<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 March 31, 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 May 9, 1996
--------------------------
Class A Common Stock, no par value 6,538,708
Class B Common Stock, no par value 3,330,780<PAGE>
<PAGE>
<TABLE>
SEQUA CORPORATION
PART I - FINANCIAL INFORMATION
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
For the Three Months
Ended March 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
SALES $349,126 $327,534
-------- --------
COSTS AND EXPENSES
Cost of sales 283,872 261,511
Selling, general and adminstrative 55,132 54,916
-------- --------
339,004 316,427
-------- --------
OPERATING INCOME 10,122 11,107
Other income (expense)
Interest expense (13,248) (13,346)
Interest income 1,040 872
Other, net (317) 992
-------- --------
LOSS BEFORE INCOME TAXES (2,403) (375)
Income tax provision (1,350) (1,500)
-------- --------
NET LOSS (3,753) (1,875)
Preferred dividend requirements (791) (791)
-------- --------
NET LOSS APPLICABLE TO COMMON STOCK $ (4,544) $ (2,666)
======== ========
LOSS PER SHARE $ (.46) $ (.27)
======== ========
DIVIDENDS DECLARED PER SHARE
Preferred $ 1.25 $ 1.25
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<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)
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aerospace $189.0 $195.0 $ - $(0.2)
Machinery & Metal Coatings 79.5 52.6 4.2 6.5
Specialty Chemicals 58.3 59.8 10.5 9.0
Other Products 22.3 20.1 2.2 2.6
Corporate - - (6.8) (6.8)
----- ----- ----- -----
TOTAL $349.1 $327.5 $10.1 $11.1
====== ====== ===== =====
</TABLE>
Sales
- -----
Sales increased 7% in the first quarter of 1996, compared
with the same period of 1995. After eliminating the contribution
to 1995 sales of units that have been divested and the
contribution to 1996 sales of units acquired in the second half
of 1995, pro forma sales increased approximately 15% in the first
quarter of 1996.
In the Aerospace segment, sales declined 3% due entirely to
absence of the sales of the Kollsman unit, which was divested in
December 1995. On a pro forma basis, the combined sales of the
two operations remaining in the segment, Chromalloy Gas Turbine
and ARC Propulsion, increased 14% in 1996, with both operations
contributing to the advance. Sales of the Gas Turbine operation
advanced despite continued pricing pressure, particularly in the
repair business. Repair sales advanced 15% with both commercial
and military work contributing to the increase, and OEM sales
rose 5%. The first quarter trend in repair volume and overall
sales continued in April. ARC propulsion achieved a strong sales
increase in the first quarter, as a solid advance in the sale of
air bag components and increases in the MLRS, Sidewinder and
MK104 Standard Missile programs, were tempered by declines in
other military programs.
Sales of the Machinery and Metal Coatings segment increased
51%, with particular strength in can machinery and a further
boost from sales added through the July 1995 acquisition of two
metal coatings plants. Without the revenues generated by these
plants, Precoat Metals recorded slightly lower sales for the
quarter --- the result of a reduced level of container business
that occurred when a large customer returned some of its work in
house. Can machinery sales were up sharply from 1995, due to
strong demand for can decorating equipment, timing of decorating
equipment shipments and the favorable market response accorded a
recently introduced new bodymaker. This unit has a solid backlog
<PAGE>
Sales (con't)
- -----
of orders for delivery in the second quarter and throughout the
year. At MEG, sales increased 35%, driven primarily by a sharp
rise in the number of flying pasters sold in the 1996 quarter.
Sales in the Specialty Chemicals segment decreased 2%, with
a decline at the overseas unit partially offset by an advance at
the domestic unit. The overseas unit was affected by the
disposition in mid-1995 of a manufacturing facility that produced
textile and bromine chemicals, and by a 3% unfavorable shift in
currency exchange rates. Sales of detergent additives and sales
generated by the specialty chemical distribution operation
recorded modest advances when measured in local currencies. At
the domestic unit advances in the specialty polymer, paper
specialties and graphics product lines were tempered by lower
sales of textile and paper chemicals.
Sales of the Other Products segment advanced 11%, with both
the automotive products unit and the can lid unit ahead for the
period. The automotive products unit recorded a solid advance
due entirely to the late 1995 acquisition of a European
automobile lighter product line. Without this acquisition, sales
for the 1996 quarter would have declined slightly, primarily as a
result of the General Motors strike. Sales of NCS increased 13%
in the 1996 quarter, as sharply higher export sales offset a
small decline in domestic sales. Rental revenues at the real
estate unit were down 17% chiefly due to a higher vacancy rate
and lower average rent in the Clayton, Missouri office building,
as well as the sale of several properties by this unit.
