<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: August 1, 1999
Commission file number: 0-25066
OWOSSO CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2756709
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
The Triad Building, 2200 Renaissance Boulevard
Suite 150, King of Prussia, PA 19406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 275-4500
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 September 10, 1999, 5,830,187 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
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OWOSSO CORPORATION
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations 3
for the three and nine months ended August 1, 1999 and
July 26, 1998 (unaudited)
Condensed Consolidated Balance Sheets at 4
August 1, 1999 (unaudited) and October 25, 1998
Condensed Consolidated Statements of Cash Flows 5
for the nine months ended August 1, 1999 and July 26,
1998 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
(unaudited)
Item 2. Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risks 19
PART II - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 20
2
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OWOSSO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- ----------------------------------
August 1, July 26, August 1, July 26,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $43,910,000 $42,998,000 $128,487,000 $118,920,000
Cost of products sold 35,114,000 34,503,000 103,167,000 92,705,000
----------- ----------- ------------ ------------
Gross profit 8,796,000 8,495,000 25,320,000 26,215,000
Expenses:
Selling, general and administrative 4,104,000 5,282,000 13,520,000 15,787,000
Corporate 1,542,000 1,396,000 4,924,000 4,420,000
Restructuring charge -- 909,000 -- 909,000
----------- ----------- ------------ ------------
Income from operations 3,150,000 908,000 6,876,000 5,099,000
Interest expense 1,272,000 1,272,000 3,787,000 3,668,000
Gain on sale of business -- -- -- 2,775,000
Other income 269,000 2,000 402,000 73,000
----------- ----------- ------------ ------------
Income (loss) before income taxes 2,147,000 (362,000) 3,491,000 4,279,000
Income tax expense (benefit) 1,093,000 (24,000) 1,270,000 2,674,000
----------- ----------- ------------ ------------
Net income (loss) 1,054,000 (338,000) 2,221,000 1,605,000
Dividends and accretion on preferred stock (275,000) (268,000) (819,000) (800,000)
----------- ----------- ------------ ------------
Net income (loss) available
for common stockholders $ 779,000 $ (606,000) $ 1,402,000 $ 805,000
=========== =========== ============ ============
Earnings (loss) per common share:
Basic $ 0.13 $ (0.10) $ 0.24 $ 0.14
=========== =========== ============ ============
Diluted $ 0.13 $ (0.10) $ 0.24 $ 0.14
=========== =========== ============ ============
Weighted average number of
common shares outstanding
Basic 5,830,000 5,815,000 5,824,000 5,812,000
=========== =========== ============ ============
Diluted 5,868,000 5,815,000 5,853,000 5,832,000
=========== =========== ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
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OWOSSO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 1, October 25,
1999 1998
(Unaudited) (See Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 507,000 $ 191,000
Receivables, net 19,022,000 17,919,000
Inventories, net 20,269,000 21,262,000
Prepaid expenses and other 1,536,000 1,283,000
Deferred taxes 1,086,000 733,000
------------ ------------
Total current assets 42,420,000 41,388,000
PROPERTY, PLANT AND EQUIPMENT, NET 36,553,000 35,915,000
GOODWILL, NET 27,257,000 28,155,000
OTHER INTANGIBLE ASSETS, NET 8,089,000 8,690,000
NET ASSETS HELD FOR SALE -- 7,619,000
RESTRICTED CASH 429,000 1,906,000
OTHER ASSETS 4,500,000 1,533,000
------------ ------------
TOTAL ASSETS $119,248,000 $125,206,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 10,723,000 $ 9,762,000
Accrued expenses 5,802,000 7,197,000
Current portion of related party debt 1,815,000 2,843,000
Current portion of long-term debt 1,610,000 1,935,000
------------ ------------
Total current liabilities 19,950,000 21,737,000
LONG-TERM DEBT, LESS CURRENT PORTION 58,461,000 63,746,000
POSTRETIRMENT BENEFITS 2,859,000 2,713,000
DEFERRED TAXES 3,064,000 2,367,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY 34,914,000 34,643,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $119,248,000 $125,206,000
============ ============
</TABLE>
Note: the balance sheet at October 25, 1998 has been condensed from the audited
financial statements at that date.
See notes to condensed consolidated financial statements.
4
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OWOSSO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------------
August 1, July 26,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,221,000 $ 1,605,000
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation 4,039,000 3,432,000
Amortization 1,710,000 1,773,000
Gain on sale of business -- (2,775,000)
Other 6,000 456,000
Changes in operating assets and liabilities (374,000) (5,573,000)
------------ ------------
Net cash provided by (used in) operating activities 7,602,000 (1,082,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of business 4,442,000 14,075,000
Acquisition of business, net of cash acquired -- (10,667,000)
Purchases of property, plant and equipment (4,846,000) (7,070,000)
Contingent consideration on acquisition (660,000) --
Other 1,839,000 747,000
------------ ------------
Net cash provided by (used in) investing activities 775,000 (2,915,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under revolving credit agreement (4,350,000) 11,850,000
Proceeds from long-term debt -- 300,000
Payments on long-term debt (1,260,000) (5,804,000)
Payments on related party debt (1,028,000) (907,000)
Dividends paid (1,423,000) (2,132,000)
------------ ------------
Net cash (used in) provided by financing activities (8,061,000) 3,307,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 316,000 (690,000)
CASH AND CASH EQUIVALENTS, BEGINNING 191,000 840,000
------------ ------------
CASH AND CASH EQUIVALENTS, ENDING $ 507,000 $ 150,000
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 4,085,000 $ 3,422,000
============ ============
Taxes paid $ 1,468,000 $ 3,211,000
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Dividends payable $ 537,000 $ --
============ ============
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
OWOSSO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company - The consolidated financial statements represent the
consolidated financial position, results of operations and cash flows
of Owosso Corporation and subsidiaries (the "Company"). The Company's
operating subsidiaries include:
o The "Motor Companies":
o Motor Products - Owosso Corporation ("Motor Products")
o Motor Products - Ohio Corporation ("MP-Ohio")
o Stature Electric, Inc. ("Stature")
o Owosso Motor Group, Inc. ("Motor Group")
o M.H. Rhodes, Inc. ("Rhodes") - acquired June 30, 1998
o Snowmax, Inc. ("Snowmax")
o Astro Air Coils, Inc. ("Astro Air") - acquired April 26, 1998
o The Landover Company ("Dura-Bond")
o Sooner Trailer Manufacturing Co. ("Sooner")
o Astro Air U.K., Ltd. ("Astro Air UK") - formed February 12, 1999
The Company is a diversified manufacturer of products in narrowly
defined niche markets and currently operates in two business segments,
Engineered Component Products (the Motor Companies, Snowmax, Dura-Bond,
Astro Air, and Astro Air UK), and Specialized Equipment (Sooner). In
1998 and prior to the end of the third fiscal quarter of 1999, the
Specialized Equipment segment also included Great Bend Manufacturing
Company, Inc. ("Great Bend") which was sold in April 1998, DewEze
Manufacturing, Inc. ("DewEze") which was sold in July 1998, and Parker
Industries ("Parker") which was sold in March 1999. In the Engineered
Component Products segment, the Company's products, primarily motors,
heat transfer "fin and tube" coils and replacement cam shaft bearings,
are sold primarily to original equipment manufacturers or service
providers who use them in their end products or services. The products
sold in the Specialized Equipment segment, primarily all-aluminum horse
trailers, are almost exclusively final products sold through dealers to
their users. Nearly all of the Company's customers are located in North
America.
