<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 June 30, 1996
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ----------
Commission File Number 1-804
------------------------------------------
SEQUA CORPORATION
- -----------------------------------------------------------------
(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 August 8, 1996
----- -----------------------------
Class A Common Stock, no par value 6,538,708
Class B Common Stock, no par value 3,330,780
<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 Six Months For the Three Months
Ended June 30, Ended June 30,
------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $710,562 $684,797 $361,436 $357,263
-------- -------- -------- --------
COSTS AND EXPENSES
Cost of sales 572,437 550,227 288,565 288,716
Selling, general and
administrative 114,982 116,683 59,850 61,767
-------- -------- -------- --------
687,419 666,910 348,415 350,483
-------- -------- -------- --------
OPERATING INCOME 23,143 17,887 13,021 6,780
OTHER INCOME (EXPENSE)
Interest expense (26,383) (26,649) (13,135) (13,303)
Interest income 1,957 1,627 917 755
Other, net 2,445 273 2,762 (719)
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 1,162 (6,862) 3,565 (6,487)
Income tax (provision) benefit (6,300) (1,100) (4,950) 400
-------- -------- -------- --------
NET LOSS (5,138) (7,962) (1,385) (6,087)
Preferred dividend requirements (1,583) (1,582) (792) (791)
-------- -------- -------- --------
NET LOSS APPLICABLE TO COMMON STOCK $ (6,721) $ (9,544) $ (2,177) $ (6,878)
======== ======== ======== ========
LOSS PER SHARE $ (.68) $ (.97) $ (.22) $ (.70)
======== ======== ======== ========
DIVIDENDS DECLARED PER SHARE
Preferred $ 2.50 $ 2.50 $ 1.25 $ 1.25
<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>
Operating
Sales Income (Loss)
Year to Date Year to Date
---------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aerospace $ 383.5 $ 397.3 $ 1.2 $ (6.9)
Machinery & Metal Coatings 166.2 129.6 11.6 15.4
Specialty Chemicals 113.7 120.8 19.3 19.1
Other Products 47.2 37.1 5.6 4.1
Corporate - - (14.6) (13.8)
-------- -------- ------ -----
TOTAL $ 710.6 $ 684.8 $ 23.1 $ 17.9
======== ======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Operating
Sales Income (Loss)
Second Quarter Second Quarter
-------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aerospace $194.5 $202.3 $ 1.1 $ (6.7)
Machinery & Metal Coatings 86.7 77.0 7.4 8.9
Specialty Chemicals 55.3 61.0 8.8 10.1
Other Products 24.9 17.0 3.4 1.5
Corporate - - (7.7) (7.0)
------ ------ ------ ------
TOTAL $361.4 $357.3 $ 13.0 $ 6.8
====== ====== ====== ======
</TABLE>
<PAGE>
Sales
- -----
Overall sales increased 4% in the six months and 1% in the
second quarter of 1996. Excluding the sales contributed by units
divested in 1995, sales improved 12% and 8% over the respective
prior year periods. Approximately 25% of the six-month increase
and 40% of the three-month increase were attributable to sales
generated by metal coatings and automotive products units
acquired in the second half of 1995.
Sales of the Aerospace segment declined 3% in the six months
and 4% in the second quarter due to the December 1995 divestiture
of the Kollsman unit. Excluding Kollsman's sales from 1995,
segment sales increased approximately 13% in both 1996 periods.
At the Gas Turbine unit, repair revenues and OEM sales advanced
despite continued pricing pressure throughout the first half of
1996. Sales of Gas Turbine locations primarily engaged in jet
engine component repair advanced 14% in the six months and 13% in
the second quarter, with both commercial and military work
contributing to the increases. OEM sales rose 9% and 13% in the
same periods. The favorable trends in repair volume and OEM
sales continued in July.
The ARC propulsion unit (ARC) recorded solid sales increases
in both 1996 periods. The increases primarily reflect strength
in air bag components and small liquid rocket motors, as well as
the addition of two new large military programs. These increases
were partially offset by a stretch out of the Trident D-5 program
and the completion of the Stinger program.
