<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 1994
----------------------------
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 1-804
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SEQUA CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-188-5030
- ---------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Indentification No.)
200 Park Avenue, New York, New York 10166
- ----------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 986-5500
----------------
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
--- ---
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at November 1, 1994
----- -------------------------------
Class A Common Stock, no par value 6,508,829
Class B Common Stock, no par value 3,330,778
<PAGE>
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Thousands of dollars except per share data)
(Unaudited)
<CAPTION>
For the Nine Months For the Three Months
Ended September 30, Ended September 30,
------------------- --------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales and revenues $1,042,479 $1,246,834 $330,799 $407,211
---------- ---------- -------- --------
Costs and expenses
Cost of sales and revenues 839,294 1,021,112 266,711 330,197
Selling, general and
administrative 162,879 190,009 51,356 61,181
Restructuring charges - 26,640 - 19,000
--------- ---------- --------- --------
1,002,173 1,237,761 318,067 410,378
--------- ---------- --------- ---------
Operating income (loss) 40,306 9,073 12,732 (3,167)
Other income (expense)
Interest expense (44,637) (50,555) (15,094) (16,752)
Interest income 1,929 1,781 576 623
Other, net (12,444) (14,119) (5,301) (5,482)
--------- ---------- -------- --------
Loss before income taxes (14,846) (53,820) (7,087) (24,778)
Income tax (provision) benefit 2,650 8,600 (1,300) 1,600
--------- ---------- ------- --------
Loss before extraordinary item (12,196) (45,220) (8,387) (23,178)
Extraordinary loss on early
retirement of debt (1,083) - - -
--------- ---------- -------- --------
Net loss $ (13,279)$ (45,220) $ (8,387) $(23,178)
Preferred dividend requirements (2,373) (2,373) (791) (791)
--------- ---------- --------- --------
Net loss applicable to
common stock $ (15,652)$ (47,593) $ (9,178) $(23,969)
========= ========== ========= ========
Loss per share
Loss before extraordinary item $ (1.51) $ (4.93) $ (.94) $ (2.48)
Extraordinary loss on early
retirement of debt (.11) - - -
-------- -------- -------- -------
Net loss $ (1.62) $ (4.93) $ (.94) $ (2.48)
======== ======== ======== ========
Dividends declared per share
Class A Common $ - $ .30 $ - $ -
Class B Common - .25 - -
Preferred - 2.50 - -
<FN>
The accompanying notes are an integral part of the financial statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
SEQUA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
SUMMARY BUSINESS SEGMENT DATA (in millions)
- -------------------------------------------
<CAPTION>
Sales and Operating
Revenues Income (Loss)
Year to Date Year to Date
--------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aerospace $ 633.5 $ 721.3 $ 2.0 $(34.7)
Machinery & Metal Coatings 175.5 174.6 19.2 17.6
Specialty Chemicals 179.9 164.1 30.8 28.9
Other Products 53.6 186.8 6.8 14.1
Corporate - - (18.5) (16.8)
-------- -------- ----- -----
TOTAL $1,042.5 $1,246.8 $ 40.3 $ 9.1
======== ======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Sales and Operating
Revenues Income (Loss)
Third Quarter Third Quarter
-------------- ---------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aerospace $186.1 $226.2 $ (1.4) $(20.3)
Machinery & Metal Coatings 65.7 68.5 8.1 9.8
Specialty Chemicals 61.6 53.5 10.1 9.1
Other Products 17.4 59.0 2.2 3.9
Corporate - - (6.3) (5.7)
TOTAL $330.8 $407.2 $ 12.7 $ (3.2)
====== ====== ====== ======
</TABLE>
<PAGE>
<PAGE>
Sales and Revenues
- ------------------
Overall sales declined 16% or $204.4 million for the nine
months and 19% or $76.4 million for the third quarter of 1994, when
compared with the same periods of 1993. Of the total sales
declines, $187.9 million for the nine months and $65.0 million for
the three months reflect the disposition of several business units
(the ARC Professional Services Group (PSG), three Gas Turbine units
and two Northern Can Systems (NCS) can plants) in late 1993 and
early 1994.
Sales of the Aerospace segment declined 12% and 18% in the
respective nine- and three-month periods. At the Gas Turbine unit,
sales declined 11% year-to-date and 18% in the third quarter. Both
1994 periods were affected by the disposition of three units as
part of the restructuring plan. Excluding the impact of these
dispositions, sales were on a par with the 1993 nine months and
down 3% in the third quarter. In the third quarter of 1994, sales
at the Orangeburg plant remained at approximately half what they
were before the suspension of F.A.A. authorized repair operations.
A portion of Orangeburg's lower sales base is attributable to a
reallocation of certain repair activities among other Gas Turbine
units. The balance reflects lost market share and continued
sluggishness in market place demand, the latter a factor that has
affected all domestic Gas Turbine units. In both 1994 periods,
sales of units in Europe improved from the low levels of the
preceding year. Management does not expect improvement in the
domestic markets served by Gas Turbine in the short term.
Sales of the ARC propulsion unit declined 14% and 8% in the
respective nine- and three-month periods, as continued restrictions
in domestic defense spending led to reduced requirements for many
programs, most notably, MLRS, Stinger, and Tomahawk. These
declines were partially offset by increased revenues from the
Trident D-5 program and increased sales of igniters and propellant
for automotive airbags. Full-year sales of the propulsion unit are
expected to decline by approximately 15%. At the Kollsman unit,
sales declined 19% and 27% in the respective nine- and three-month
periods, with declines in all major product lines.
Sales of the Specialty Chemicals segment advanced 10% in the
nine months and 15% in the third quarter, with both the overseas
and domestic units ahead in both periods. At the overseas unit,
increased sales of detergent additives, and a favorable foreign
exchange rate swing were the primary factors in the sales advance.