Operating Income
- ----------------
Operating income for the first quarter of 1996 was down 9%
compared with the same quarter of 1995. Improvements in the
operating performance of Chromalloy Gas Turbine and an advance by
the Specialty Chemicals segment were more than offset by several
factors: substantial legal expenses related to the Pratt &
Whitney litigation (Additional information about this litigation
is included on pages 15 and 16 of this Quarterly Report of Form
10-Q); the absence of profits from Kollsman; and the declines in
the Machinery and Metal Coatings and the Other Products segments.
The Aerospace segment recorded a slight improvement in
operating results, despite the absence of profits contributed by
the Kollsman unit, which was sold in late 1995. The Chromalloy
Gas Turbine operation posted a solid advance (in spite of legal
expenses associated with the Pratt & Whitney litigation), as the
combination of improved sales and lower internal costs began to
become evident. Chromalloy's repair units recorded a significant
<PAGE>
Operating Income (con't)
- ----------------
improvement in profitability in the first quarter, while the OEM
units registered a significantly smaller loss. In 1996, Gas
Turbine's reported loss, which includes substantial litigation
expenses, was reduced significantly. The ARC Propulsion unit
recorded operating income on a par with the 1995 first quarter,
as the benefits of increased sales and lower bid and proposal
costs were offset by lower margins on solid propulsion rocket
motor programs and weaker results in both advanced materials and
liquid rocket motors.
Operating income in the Machinery and Metal Coatings
segment declined 36%, as the advance at the can machinery unit
was more than offset by a decline at the metal coatings operation
and by increased losses at the auxiliary press equipment unit.
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, this
unit was affected by a significant increase in prices paid for
natural gas used to fuel its curing ovens. The can machinery
unit recorded a strong first quarter profit advance, as a result
of higher sales. Based on current backlog, management anticipates
improved profits for 1996. The auxiliary press equipment unit
incurred a larger loss in the first quarter of 1996, as the
benefits of increased sales were more than offset by lower
pricing, increased warranty costs, severance costs, and expenses
related to a program to improve operating efficiencies.
Management currently anticipates a gradual improvement of results
at MEG over the course of 1996.
Operating income in the Specialty Chemicals segment
increased 17% as a sharp advance at the domestic unit was
tempered by a small decline at the overseas unit. At the
overseas unit, local currency profits from the detergent
chemicals and specialty chemicals distribution operations were on
a par with the year earlier level. The decline was primarily due
to the disposition of the manufacturing unit in mid 1995, and a
small unfavorable swing in exchange rates. At the domestic unit
profits were up due to improved margins and the favorable
settlement of a lawsuit.
Operating income in the Other Products segment declined
16%, as a result of reduced profits at the automotive products
unit and the real estate unit. Profits at the automotive unit
reflect both lower sales caused by the General Motors strike and lower
overall margins. At the NCS unit, profits were on a par with
year earlier levels, as the benefit of higher sales was offset by
increased manufacturing expenses. At the Centor unit, profits
declined due to lower rental income.
<PAGE>
Other, Net
- ----------
In the first quarter of 1996, Other, net includes $0.5
million in amortization of capitalized debt costs and $1.3
million of equity in the income of unconsolidated joint ventures.
In the first quarter of 1995, Other, net includes a $2.0 million
gain on the sale of an investment, amortization of capitalized
debt costs in the amount of $0.5 million, and $0.1 million of
equity in the income of unconsolidated joint ventures.
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 first quarters 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.
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 the
facility fee was reduced from an annual rate of 0.5% to 0.375% of
the maximum amount available under the credit line. In early
1997, it is the Company's intention to arrange a new credit
agreement with a term of at least three years.
Management anticipates that cash flow from operations,
proceeds from the divestiture of assets, the $83.4 million of
credit available at May 8, 1996 under the revolving credit
agreement, the $45.0 million of available financing under the
Receivables Purchase Agreement, plus the $51.8 million of cash
and cash equivalents on hand at March 31, 1996 will be more than
sufficient to fund the Company's operations for the foreseeable
future.