Financial Statements - The condensed consolidated balance sheet as of
August 1, 1999, the condensed consolidated statements of operations for
the three and nine-month periods ended August 1, 1999 and July 26,
1998, and the condensed consolidated statements of cash flows for the
nine-month periods ended August 1, 1999 and July 26, 1998, have been
prepared by the Company, without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
considered necessary to present fairly the financial position, results
of operations and cash flows as of August 1, 1999 and for all periods
presented have been made. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. These financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's October 25, 1998 Annual Report on Form 10-K.
6
<PAGE>
Fiscal Year - The Company's fiscal year includes 52 or 53 weeks ending
on the last Sunday in October. Fiscal year 1999 will consist of 53
weeks. The first nine months of 1999, ended August 1, 1999, included 40
weeks, whereas the first nine months of 1998 included 39 weeks. Both
the third quarter of 1999 and 1998 included 13 weeks.
Earnings Per Share - Basic earnings per common share is computed by
dividing net earnings (the numerator) by the weighted average number of
common shares outstanding during each period (the denominator). The
computation of diluted earnings per common share is similar to that of
basic earnings per common share, except that the denominator is
increased by the dilutive effect of stock options outstanding, computed
using the treasury stock method.
Comprehensive Income - Effective for the first quarter of 1999, the
Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, Reporting Comprehensive Income. SFAS No. 130 requires the
presentation of comprehensive income and its components in a full set
of general purpose financial statements. For the three months ended
August 1, 1999, total comprehensive income was $725,000 and consisted
of net earnings of $779,000, offset by a $54,000 loss on foreign
currency translation. For the nine months ended August 1, 1999, total
comprehensive income was $1,348,000 and consisted of net earnings of
$1,402,000, offset by a $54,000 loss on foreign currency translation.
The Company's comprehensive income for 1998 consisted solely of net
earnings.
New Accounting Pronouncements - In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. This statement,
which establishes standards for reporting information about operating
segments and requires the reporting of selected information about
operating segments in interim financial statements, is effective for
fiscal years beginning after December 15, 1997, although earlier
application is permitted. Reclassification of segment information for
earlier periods presented for comparative purposes is required under
SFAS No. 131. As this statement only requires additional disclosures in
the Company's consolidated financial statements, its adoption will not
have any impact on the Company's consolidated financial position or
results of operations. The Company expects to adopt SFAS No. 131
effective October 31, 1999.
In March 1998, the FASB issued SFAS No. 132, Employers' Disclosure
About Pensions and Other Postretirement Benefits. This statement, which
revises the required disclosures for employee benefit plans, is
effective for fiscal years beginning after December 15, 1997, although
earlier adoption is permitted. Restatement of disclosures for earlier
periods, presented for comparative purposes, is required under SFAS No.
132. As this statement only revises disclosures in the Company's
consolidated financial statements, its adoption will not have any
impact on the Company's consolidated financial position or results of
operations. The Company expects to adopt SFAS No. 132 effective October
31, 1999.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement, which establishes
accounting and reporting standards for derivative instruments and
hedging activities, is effective for fiscal years beginning after June
15, 1999, although earlier adoption is permitted. The Company has not
yet completed its analysis of the effects of adopting this statement on
its consolidated financial position or results of operations. The FASB
has recently issued a proposed statement, which if adopted, would amend
SFAS No. 133 to defer its effective date to fiscal years beginning
after June 15, 2000.
7
<PAGE>
2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES
Acquisition of Astro Air - In connection with the acquisition of Astro
Air in April 1998, the Company entered into a five-year consulting
agreement with Dacus Properties, Inc. ("DPI"), the former owner of
Astro Air, under which DPI receives 3.4% of net revenues generated by
certain specified customers. For the nine months ended August 1, 1999,
the Company recorded $660,000 of contingent consideration under the
agreement with DPI as goodwill based upon related 1999 revenues.
Disposition of Parker - On March 5, 1999, the Company completed the
sale of the business and substantially all of the assets of Parker to
Top Air Manufacturing, Inc., of Cedar Falls, Iowa. In connection with
the sale, the Company received cash of $3.7 million, a non-interest
bearing note of $3.3 million, and the assumption of liabilities of
$476,000. In addition, the local development authority in Iowa acquired
certain Parker fixed assets for $750,000, and will lease those assets
to Top Air. Based upon the proposed terms of the sale, the Company
recorded, in the fourth quarter of fiscal 1998, a pre-tax charge of
$1,635,000 to adjust the carrying value of Parker's assets to their
estimated fair market value. No additional pre-tax gain or loss was
recorded upon completion of the sale. However, the sale did result in a
tax benefit of approximately $440,000, recorded in the second fiscal
quarter of 1999.