Sales of the Machinery and Metal Coatings segment increased
28% in the six months and 13% in the second quarter of 1996, with
all units ahead for the six months and the metal coatings and can
machinery operations ahead in the second quarter. Sales of the
metal coatings division advanced in both periods, primarily as a
result of sales added through the acquisition of two coil coating
lines in the third quarter of 1995. Demand from the building
products market has continued to be strong in 1996, but the unit
has been adversely affected by the late 1995 decision of a major
container industry customer to bring a large portion of its metal
coating work in house. Can Machinery sales were solidly ahead in
both periods due to continued strong demand for can decorating
equipment and favorable market response to a recently introduced
bodymaker model. While second half sales are expected to
continue to be strong, second half year-to-year comparisons are
likely to be unfavorable as a result of unusually heavy shipments
in the second half of 1995. Total 1996 sales for this unit;
however, are currently expected to be 20-25% above 1995 levels.
<PAGE>
Sales (con't)
Sales of auxiliary press equipment increased for the six
months but declined in the second quarter. Six-months results
primarily reflect increased sales of flying pasters, while
second-quarter improvements in paster sales were more than offset
by reduced sales of dryers and other equipment.
Sales of the Specialty Chemicals segment declined 6% for the
six months and 9% for the second quarter, with decreases at the
overseas unit partially offset by small increases at the domestic
operation. The decline at the overseas unit primarily reflects
the mid-1995 disposition of a manufacturing facility that
produced textile and bromine chemicals, as well as an unfavorable
shift in foreign exchange rates in 1996. At the domestic unit, a
small sales increase in both periods reflects a solid advance in
specialty polymers tempered by softness in other major markets.
Sales of the Other Products segment increased 27% in the six
months and 46% in the second quarter. Excluding the sales
contributed by the Italian automobile cigarette lighter line
acquired in December 1995, sales advanced approximately 16% in
the six months and 32% in the second quarter of 1996. For both
periods, the automotive products unit and the can lid unit both
recorded strong increases, while the real estate unit was down
approximately 20%. The automotive products unit benefitted from
the addition of the Italian lighter line, increases in its
electronics products area, and higher domestic lighter sales.
Sales of the can lid unit increased sharply in both periods, as
export sales more than tripled from 1995 levels, when the unit
was impacted by the economic difficulties in Mexico. In
addition, the unit recorded a solid improvement in domestic sales
in the second quarter. In both periods the real estate unit
recorded lower revenues due to higher vacancies and lower average
rents at the Clayton, Missouri office building. This unit
continues to sell properties, and in July, the office building in
Clayton, Missouri was sold. (See the Subsequent Event section of
the Management Discussion and Analysis).
Operating Income
Operating income increased 29% in the first six months of
1996 and 92% in the second quarter, primarily driven by
improvements in the Aerospace segment.
For both the six-months and second-quarter periods of 1996,
the Aerospace segment recorded small profits; whereas in 1995 the
segment reported losses in both periods. The full magnitude of
the improvement in the segment is obscured by the absence in 1996
of profits generated by Kollsman. In 1995, Kollsman contributed
operating income of $7.2 million for the six months and $4.7
million for the second quarter. In both 1996 periods, the Gas
<PAGE>
Operating Income (con't)
Turbine operation recorded substantially smaller losses than in
1995. For this unit, the benefits of improved profits from
operations in 1996 and the absence of a $7.2 million downsizing
charge taken in the second quarter of 1995 were partially offset
by substantial legal fees - - $13.7 million in the six months and
$8.5 million in the second quarter. These legal fees are related
to the litigation with the Pratt & Whitney division of United
Technologies (see Part II, Item 1 - Legal Proceedings for further
details). On an operating basis, Chromalloy's repair units
recorded significant improvements in profitability in both 1996
periods and the OEM units reported reduced losses in both
periods. ARC profits also advanced in both periods, primarily a
reflection of higher sales and lower bid and proposal and
research and development costs.