<PAGE>
Backlog
- -------
The businesses of Sequa for which backlogs are significant
are the Turbine Airfoils, Caval Tool, Turbocombustor Technologies
and Castings units of Chromalloy Gas Turbine, and the ARC
Propulsion operations of the Aerospace segment; and the Can
Machinery, MEG and Precoat Metals operations of the Machinery and
Metal Coatings segment. The aggregate dollar amount of backlog
in these segments at March 31, 1996 was $387.2 million ($346.4
million at December 31, 1995). There is no seasonal variation in
the Company's backlog.
Environmental Liabilities
- -------------------------
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 known conditions, probable
conditions, regulatory requirements, existing technology, past
expenditures, and other potentially responsible parties and their
probable level of involvement. Outside legal, scientific and
technical 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 $20 million to $48 million. At March 31,
1996, the Company's balance sheet includes accruals for
remediation costs of $40.3 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 next several years.
Actual remedial expenditures for the first three months of 1996
were approximately $4.2 million.
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
ASSETS
------
<CAPTION>
(Unaudited)
March 31, December 31,
1996 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 51,781 $ 62,667
Trade receivables (less allowances
of $12,172 and $12,045) 256,775 255,342
Unbilled receivables (less
allowances of $2,089 and $1,616) 28,490 23,602
Inventories 242,157 242,126
Other current assets 34,792 37,476
---------- ----------
Total current assets 613,995 621,213
---------- ----------
INVESTMENTS
Net assets of discontinued operations 148,058 144,891
Other investments 18,673 15,891
---------- ----------
166,731 160,782
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET 485,143 496,588
---------- ----------
OTHER ASSETS
Excess of cost over net assets of
companies acquired 317,482 320,214
Deferred charges and other 22,073 23,181
---------- ----------
339,555 343,395
---------- ----------
TOTAL ASSETS $1,605,424 $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)
March 31, December 31,
1996 1995
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 15,457 $ 16,316
Accounts payable 107,546 123,529
Taxes on income 40,838 38,422
Accrued expenses 159,832 146,388
---------- ----------
Total current liabilities 323,673 324,655
---------- ----------
NONCURRENT LIABILITIES
Long-term debt 561,615 563,245
Deferred taxes on income 1,627 3,521
Other noncurrent liabilities 150,334 153,962
---------- ----------
Total noncurrent liabilities 713,576 720,728
---------- ----------
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 March 31, 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 287,204 287,204
Cumulative translation adjustment (1,607) 2,333
Retained earnings 355,746 360,290
---------- ----------
653,055 661,539
Less: Cost of treasury stock 84,880 84,944
---------- ----------
Total shareholders' equity 568,175 576,595
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,605,424 $1,621,978
========== ==========
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Year Ended December 31, 1995 and period ended March 31, 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 - - - - - (3,753) -
Amortization of restricted
stock grant - - - - - - 64
Foreign currency translation
adjustment - - - - (3,940) - -
Cash dividends:
Preferred - $1.25 per share - - - - - (791) -
------ ------ ------ -------- -------- -------- ---------
Balance at March 31, 1996 $ 797 $7,188 $3,727 $287,204 $ (1,607) $355,746 $ (84,880)
====== ====== ====== ======== ======== ======== =========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
For the Three Months
Ended March 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss before income taxes $ (2,403) $ (375)
Adjustments to reconcile loss to net cash
provided by operating activities:
Depreciation and amortization 22,925 23,813
Provision for losses on receivables 863 538
Equity in income of unconsolidated joint ventures (1,292) (117)
Other items not requiring (providing) cash 190 (1,597)
Changes in operating assets and liabilities,
net of business sold:
Receivables (9,066) 8,201
Inventories (1,000) (12,382)
Other current assets 2,531 (3,422)
Accounts payable and accrued expenses (1,031) 5,761
Other noncurrent liabilities (5,945) (4,342)
-------- --------
Net cash provided by continuing operations
before income taxes 5,772 16,078
Net cash provided by (used for) discontinued
operations before income taxes (2,644) 873
Income taxes refunded (paid), net (720) 265
-------- --------
Net cash provided by operating activities 2,408 17,216
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (11,894) (13,332)
Business sold - 5,162
Sale of property, plant and equipment 1,734 1,406
Other investing activities 431 2,713
-------- --------
Net cash used for investing activities (9,729) (4,051)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 1,078 595
Payments of debt (3,445) (4,341)
Dividends paid (791) (791)
-------- --------
Net cash used for financing activities (3,158) (4,537)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (407) (278)
-------- --------
Net increase (decrease) in cash and cash equivalents (10,886) 8,350
Cash and cash equivalents at beginning of period 62,667 18,655
-------- --------
Cash and cash equivalents at end of period $ 51,781 $ 27,005
======== ========
<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 March 31, 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. All adjustments to the March 31, 1995 and
March 31, 1996 interim periods 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 three months ended March 31, 1996
are not necessarily indicative of the results to be expected for
the full year.