The non-interest bearing note has been discounted to $3.0 million and
is payable in monthly installments as and to the extent the accounts
receivable, acquired by Top Air pursuant to the sale agreement, are
collected. The note is secured by such accounts receivable. The terms
of the note provide further that, irrespective of the amounts collected
on such accounts receivable, Top Air is required to pay no less than
60% of the principal amount of the note by November 15, 1999, 85% of
the principal of the note by November 15, 2000, with the final payment
of all outstanding principal due on February 15, 2001.
The carrying value of the net assets of Parker, which was a component
of the Company's Specialized Equipment segment, are included in the
consolidated balance sheet at October 25, 1998 as "Net assets held for
sale." Sales attributable to Parker were $1,004,000 and $9,264,000 for
the first nine months of 1999 and 1998, respectively. Loss from
operations, before the allocation of corporate expenses, from Parker
was $607,000 for the first nine months of 1999, as compared to income
from operations of $732,000 for the first nine months of 1998.
3. INVENTORIES
<TABLE>
<CAPTION>
August 1, October 25,
1999 1998
<S> <C> <C>
Raw materials and purchased parts $ 10,295,000 $ 10,039,000
Work in process 3,650,000 4,161,000
Finished goods 6,324,000 7,062,000
------------ ------------
Total $ 20,269,000 $ 21,262,000
------------ ------------
</TABLE>
8
<PAGE>
4. ACCRUED RESTRUCTURING CHARGE
In connection with the merger, in June 1998, of the Company's former
subsidiary, Cramer Company ("Cramer"), into Rhodes, and the
consolidation of Cramer's manufacturing into Rhodes' manufacturing
facility, the Company recorded a restructuring charge of $909,000,
essentially all of which had been paid through August 1, 1999.
5. LONG-TERM DEBT
On January 22, 1999, the Company entered into a new $55,000,000
revolving credit facility with the Company's two primary banks,
expiring in December 2002. At August 1, 1999, $43,850,000 was
outstanding and $11,150,000 was available for additional borrowing
under the facility. The facility is secured by the non-real estate
assets of the Company. Interest is payable, at the Company's option, at
either the bank's prime rate or a variable spread (2.5% at August 1,
1999) over the London Interbank Offered Rate. The agreement includes
financial and other covenants, including fixed charge, cash flow and
net worth ratios and restrictions on certain asset sales, mergers and
other significant transactions. The Company was in compliance with such
covenants at August 1, 1999, and expects to be in compliance with such
covenants for the foreseeable future.
6. COMMITMENTS AND CONTINGENCIES
The Company is subject to federal, state and local environmental
regulation with respect to its operations. The Company believes that it
is operating in substantial compliance with applicable environmental
regulations. Manufacturing and other operations at the Company's
various facilities may result, and may have resulted, in the discharge
and release of hazardous substances and waste from time to time. The
Company routinely responds to such incidents as deemed appropriate
pursuant to applicable federal, state and local environmental
regulations.
The Company is a party to a consent decree with the State of
Connecticut pursuant to which it has agreed to complete its
environmental investigation of the site on which its Cramer facility
was previously located and conduct any remedial measures which may be
required. The Company is also in negotiations with the former operator
of the site concerning the reimbursement by the former operator of any
costs the Company has incurred or may incur in the future in connection
with this matter. Based upon the amounts recorded as liabilities, the
Company does not believe that the ultimate resolution of this matter
will have a material adverse effect on the consolidated financial
results of the Company.
The Company has been named as a potentially responsible party with
respect to two hazardous substance disposal sites currently under
remediation by the U.S. Environmental Protection Agency (the "EPA")
under its "Superfund" program. With respect to both sites, based on the
minimal amount of waste alleged to have been contributed to the site by
the Company, the Company expects to resolve the matters through the
payment of de minimis amounts.
Rhodes has been named as a potentially responsible party with respect
to a hazardous disposal site currently under remediation by the EPA
under its "Superfund" program. Based on the minimal amount of waste
alleged to have been contributed to the site by Rhodes, the Company
expects to resolve the matter through the payment of a de minimis
9
<PAGE>
amount. Rhodes is also involved in environmental remediation at its
manufacturing site, which is not subject to any "Superfund" law
proceeding. Based upon the amounts recorded as liabilities, the Company
does not believe that the resolution of this matter will have a
material adverse effect on the consolidated financial results of the
Company.
Sooner has arrangements with a number of financial institutions to
provide floor plan financing for its dealers, which requires it to
repurchase repossessed products from the financial institutions in the
event of a default by the financed dealer. Its obligation is typically
to repurchase the equipment at 90% of the purchase price for the first
180 days, 80% for the next 90 days and 70% for the next 90 days, after
which the obligation expires. In the event of a default by all of the
financed dealers, the Company would be required to repurchase
approximately $10,059,000 of product as of August 1, 1999. The Company
does not believe that its obligation under these repurchase agreements
will have a material adverse effect on the financial results of the
Company. Sooner has not taken possession of any significant amount of
equipment pursuant to the repurchase obligations in these contracts.
In addition to the matters reported herein, the Company is involved in
litigation dealing with numerous aspects of its business operations.
The Company believes that settlement of such litigation will not have a
material adverse effect on its consolidated financial position or
results of operations.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion addresses the financial condition of the Company as of
August 1, 1999 and the results of operations for the three and nine months ended
August 1, 1999 and July 26, 1998. The first nine months of the 1999 period
included 40 weeks, whereas the first nine months of the 1998 period included 39
weeks. Both of the three-month periods included 13 weeks. This discussion should
be read in conjunction with the financial statements included elsewhere herein
and the Management's Discussion and Analysis and Financial Statement sections of
the Company's Annual Report on Form 10-K for the year ended October 25, 1998, to
which the reader is directed for additional information.