In both periods, the domestic unit posted higher sales of every
major product, except paper coatings which did not begin to rebound
until the third quarter. Sales of specialty polymers continued to
advance strongly, primarily due to increased market penetration
derived from the introduction of new products.
<PAGE>
Sales and Revenues (con't)
- ------------------
Sales of the Machinery and Metal Coatings segment were on a
par with 1993 nine-month results and down for the third quarter.
In both periods, advances at the Precoat Metals division were
offset by declines at the can machinery and auxiliary press
equipment units. The metal coatings unit experienced continued
strong demand from construction markets served, whereas sales to
the container market declined due to lower demand and reduced
pricing. Overall fourth quarter metal coatings sales are expected
to be strong. Can machinery sales declined 8% year-to-date and 13%
in the third quarter. Sales of the can decorating product line
were on a par with the 1993 third quarter level but were down for
the nine months, whereas sales of can forming equipment were down
in both periods. For the full year, can machinery sales are
expected to decline by approximately 10% from the prior-year level.
At the auxiliary press equipment unit, sales were down in both
periods. Based on backlog, sales are expected to be strong in the
fourth quarter for both the can machinery and auxiliary press
equipment units.
Sales of the Other Products segment (formerly the Professional
Services and Other Products Segment) declined approximately 71% in
both periods, due entirely to the divestiture of the PSG unit and
the two NCS can plants in 1993. On a pro forma basis -- excluding
the prior year's sales of divested units -- sales advanced 12% in
the nine months and 8% in the third quarter. The automotive
products and real estate operations had revenue advances in both
periods, while NCS was on a par with the 1993 year-to-date results
and down 17% in the third quarter. At the automotive products
unit, the impact of increased North American automobile production,
together with increased sales of electronic products, caused sales
to increase approximately 20% in both periods. At NCS, a temporary
reduction in demand of one major customer adversely affected 1994
sales levels, while rental income increased in both periods at the
Centor real estate unit.
Operating Income
- ----------------
Overall, operating income of $40.3 million and $9.1 million in
the respective nine- and three-months periods of 1994 compared
favorably to operating income of $12.7 million and an operating
loss of $3.2 million in the comparable 1993 periods.
The Aerospace segment registered a small profit in the 1994
nine-month period and a small loss in the 1994 third quarter,
whereas the segment recorded significant losses in both 1993
periods. Gas Turbine registered losses in all four periods while
ARC Propulsion and Kollsman were profitable in all periods.
Results for both 1993 periods included restructuring charges at Gas
Turbine ($23.8 million in the nine months and $19.0 million in the
three-month period), as well as the effects of a government
<PAGE>
Operating Income (con't)
- ----------------
investigation and the second quarter suspension of F.A.A.
authorized repairs at the Gas Turbine facility in Orangeburg, New
York. The 1994 year-to-date results include a $3.9 million charge
for the correction of accounting irregularities at a Gas Turbine
unit. Both the nine-months and the third quarter of 1994 reflect
a $4.0 million benefit from the settlement of a legal judgment for
which a $6.0 million provision was made in the second quarter.
From the standpoint of operations, Gas Turbine continues to
confront poor overall market conditions and the challenge of
restoring its Orangeburg facility to profitability.
At the ARC propulsion unit, profits were down for the nine
months, but on a par with the year-earlier third quarter. For the
three months, the effects of lower sales were offset by lower bid
and proposal and administrative costs. Year-to-date results were
impacted by lower sales and a second quarter provision stemming
from technical difficulties on a liquid propellant rocket motor
program. Profits at the Kollsman operation were up in both periods
as the result of improved performance in the electro optics product
line, partially offset by declines in the avionics and commercial
manufacturing.
Operating income in the Specialty Chemicals segment increased
7% year-to-date and 11% in the third quarter. For the nine months,
both units contributed to the increase, while the domestic unit
declined in the third quarter. At the overseas unit, improved
results in both periods were primarily due to increased sales and
a favorable swing in foreign currency exchange rates. At the
domestic unit, the year-to-date results were slightly ahead of
1993, as a first half improvement was offset by a third quarter
decline. In the third quarter, the benefits of a solid sales
advance were offset by a decline in gross margin due to the rapid
increase in raw material costs, which could not immediately be
offset by increased selling prices. Both periods were also
impacted by increased environmental expenditures, higher marketing
and selling expenses related to the introduction of a new paper
specialties product line, and the acceleration of a direct sales
effort in Europe.
Operating income in the Machinery and Metal Coatings segment
increased 9% year-to-date but declined 17% in the third quarter.
It should be noted that the nine-month comparison is skewed by the
fact that the 1993 period included a $2.8 million restructuring
provision at the can machinery operation. Without this charge,
operating income for the nine months of 1994 would have been down
6%. At the Precoat Metals division, profits increased in both
periods, although the benefits of higher sales were partially
offset by start-up costs related to the new facility in Jackson,
Mississippi. Profits of the can machinery operation (excluding the
1993 second quarter restructuring charge) were on a par with 1993
<PAGE>
Operating Income (con't)
- ----------------
for both periods. The auxiliary press equipment unit registered
losses in both 1994 periods, whereas the unit recorded a profit in
the 1993 third quarter and a smaller loss in the 1993 nine months.
Both 1994 periods were impacted by lower sales, significant pricing
pressures and higher costs related to new product development.
Although this unit is expected to operate profitably in the fourth
quarter on higher sales of auxiliary press equipment, a loss for
the full year is anticipated.
Operating income in the Other Products segment declined 52% and 44%
in the respective nine- and three-month periods. Excluding profits
of the units sold in 1993, results for both periods were higher.
At the automotive products unit, the benefits of higher sales led
to solid gains in both periods. At NCS, results for both periods
were slightly better than breakeven, while at Centor results for
both periods were marginally ahead of 1993.