Operating income in the Machinery and Metal Coatings segment
declined 25% in the six months and 17% in the second quarter.
Advances at the can machinery unit were more than offset by
declines at the metal coatings and auxiliary press equipment
units. Results of the metal coatings unit reflect lower average
coating line utilization, increased costs related to the recently
acquired facilities, and lower container sales. In addition,
results for the six months reflect a sizable increase in the cost
of natural gas used to fuel coating ovens. The can machinery
unit recorded strong profit advances in both periods primarily
related to higher sales. At the overseas auxiliary press
equipment unit, losses were higher in both periods. For the six
months, the benefits of higher sales were offset by lower
pricing, higher warranty costs and severance provisions. The
second quarter was adversely affected by lower sales, pricing
pressures, higher warranty costs, and severance costs.
Operating income in the Specialty Chemicals segment
increased 2% for the six months but declined 12% in the second
quarter. The overseas unit was down in both periods, while the
domestic unit was ahead in both periods. Results at the overseas
unit were unfavorably affected by several factors: an unfavorable
foreign exchange rate shift; lower margins; the absence of
profits from the unit divested in mid-1995; and poor performance
at one of the European chemical distribution units. At the
domestic unit, profits advanced sharply against weak 1995
performance. Both periods benefitted from increased sales in
specialty polymers and improved margins. The six-month period
was also impacted by the favorable settlement of a lawsuit.
Operating income in the Other Products segment increased in
both periods, with all three units contributing to the advances.
<PAGE>
Operating Income (con't)
At the automotive products unit, profits advanced in both periods
primarily as a result of increased domestic sales, as well as by
the late 1995 addition of a new lighter line in Italy. At the
can lid unit, improved results primarily were derived from higher
sales. At the real estate unit, lower professional fees and
property taxes more than offset the impact of lower rental
revenue in both periods.
Other, Net
- ----------
In the second quarter of 1996, Other, net includes $3.0
million of income from a settlement with the counterparty to
interest-rate derivative transactions entered into in prior
years. Other, net includes charges of $1.1 million for
amortization of capitalized debt costs in the six-month periods
of 1996 and 1995, and $0.5 million in the three-month periods of
1996 and 1995. Other, net also includes $2.3 million and $1.0
million, respectively, of equity income from unconsolidated joint
ventures during the six-month and three-month periods of 1996 and
$0.4 million and $0.5 million, respectively, of equity losses
from unconsolidated joint ventures during the six-month and
three-month periods of 1995.
Income Tax Provision
- --------------------
The Company revises its effective tax rate quarterly to
reflect the best current estimate of its annual effective tax
rate. The effective tax rates for the six-month periods of
1996 and 1995 were based upon estimated annual pre-tax foreign
earnings and estimated annual pre-tax domestic losses adjusted
for goodwill amortization. The effective rates also reflect
the effect of a provision for state income and franchise taxes,
the favorable tax treatment of earnings of the Company's
foreign sales corporation and the establishment of a valuation
allowance to reduce the tax benefit for losses of the Company's
French subsidiaries. Separate domestic and foreign estimated
annual effective tax rates were determined and applied
separately to actual domestic losses and actual foreign
earnings. The tax (provision) benefit for the second quarters
of 1996 and 1995 represent the difference between the year-to-
date tax provisions recorded as of June 30, 1996 and 1995 and
the amounts reported for the first quarters of 1996 and 1995.
Liquidity
- ---------
During the first quarter of 1996, the Company extended its
revolving credit agreement (the "revolver") one year to March
31, 1998. Under the terms of the amended revolver, the maximum
amount of credit available under the facility was reduced from
$150.0 million to $125.0 million at the Company's request and
<PAGE>
Liquidity (con't)
- ---------
the facility fee was reduced from an annual rate of 0.5% to
0.375% of the maximum amount available under the credit line.
Management anticipates that cash flow from operations, proceeds
from the divestiture of assets, the $83.4 million of credit
available at August 8, 1996 under the revolving credit
agreement, the $45.0 million of available financing under the
Receivables Purchase Agreement, plus the $70.0 million of cash
and cash equivalents on hand at June 30, 1996 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 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 June 30, 1996 was $395.1
million ($330.4 million at December 31, 1995). There is no
seasonal variation in the Company's backlog.
