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 November 29, 1996
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 1-5034
CORE INDUSTRIES INC
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(Exact name of registrant as specified in its charter)
Nevada 38-1052434
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P. O. Box 2000, Bloomfield Hills, Michigan 48304
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 642-3400
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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, 1996 - 10,722,931 shares.
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<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(Dollars in 000s, except per share data)
<CAPTION>
First Quarter Ended
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Nov. 29, 1996 Dec. 1, 1995
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<S> <C> <C>
Net sales $ 58,024 $ 46,437
Cost of sales $ 37,852 $ 30,914
Selling, general and administrative expenses 14,349 11,042
Interest expense 754 805
Other income (139) (114)
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$ 52,816 $ 42,647
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Earnings before taxes on income $ 5,208 $ 3,790
Taxes on income 1,910 1,380
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Net earnings $ 3,298 $ 2,410
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Net earnings per share $ .31 $ .25
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Dividends per share $ .06 $ .06
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Weighted average shares of stock outstanding 10,717,000 9,827,000
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<FN>
See notes to financial statements
</FN>
</TABLE>
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<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in 000s)
ASSETS
<CAPTION>
Nov. 29, 1996
(Unaudited) Aug. 31, 1996
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 674 $ 572
Accounts receivable, less collection allowances of
$1,380 at November 29 and $1,260 at August 31 50,344 56,923
Inventories 54,268 51,935
Prepaid expenses 1,028 1,199
Deferred taxes on income 2,137 2,167
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TOTAL CURRENT ASSETS $ 108,451 $ 112,796
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PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements $ 896 $ 896
Buildings 17,824 17,552
Machinery and equipment 45,150 43,173
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Total $ 63,870 $ 61,621
Less accumulated depreciation 37,177 35,715
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TOTAL PROPERTY, PLANT AND EQUIPMENT $ 26,693 $ 25,906
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OTHER ASSETS:
Excess of cost over net assets of companies acquired $ 22,075 $ 22,251
Investment in real estate partnership 1,238 1,273
Notes receivable 4,212 4,311
Prepaid pensions and other 6,543 6,412
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TOTAL OTHER ASSETS $ 34,068 $ 34,247
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$ 169,212 $ 172,949
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LIABILITIES & STOCKHOLDERS' EQUITY
Nov. 29, 1996
(Unaudited) Aug. 31, 1996
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CURRENT LIABILITIES:
Notes payable $ 2,100 $ 5,100
Accounts payable 11,857 13,016
Accrued payroll and other expenses 12,308 15,721
Dividends payable 644 643
Taxes on income 1,941 1,090
Long-term debt due within one year 4,610 4,610
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TOTAL CURRENT LIABILITIES $ 33,460 $ 40,180
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LONG-TERM DEBT, less amount due within one year 24,410 24,520
DEFERRED TAXES ON INCOME 2,350 2,250
ACCRUED EMPLOYEE BENEFITS 3,445 3,355
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1:
Authorized - 100,000,000 shares
Issued - none
Common stock, par value $1:
Authorized - 20,000,000 shares
Issued - 11,276,000 shares at November 29
and 11,261,000 at August 31 $ 11,276 $ 11,261
Additional paid-in capital 8,701 8,570
Retained earnings 87,576 84,922
Cumulative translation adjustments 620 517
Treasury stock (553,000 shares) - at cost (2,626) (2,626)
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TOTAL STOCKHOLDERS' EQUITY $ 105,547 $ 102,644
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$ 169,212 $ 172,949
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<FN>
See notes to financial statements
</FN>
</TABLE>
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<TABLE>
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(in 000s)
<CAPTION>
Additional Cumulative
Common Paid-In Retained Translation Treasury
Stock Capital Earnings Adjustments Stock
-------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance, August 31, 1996 $ 11,261 $ 8,570 $ 84,922 $ 517 ($ 2,626)
Net earnings 3,298
Cash dividends declared,
$.06 per share (644)
Stock issued - compensation
plans 15 131
Foreign currency adjustments 103
-------- -------- -------- ----------- --------
Balance, November 29, 1996 $ 11,276 $ 8,701 $ 87,576 $ 620 ($ 2,626)
======== ======== ======== =========== ========
<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)
(in 000s)
<CAPTION>
First Quarter Ended
-----------------------------
Nov. 29, 1996 Dec. 1, 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,298 $ 2,410
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,717 1,210
Deferred taxes on income 130 80
Net changes in:
Accounts receivable 6,579 273
Inventories (2,333) (637)
Prepaid expenses 171 (347)
Taxes on income 851 (75)
Accounts payable (1,159) 887
Accrued payroll and other expenses (3,412) (2,829)
Other non-current assets and liabilities 80 (290)
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,922 $ 682
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($ 2,287) ($ 583)
Discontinued operations -- (690)
Other 221 (7)
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NET CASH USED IN INVESTING ACTIVITIES ($ 2,066) ($ 1,280)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings on short-term notes ($ 3,000) $ 700
Reductions in long-term debt (110) (110)
Cash dividends paid (644) (590)
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NET CASH USED IN FINANCING ACTIVITIES ($ 3,754) $ 0
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 102 (598)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 572 1,135
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 674 $ 537
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SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 1,041 $ 1,325
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Income taxes paid $ 768 $ 1,374
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<FN>
See notes to financial statements
</FN>
</TABLE>
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<PAGE>
CORE INDUSTRIES INC AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in 000s unless otherwise stated)
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, 1996, for a description of accounting policies and other
detailed footnote information.