Restructuring Charges
- ---------------------
During the second and third quarters of 1993, the Company
recorded $7.6 million and $19.0 million, respectively, in
restructuring costs largely related to Gas Turbine's plan to reduce
its investment in units engaged in activities other than the repair
of components for flight engines. In the second quarter of 1994,
the Company sold two Gas Turbine units primarily engaged in engine
overhaul and a small unit primarily engaged in the manufacture of
aircraft parts for an aggregate sale price of approximately $59.3
million. Losses on these disposals were in line with amounts
recorded by the Company during 1993. As of September 30, 1994,
$6.7 million of the restructuring reserve remained in accrued
expenses. Management does not anticipate material net cash outlays
to be associated with future charges to the remaining restructuring
reserve.
Interest Expense
- ----------------
The decrease in interest expense of approximately $5.9 million
during the 1994 nine-month period and approximately $1.7 million in
the third quarter of 1994 was due to a decrease in average
borrowings primarily attributable to the application of cash
generated from the sale of businesses and the nonrecourse
securitization of the Company's discontinued leveraged lease
portfolio.
The Company's weighted average borrowing rate was 9.5% for
both nine-month periods. The Company's hedging activities related
to interest rate swaps increased interest expense by $0.1 million,
or 2 basis points, during the nine months ended September 30, 1994
and reduced interest expense by $1.3 million, or 24 basis points,
during the nine months ended September 30, 1993. During the third
quarter of 1994, the Company's floating-rate debt levels fell below
the notional amounts of interest rate swaps which effectively
convert floating-rate debt to fixed-rate debt. Accordingly,
interest expense included a $0.7 million charge during the third
quarter of 1994 to record the market value of the excess portion of
the related interest rate swaps.
<PAGE>
Other, Net
- ----------
During the nine-month period and third quarter of 1994, Other,
net included charges of $2.9 million and $0.2 million,
respectively, to adjust the carrying value of options sold on
interest rate swaps which are considered to be non-hedging
instruments. Other, net also includes a $1.8 million and a $2.3
million charge in the nine-month periods of 1994 and 1993,
respectively, and a $0.5 million and $0.9 million charge in the
three-month periods of 1994 and 1993, respectively, for discount
expenses related to the Company's sale of accounts receivable. The
Company recorded equity losses in its unconsolidated airbag
businesses of $2.5 million and $6.6 million in the nine-month
periods of 1994 and 1993, respectively, and $0.9 million and $2.6
million in the three-month periods of 1994 and 1993, respectively.
Other, net includes $1.8 million and $2.6 million charges for the
amortization of capitalized debt costs in the nine-month periods of
1994 and 1993, respectively, and $0.5 million and $1.0 million in
the three-month periods of 1994 and 1993, respectively.
Income Tax (Provision) Benefit
- ------------------------------
The Company revises its effective tax rate quarterly, if
necessary, to reflect the best current estimate of its annual
effective tax rate. The effective tax rates for the nine-month
periods in 1994 and 1993 were 18% and 16%, respectively. These
tax rates were based upon estimated annual pre-tax losses
adjusted for nondeductible goodwill amortization, a provision for
state income and franchise taxes, and the favorable tax treatment
of earnings of the Company's foreign sales corporations. The tax
(provision) benefit for the quarters ended September 30, 1994 and
1993 represent the difference between the year-to-date tax
benefits recorded as of September 30, 1994 and 1993 and the year-
to-date amounts reported for the six months ended June 30, 1994
and 1993.
As of September 30, 1994, the Company has net domestic
deferred tax assets of approximately $54.8 million, including
approximately $41.4 million of deferred tax assets recorded for
net operating loss carryforwards, $36.7 million of alternative
minimum tax (AMT) credit carryforwards and approximately $23.3
million of net deferred tax liabilities related to temporary
differences. The regular tax carryforward period for net
<PAGE>
Income Tax (Provision) Benefit (con't)
- ------------------------------
operating losses extends for 15 years from the year of
origination and the AMT credit can be carried forward
indefinitely.
Although the Company has experienced domestic losses in the
past three and a half years, management believes that the Company
will return to profitability and will be able to utilize its
domestic net operating loss carryforwards before expiration. The
losses were largely attributable to loss provisions recorded
during 1992 and 1991 for the Company's discontinued leasing unit,
the government investigation of jet engine component repairs and
repair procedures at Gas Turbine's Orangeburg plant, the Gas
Turbine restructuring charges and the persistent difficulties of
overcapacity and pricing pressure in the airline marketplace
which resulted in Gas Turbine - a consistent contributor to
profits in the past - operating at a loss during 1993 and 1994.
The Company has divested itself of a significant portion of Sequa
Capital's assets, is downsizing and restructuring the Gas Turbine
operation, has resumed FAA repair operations at Gas Turbine's
Orangeburg plant and has decreased interest expense by
significantly reducing debt levels.
The Company's ability to generate the expected amounts of
domestic taxable income from future operations is dependent upon
general economic conditions, the state of the airline industry,
competitive pressures on revenues and margins, and other factors
beyond management's control. There can be no assurance that the
Company will meet its expectations for future domestic taxable
income in the carryforward period; however, management has
considered the above factors in reaching the conclusion that it
is more likely than not that future domestic taxable income will
be sufficient to fully realize the net domestic deferred tax
assets at September 30, 1994.
Liquidity
- ---------
In March 1994, Sequa Capital, a discontinued operation,
received $25.0 million in proceeds from the nonrecourse
securitization of its leveraged lease portfolio. Proceeds from
this financing arrangement were used to reduce debt of continuing
operations. Management's continuing effort to liquidate Sequa
Capital, through asset sales and portfolio run-off, generated an
additional $13.6 million during the nine months ended September
30, 1994.