Results of Operations
The following table sets forth for the periods indicated the percentage
relationship that certain items in the Company's Condensed Consolidated
Statements of Operations bear to net sales.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ----------------------
August 1, July 26, August 1, July 26,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 80.0% 80.2% 80.3% 78.0%
------- ------ ------- ------
Gross profit 20.0% 19.8% 19.7% 22.0%
Expenses:
Selling, general and administrative 9.3% 12.3% 10.5% 13.3%
Corporate 3.5% 3.2% 3.8% 3.7%
Restructuring charge 0.0% 2.1% 0.0% 0.8%
------- ------ ------- ------
Income from operations 7.2% 2.2% 5.4% 4.2%
Interest expense 2.9% 3.0% 2.9% 3.1%
Gain on sale of business 0.0% 0.0% 0.0% 2.4%
Other income 0.6% 0.0% 0.2% 0.1%
------- ------ ------- ------
Income before income taxes 4.9% -0.8% 2.7% 3.6%
Income tax expense 2.5% 0.0% 1.0% 2.2%
------- ------ ------- ------
Net income 2.4% -0.8% 1.7% 1.4%
Dividends and accretion on preferred stock 0.6% 0.6% 0.6% 0.7%
------- ------ ------- ------
Net income available for common stockholders 1.8% -1.4% 1.1% 0.7%
======= ====== ======= ======
</TABLE>
On March 5, 1999, the Company completed the sale of the business and
substantially all of the assets of Parker to Top Air Manufacturing, Inc., of
Cedar Falls, Iowa. In connection with the sale, the Company received cash of
$3.7 million, a non-interest bearing note of $3.3 million, and the assumption of
liabilities of $476,000. In addition, the local development authority in Iowa
acquired certain Parker fixed assets for $750,000, and will lease those assets
to Top Air. Based upon the proposed terms of the sale, the Company recorded, in
the fourth quarter of fiscal 1998, a pre-tax charge of $1,635,000 to adjust the
carrying value of Parker's assets to their estimated fair market value. No
additional pre-tax gain or loss was recorded upon completion of the sale.
However, the sale did result in a tax benefit of approximately $440,000,
recorded in the second fiscal quarter of 1999.
In March 1999, the Company began production of heat transfer coils at a new
15,000 square foot facility located in Birmingham, England. The business, Astro
Air UK, Ltd. ("Astro Air UK"), is a joint venture with the Company's largest
customer, Bergstrom, Inc. The joint venture, which is owned 90% by the Company,
supplies heat transfer coils primarily to Bergstrom's facility in Birmingham.
The facility has generated a loss at the business unit income level (defined as
11
<PAGE>
income from operations before the allocation of corporate expenses) of $280,000
since its inception. The Company expects to incur losses from this facility
through at least the remainder of the fiscal year.
Three months ended August 1, 1999 compared to three months ended July 26, 1998
Net sales. For the third quarter of 1999, net sales increased 2.1%, to $43.9
million, as compared to net sales of $43.0 million in the third quarter of 1998.
These results include the effects of disposing of DewEze, sold in July 1998, and
Parker, sold in March 1999. Sales attributable to DewEze and Parker were $1.5
million and $3.1 million, respectively, in 1998. Exclusive of the effects of the
dispositions of DewEze and Parker, net sales increased 14.4% over the prior year
quarter.
In the Company's Engineered Component Products segment, net sales increased $4.0
million, to $33.1 million in 1999 from $29.1 million in 1998. This increase
reflects a $3.4 million, or 22.4%, increase in sales at the Motor Companies as a
result of increased sales to existing customers and the addition of new
customers. Net sales at the Coil Companies (Astro Air, Astro Air UK, and
Snowmax), were mixed. Sales at Astro Air and Astro Air UK increased 17.3%. Sales
at Snowmax, however, decreased 9.8% as a result of decreased sales to its
primary beverage industry customer.
Sales at Sooner Trailer, the only remaining business unit in the Specialized
Equipment segment, increased 17.1%, or $1.6 million, to $10.8 million, as a
result of increased volume.
Gross profit. For the third quarter of 1999, gross profit increased to $8.8
million, or 20.0% of net sales, as compared to $8.5 million, or 19.7% of net
sales in the prior year quarter.
Gross profit in the Engineered Component Products segment increased 19.6%, to
$6.8 million, or 20.7% of net sales, as compared to $5.7 million, or 19.8% of
net sales in the prior year quarter. The increase in gross profit was
principally a result of increased sales and changes in product mix at the Motor
Companies. Gross profit of the Motor Companies in the prior year quarter was
adversely effected by the write-off of approximately $327,000 of inventory in
connection with the merger of the Company's former Cramer subsidiary into Rhodes
in July 1998. Gross profit at the Coil Companies decreased $281,000, or 16.4%,
compared to the prior year quarter, primarily as a result of decreased sales and
operating inefficiencies at Snowmax and losses at the Company's start-up coil
production facility, Astro Air UK.
Gross profit at Sooner Trailer, the only remaining business unit in the
Specialized Equipment segment, increased to $2.0 million, or 18.0% of net sales,
in 1999, from $1.8 million, or 19.8% of net sales, in 1998, primarily as a
result of increased sales.
Selling, general and administrative expenses. As a percentage of net sales,
selling, general and administrative expenses decreased to 9.3%, or $4.1 million,
in the third quarter of 1999, as compared to 12.3%, or $5.3 million, in the
prior year quarter.
Selling, general and administrative expenses in the Engineered Component
Products segment were $2.9 million, or 8.8% of net sales, in 1999, as compared
to $3.3 million, or 11.3% of net sales, in 1998. Selling, general and
administrative expenses in the prior year quarter included $380,000 of expenses
related to the merger of the Company's former Cramer subsidiary into Rhodes.