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 $18 million to $46 million. At June
30, 1996, the Company's balance sheet includes accruals for
<PAGE>
Environmental Matters (con't)
- ---------------------
remediation costs of $38.2 million. These accruals are at
undiscounted amounts and are primarily included in accrued
expenses and other noncurrent liabilities. While the
possibility of recovery of some of the costs from insurance
companies exists, 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.
With respect to all known environmental liabilities, it is
currently estimated that the Company will spend in the range of
$8 million to $12 million during each of the following several
years. Actual remedial expenditures for the first six months
of 1996 were approximately $6.3 million.
Subsequent Event
- ----------------
On July 2, 1996, the Company sold the Chromalloy Plaza
Building, an 18-story office building in Clayton, Missouri, for
net cash proceeds of $11.3 million. The sale, which will not
have a significant impact on the Company's future operating
income, resulted in a pre-tax gain of $8.6 million.
<PAGE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
ASSETS
<CAPTION>
(Unaudited)
June 30, December 31,
1996 1995
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 69,989 $ 62,667
Trade receivables (less allowances of
$11,450 and $12,045) 264,189 255,342
Unbilled receivables (less allowances
of $2,250 and $1,616) 22,971 23,602
Inventories 226,035 242,126
Other current assets 31,459 37,476
---------- ----------
Total current assets 614,643 621,213
---------- ----------
INVESTMENTS
Net assets of discontinued operations 143,357 144,891
Other investments 17,978 15,891
---------- ----------
161,335 160,782
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET 478,908 496,588
---------- ----------
OTHER ASSETS
Excess of cost over net assets of
companies acquired 314,017 320,214
Deferred charges and other 21,560 23,181
---------- ----------
335,577 343,395
---------- ----------
TOTAL ASSETS $1,590,463 $1,621,978
========== ==========
<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)
June 30, December 31,
1996 1995
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 4,402 $ 16,316
Accounts payable 108,390 123,529
Taxes on income 45,165 38,422
Accrued expenses 156,027 146,388
---------- ----------
Total current liabilities 313,984 324,655
---------- ----------
NONCURRENT LIABILITIES
Long-term debt 560,040 563,245
Deferred taxes on income 3,724 3,521
Other noncurrent liabilities 145,735 153,962
---------- ----------
709,499 720,728
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock--$1 par value,
1,825,000 shares authorized,
797,000 shares of $5 cumulative
convertible stock issued in 1996
and 1995 (involuntary
liquidation value--$26,359 at
June 30, 1996) 797 797
Class A common stock--no par value,
25,000,000 shares authorized,
7,188,000 shares issued in 1996
and 1995 stated at 7,188 7,188
Class B common stock--no par value,
5,000,000 shares authorized,
3,727,000 shares issued in 1996
and 1995 stated at 3,727 3,727
Capital in excess of par value 287,256 287,204
Cumulative translation adjustment (824) 2,333
Retained earnings 353,569 360,290
---------- ----------
651,713 661,539
Less: Cost of treasury stock 84,733 84,944
---------- ----------
Total shareholders' equity 566,980 576,595
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
equity $1,590,463 $1,621,978
========== ==========
<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, 1995 AND PERIOD ENDED JUNE 30, 1996
(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, 1994 $ 797 $7,188 $3,727 $287,204 $ (1,899) $354,676 $ (85,202)
Net income - - - - - 8,779 -
Amortization of restricted
stock grant - - - - - - 258
Foreign currency translation
adjustment - - - - 4,906 - -
Sale of foreign subsidiary - - - - (674) - -
Cash dividends:
Preferred - $5.00 per share - - - - - (3,165) -
------ ------ ------ -------- -------- -------- ---------
Balance at December 31, 1995 $ 797 $7,188 $3,727 $287,204 $ 2,333 $360,290 $ (84,944)
Net Loss - - - - - (5,138) -
Stock grants forfeited - - - 307 - - (401)
Stock options exercised - - - (255) - - 491
Amortization of restricted
stock grant - - - - - - 121
Foreign currency translation
adjustment - - - - (3,157) - -
Cash dividends:
Preferred - $2.50 per share - - - - - (1,583) -
------ ------ ------ -------- -------- -------- ---------
Balance at June 30, 1996 $ 797 $7,188 $3,727 $ 287,256 $ (824) $353,569 $ (84,733)
====== ====== ====== ========= ======== ======== =========
<FN>
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