During the second quarter of 1994, the Company completed the
sale of three Gas Turbine units engaged primarily in activities
other than basic component repair of flight engines for an
aggregate sale price of approximately $59.3 million, of which
$57.2 million has been received in cash as of September 30, 1994.
<PAGE>
Liquidity (con't)
- ---------
The proceeds from the businesses sold were used to fund
operations and to extinguish the remaining $33.5 million
principal balance of the Company's 10 1/2% senior subordinated
notes due 1998 which were called in April 1994. The early
retirement of this debt resulted in an extraordinary loss of $1.1
million, net of tax benefits of $0.6 million.
The dividend restrictions under the terms of the 10 1/2%
senior subordinated notes have been eliminated by the full
redemption of the related indebtedness. Pursuant to the terms of
the Company's senior notes due 2001 and the senior subordinated
notes due 2003, the Company's earnings before interest, taxes,
depreciation and amortization must be sufficient to maintain a
consolidated interest coverage ratio of 2.0 to 1.0 to permit the
Company to pay dividends among other restricted activities. At
September 30, 1994, the Company met the minimum consolidated
interest coverage ratio, and the Company intends to declare and pay
all preferred stock dividends in arrears during the fourth quarter
of 1994.
Management anticipates that cash flow from operations,
proceeds from the divestiture of the remaining discontinued
operations and other assets, the $76.6 million of credit available
at November 4, 1994 under the revolving credit agreement, the $45.0
million of available financing under the Receivables Purchase
Agreement, plus cash and cash equivalents on hand at September 30,
1994 will be more than sufficient to fund the Company's operations
for the foreseeable future.
Backlog
- -------
The businesses of Sequa for which backlogs are significant are
the Kollsman division, the Turbine Airfoils, Caval Tool and
Castings units of Gas Turbine, and the ARC Propulsion operations of
the Aerospace segment; and the Can Machinery and MEG operations of
the Machinery and Metal Coatings segment. The aggregate dollar
amount of backlog in these segments at September 30, 1994 was
$425.5 million ($369.7 million at December 31, 1993). There is no
seasonal variation in the Company's backlog.
Derivative Financial Instruments
- --------------------------------
The Company has utilized various derivative financial
instruments to manage its interest rate risk. By entering into
interest rate swaps, the Company has functionally converted
floating-rate debt to fixed-rate debt to minimize exposure to
rising interest rates and has functionally converted fixed-rate
debt to floating-rate debt to minimize interest costs in declining
interest rate environments. The Company has also utilized interest
options, caps and floors to manage economic exposures resulting
<PAGE
Derivative Financial Instruments (con't)
from changes in interest rates.
It is the Company's current policy that the Treasurer has the
authority to enter into derivative transactions in the amounts and
for the purposes to be stipulated by the Board of Directors and the
Management Executive Committee ("the Committee"). The Treasurer
must obtain approval from the Committee prior to entering into any
derivative transaction and the Treasurer is responsible for monthly
reporting of market values of derivative activities to the
Committee. In the event of a decrease of 5% or more in the total
market value of the portfolio, the Committee must be notified
immediately in order to make a determination as to what action is
required to limit the Company's exposure.
The Company accounts for interest rate swaps as hedges
provided that the derivative changes the nature of a designated
debt instrument which is on the Company's Balance Sheet and the
underlying debt obligation has a principal balance equal to or
greater than the notional amount of the related derivative. In
accordance with hedge accounting, any gains or losses from changes
in the value of the swaps are deferred and interest expense on the
hedged debt instrument is recorded using the interest rate as
effectively revised by the related swap. If the principal amount
of the particular debt instrument being hedged falls below the
notional amount of the related swap, the excess portion of the
derivative is marked to market and the resulting gain or loss is
included in interest expense. Gains or losses on terminated
interest rate swaps that were accounted for as hedges are deferred
and amortized to interest expense over the original lives of the
terminated swaps. Non-hedge accounting is applied to interest rate
options sold, accordingly, these financial instruments are marked
to market and resulting gains and losses are recorded currently in
the Income Statement in Other, net.
At September 30, 1994, the Company had outstanding interest
rate swaps expiring in 1996 that were accounted for as hedges and
that effectively convert $50 million of variable-rate borrowings
under short-term financing facilities to fixed-rate borrowing with
an average interest rate of 8.7%. Based upon market interest rates
as of September 30, 1994, the Company would have to pay
approximately $1.5 million to terminate its interest rate swaps
outstanding. As disclosed in the Management's Discussion and
Analysis of interest expense, $0.7 million of the market value was
accrued by a charge to interest expense in the third quarter of
1994 to reflect that portion of the notional amount of these swaps
which exceeded principal amounts of variable-rate borrowings
outstanding at September 30, 1994. As of September 30, 1994,
deferred gains on terminated interest rate swaps amounted to $7.8
million and amortization of such deferred gains will serve to
reduce interest expense by $0.6 million during the fourth quarter
of 1994 and $2.6 million and $1.9 million, respectively, during the
years ending December 31, 1995 and 1996.
<PAGE>
Derivative Financial Instruments (con't)
- --------------------------------
At September 30, 1994, the Company had outstanding interest
rate options, accounted for under non-hedge accounting, which have
been exercised by the counterparty and effectively convert $50
million of variable-rate borrowings to fixed-rate borrowings
through early 1996. Based upon market interest rates at September
30, 1994, the Company would have to pay approximately $7.9 million
to terminate the interest rate options outstanding. In accordance
with non-hedge accounting, the market value of these derivatives
has been accrued in the Company's Balance Sheet and Other, net for
the nine months ended September 30, 1994 includes a $2.9 million
charge related to the net mark-to-market adjustment of these
interest rate options and other interest rate options which were
terminated during 1994.