Selling, general and administrative expenses in the Specialized Equipment
segment decreased $818,000, to $1.2 million in 1999, reflecting the dispositions
of DewEze and Parker. As a percentage of net sales, selling general and
administrative expenses in this segment decreased to 10.9% in 1999, as compared
12
<PAGE>
to 14.4% in the prior year quarter, primarily as a result of the dispositions of
DewEze and Parker, which had higher selling, general and administrative expenses
as a percentage of sales than Sooner Trailer.
Corporate expenses. Corporate expenses were $1.5 million, or 3.5% of net sales,
in the third quarter of 1999, as compared to $1.4 million, or 3.2% of net sales,
in 1998.
Income from operations. For the third quarter of 1999, income from operations
was $3.2 million, or 7.2% of net sales, as compared to $908,000, or 2.2% of net
sales, in 1998. Income from operations in the prior year quarter included a
restructuring charge of $909,000 and other merger-related expenses of $707,000
incurred in connection with the merger of the Company's former Cramer subsidiary
into Rhodes.
Among other measures, the Company evaluates the operating performance of its
business segments and its individual subsidiaries based on business unit income,
which is defined as income from operations before allocation of corporate
expenses and before the restructuring charge incurred in 1998. The Company
believes this measurement most closely reflects the subsidiaries' individual
contributions. On this basis, business unit income for the Engineered Component
Products segment increased to $3.9 million, or 11.9% of net sales, in the third
quarter of 1999, as compared to $2.4 million, or 8.4% of net sales, in the prior
year quarter. This increase was a result of increased business unit income at
the Motor Companies, primarily as a result of increased sales. In addition,
business unit income at the Motor Companies was adversely effected in the prior
year quarter by the merger-related costs at the Company's former Cramer
subsidiary. The increase in business unit income at the Motor Companies was
partially offset by a $376,000 decrease at the Coil Companies, primarily as a
result of operating inefficiencies at Snowmax and losses at Astro Air UK.
Business unit income at Sooner Trailer increased to $771,000, or 7.1% of net
sales, in 1999, as compared to $635,000, or 6.9% of net sales, in the prior year
quarter, primarily as a result of increased sales.
Interest expense. Interest expense was $1.3 million for both the third quarter
of 1999 and 1998.
Income tax expense. The Company's effective income tax rate was 50.9% for the
current year quarter and is expected to remain at that level for the remainder
of the year. The effective tax rate has been adversely effected by a higher
proportion of non-deductible expenses, primarily non-cash amortization expenses
related to acquisitions, as compared to pretax income.
Net income available for common stockholders. Net income available for common
stockholders was $779,000, or $.13 per share, in the third quarter of 1999, as
compared to a net loss for common stockholders of $606,000, or $0.10 per share
in the prior year quarter. Income available for common stockholders is
calculated by subtracting dividends on preferred stock of $187,000 for both 1999
and 1998, and by deducting the non-cash accretion in book value of preferred
stock of $88,000 and $81,000 for 1999 and 1998, respectively. The prior year
quarter results include a restructuring charge and other merger-related costs
incurred in connection with the merger of Cramer into Rhodes.
Nine months ended August 1, 1999 compared to nine months ended July 26, 1998
Net sales. For the nine months ended August 1, 1999, net sales increased 8.0% to
$128.5 million, as compared to net sales of $118.9 million in the first nine
months of 1998. These results include the effects of disposing of Great Bend
(sold in April 1998), DewEze and Parker (collectively the "Agricultural
Equipment Companies"), and the acquisition in April 1998 of Astro Air. Sales
attributable to Great Bend and DewEze were $7.3 million and $5.8 million,
respectively, for the 1998 nine-month period. Sales attributable to Parker were
$1.0 million in 1999, as compared to $9.3 million in 1998. Sales attributable to
Astro Air included in 1999 results were $22.1 million as compared to $6.5
13
<PAGE>
million in 1998. Exclusive of the effects of the acquisition of Astro Air and
the disposition of the Agricultural Equipment Companies, net sales increased
17.1% over the prior year period.
In the Company's Engineered Component Products segment, net sales increased
$27.2 million, to $98.2 million in 1999 from $71.0 million in 1998. This
increase reflects a $15.6 million increase in sales attributable to Astro Air.
These results also reflect a $10.7 million, or 23.9%, increase in sales at the
Motor Companies, principally Stature, as a result of increased sales to existing
customers and the addition of new customers.
Net sales in the Specialized Equipment segment were $30.3 million in 1999, as
compared to $47.9 million in 1998. This decrease reflects the sale of the
Agricultural Equipment Companies. Sales at Sooner Trailer, the only remaining
business unit in this segment, increased 14.4%, or $3.7 million, to $29.3
million as a result of increased volume.
Gross profit. For the nine months ended August 1, 1999, gross profit was $25.3
million, or 19.7% of net sales, as compared to $26.2 million, or 22.0% of net
sales in the prior year period. The decrease in gross profit reflects
principally the disposition of the Agricultural Equipment Companies, partially
offset by the inclusion of Astro Air.
Gross profit in the Engineered Component Products segment increased 22.9%, to
$20.0 million, or 20.4% of net sales, as compared to $16.3 million, or 23.0% of
net sales in 1998. The increase in gross profit was principally a result of the
inclusion of Astro Air and increased profitability at the Motor Companies,
principally Stature, resulting from increased sales. The increase in gross
profit attributable to Astro Air and the Motor Companies was partially offset by
decreased gross profit at Snowmax as a result of operating inefficiencies. The
decrease in gross margin percentage was primarily a result of the inclusion of
Astro Air, which has lower gross profit margins than other companies in this
segment, and operating inefficiencies at Snowmax.
In the Specialized Equipment segment, gross profit was $5.3 million, or 17.5% of
net sales, as compared to $9.9 million, or 20.7% of net sales, in the prior year
period. This decrease reflects the sale of the Agricultural Equipment Companies.