<TABLE>
Sequa Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)
<CAPTION>
For the Six Months
Ended June 30,
------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before income taxes $ 1,162 $ (6,862)
Adjustments to reconcile income (loss) to net
cash provided by operating activities:
Depreciation and amortization 45,854 49,191
Provision for losses on receivables 1,677 1,643
Equity in (income) losses of unconsolidated
joint ventures (2,277) 430
Other items not requiring (providing) cash 208 (2,998)
Changes in operating assets and liabilities,
net of business sold:
Receivables (12,229) 5,441
Inventories 14,705 (13,948)
Other current assets 5,024 (6,187)
Accounts payable and accrued expenses (3,377) (3,038)
Other noncurrent liabilities (9,279) (5,245)
-------- --------
Net cash provided by continuing operations
before income taxes 41,468 18,427
Net cash provided by discontinued
operations before income taxes 1,738 3,395
Income taxes refunded, net 241 1,973
-------- --------
Net cash provided by operating activities 43,447 23,795
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (24,114) (28,744)
Business sold - 5,162
Sale of property, plant and equipment 1,878 5,919
Other investing activities 1,291 53
-------- --------
Net cash used for investing
activities (20,945 (17,610)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 1,271 2,169
Payments of debt (15,509) (5,796)
Dividends paid (1,583) (1,582)
Proceeds from exercise of stock options 150 -
-------- --------
Net cash used for financing activities (15,671) (5,209)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents 491 (447)
-------- --------
Net increase in cash and cash equivalents 7,322 529
Cash and cash equivalents at beginning of period 62,667 18,655
-------- --------
Cash and cash equivalents at end of period $ 69,989 $ 19,184
======== ========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<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. At June 30, 1996 and December 31, 1995, SRC had no
obligations outstanding to its creditors. All material accounts
and transactions between the Company's consolidated subsidiaries
have been eliminated in consolidation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
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. Except for a $7.2 million charge recorded by
Chromalloy Gas Turbine during the second quarter of 1995 for
severance and plant closings, such adjustments 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 six months ended June
30, 1996 are not necessarily indicative of the results to be
expected for the full year.
<PAGE>
NOTE 2 - INVENTORIES
The inventory amounts at June 30, 1996 and December 31, 1995
were as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars)
(Unaudited)
June 30, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Finished Goods $ 69,339 $ 66,273
Work in process 75,135 72,600
Raw materials 84,869 106,627
Long-term contract costs 7,148 9,600
Progress payments (10,456) (12,974)
-------- --------
$226,035 $242,126
======== ========
</TABLE>
NOTE 3 - LOSSES PER SHARE
Primary losses per common share in 1996 and 1995 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 9,867,000
shares for the six and three month periods in 1996 and 1995.
Fully diluted losses per common share calculations for the
assumed conversion of the cumulative convertible preferred stock
were anti-dilutive in both the six-month and three-month periods
of 1996 and 1995.
<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
the Company involving allegations that are not routine and
include, in certain cases, compensatory and punitive damage
claims. Included in this other class of litigation is an
arbitration proceeding that was formally commenced in 1992 to
resolve a dispute between the Egyptian Air Force and Chromalloy
Gas Turbine Corporation, a subsidiary of Sequa. In 1994, the
arbitral tribunal issued a net award of $16.3 million plus
interest in favor of Chromalloy Gas Turbine. At June 30, 1996,
the Company's Consolidated Balance Sheet includes net assets of
approximately $17.5 million related to this issue. Chromalloy
Gas Turbine has filed a petition in the US District Court for the
District of Columbia to confirm and enforce the award. The
government of Egypt has succeeded in a challenge to this award in
the Court of Appeal of Cairo. Notwithstanding that Egyptian
court decision, the U.S. District Court recently granted
Chromalloy Gas Turbine's enforcement petition. The district
court's decision could be appealed by the Egyptian government to
the U.S. Court of Appeals for the D.C. Circuit.