Environmental Matters
- ---------------------
The Company's environmental department, under senior
management direction, manages all activities related to the
Company's involvement in environmental clean-up. This department
establishes the projected range of expenditures for individual
sites with respect to which the Company may be considered a
potentially responsible party under applicable federal or state
law. These projected expenditures, which are reviewed
periodically, include: remedial investigation and feasibility
studies; outside legal, consulting and remediation project
management fees; the projected cost of remediation activities; site
closure and post-remediation monitoring costs. The assessments
take into account currently available facts, existing technology,
presently enacted laws, past expenditures, and other potentially
responsible parties and their probable level of involvement.
Outside technical, scientific and legal consulting services are
used to support management's assessments of costs at significant
individual sites.
It is the Company's policy to accrue environmental remediation
costs for identified sites when it is probable that a liability has
been incurred and the amount of loss can be reasonably estimated.
The potential exposure for such costs is estimated to range from
$22 million to $64 million. At September 30, 1994, the Company's
balance sheet includes accruals for remediation costs of $53.1
million, which represents the best estimate within this range.
These accruals, which are generally included in other long-term
liabilities, are at undiscounted amounts. While the possibility of
recovery of some of the costs from insurance companies exist, the
Company does not recognize these recoveries in its financial
statements until they are realized. Actual costs to be incurred at
identified sites in future periods may vary from the estimates,
given inherent uncertainties in evaluating environmental exposures.
In connection with a grand jury investigation being conducted
by the United States Attorney's Office in the Southern District of
Florida, federal, state and local environmental agents executed a
search warrant on June 2, 1994 at TurboCombustor Technologies Inc.
(TCT), a subsidiary of Chromalloy Gas Turbine Corporation, located
<PAGE>
Environmental Matters (con't)
- ---------------------
in Stuart, Florida. TCT is continuing to cooperate with this
investigation, which involves the manner in which TCT neutralizes
and disposes of certain hazardous waste water. Government sources
have stated publicly that no health risk was posed by the alleged
discharges.
The Company is committed to conducting its operations in full
compliance with all federal, state and local environmental laws and
regulations. In furtherance of such objective, TCT is reviewing
its environmental health and safety procedures and providing
additional training to all employees. Based upon the information
known to the Company at this preliminary stage, management is not
in a position to make an assessment as to whether this matter is
material.
With respect to all known environmental liabilities, it is
currently estimated that the Company will spend in the range of $10
million to $12 million in 1994 and between $5 million to $7 million
during each of the following several years. Actual remedial
expenditures for the first nine months of 1994 were approximately
$7.7 million.
Other Matters
- -------------
In August 1994, the Company uncovered accounting
irregularities at one of the domestic Chromalloy Gas Turbine plants
which was booking sales for orders in backlog which had not yet
been shipped and recording other accounting entries whose purpose
was to inflate profits. As a result of these irregularities,
operating income for 1993 and the first quarter of 1994 was
overstated by approximately $3.9 million and $0.4 million,
respectively, and after-tax losses were understated by
approximately $2.4 million or $.25 per share in 1993 and $0.2
million or $.02 per share in the first quarter of 1994. In the
second quarter of 1994, the Company recorded correcting entries
which reduced operating income by $4.3 million and increased the
after-tax loss by $2.1 million or $.22 per share. After reviewing
the issue with its independent auditors, the Company has concluded
that no restatement of prior period financial statements is
required since the net adjustments are not material to the
Company's financial position or results of operations for the
affected reporting periods. Additionally, it should be noted that
the irregularities had no cash impact.
Management believes that these irregularities resulted from
the isolated actions of certain individuals at the plant. Such
individuals are no longer employees.
Management believes that the Company's internal controls are
adequate. However, this situation has prompted management to
conduct an ongoing review by the Company's internal audit group of
certain of Gas Turbine's internal control systems and to engage the
Company's independent auditors to review certain of Gas Turbine's
internal control procedures.
<PAGE>
<TABLE>
Sequa Corporation and Subsidiaries
Consolidated Balance Sheet
(Amounts in thousands)
ASSETS
<CAPTION>
(Unaudited)
September 30, December 31,
1994 1993
------------ -----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 29,730 $ 24,780
Trade receivables (less allowances
of $11,361 and $10,892) 242,424 227,688
Unbilled receivables (less allowances
of $ 12,995 and $13,165) 36,036 55,451
Inventories 277,987 290,323
Other current assets 36,811 63,350
---------- ----------
Total current assets 622,988 661,592
---------- ----------
Investments
Net assets of discontinued operations 156,999 188,964
Non-current receivables and other
investments 24,345 17,179
---------- ----------
181,344 206,143
---------- ----------
Property, plant and equipment, net 536,724 562,623
---------- ----------
Other assets
Excess of cost over net assets of
companies acquired 327,799 348,696
Deferred charges and other 21,739 24,467
---------- ----------
349,538 373,163
---------- ----------
Total assets $1,690,594 $1,803,521
========== ==========
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
Sequa Corporation and Subsidiaries
Consolidated Balance Sheet
(Amounts in thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
(Unaudited)
September 30, December 31,
1994 1993
----------- -----------
<S> <C> <C>
Current liabilities
Current maturities of
long-term debt $ 12,110 $ 23,998
Accounts payable 103,994 114,529
Taxes on income 14,469 16,357
Accrued expenses 196,306 221,654
---------- ----------
Total current liabilities 326,879 376,538
---------- ----------
Long-term debt, net of
current maturities 603,393 624,092
---------- ----------
Deferred taxes and other liabilities
Deferred taxes on income 16,015 27,039
Other long-term liabilities 163,192 200,068
---------- ----------
179,207 227,107
---------- ----------
Shareholders' equity
Preferred stock--$1 par value,
1,825,000 shares authorized,
797,000 shares of $5 cumulative
convertible stock issued in 1994
and 1993 (involuntary
liquidation value--$26,359 at
September 30, 1994) 797 797
Class A common stock--no par value,
25,000,000 shares authorized,
7,188,000 shares issued in 1994
and 7,054,000 shares issued in
1993 stated at 7,188 7,054
Class B common stock--no par value,
5,000,000 shares authorized,
3,727,000 shares issued in 1994
and 3,861,000 shares issued in
1993 stated at 3,727 3,861
Capital in excess of par value 288,334 295,841
Cumulative translation adjustment (520) (16,771)
Retained earnings 367,965 383,617
---------- ----------
667,491 674,399
Less: Cost of treasury stock (86,376) (98,615)
---------- ----------
Total shareholders' equity 581,115 575,784
---------- ----------
Total liabilities and shareholders'
equity $1,690,594 $1,803,521
========== ===========
<FN>
The accompanying notes are an integral part of the financial
statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
Sequa Corporation and Subsidiaries
Consolidated Statement of Shareholders' Equity
Year Ended December 31, 1993 and period ended September 30, 1994
(Amounts in thousands, except per share data)
<CAPTION>
Class A Class B Capital in Cum.