<PAGE>
<TABLE>
NOTE 2 - INVENTORIES
The inventory amounts at March 31, 1996 and December 31, 1995 were as
follows:
<CAPTION>
(Amounts in thousands)
(Unaudited)
March 31, December 31,
1996 1995
-------- -----------
<S> <C> <C>
Finished Goods $ 67,388 $ 66,273
Work in process 77,404 72,600
Raw materials 103,805 106,627
Long-term contract costs 6,391 9,600
Customer deposits (12,831) (12,974)
-------- --------
$242,157 $242,126
======== ========
</TABLE>
<TABLE>
NOTE 3 - DISCONTINUED OPERATIONS
Net assets of discontinued operations approximate net realizable value
and have been classified as noncurrent. The amounts the Company will
ultimately realize from the leveraged lease portfolio and other investments
could differ materially from management's best estimates of their
realizable value. A summary of the net assets of discontinued operations
is as follows:
<CAPTION>
(Amounts in thousands)
(Unaudited)
March 31, December 31,
1996 1995
-------- -----------
<S> <C> <C>
Receivables, net $ 13,641 $ 7,788
Inventories 5,346 6,765
Investment in leveraged leases and other
investments 158,482 159,987
Property, plant, and equipment, net 2,703 2,807
Other assets 10,338 11,123
-------- --------
Total assets 190,510 188,470
-------- --------
Accounts payable 2,321 2,438
Accrued expenses 3,968 4,425
Debt 29,411 29,528
Other noncurrent liabilities 6,752 7,188
-------- --------
Total liabilities 42,452 43,579
Net assets of discontinued operations $148,058 $144,891
======== ========
</TABLE>
Debt of discontinued operations represents the accreted
principal amount of the $25.0 million in proceeds received from
the non-recourse securitization of Sequa Capital's leveraged
lease portfolio in 1994. The leveraged lease cash flow stream
will service the payment of interest and principal until the loan
is paid off. To the extent that the leveraged lease cash flow
stream during the next several years is less than the amount
necessary to service the debt, the loan will increase.
Subsequent to the payment of the secured indebtedness, the
remaining investment in leveraged leases will be liquidated over
time as rentals are received and residual values are realized.
Disposal activities are ongoing for other discontinued assets.
<PAGE>
NOTE 4 - LOSS 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 three
month periods in 1996 and 1995.
Fully diluted loss per common share calculations for the
assumed conversion of the cumulative convertible preferred stock
were anti-dilutive in the first quarters of 1996 and 1995.
<TABLE>
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
<CAPTION>
(Amounts in thousands)
(Unaudited)
Three Months Ended
------------------
March 31,
---------
1996 1995
---- ----
<S> <C> <C>
Net cash provided by (used for) discontinued
operations:
Changes in working capital $ (4,701) $ 529
Decrease in debt (117) (117)
Principal repayments on leasing assets 1,541 1,565
Sale of leasing assets 39 475
Other changes in net assets 594 (1,579)
-------- --------
$ (2,644) $ 873
======== ========
<FN>
Other supplemental cash flow information:
Interest paid was $0.1 million during the three months ended
March 31, 1996 and 1995.
</TABLE>
<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 an award of $16.3 million plus interest
in favor of Chromalloy Gas Turbine. At March 31, 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. Management does not believe that
this will prevent the ultimate collection of the award.
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.
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
violated the Texas Free Enterprise and Antitrust Act, and engaged
in unfair competition and tortiously interfered with Chromalloy
Gas Turbine's business relations. On October 2, 1995, United
Technologies filed its answer denying the material allegations of
<PAGE>
ITEM 1 - LEGAL PROCEEDINGS (con't)
the petition and raising certain affirmative defenses. On
December 28, 1995, United Technologies filed counterclaims in
this action seeking monetary damages and injunctive relief.