NOTE C - Inventories
<TABLE>
<CAPTION>
12/29/96 08/31/96
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<S> <C> <C>
Raw materials and supplies $ 26,318 $ 24,399
Work in process 8,172 7,864
Finished goods 19,778 19,672
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$ 54,268 $ 51,935
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</TABLE>
NOTE D - Segment Information
<TABLE>
<CAPTION>
First Quarter Ended
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11/29/96 12/01/95
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<S> <C> <C>
Net Sales
Fluid Controls and Construction Products $ 27,306 $ 20,826
Test, Measurement and Control 16,427 16,224
Farm Equipment 14,291 9,387
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Total $ 58,024 $ 46,437
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Earnings Before Income Taxes
Fluid Controls and Construction Products $ 3,412 $ 3,006
Test, Measurement and Control 1,621 1,618
Farm Equipment 2,066 935
Corporate unallocated (1,137) (964)
Interest expense (754) (805)
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Total $ 5,208 $ 3,790
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</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 1997 increased 37% to
$3,298,000 or $.31 per share on sales of $58,024,000 compared with last year's
first quarter net earnings of $2,410,000, net earnings per share of $.25 and
sales of $46,437,000. There were 9% more shares outstanding during this year's
first quarter compared to last year.
For the first quarter of fiscal 1997, the Company's Fluid Controls and
Construction Products Segment provided 47% of total sales; the Test, Measurement
and Control Segment, 28% of total sales; and the Farm Equipment Segment, 25% of
sales. Net sales and earnings before income taxes of the Fluid Controls and
Construction Products Segment increased 31% and 13%, respectively, compared with
the prior year's first quarter. This segment benefitted from the acquisitions of
CMB Industries and Davis Filters in the second quarter of fiscal 1996. The Farm
Equipment Segment had a strong performance with sales and earnings before income
taxes ahead of last year by 52% and 121%, respectively, helped by both the
strong grain market and favorable acceptance of new products.
Overall gross margins on net sales for the first quarter of fiscal 1997
improved to 34.8% from 33.4% last year as a result of favorable product mix
changes. Selling, general and administrative expenses increased to 24.7% of
sales in this year's first quarter from 23.8% last year, primarily due to higher
sales expenses at CMB Industries. CMB (acquired in the second quarter of fiscal
1996), traditionally has had higher selling expenses than Core due to its higher
distribution costs.
Interest expense declined 6.3% in this year's first quarter compared with
last year due to reduced borrowings.
LIQUIDITY AND CAPITAL RESOURCES
At November 29, 1996, the Company had working capital of $75 million and a
current ratio of 3.2 to 1, and the Company's capital employed (total debt and
equity) amounted to $137 million. The debt to capital ratio improved to 23% from
31% a year ago primarily due to the Company exercising its maximum allowable
prepayment options and reducing its 10% rate long-term debt by $8 million over
the past year.
The Company is negotiating to replace its $20 million line of credit
facility with a $50 million unsecured revolving credit facility with a major
domestic bank. Although there was only $1.7 million in short-term bank
borrowings at November 29, 1996, the increased capacity will provide the Company
committed funds to support its growth initiatives.
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, new product development, and acquisition activities.
During the first quarter of fiscal 1997, cash flow from operations improved over
$5 million compared to last year's first quarter, primarily due to working
capital reductions. 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 $29
million are available for dividends, subject to future earnings levels.
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<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 quarter ended
November 29, 1996.
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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
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(Registrant)
Date: January 9, 1997 /s/ MARK J. MACGUIDWIN
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Mark J. MacGuidwin
Vice President-Finance and Chief Financial Officer
Date: January 9, 1997 /s/ THOMAS G. HOOPER
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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-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-29-1996
<CASH> 674,000
<SECURITIES> 0
<RECEIVABLES> 51,724,000
<ALLOWANCES> (1,380,000)
<INVENTORY> 54,268,000
<CURRENT-ASSETS> 108,451,000
<PP&E> 63,870,000
<DEPRECIATION> 37,177,000
<TOTAL-ASSETS> 169,212,000
<CURRENT-LIABILITIES> 33,460,000
<BONDS> 24,410,000
0
0
<COMMON> 11,276,000
<OTHER-SE> 94,271,000
<TOTAL-LIABILITY-AND-EQUITY> 169,212,000
<SALES> 58,024,000
<TOTAL-REVENUES> 58,024,000
<CGS> 37,852,000
<TOTAL-COSTS> 52,201,000
<OTHER-EXPENSES> (139,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 754,000
<INCOME-PRETAX> 5,208,000
<INCOME-TAX> 1,910,000
<INCOME-CONTINUING> 3,298,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,298,000
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