Gross profit at Sooner Trailer increased to $5.2 million, or 17.9% of net sales
in 1999, from $4.3 million, or 16.7% of net sales in 1998, as a result of
increased sales and changes in product mix.
Selling, general and administrative expenses. As a percentage of net sales,
selling, general and administrative expenses decreased to 10.5%, or $13.5
million in 1999, as compared to 13.3%, or $15.8 million in the prior year
period.
Selling, general and administrative expenses in the Engineered Component
Products segment were $9.2 million in 1999, as compared to $8.4 million in 1998.
This increase reflects the inclusion of Astro Air. As a percentage of net sales,
selling, general and administrative expenses decreased to 9.4%, from 11.8%, in
1998. This decrease was primarily a result of the inclusion of Astro Air, which
has lower selling, general and administrative expenses as a percentage of net
sales than other companies in this segment.
Selling, general and administrative expenses in the Specialized Equipment
segment were $4.3 million, or 14.1% of net sales, in 1999, as compared to $7.4
million, or 15.5% of net sales in the prior year period. This decrease reflects
the dispositions of the Agricultural Equipment Companies.
14
<PAGE>
Corporate expenses. In the first nine months of 1999, corporate expenses were
$4.9 million, or 3.8% of net sales, as compared to $4.4 million, or 3.7% of net
sales in 1998. This increase includes $200,000 recorded in connection with the
Company's environmental investigation of the site on which its Cramer facility
was previously located and the conduct thereon of any remedial measures that may
be required.
Income from operations. For the first nine months of 1999, income from
operations was $6.9 million, or 5.4% of net sales, as compared to $5.1 million,
or 4.2% of net sales, in 1998. Income from operations in the prior year included
a restructuring charge of $909,000 and other merger-related expenses of
$707,000, incurred in connection with the merger of the Company's former Cramer
subsidiary into Rhodes.
Business unit income, defined as income from operations before allocation of
corporate expenses and before the restructuring charge incurred in 1998, for the
Engineered Component Products segment increased to $10.8 million, or 11.0% of
sales, in 1999, as compared to $7.9 million, or 11.2% of net sales, in the prior
year period. This increase was primarily a result of the inclusion of Astro Air
and increased business unit income at the Motor Companies attributable to
increased sales. The increase in business unit income attributable to Astro Air
and the Motor Companies was partially offset by decreased business unit income
of Snowmax as a result of operating inefficiencies. In addition, business unit
income at the Motor Companies was adversely affected in the prior year by the
merger-related costs of Cramer.
The Specialized Equipment segment had business unit income of $1.0 million in
1999, as compared to $2.5 million in 1998. This decrease reflects the
dispositions of Great Bend and DewEze and poor operating results at Parker, as a
result of the weak agricultural market and the effects of its sale in March
1999. Business unit income at Sooner Trailer increased to $1.6 million, or 5.5%
of net sales, in 1999, from $812,000, or 3.2% of net sales, in 1998, as a result
of increased sales and improved gross margins.
Interest expense. For the first nine months of 1999, interest expense was $3.8
million, as compared to $3.7 million in 1998. This increase was primarily the
result of increased borrowings under the Company's revolving credit agreement
partially offset by decreased average interest rates.
Income tax expense. The Company's effective income tax rate was 36.4% for 1999,
as compared to an effective rate of 62.5% in the prior year period. The
effective tax rate for the current period was favorably impacted by a deferred
tax benefit realized upon the sale of Parker. The prior year effective tax rate
was adversely affected by non-deductible goodwill associated with Great Bend.
The Company expects its effective tax rate to increase for the remainder of the
year.
Net income available for common stockholders. Net income available for common
stockholders was $1.4 million, or $.24 per share, for the current nine-month
period, as compared to $805,000, or $.14 per share, in the prior year period.
Income available for common stockholders is calculated by subtracting dividends
on preferred stock of $562,000 for both 1999 and 1998, and by deducting the
non-cash accretion in book value of preferred stock of $257,000 and $238,000 for
1999 and 1998, respectively. The current period results include severance and
other costs and an income tax benefit related to the disposition of Parker,
providing an aggregate increase to net income available for common stockholders
of $333,000, or $0.06 per share. The prior year period results include the gain
on the sale of Great Bend of $2.8 million ($924,000 net of taxes, or $0.16 per
share) and a restructuring charge and other merger-related costs incurred in
connection with the merger of Cramer into Rhodes.
15
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents were $507,000 at August 1, 1999, exclusive of $429,000
of cash that was restricted under an industrial revenue financing. Working
capital increased to $22.5 million at August 1, 1999 from $19.7 million at
October 25, 1998. This increase was primarily a result of a reduction in the
current portion of long-term debt partially offset by reduced levels of
inventories. Net cash provided by operating activities was $7.6 million, as
compared to net cash used in operating activities of $1.1 million in the prior
year period. The increase in cash from operations was principally the result of
increased operating results, as well as increased cash collections on accounts
receivable in comparison to the prior year and decreased levels of inventories.
Investing activities included proceeds from the sale of Parker of $4.4 million.
Investing activities also included $4.8 million for capital expenditures for
equipment, invested primarily in the Engineered Component Products segment and
$660,000 of contingent consideration paid to the former owner of Astro Air and
recorded as goodwill. The Company currently plans to invest approximately $1.0
million during the remainder of fiscal 1999, primarily for added capacity and
production efficiencies in the Engineered Component Products segment. Management
anticipates funding capital expenditures with cash from operations and proceeds
from the Company's revolving credit facility.
Net cash used in financing activities included net repayments of $4.4 million
under the Company's $55.0 million revolving credit agreement, debt repayments of
$2.3 million, including the repayment of $1.0 million of related party debt, and
the payment of dividends of $1.4 million.