Chromalloy Gas Turbine intends to formally respond to these
counterclaims. 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 OEMs 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 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
10.1 Amendment No. 5 (dated as of March 29, 1996) to
the Amended and Restated Credit Agreement, dated
as of December 14, 1993, filed herewith.
11.1 Schedule showing calculations of Primary and Fully
Diluted Loss Per Share for the 3-month periods
ended March 31, 1996 and 1995.
27.1 Financial Data Schedule, filed herewith.
(B) Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K,
dated January 16, 1996, in connection with the
Registrant's sale of Kollsman to EL-OP U.S., Inc.
<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
May 14, 1996
18
<TABLE>
EXHIBIT 11.1
SEQUA CORPORATION
CALCULATION OF PRIMARY AND FULLY DILUTED LOSS PER SHARE
-------------------------------------------------------
(Amounts in thousands, except earnings per share)
<CAPTION>
(Unaudited)
For the Three Months
Ended March 31,
------------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY
Loss
Net loss $(3,753) $(1,875)
Preferred stock dividend requirements (791) (791)
------- -------
Net loss applicable to common shareholders $(4,544) $(2,666)
======= =======
Shares
Common and common equivalent shares 9,867 9,867
======= =======
Primary loss per common share
Net loss $ (.46) $ (.27)
======= =======
*FULLY DILUTED
Loss
Net loss $(3,753) $(1,875)
======= =======
Shares
Common and common equivalent shares 10,705 10,705
======= =======
Fully diluted loss per common share
Net loss $ (.35) $ (.18)
======= =======
SHARES
Weighted average common shares outstanding 9,867 9,867
Preferred stock assumed to be converted 838 838
------- -------
Common and common equivalent shares 10,705 10,705
======= =======
<FN>
(*)The 1996 and 1995 fully diluted loss per share calculations are
anti-dilutive; therefore, fully diluted losses per share have not been
presented in the Consolidated Statement of Income.
</TABLE>
<PAGE>
AMENDMENT NO. 5
Dated as of March 29, 1996
to
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 14, 1993
Sequa Corporation, a Delaware corporation (the
"Borrower"), The Bank of New York, as Administrative Agent (the
"Administrative Agent"), The Bank of New York, The Bank of Nova
Scotia and Chemical Bank, as Managing Agents (the "Managing
Agents"), Bank of America National Trust and Savings Association,
Chase Manhattan Bank, N.A. and The Nippon Credit Bank, Ltd., as
Co-Agents (the "Co-Agents"), and the banks listed on the
signature pages hereto (the "Banks") agree as follows:
SECTION 1. CREDIT AGREEMENT. Reference is made to
the Amended and Restated Credit Agreement, dated as of December
14, 1993 among the Borrower, the Administrative Agent, the
Managing Agents, the Co-Agents and the Banks, as amended by
Amendment No. 1, dated as of June 13, 1994, Amendment No. 2,
dated as of December 14, 1994, Amendment No. 3 and Waiver, dated
as of March 3, 1995 and Amendment No. 4, Consent and Waiver,
dated as of April 1, 1995 (as so amended, the "Credit
Agreement"). Capitalized terms used herein but not defined
herein shall have the meanings ascribed thereto in the Credit
Agreement. The Credit Agreement as amended by this Amendment No.
5 is and shall continue to be in full force and effect and is
hereby in all respects ratified and confirmed.