Preferred Common Common Excess of Trans. Retained Treasury
Stock Stock Stock Par Value Adj. Earnings Stock
----- ------- ------- ---------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 797 $7,042 $3,873 $295,806 $(10,583) $453,486 $ (98,755)
Net Loss - - - - - (63,982) -
Revaluation and amortization
of restricted stock grant - - - 35 - - 140
Exchange of common stock - 12 (12) - - - -
Foreign currency translation
adjustment - - - - (6,696) - -
Sale of foreign subsidiary - - - - 508 - -
Cash dividends:
Class A - $.30 per share - - - - - (1,854) -
Class B - $.25 per share - - - - - (870) -
Preferred - $2.50 per share - - - - - (1,581) -
Preferred dividends in
arrears* - $2.50 per share - - - - - (1,582) -
------ ------ ------ -------- -------- -------- ---------
Balance at December 31, 1993 $ 797 $7,054 $3,861 $295,841 $(16,771) $383,617 $ (98,615)
Net Loss - - - - - (13,279) -
Issuance and amortization of
restricted stock grant - - - (185) - - 192
Exchange of common stock - 134 (134) - - - -
Foreign currency translation
adjustment - - - - 14,265 - -
Sale of foreign subsidiary - - - - 1,986 - -
Treasury Stock contributed
to Pension Plan - - - (7,322) - - 12,047
Preferred dividends in
arrears* - $3.75 per share - - - - - (2,373) -
------ ------ ------ -------- -------- -------- ---------
Balance at September 30, 1994 $ 797 $7,188 $3,727 $ 288,334 $ (520) $367,965 $ (86,376)
====== ====== ====== ========= ======== ======== =========
<FN>
* Aggregate preferred dividends in arrears were $3,955 ($6.25 per share) as of September 30, 1994.
</TABLE>
<PAGE>
<TABLE>
Sequa Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)
<CAPTION>
For the Nine Months
September 30,
------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Loss before income taxes $(14,846) $(53,820)
Adjustments to reconcile loss to net cash
provided by operating activities:
Depreciation and amortization 75,888 85,928
Provision for losses on receivables 1,595 3,761
Equity in losses of joint ventures 1,874 6,383
Other items not requiring cash 346 1,173
Changes in operating assets and liabilities,
net of businesses sold:
Receivables 32,849 32,224
Inventories (24,629) 10,965
Other current assets 23,038 (2,165)
Accounts payable and accrued expenses (22,376) 30,933
Other long-term liabilities (3,875) 20,345
Funding of insurance reserves - (27,637)
-------- --------
Net cash provided by continuing operations
before income taxes 69,864 108,090
Net cash provided by discontinued operations
before income taxes 29,612 4,353
Income taxes paid, net (9,759) (7,972)
-------- --------
Net cash provided by operating activities 89,717 104,471
-------- --------
Cash flows from investing activities:
Businesses sold 57,248 17,840
Purchase of minority interest in subsidiary (16,701) -
Purchase of property, plant and equipment (45,124) (59,606)
Sale of property, plant and equipment 7,909 4,325
Other investing activities (7,418) (3,618)
-------- --------
Net cash used for investing activities (4,086) (41,059)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of debt 1,206 -
Net increase (decrease) in revolving credit 14,457 (22,032)
Payments of debt (17,128) (14,810)
Early retirement of debt (34,839) -
Dividends paid - (4,303)
Repurchase of accounts receivable sold (45,000) (19,000)
-------- --------
Net cash used for financing activities (81,304) (60,145)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents 623 (445)
-------- --------
Net increase in cash and cash equivalents 4,950 2,822
Cash and cash equivalents at beginning of period 24,780 14,807
-------- --------
Cash and cash equivalents at end of period $ 29,730 $ 17,629
======== ========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<PAGE>
SEQUA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of presentation
The consolidated financial statements of Sequa Corporation
(the "Company") include the accounts of all majority-owned
subsidiaries including those of Sequa Receivables Corp. ("SRC"), a
special purpose corporation formed for the sale of eligible
receivables. Under the terms of the receivables purchase
agreement, SRC's assets will be available to satisfy its
obligations to its creditors, which have security interests in
certain of SRC's assets, prior to any distribution to the Company.
The consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. In the
opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to fairly
present the Company's results for the interim periods presented.