On January 22, 1999, the Company entered into a new $55.0 million revolving
credit agreement with the Company's two primary banks, expiring in December
2002. At August 1, 1999, $43.9 million was outstanding and $11.1 million was
available for additional borrowing under the agreement. Interest is payable, at
the Company's option, at either the agent bank's prime rate or at a spread over
the London Interbank Offered Rate that varies with the Company's ratio of total
debt to EBITDA. The LIBOR spread was 2.5% at August 1, 1999. The agreement
contains customary financial and other covenants, including fixed charges, cash
flow and net worth ratios, restrictions on certain asset sales, mergers and
other significant transactions. The Company was in compliance with such
covenants at August 1, 1999, and anticipates that it will remain in compliance
with these covenants for the foreseeable future.
The Company has interest rate swap agreements with its two banks with notional
amounts totaling $15.0 million. The agreements require the Company to make
quarterly fixed payments on the notional amount at rates of 7.0675% and 7.09%
through July 2002 in exchange for receiving payments at the three-month London
Interbank Offered Rate. In March 1999, the Company entered into an interest rate
swap agreement with one of its banks with an initial notional amount of $5.75
million. The agreement requires the Company to make quarterly fixed payments on
the notional amount at 4.22% through October 2003 in exchange for receiving
payments at the BMA Municipal Swap Index. The Company entered into these
agreements to change the fixed/variable interest rate mix of its debt portfolio,
in order to reduce the Company's aggregate risk from movements in interest
rates.
In June 1999, the Company changed its quarterly dividend rate to $0.06 per
share, from the $0.09 per share amount previously paid. The Company expects to
pay its quarterly dividend at the new rate for the foreseeable future.
Also in June 1999, the Company announced that its Board of Directors had
authorized the purchase of up to $1.0 million of the Company's stock in open
market purchases or through private transactions. Such authorization is
effective through June 2000, subject to review by the Board of Directors at its
16
<PAGE>
regular meetings. Management anticipates funding such stock purchases with cash
from operations and proceeds from the Company's revolving credit facility.
The Company believes anticipated funds to be generated from future operations
and available credit facilities will be sufficient to meet anticipated operating
and capital needs.
"Year 2000" Costs
The Company's primary centralized manufacturing and accounting information
system is currently Year 2000 compliant (meaning that it can properly process
dates in the year 2000 and beyond). In addition, the Company has evaluated and
continues to monitor any possible exposures related to other date-sensitive
equipment and believes such equipment is Year 2000 compliant. Historical costs
related to Year 2000 issues have not been material. In addition, the Company has
communicated with its significant suppliers and large customers to determine the
extent to which the Company is vulnerable to those third parties' failure to
remediate their own Year 2000 compliance issues. There can be no assurance that
the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company. Management believes that the Company has
taken measures to minimize the exposure to a Year 2000 disruption. The Company
has essentially completed a contingency plan that focuses on various types of
possible business interruptions that could occur.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
The following information is provided pursuant to the "Safe Harbor" provisions
of the Private Securities Litigation Reform Act of 1995. Certain statements in
Management's Discussion and Analysis of this Form 10-Q, including those which
express "belief", "anticipation" or "expectation" as well as other statements
which are not historical fact, are "forward-looking statements" made pursuant to
these provisions. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. The Company undertakes no
obligation to republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
The Company cautions readers that the following important factors, among others,
have in the past affected and could in the future affect the Company's actual
results of operations and cause the Company's actual results to differ
materially from the results expressed in any forward-looking statements made by
or on behalf of the Company:
o Anticipated cost savings in connection with the merger of Cramer
and Rhodes have not yet fully materialized as a result of the
continuing process of integrating their systems and operations.
Improvement in the operating results of Rhodes is not expected
until such integration is completed.
o The Company's results have been and can be expected to continue to
be affected by the general economic conditions in the United
States and specific economic factors influencing the manufacturing
sector of the economy. Lower demand for the Company's products can
lower revenues as well as cause underutilization of the Company's
plants, leading to reduced gross margins.
17
<PAGE>
o Commodity prices can have a material influence on the Company's
results. Metal prices, particularly aluminum, copper and steel,
can affect the Company's costs as well as demand for the Company's
products and the value of inventory held at the end of a reporting
period. Lack of availability of certain commodities could also
disrupt the Company's production.
o Changes in demand that change product mix may reduce operating
margins by shifting demand toward less profitable products.
o Loss of a substantial customer may affect results of operations.
o The Company's results can be affected by engineering difficulties
in designing new products or applications for existing products to
meet the requirements of its customers.
o Obsolescence or quality problems leading to returned goods in need
of repair can affect the value of the Company's inventories and
its profitability.
o The Company has a substantial amount of floating rate debt.
Increases in short-term interest rates could be expected to
increase the Company's interest expense.
o The Company's facility in the United Kingdom subjects the Company
to various risks, which may include currency risk, risk associated
with compliance with foreign regulations, and political and
economic risks.
o Acquisitions are an important part of the Company's growth
strategy. Acquisitions may have a dilutive effect on the Company's
earnings and could effect the Company's available credit and
interest costs. Conversely, the Company may from time to time
divest of product lines or business units. Any such divestiture
may involve costs of disposition or loss on the disposition that
could reduce the Company's results. In addition, acquisitions or
dispositions could effect the Company's relative mix of operating
results from engineered component products and specialized
equipment, thereby effecting the seasonality and cyclicality of
such operating results.
o Although the Company believes that it has taken measures to
minimize the exposure of a Year 2000 disruption, there can be no
assurance that, if a disruption occurs, it would not have a
material adverse effect on the Company's operating results.
18
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses a revolving credit facility, industrial revenue bonds and term
loans to finance a significant portion of its operations. These on-balance sheet
financial instruments, to the extent they provide for variable rates of
interest, expose the Company to interest rate risk resulting from changes in
London Interbank Offered Rate or the prime rate. The Company uses off-balance
sheet interest rate swap agreements to partially hedge interest rate exposure
associated with on-balance sheet financial instruments. All of the Company's
derivative financial instrument transactions are entered into for non-trading
purposes.