SECTION 2. AMENDMENTS. Upon and after the
Amendment Effective Date (as defined in Section 4 hereof), the
Credit Agreement shall be amended as follows:
(a) Section 1.09(b) is amended by
(i) replacing the figure "0.50%" in the fourth
line thereof with the figure "0.375%"; and
(ii) deleting in its entirety the phrase
"; PROVIDED THAT, for each day during which the Borrower's long-
term senior debt shall be rated both (i) Baa3 or better by
Moody's Investors Service and (ii) BBB- or better by Standard &
Poor's Corporation, the applicable rate per annum shall instead
be 0.375%";
<PAGE>
(b) Section 4.13(c) is amended by replacing the table
therein with the following:
"CALENDAR YEAR MAXIMUM CAPITAL EXPENDITURES
1993 $85,000,000;
1994 $95,000,000 (less the
aggregate amount of Capital
Expenditures made in calendar
year 1993 in excess of
$80,000,000);
1995 $100,000,000;
1996 $100,000,000;
1997 $100,000,000;
1998 $100,000,000;";
(c) Section 4.16 is amended by replacing the table
therein with the following:
"DATE MINIMUM FIXED CHARGE
COVERAGE RATIO
December 31, 1994 1.70 to 1.00
March 31, 1995 1.70 to 1.00
June 30, 1995 1.70 to 1.00
September 30, 1995 1.80 to 1.00
December 31, 1995 2.00 to 1.00
March 31, 1996 2.25 to 1.00
Thereafter 2.25 to 1.00";
(d) Section 5.01(a) is amended to read in its entirety
as follows:
"(a) MONTHLY OPERATING REPORTS; OFFICER's
CERTIFICATE. As soon as available and in any event within 30
days after the close of each monthly accounting period
beginning on or after November 1, 1993, Monthly Operating
<PAGE>
Reports of the Borrower and the Consolidated Subsidiaries as
at the end of such monthly period, together with a
certificate of the president, chief financial officer,
controller or treasurer of the Borrower stating that such
reports (a) were prepared in good faith and (b) present with
reasonable accuracy the financial performance for the
covered period.";
(e) Section 10.01 is amended by
(i) inserting before the period at the end of the
definition of "CONSOLIDATED NET INCOME" therein the following:
"; and PROVIDED FURTHER, that all gains described in
clause (y) of the definition of Consolidated Net Worth
in excess of all losses described in such clause shall
be disregarded in the computation of Consolidated Net
Income"; and
(ii) restating the definition of "MATURITY DATE"
therein in its entirety as follows:
"`MATURITY DATE' means, unless extended under
Section 1.15 of this Agreement, March 31, 1998."; and
(f) Annex A is amended, in its entirety, to read as
set forth on Annex A attached hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of
the Borrower and each Guarantor (as defined after giving effect
to this Amendment No. 5) has the power, and has taken all
necessary action (including any necessary stockholder action) to
authorize it, to execute, deliver and perform in accordance with
its terms Amendment No. 5 and the Credit Agreement as amended
thereby. Amendment No. 5 has been duly executed and delivered by
the Borrower and each such Guarantor and is a legal, valid and
binding obligation of each Loan Party that is a party thereto,
enforceable against such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally. The execution,
delivery and performance in accordance with its terms by the
Borrower and such Guarantors of Amendment No. 5 and the Credit
Agreement as amended thereby do not and (absent any change in any
Applicable Law or applicable Contract) will not (a) require any
Governmental Approval or any other consent or approval, including
any consent or approval of any Subsidiary or any consent or
approval of the stockholders of the Borrower or any Subsidiary or
(b) violate or conflict with, result in a breach of, constitute a
default under, or result in or require the creation of any Lien
upon any assets of the Borrower or any Subsidiary under, (i) any
<PAGE>
Contract to which the Borrower or any Subsidiary is a party or by
which the Borrower or any Subsidiary or any of their respective
properties may be bound, the breach of which, either singly or in
the aggregate with all other such Contracts, would have a
Materially Adverse Effect upon the Borrower or any Subsidiary, or
(ii) any Applicable Law.
SECTION 4. AMENDMENT EFFECTIVE DATE; CONDITIONS TO
EFFECTIVENESS. This Amendment No. 5 shall become effective as of
the date first written above (the "Amendment Effective Date") on
the first date on which this Amendment No. 5 shall have been duly
executed and delivered by the Borrower, the Guarantors and the
Banks and the Administrative Agent has received each of the
following, in form and substance and, in the case of the
materials referred to in clauses (a), (b), (c) and (e) certified
in a manner satisfactory to the Administrative Agent and
Winthrop, Stimson, Putnam & Roberts, special counsel to the
Administrative Agent:
(a) a certificate of the Secretary or an Assistant
Secretary of each Loan Party, dated the Amendment Effective Date,
substantially in the form of SCHEDULE 2.01(a)(i) or (ii) to the
Credit Agreement, as the case may be, to which shall be attached
copies of the resolutions and by-laws referred to in such
certificate;
(b) a copy of the certificate of incorporation of each
Loan Party, (x) certified, as of a recent date, by the Secretary
of State or other appropriate official of such Loan Party's
jurisdiction of incorporation or (y) if such Loan Party has
previously delivered such a certified copy of its certificate of
incorporation to the Administrative Agent, certified, as of the
Amendment Effective Date, by the Secretary or other appropriate
officer of such Loan Party, which certificate shall certify that
the certificate of incorporation for such Loan Party has not been
amended or modified since the date of the previously delivered
Secretary of State's certificate;
(c) a good standing certificate with respect to each
Loan Party and each of their respective U.S. domestic Material
Subsidiaries, issued as of a recent date by the Secretary of
State or other appropriate official of such Person's jurisdiction
of incorporation;
(d) an opinion of counsel for each Loan Party, dated
the Amendment Effective Date, in form satisfactory to the
Managing Agents;
(e) a certificate of the president, chief financial
officer or treasurer of the Borrower, certifying that,
<PAGE>
immediately prior to giving effect to this Amendment No. 5, no
Default exists under the Credit Agreement;
(f) payment of all facility fees accrued and unpaid as
of the Amendment Effective Date pursuant to Section 1.09(b) and
payment of such fees and expenses of Winthrop, Stimson, Putnam &
Roberts, special counsel to the Administrative Agent, as shall
have been billed as of the Effective Date; and
(g) such instruments and other documents as the
Administrative Agent or its special counsel may request.