Such adjustments to the September 30, 1993 Consolidated Statement
of Income consisted only of normal recurring items with the
exception of a $5.0 million charge for the remedial payment made to
the Federal Aviation Administration, a charge for $2.5 million
deposited into a fund to cover the cost of testing of jet engine
parts seized by federal authorities, $2.2 million of accruals for
severance costs related to labor reductions at the Orangeburg
plant, legal and expert fees of $2.6 million and restructuring
charges of $26.6 million. The September 30, 1994 Consolidated
Statement of Income includes a $6.0 million accrual in the second
quarter for the unexpected adverse judgement in a lawsuit, a $4.0
million credit to income in the third quarter for the favorable
negotiated settlement of the same lawsuit, a $3.9 million charge to
correct an accounting irregularity, a $2.9 million charge to adjust
the carrying value of options sold on interest rate swaps and a
$1.1 million after-tax extraordinary loss related to the redemption
of the Company's 10 1/2% senior subordinated notes. All other
adjustments in the September 30, 1994 interim period consisted of
normal recurring items. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's latest Annual Report on Form 10-K. The
results of operations for the nine months ended September 30, 1994
are not necessarily indicative of the results to be expected for
the full year.
<PAGE>
<PAGE>
<TABLE>
Note 2 - Inventories
The inventory amounts at September 30, 1994 and December 31,
1993 were as follows:
<CAPTION>
(Thousands of Dollars)
(Unaudited)
September 30, 1994 December 31, 1993
------------------ -----------------
<S> <C> <C>
Finished Goods $ 66,393 $ 73,460
Work in process 77,317 100,341
Raw materials 125,577 111,866
Long-term contract costs 12,094 9,097
Progress payments (3,394) (4,441)
-------- --------
$277,987 $290,323
======== ========
</TABLE>
Note 3 - Discontinued Operations
Net assets of discontinued operations approximate net
realizable value and have been classified as non-current. The net
assets of discontinued operations comprise Sequa Capital's
remaining investments and the men's apparel unit summarized as
follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
(Unaudited)
September 30, December 31,
1994 1993
-------- --------
<S> <C> <C>
Receivables, net $ 7,227 $ 6,380
Inventories 12,376 10,354
Investment in leveraged leases and
other investments 163,941 176,363
Property, plant, and equipment 3,634 3,519
Other assets 10,771 12,389
-------- --------
Total assets 197,949 209,005
-------- --------
Accounts payable 4,211 2,756
Accrued expenses 11,274 15,776
Debt 24,657 -
Other long-term liabilities 808 1,509
-------- --------
Total liabilities 40,950 20,041
-------- --------
Net assets of discontinued
operations $156,999 $188,964
======== ========
</TABLE>
<PAGE>
<PAGE>
Note 4 - Losses per share
Primary losses per common share in 1994 and 1993 were computed
by dividing net losses, after deducting dividend requirements on
cumulative convertible preferred stock, by the weighted average
number of shares of common stock outstanding during the periods.
These computations were based on 9,677,000 and 9,655,000 shares in
the nine-month periods, respectively, and 9,720,000 and 9,655,000
shares in the three month periods, respectively.
Fully diluted losses per common share calculations for the
assumed conversion of the cumulative convertible preferred stock
were anti-dilutive in both the nine-month and three-month periods
of 1994 and 1993.
Note 5 - Supplemental Cash Flow Information
<TABLE>
<CAPTION>
(Amounts in thousands)
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1994 1993
---- ----
<S> <C> <C>
Net cash provided by
discontinued operations:
Changes in working capital $ (6,348) $ (936)
Increase (decrease) in debt 24,657 (37,432)
Principal repayments on leasing
assets 6,524 1,287
Sale of leasing assets 7,097 40,796
Other changes in net assets (2,318) 638
$ 29,612 $ 4,353
======== ========
</TABLE>
In March 1994, Sequa Capital received $25.0 million in
proceeds from the nonrecourse securitization of its leveraged lease
portfolio.
Other supplemental Cash Flow information:
Interest paid during the nine months ended September 30, 1994
and 1993 was $31.6 million and $38.8 million, respectively.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
-----------------
Sequa is involved in a number of claims, lawsuits and
proceedings (environmental and otherwise) which arose in the
ordinary course of business. Other litigation is pending against
Sequa involving allegations that are not routine and include, in
certain cases, compensatory and punitive damage claims. As
previously reported in the Company's Form 10-Q for the quarterly
period ended June 30, 1994, included in this other class of
litigation was an arbitration proceeding that was formally
commenced in 1992 to resolve a dispute between the Egyptian Air
Force and Chromalloy Gas Turbine. In the damage portion of the
arbitration hearing in October 1993, Chromalloy Gas Turbine claimed
$29.6 million in damages (which included $17.5 million of net
assets in the Company's Consolidated Balance Sheet) and the
Egyptian Air Force counterclaimed for $46.5 million in damages. On
August 24, 1994, the arbitration panel ruled in favor of Chromalloy
Gas Turbine awarding it approximately $16.9 million plus interest.
As previously reported in the Company's Form 10-Q for the
quarterly period ended June 30, 1994, an adverse judgment in the
amount of $6.0 million was entered against Chromalloy Gas Turbine
Corporation (d/b/a Chromalloy Aeroservices and Chromalloy
Aeroservices International, Ltd.) in the District Court of Dallas
County, Texas (68th Judicial District) on July 25, 1994. This
judgment was the result of a jury finding that Chromalloy breached
an alleged 1987 oral contract with an independent sales agent,
Hassan M.K. Elwakil, plus a finding that the agent had been
slandered in 1989. This action was commenced in June 1991. The
above referenced July 25, 1994 judgment was vacated and set aside
as a result of a settlement arrived at between the parties.
Pursuant to such settlement Chromalloy paid $2.3 million to Hassan
M.K. Elwakil in full and final settlement of all claims of Mr.
Elwakil against Chromalloy under such action or otherwise. A
portion of the settlement amount was covered by insurance proceeds.
In connection with the grand jury investigation being
conducted by the United States Attorney's Office in the Southern
District of Florida, at TurboCombustor Technologies Inc. (TCT), a
subsidiary of Chromalloy Gas Turbine Corporation, located in
Stuart, Florida, previously reported in the Company's Form 10-Q for
the quarterly period ended June 30, 1994, TCT is continuing to
cooperate with this investigation. The investigation involves the
manner in which TCT neutralizes and disposes of certain hazardous
waste water. Government sources have stated publicly that no
health risk was posed by the alleged discharges.