On July 11, 1995, United Technologies Corporation, through
its Pratt & Whitney division, commenced an action against
Chromalloy Gas Turbine Corporation in the United States District
Court for the District of Delaware. The complaint seeks
unspecified monetary damages (including treble and punitive
damages with respect to certain claims) and injunctive relief
based upon alleged breaches of certain license agreements,
alleged infringement of patents and misuse of other Pratt &
Whitney intellectual and intangible property. This lawsuit is in
its preliminary stage and, accordingly, management cannot make an
evaluation of the likely outcome at this time. Management
intends to vigorously defend against all claims, which it regards
as substantially lacking in merit. In this connection, on August
30, 1995, Chromalloy Gas Turbine filed its answer denying the
significant allegations in such complaint, and included numerous
affirmative defenses and a counterclaim against United
Technologies. Since the filing of its answer, Chromalloy Gas
Turbine has added additional counterclaims against United
Technologies.
On August 29, 1995, Chromalloy Gas Turbine Corporation
commenced an action against United Technologies Corporation in
the District Court, 131st Judicial District, of Bexar County,
Texas. This is a suit to recover monetary damages (including
treble and punitive damages) and for injunctive relief based upon
Chromalloy Gas Turbine's claims that United Technologies has
<PAGE>
ITEM 1 - LEGAL PROCEEDINGS (con't)
-----------------
violated the Texas Free Enterprise and Antitrust Act. On October
2, 1995, United Technologies filed its answer denying the
material allegations of the petition and raising certain
affirmative defenses. On December 28, 1995, United Technologies
filed counterclaims in this action seeking monetary damages and
injunctive relief. Both parties have amended their pleadings
during the course of discovery. The trial is currently scheduled
to commence on August 19, 1996. Chromalloy Gas Turbine's claims
focus on allegedly illegal, exclusionary and monopolistic
activities with respect to key segments of commerce in repairs
for Pratt & Whitney commercial jet engines. While management
cannot predict the outcome of this litigation at this time, in
management's opinion, a successful outcome, including the
possible award of injunctive and monetary relief to restore
competition in areas of commerce now alleged to have been
unlawfully foreclosed and restrained, could be favorable to the
Company.
Related to the above lawsuits, Chromalloy Gas Turbine's
divisions compete for turbine engine repair business with a
number of other major companies, including the original equipment
manufacturers (OEM). Such OEM's generally have obligations
(contractual and otherwise) to approve vendors to manufacture
components for their engines and/or perform repair services on
their engines and components. Chromalloy Gas Turbine has a
number of such approvals, including licensing agreements, which
allow it to manufacture and repair certain components of flight
engines. The loss of approval by one of the major OEMs to
manufacture or repair components for such OEM's engines could
have an adverse effect on Chromalloy Gas Turbine, although
management believes it has certain actions available to it to
mitigate the adverse effect.
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
significant impact on the Company's results of operations for
that period.
<PAGE>
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Annual Meeting of Stockholders of Sequa Corporation was
held on May 16, 1996, for the purpose of electing directors and
approving the appointment of independent public accountants.
Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities Exchange Act of 1934, and there was no
solicitation in opposition to management's solicitations.