SECTION 5. GOVERNING LAW. This Amendment No. 5
shall be construed in accordance with and governed by the
substantive law of the State of New York.
SECTION 6. HEADINGS. Section headings in this
Amendment No. 5 are included herein for convenience and reference
only and shall not constitute a part of this Amendment No. 5 for
any other purpose.
SECTION 7. COUNTERPARTS. This Amendment No. 5 may
be executed in any number of counterparts and on separate
counterparts, each of which shall be deemed to be an original and
shall be binding upon the parties, their successors and assigns.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment No. 5, or caused it to be executed and delivered
by their duly authorized officers, all as of the day and year
first above written.
SEQUA CORPORATION
By_____________________________________
Name:
Title:
CASCO INVESTORS CORPORATION
CHROMALLOY AMERICAN CORPORATION
CHROMALLOY GAS TURBINE CORPORATION
SEQUA CHEMICALS, INC.
CASCO PRODUCTS CORPORATION
SEQUA FINANCIAL CORPORATION
NORTHERN TECHNOLOGIES, INC.
each as a Guarantor,
By___________________________________
Name:
Title:
THE BANK OF NEW YORK, as Administrative
Agent, as a Managing Agent and as a Bank
By_____________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Managing Agent
and as a Bank
By_____________________________________
Name:
Title:
<PAGE>
CHEMICAL BANK, as a Managing Agent and
as a Bank
By_____________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Co-Agent and as a Bank
By_____________________________________
Name:
Title:
CHASE MANHATTAN BANK, N.A., as a Co-Agent and
as a Bank
By_____________________________________
Name:
Title:
THE NIPPON CREDIT BANK, LTD., as a Co-Agent
and as a Bank
By_____________________________________
Name:
Title:
BANK BRUSSELS LAMBERT, NEW YORK BRANCH
By_____________________________________
Name:
Title:
By_____________________________________
Name:
Title:
<PAGE>
ANNEX A
Banks, Lending Offices
and Notice Addresses Commitments
- --------------------- -----------
THE BANK OF NEW YORK $27,500,000
Domestic Lending Office:
THE BANK OF NEW YORK
One Wall Street
New York, New York 10286
Eurodollar Lending Office:
THE BANK OF NEW YORK
One Wall Street
New York, New York 10286
Notice Address:
THE BANK OF NEW YORK
One Wall Street
New York, New York 10286
Facsimile No. : (212) 635-1480
Telephone No. : (212) 635-1368
Attention: William A. Kerr
Pro rata share of aggregate amount of all Commitments as of March
29, 1996 : 22.00000000%<PAGE>
<PAGE>
THE BANK OF NOVA SCOTIA $27,500,000
Domestic Lending Office:
THE BANK OF NOVA SCOTIA
NEW YORK AGENCY
One Liberty Plaza
New York, New York 10006
Eurodollar Lending Office:
THE BANK OF NOVA SCOTIA
NEW YORK AGENCY
One Liberty Plaza
New York, New York 10006
Notice Address:
THE BANK OF NOVA SCOTIA
One Liberty Plaza
26th Floor
New York, New York 10006
Facsimile No. : (212) 225-5090
Telephone No. : (212) 225-5070
Attention: Herman Santiago
Pro rata share of aggregate amount of all Commitments as of March
29, 1996 : 22.00000000%
CHEMICAL BANK $27,500,000
Domestic Lending Office:
CHEMICAL BANK
270 Park Avenue, 10th Floor
New York, New York 10017
Eurodollar Lending Office:
CHEMICAL BANK
270 Park Avenue, 10th Floor
New York, New York 10017
Notice Address:
<PAGE>
CHEMICAL BANK
270 Park Avenue, 10th Floor
New York, New York 10017
Facsimile No. : (212) 682-8937
Telephone No. : (212) 270-3867
Attention: Andrew Stawsi
Pro rata share of aggregate amount of all Commitments as of March
29, 1996 : 22.00000000%
BANK OF AMERICA NT&SA $7,500,000
Domestic Lending Office:
BANK OF AMERICA NT&SA
1850 Gateway Blvd.
Concord, CA 94520
Eurodollar Lending Office:
BANK OF AMERICA NT&SA
1850 Gateway Blvd.
Concord, CA 94520
Notice Address:
BANK OF AMERICA NT&SA
1850 Gateway Blvd.
Concord, CA 94520
Facsimile No. : (510) 675-7233
Telephone No. : (510) 675-7212
Attention: Cheryl Colombo
Pro rata share of aggregate amount of all Commitments as of March
29, 1996 : 6.00000000%
<PAGE>
<PAGE>
THE CHASE MANHATTAN BANK, N.A. $14,500,000
Domestic Lending Office:
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
New York, New York 10081
Eurodollar Lending Office:
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
New York, New York 10081
Notice Address:
THE CHASE MANHATTAN BANK, N.A.
2 Chase Manhattan Plaza
5th Floor
New York, New York 10081
Facsimile No. : (212) 552-7375
Telephone No. : (212) 552-7529
Attention: Lenora Kiernan
Pro rata share of aggregate amount of all Commitments as of March
29, 1996 : 11.60000000%
THE NIPPON CREDIT BANK, LTD. $14,500,000
Domestic Lending Office:
THE NIPPON CREDIT BANK, LTD.
245 Park Avenue - 30th Floor
New York, New York 10167
Eurodollar Lending Office:
<PAGE>
THE NIPPON CREDIT BANK, LTD.
245 Park Avenue - 30th Floor
New York, New York 10167
Notice Address:
THE NIPPON CREDIT BANK, LTD.
245 Park Avenue - 30th Floor
New York, New York 10167
Facsimile No. : (212) 697-8034
Telephone No. : (212) 984-1263
Attention: PETER FIORILLO
Loan Administration
Pro rata share of aggregate amount of all Commitments as of March
29, 1996 : 11.60000000%
BANK BRUSSELS LAMBERT, $6,000,000
NEW YORK BRANCH
Domestic Lending Office:
BANK BRUSSELS LAMBERT
NEW YORK BRANCH
630 Fifth Avenue
Suite 2020
New York, New York 10111
Eurodollar Lending Office:
BANK BRUSSELS LAMBERT
NEW YORK BRANCH
630 Fifth Avenue
Suite 2020
New York, New York 10111
<PAGE>
Notice Address:
BANK BRUSSELS LAMBERT
NEW YORK BRANCH
630 Fifth Avenue
Suite 2020
New York, New York 10111
Facsimile No. : (212) 333-5786
Telephone No. : (212) 632-5316
Attention: JOHN E. KIPPAX
Vice President
Pro rata share of aggregate amount of all Commitments as of March
29, 1996 : 4.80000000%
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 51,781
<SECURITIES> 0
<RECEIVABLES> 299,526
<ALLOWANCES> 14,261
<INVENTORY> 242,157
<CURRENT-ASSETS> 613,995
<PP&E> 1,023,429
<DEPRECIATION> 538,286
<TOTAL-ASSETS> 1,605,424
<CURRENT-LIABILITIES> 323,673
<BONDS> 561,615
0
797
<COMMON> 10,915
<OTHER-SE> 556,463
<TOTAL-LIABILITY-AND-EQUITY> 1,605,424
<SALES> 349,126
<TOTAL-REVENUES> 349,126
<CGS> 283,872
<TOTAL-COSTS> 339,004
<OTHER-EXPENSES> (723)
<LOSS-PROVISION> 863
<INTEREST-EXPENSE> 13,248
<INCOME-PRETAX> (2,403)
<INCOME-TAX> 1,350
<INCOME-CONTINUING> (3,753)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,753)
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> (0.35)
</TABLE>