The Company is committed to conducting its operations in full
compliance with all federal, state and local environmental laws and
regulations. In furtherance of such objective, TCT is reviewing
its environmental health and safety procedures and providing<PAGE>
<PAGE>
Item 1 - LEGAL PROCEEDINGS (con't)
-----------------
additional training to all employees. Based upon the information
known to the Company at this preliminary stage, management is not
in a position to make an assessment as to whether this matter is
material.
The ultimate legal and financial liability of the Company in
respect to all claims, lawsuits and proceedings referred to above
cannot be estimated with any certainty. However, in the opinion of
management, based on its examination of such matters, its
experience to date and discussions with counsel, the ultimate
outcome of these contingencies, net of liabilities already accrued
in the Company's Consolidated Balance Sheet, is not expected to
have a material adverse effect on the Company's consolidated
financial position, although the resolution in any reporting period
of one or more of these matters could have a material impact on the
Company's results of operations for that period.
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) Exhibits
11 - Schedule showing calculations of Primary and Fully
Diluted Losses Per Share for the nine-month and
three-month periods ended September 30, 1994 and
1993.
(B) Reports on Form 8-K
No report on Form 8-K was filed during the three-
month period ended September 30, 1994.
<PAGE>
<PAGE>
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.
SEQUA CORPORATION
BY:/S/ WILLIAM P. KSIAZEK
-----------------------------
William P. Ksiazek
Vice President and Controller
November 14, 1994
<PAGE>
<TABLE>
EXHIBIT 11
SEQUA CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED LOSSES PER SHARE
---------------------------------------------------------
<CAPTION>
(Unaudited)
For the Nine Months
Ended September 30,
--------------------
1994 1993
---- ----
<S> <C> <C>
Primary
- -------
Losses
Loss before extraordinary loss $(12,196) $(45,220)
Preferred stock dividend requirements (2,373) (2,373)
-------- --------
Loss applicable to common
shareholders before extraordinary loss (14,569) (47,593)
Extraordinary loss on early retirement of
debt (1,083) -
-------- --------
Net loss applicable to common
shareholders $(15,652) $(47,593)
======== ========
Shares
Common and common equivalent shares 9,677 9,655
======== ========
Primary loss per common share
Loss before extraordinary loss $ (1.51) $ (4.93)
Extraordinary loss on early retirement of
debt (.11) -
------- --------
Net loss $ (1.62) $ (4.93)
======= ========
*Fully Diluted
-------------
Losses
Loss before extraordinary loss $(12,196) $(45,220)
Extraordinary loss on early retirement of
debt (1,083) -
-------- --------
Net loss $(13,279) $(45,220)
======== ========
Shares
Common and common equivalent shares 10,515 10,493
======== ========
Fully diluted loss per common share
Loss before extraordinary loss $ (1.16) $ (4.31)
Extraordinary loss on early retirement
of debt (.10) -
-------- --------
Net loss $ (1.26) $ (4.31)
======== ========
Shares
- ------
Weighted average common shares outstanding 9,677 9,655
Preferred stock assumed to be converted 838 838
Common and common equivalent shares 10,515 10,493
======== ========
<FN>
* The 1994 and 1993 fully diluted losses per share calculations are
anti-dilutive; therefore, fully diluted losses per share have not
been presented in the Consolidated Statement of Income.
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 11
SEQUA CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED LOSSES PER SHARE
---------------------------------------------------------
<CAPTION>
(Unaudited)
For the Three Months
Ended September 30,
--------------------
1994 1993
---- ----
<S> <C> <C>
Primary
- -------
Losses
Net loss $ (8,387) $(23,178)
Preferred stock dividend requirements (791) (791)
-------- --------
Net loss applicable to common
stockholders $ (9,178) $(23,969)
======== ========
Shares
Common and common equivalent shares 9,720 9,655
======== ========
Primary net loss per common share $ (.94) $ (2.48)
======== ========
*Fully Diluted
-------------
Losses
Net loss $ (8,387) $(23,178)
======== ========
Shares
Common and common equivalent shares 10,558 10,493
======== ========
Fully diluted net loss per
common share $ (.79) $ (2.21)
======== ========
Shares
- ------
Weighted average common shares outstanding 9,720 9,655
Preferred stock assumed to be converted 838 838
-------- --------
Common and common equivalent shares 10,558 10,493
======== ========
<FN>
* The 1994 and 1993 fully diluted losses per share calculations
are anti-dilutive; therefore, fully diluted losses per share
have not been presented in the Consolidated Statement of Income.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 29730
<SECURITIES> 0
<RECEIVABLES> 302816
<ALLOWANCES> 24356
<INVENTORY> 277987
<CURRENT-ASSETS> 622988
<PP&E> 1054390
<DEPRECIATION> 517666
<TOTAL-ASSETS> 1690594
<CURRENT-LIABILITIES> 326879
<BONDS> 603393
<COMMON> 10915
0
797
<OTHER-SE> 569403
<TOTAL-LIABILITY-AND-EQUITY> 1690594
<SALES> 1042479
<TOTAL-REVENUES> 1042479
<CGS> 839294
<TOTAL-COSTS> 1002173
<OTHER-EXPENSES> 10515
<LOSS-PROVISION> 1595
<INTEREST-EXPENSE> 44637
<INCOME-PRETAX> (14846)
<INCOME-TAX> (2650)
<INCOME-CONTINUING> (12196)
<DISCONTINUED> 0
<EXTRAORDINARY> (1083)
<CHANGES> 0
<NET-INCOME> (13279)
<EPS-PRIMARY> (1.62)
<EPS-DILUTED> (1.26)
</TABLE>