All of management's nominees for directors, as listed in the
proxy statement, were elected with the following vote:
Name of Nominee Votes For Votes Withheld
Norman E. Alexander 37,359,706 1,040,075
Alvin Dworman 37,363,411 1,036,370
A. Leon Fergenson 37,360,399 1,039,382
David S. Gottesman 37,366,536 1,033,245
Stuart Z. Krinsly 37,360,328 1,039,453
Donald D. Kummerfeld 37,368,058 1,031,723
Richard S. LeFrak 37,366,416 1,033,365
John J. Quicke 37,368,361 1,031,420
Michael I. Sovern 37,368,123 1,031,658
Fred R. Sullivan 37,359,864 1,039,917
Gerald Tsai, Jr. 37,365,767 1,034,014
The appointment of Arthur Andersen LLP as independent public
accountants was approved by the following vote:
Votes For Votes Against Votes Abstaining
37,847,615 544,503 7,663
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) Exhibits
11.1 Schedule showing calculations of Primary and
Fully Diluted Loss Per Share for the six-month
and three-month periods ended June 30, 1996 and
1995.
27.1 Financial Data Schedule, filed herewith.
(B) Reports on Form 8-K
No report on Form 8-K was filed during the three-
month period ended June 30, 1996.
<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
August 14, 1996
<PAGE>
<TABLE>
EXHIBIT 11
SEQUA CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED LOSSES PER SHARE
<CAPTION>
(Unaudited)
For the Six Months
Ended June 30,
----------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY
-------
Loss
Net loss $ (5,138) $ (7,962)
Preferred stock dividend requirements (1,583) (1,582)
-------- --------
Net loss applicable to common stock $ (6,721) $ (9,544)
======== ========
Shares
Weighted average common shares outstanding 9,867 9,867
======== ========
Primary net loss per common share $ (.68) $ (.97)
======== ========
* FULLY DILUTED
-------------
Loss
Net loss $ (5,138) $ (7,962)
======== ========
Shares
Fully diluted common and equivalent shares 10,705 10,705
======== ========
Fully diluted net loss per common share $ (.48) $ (.74)
======== ========
SHARES
------
Weighted average common shares outstanding 9,867 9,867
Preferred stock assumed to be converted 838 838
-------- --------
Fully diluted common and equivalent shares 10,705 10,705
======== ========
<FN>
(*)The 1996 and 1995 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>
<PAGE>
<TABLE>
EXHIBIT 11
SEQUA CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED LOSSES PER SHARE
<CAPTION>
(Unaudited)
For the Three Months
Ended June 30,
-------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY
-------
Loss
Net loss $ (1,385) $ (6,087)
Preferred stock dividend requirements (792) (791)
-------- --------
Net loss applicable to common stock $ (2,177) $ (6,878)
======== ========
Shares
Weighted average common shares outstanding 9,867 9,867
======== ========
Primary net loss per common share $ (.22) $ (.70)
======== ========
* FULLY DILUTED
-------------
Loss
Net loss $ (1,385) $ (6,087)
======== ========
Shares
Fully diluted common and equivalent shares 10,705 10,705
======== ========
Fully diluted net loss per common share $ (.13) $ (.57)
======== ========
SHARES
------
Weighted average common shares outstanding 9,867 9,867
Preferred stock assumed to be converted 838 838
-------- --------
Fully diluted common and equivalent shares 10,705 10,705
======== ========
<FN>
* The 1996 and 1995 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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 69,989
<SECURITIES> 0
<RECEIVABLES> 300,860
<ALLOWANCES> 13,700
<INVENTORY> 226,035
<CURRENT-ASSETS> 614,643
<PP&E> 1,035,222
<DEPRECIATION> 556,314
<TOTAL-ASSETS> 1,590,463
<CURRENT-LIABILITIES> 313,984
<BONDS> 560,040
0
797
<COMMON> 10,915
<OTHER-SE> 555,268
<TOTAL-LIABILITY-AND-EQUITY> 1,590,463
<SALES> 710,562
<TOTAL-REVENUES> 710,562
<CGS> 572,437
<TOTAL-COSTS> 687,420
<OTHER-EXPENSES> (4,402)
<LOSS-PROVISION> 1,677
<INTEREST-EXPENSE> 26,383
<INCOME-PRETAX> 1,162
<INCOME-TAX> 6,300
<INCOME-CONTINUING> (5,138)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,138)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> (0.48)
</TABLE>