The quantitative and qualitative disclosures about market risk as of August 1,
1999 did not differ materially from the information disclosed in the Company's
Form 10-K for the fiscal year ended October 25, 1998. The information set forth
in the Form 10-K under Part I, Item 7A - Quantitative and Qualitative
Disclosures About Market Risk is incorporated herein by reference in response to
this Item 3.
19
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
10.2 Severance Agreement between the Company and John H. Wert, Jr.,
dated May 12, 1999
11 Computation of Per Share Earnings
27 Financial Data Schedule
*99.1 Part I, Item 7A - Quantitative and Qualitative Disclosures About
Market Risk of the Company's Annual Report on Form 10-K for the
year ended October 25, 1998.
(b) Form 8-K
No reports on Form 8-K were filed during the quarter ended August
1, 1999.
- ----------------------------
* Incorporated by reference.
20
<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 hereunto duly authorized.
OWOSSO CORPORATION
Date: September 14, 1999 By: /s/ George B. Lemmon, Jr.
-------------------------------------
George B. Lemmon, Jr.
President, Chief Executive
Officer, and Director
By: /s/ John M. Morrash
-------------------------------------
John M. Morrash
Executive Vice President - Finance,
Chief Financial Officer, and
Treasurer and Secretary
21
<PAGE>
Exhibit 10.2
Memo
To: John H. Wert, Jr.
From: George B. Lemmon, Jr.
Date: May 12, 1999
Re: Work Arrangements
- ------------------------------------------------------------------------------
I understand, from recent conversations that you and I have had over
the last several months, that you are going to submit your resignation at the
next Board meeting, June 1, 1999. Your last day in the office will be June 16,
but you will continue to be paid as an employee as set forth below.
We have agreed that Owosso will continue all aspects of your employment
from June 25, 1999 until December 31, 1999 or until you begin new employment,
which ever is the shorter period of time; we will define this as the "Covered
Period." With regard to the Covered Period:
o Salary payments at your current rate under the payment policy of the
corporate office will continue.
o You will receive full benefits - medical, pension, life insurance, etc.
If you are not with Owosso at calendar year end, Owosso will make up to
you, on an after-tax basis, the 3% contribution to the 401(k), based on
total dollars paid to you through the end of the Covered Period. If we
are restricted legally or contractually from providing any benefit, we
will pay you the cost of that benefit or otherwise make it up to you.
Owosso will continue to indemnify you and extend its D&O coverage to
you for your services as an officer or director of Owosso and its
subsidiaries, and such coverage will extend beyond the Covered Period.
o Owosso will pay for the services of any executive placement firm for
the Covered Period, not to exceed $15,000.
<PAGE>
o You will continue use of your leased vehicle, and Owosso will continue
to pay for insurance and maintenance. At the end of the Covered Period,
you will take over the lease from Owosso, and you will be responsible
for insurance, maintenance, and gas for the vehicle at that point.
o All options will vest at the end of the Covered Period. For purposes of
determining the date of your termination for exercise of the options,
the date will be the last day of the Covered Period, irrespective of
whether the options would expire sooner.
o In lieu of a bonus, you would be paid $11,556.60 on June 24, 1999
representing a pro rated bonus for the current fiscal year. No bonus
will be paid on account of the Covered Period.
o You will use your accrued vacation and personal days as described
above, but will not accrue any more during the Covered Period.
o You will retain the use of your computer during the Covered Period.
o For purposes of COBRA continuation coverage, your last day of
Company-paid health insurance will be the last day of the Covered
Period.
o The foregoing is conditioned on the execution and observance of the
Confidentiality Agreement and Release attached hereto.
/s/ George B. Lemmon, Jr.
----------------------------------------
George B. Lemmon, Jr.
President and Chief Executive Officer
Agreed to:
/s/ John H. Wert, Jr.
----------------------------------------
John H. Wert, Jr.
<PAGE>
OWOSSO CORPORATION
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
August 1, July 26, August 1, July 26,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
BASIC:
Net income (loss) available for common stockholders $ 779,000 $(606,000) $1,402,000 $ 805,000
--------- --------- ---------- ---------
Weighted average number
of common shares outstanding 5,830,000 5,815,000 5,824,000 5,812,000
--------- --------- ---------- ---------
Basic earnings (loss) per common share $ 0.13 $ (0.10) $ 0.24 $ 0.14
--------- --------- ---------- ---------
DILUTED:
Net income (loss) available for common stockholders $ 779,000 $(606,000) $1,402,000 $ 805,000
--------- --------- ---------- ---------
Weighted average number
of common shares outstanding 5,830,000 5,815,000 5,824,000 5,812,000
Dilutive effect of stock options 38,000 - 29,000 20,000
--------- --------- ---------- ---------
Weighted average number of shares outstanding 5,868,000 5,815,000 5,853,000 5,832,000
--------- --------- ---------- ---------
Diluted earnings (loss) per common share $ 0.13 $ (0.10) $ 0.24 $ 0.14
--------- --------- ---------- ---------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> AUG-01-1999
<CASH> 507
<SECURITIES> 0
<RECEIVABLES> 19,323
<ALLOWANCES> 301
<INVENTORY> 20,269
<CURRENT-ASSETS> 42,420
<PP&E> 68,922
<DEPRECIATION> 32,369
<TOTAL-ASSETS> 119,248
<CURRENT-LIABILITIES> 19,950
<BONDS> 58,461
0
14,540
<COMMON> 59
<OTHER-SE> 20,315
<TOTAL-LIABILITY-AND-EQUITY> 119,248
<SALES> 128,487
<TOTAL-REVENUES> 128,487
<CGS> 103,167
<TOTAL-COSTS> 103,167
<OTHER-EXPENSES> 18,444
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,787
<INCOME-PRETAX> 3,491
<INCOME-TAX> 1,270
<INCOME-CONTINUING> 2,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,221
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.24
</TABLE>
