1994 Dec. 1, 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $2,021,000 $2,410,000
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation $919,000 $1,093,000
Amortization 73,000 117,000
Discontinued operations 229,000 --
(Increase) decrease in assets:
Accounts receivable 371,000 273,000
Inventories (1,622,000) (637,000)
Prepaid expenses 262,000 (347,000)
Taxes on income 37,000 (75,000)
Deferred taxes on income 90,000 80,000
Increase (decrease) in liabilities:
Accounts payable 138,000 887,000
Accrued payroll and other expenses (1,933,000) (2,829,000)
------------- ------------
TOTAL ADJUSTMENTS ($1,436,000) ($1,438,000)
------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $585,000 $972,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($1,291,000) ($583,000)
Discontinued operations (429,000) (690,000)
Other 70,000 (297,000)
------------- ------------
NET CASH USED IN INVESTING ACTIVITIES ($1,650,000) ($1,570,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on short-term bank loans -- $700,000
Reductions in long-term debt ($76,000) (110,000)
Cash dividends paid (589,000) (590,000)
------------- -----------
NET CASH USED IN FINANCING ACTIVITIES ($665,000) $0
------------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,730,000) (598,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 14,643,000 1,135,000
------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $12,913,000 $537,000
============= ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $1,394,000 $1,325,000
============= ============
Income taxes paid $1,162,000 $1,374,000
============= ============
<FN>
See notes to financial statements
</FN>
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</TABLE>
<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. Effective in Fiscal 1996, the Company changed its accounting periods to
a fixed 13 weeks per quarter.
NOTE B
Reference is made to the Company's Annual Report on Form 10-K for the year
ended August 31, 1995, for a description of accounting policies and other
detailed footnote information.
NOTE C - Inventories
<TABLE>
<CAPTION>
August 31, December 1,
1995 1995
----------- -----------
<S> <C> <C>
Raw materials and supplies $17,734,000 $17,149,000
Work in process 8,225,000 8,280,000
Finished goods 15,317,000 16,484,000
----------- -----------
$41,276,000 $41,913,000
</TABLE>
NOTE D - Subsequent Event
On December 15, 1995, the Company acquired the common stock of CMB
Industries, a privately held producer of specialty valves, with annual revenues
of approximately $30 million. The transaction will be accounted for as a
purchase. The capital investment included a combination of debt assumptions and
notes payable issued totaling approximately $13.5 million and 857,283 shares of
the Company's common stock, which stock was valued at $13.50 per share.
NOTE E - Product Segment Information
The Company classifies its products and services into three general
segments. Financial information by segment is summarized below.
<TABLE>
<CAPTION>
Earnings (Loss)
Before
Net Sales Income Taxes
<S> <C> <C>
First quarter ended December 1, 1995:
Fluid Controls and Construction Products $20,826,000 $ 3,006,000
Test, Measurement and Control 16,224,000 1,618,000
Farm Equipment 9,387,000 935,000
Corporate unallocated - (964,000)
Interest expense - (805,000)
------------ -----------
Total $ 46,437,000 $ 3,790,000
============ ===========
First quarter ended November 30, 1994:
Fluid Controls and Construction Products $19,213,000 $ 2,709,000
Test, Measurement and Control 13,618,000 1,157,000
Farm Equipment 10,356,000 1,510,000
Corporate unallocated - (981,000)
Interest expense - (895,000)
------------ -----------
Total $ 43,187,000 $ 3,500,000
============ ===========
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net earnings for the first quarter of fiscal 1996 increased 19% to
$2,410,000 or $.25 per share on sales of $46,437,000 compared with last year's
first quarter net earnings of $2,021,000, net earnings per share of $.21 and
sales of $43,187,000. Last year's first quarter included a loss from
discontinued operations of $229,000 ($.02 per share).
For the first quarter of fiscal 1996, the Company's Fluid Controls and
Construction Products Group provided 45% of total sales; the Test, Measurement
and Control Group, 35% of total sales; and the Farm Equipment Group, 20% of
sales. The sales and earnings of the Fluid Controls and Construction Products
Group increased 8% and 11%, respectively, compared with the prior year's first
quarter primarily due to the improved performance of its valve and strainer
products. The Test, Measurement and Control Group had a strong first quarter
with sales and earnings up 19% and 40%, respectively, over last year, benefiting
from internal growth programs and the contribution of Promax, acquired in
January, 1995. The Farm Equipment Group, feeling the effects of a softening of
the farm economy brought about by difficult weather conditions earlier this
year, had sales and earnings behind last year by 9% and 38%, respectively.
Overall gross margins on net sales for the first quarter of fiscal 1996
decreased to 35.4% from 35.8% last year as a result of product mix changes.
Selling, general and administrative expenses decreased to 23.2% of sales in this
year's first quarter from 24% last year, primarily due to lower sales expenses.
Interest expense declined 10.2% in this year's first quarter compared with
last year due to reduced borrowings.
LIQUIDITY AND CAPITAL RESOURCES
At December 1, 1995, the Company had working capital of $82.5 million and a
current ratio of 4.1 to 1, and the Company's capital employed (total debt and
equity) amounted to $120 million. Capital consisted of 31% debt and 69% equity,
an improvement from 36% debt of total capital employed a year ago.
Management believes its current cash position, cash flows from operations,
along with its borrowing capacity, are adequate to fund its strategies for
future growth, including working capital, expenditures for manufacturing
expansion and efficiencies, and acquisition activities. At the Company's current
dividend rate of $.06 per share, annual dividend payments would approximate $2.6
million. Under the Company's debt agreement with insurance companies, retained
earnings of approximately $22 million are available for dividends, subject to
future earnings levels.
The Company is in negotiations to dispose of its previously announced
discontinued Cherokee operation. It is anticipated that this transaction will be
closed before the end of the Company's fiscal year and will generate significant
cash for the Company.
Effective on December 2, 1995, the beginning of the Company's second
quarter, the Company acquired CMB Industries in a merger transaction. The
capital investment included a combination of debt assumptions and notes payable
issued totaling approximately $13.5 million and 857,283 shares of the Company's
common stock, which stock was valued at $13.50 per share. The necessary cash to
facilitate the transaction was borrowed under the Company's $20 million
unsecured bank line of credit.
-7-
<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
27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the quarter ended
December 1, 1995.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: January 5, 1996 /s/ RAYMOND H. STEBEN, JR.
--------------- --------------------------------------------------
Raymond H. Steben, Jr.
Vice President-Finance and Chief Financial Officer
Date: January 5, 1996 /s/ THOMAS G. HOOPER
--------------- --------------------------------------------------
Thomas G. Hooper
Treasurer and Controller
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
*27 Financial Data Schedule
</TABLE>
*Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> DEC-01-1995
<CASH> 537,000
<SECURITIES> 0
<RECEIVABLES> 45,003,000
<ALLOWANCES> (1,062,000)
<INVENTORY> 41,913,000
<CURRENT-ASSETS> 109,162,000
<PP&E> 55,709,000
<DEPRECIATION> 33,371,000
<TOTAL-ASSETS> 146,784,000
<CURRENT-LIABILITIES> 26,677,000
<BONDS> 32,499,000
<COMMON> 11,237,000
0
0
<OTHER-SE> 71,599,000
<TOTAL-LIABILITY-AND-EQUITY> 146,784,000
<SALES> 46,437,000
<TOTAL-REVENUES> 46,437,000
<CGS> 29,999,000
<TOTAL-COSTS> 41,969,000
<OTHER-EXPENSES> (127,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 805,000
<INCOME-PRETAX> 3,790,000
<INCOME-TAX> 1,380,000
<INCOME-CONTINUING> 2,410,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,410,000
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
