SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 1994 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 1-5034 CORE INDUSTRIES INC (Exact name of registrant as specified in its charter) Nevada 38-1052434 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 2000, Bloomfield Hills, Michigan 48304 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (810) 642-3400 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Common Stock outstanding at March 31, 1994 - 9,799,398 shares. CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) For the Second Quarter Ended 1994 1993 Net sales $49,594,000 $46,875,000 Cost of sales, exclusive of depreciation and amortization $34,565,000 $32,271,000 Depreciation and amortization 1,278,000 1,278,000 Selling, general and administrative expenses 9,631,000 9,671,000 Interest expense 1,124,000 1,321,000 Other income (357,000) (447,000) $46,241,000 $44,094,000 Earnings before taxes on income $3,353,000 $2,781,000 Taxes on income 1,210,000 1,020,000 Net earnings $2,143,000 $1,761,000 Net earnings per share $.22 $.18 Dividends per share $.06 $.06 Average shares of stock outstanding 9,799,000 9,776,000 <FN> See notes to financial statements CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) For the Six Months Ended 1994 1993 Net sales $103,602,000 $92,959,000 Cost of sales, exclusive of depreciation and amortization $72,853,000 $63,808,000 Depreciation and amortization 2,544,000 2,585,000 Selling, general and administrative expenses 19,855,000 19,178,000 Interest expense 2,266,000 2,701,000 Other income (1,887,000) (660,000) $95,631,000 $87,612,000 Earnings before taxes on income $7,971,000 $5,347,000 Taxes on income 2,920,000 1,960,000 Net earnings $5,051,000 $3,387,000 Net earnings per share $.52 $.35 Dividends per share $.12 $.12 Average shares of stock outstanding 9,799,000 9,775,000 <FN> See notes to financial statements CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ASSETS Feb. 28. 1994 (Unaudited) Aug. 31, 1993 CURRENT ASSETS: Cash and short-term investments $6,266,000 $651,000 Accounts receivable, less collection allowances of $910,000 in February and $970,000 in August 49,315,000 50,558,000 Inventories 51,495,000 54,092,000 Prepaid expenses 990,000 1,337,000 Deferred taxes on income 2,557,000 2,776,000 TOTAL CURRENT ASSETS $110,623,000 $109,414,000 PROPERTY, PLANT AND EQUIPMENT: Land and land improvements $1,197,000 $1,374,000 Buildings 17,115,000 18,672,000 Machinery and equipment 50,112,000 50,145,000 Total $68,424,000 $70,191,000 Less accumulated depreciation 41,193,000 41,304,000 TOTAL PROPERTY, PLANT AND EQUIPMENT $27,231,000 $28,887,000 OTHER ASSETS: Excess of cost over net assets of companies acquired $7,028,000 $7,269,000 Investment in real estate partnership 1,338,000 1,432,000 Prepaid pensions and other 5,018,000 4,275,000 TOTAL OTHER ASSETS $13,384,000 $12,976,000 $151,238,000 $151,277,000 <FN> See notes to financial statements LIABILITIES & STOCKHOLDERS' EQUITY Feb. 28. 1994 (Unaudited) Aug. 31, 1993 CURRENT LIABILITIES: Notes payable to bank -- $900,000 Accounts payable $10,801,000 12,521,000 Accrued payroll and other exp. 11,386,000 12,899,000 Dividends payable 588,000 587,000 Taxes on income 91,000 -- Long-term debt due within 1 yr. 1,500,000 1,500,000 TOTAL CURRENT LIABILITIES $24,366,000 $28,407,000 LONG-TERM DEBT, less amount due within one year 47,130,000 47,134,000 DEFERRED TAXES ON INCOME 1,970,000 1,580,000 ACCRUED POSTRETIREMENT BENEFITS 2,923,000 3,190,000 STOCKHOLDERS' EQUITY: Preferred stock, par value $1: Authorized - 100,000 shares Issued - none Common stock, par value $1: Authorized - 100,000 shares Issued - 11,209,558 shares $11,210,000 $11,208,000 Additional paid-in capital 734,000 728,000 Retained earnings 69,247,000 65,372,000 Cumulative translation adjustments 356,000 356,000 Treasury stock (1,410,160 shares) - at cost (6,698,000) (6,698,000) TOTAL STOCKHOLDERS' EQUITY $74,849,000 $70,966,000 $151,238,000 $151,277,000 <FN> See notes to financial statements CORE INDUSTRIES INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended February 28 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $5,051,000 $3,387,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation $2,404,000 $2,455,000 Amortization 140,000 130,000 Gain on sale of division (915,000) - (Increase) decrease in assets: Accounts receivable (14,000) (2,115,000) Inventories (275,000) (1,901,000) Prepaid expenses 272,000 (26,000) Taxes on income (330,000) 2,644,000 Deferred taxes on income 470,000 2,626,000 Increase (decrease) in liabilities: Accounts payable (1,876,000) 1,681,000 Accrued payroll and other expenses (1,102,000) (888,000) TOTAL ADJUSTMENTS ($1,226,000) $4,606,000 NET CASH PROVIDED BY OPERATING ACTIVITIES $3,825,000 $7,993,000 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($2,068,000) ($2,122,000) Proceeds from sale of division 5,898,000 - Proceeds from discontinued operations - 6,901,000 Other 35,000 109,000 NET CASH FROM INVESTING ACTIVITIES $3,865,000 $4,888,000 CASH FLOWS FROM FINANCING ACTIVITIES: Net payments on short-term bank loans ($900,000) ($12,700,000) Cash dividends paid (1,175,000) (1,173,000) NET CASH USED IN FINANCING ACTIVITIES ($2,075,000) ($13,873,000) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,615,000 (992,000) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 651,000 1,917,000 CASH AND CASH EQUIVALENTS, END OF PERIOD $6,266,000 $925,000 SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $2,243,000 $2,590,000 Income taxes paid (refunded) $2,111,000 ($550,000) <FN> See notes to financial statements CORE INDUSTRIES INC AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE A The accompanying consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the information presented therein, and such adjustments are of a normal recurring nature. NOTE B Reference is made to the Company's Annual Report on Form 10-K for the year ended August 31, 1993, for a description of accounting policies and other detailed footnote information. NOTE C - Inventories February 28, August 31, 1994 1993 Raw materials and supplies $ 27,355,000 $ 26,762,000 Work in process 11,579,000 13,417,000 Finished goods 12,561,000 13,913,000 $ 51,495,000 $ 54,092,000 NOTE D - Sale of Division On September 23, 1993, the Company sold one of its farm equipment divisions, Du-Al Manufacturing Company, for a pretax gain of $1,475,000 (total of $.09 per share). This gain is included in other income on the Statement of Earnings. Du-Al represented approximately 4% of the Company's total 1993 sales and approximately 4% of the Company's assets as of August 31, 1993. NOTE E - Product Segment Information The Company classifies its products and services into three general segments. Financial information by segment is summarized below. 1994 Earnings(Loss) Before Net Sales Income Taxes 	 Second quarter ended Feb. 28: Electronics $ 23,841,000 $ 2,001,000 Farm equipment 8,359,000 1,310,000 Fluid controls and construction products 17,394,000 1,925,000 Corporate unallocated - (759,000) Interest expense - (1,124,000) Total $ 49,594,000 $ 3,353,000 Six months ended Feb. 28: Electronics $ 49,310,000 $ 3,675,000 Farm equipment 17,170,000 3,945,000(1) Fluid controls and construction products 37,122,000 4,286,000 Corporate unallocated - (1,669,000) Interest expense - (2,266,000) Total $103,602,000 $ 7,971,000 1993 Earnings(Loss) Before Net Sales Income Taxes Second quarter ended Feb. 28: Electronics $ 20,971,000 $ 1,435,000 Farm equipment 8,923,000 1,133,000 Fluid controls and construction products 16,981,000 2,325,000 Corporate unallocated - (791,000) Interest expense - (1,321,000) Total $ 46,875,000 $ 2,781,000 Six months ended Feb. 28: Electronics $ 40,514,000 $ 2,900,000 Farm equipment 18,542,000 2,434,000 Fluid controls and construction products 33,903,000 4,332,000 Corporate unallocated - (1,618,000) Interest expense - (2,701,000) Total $ 92,959,000 $ 5,347,000 <F1> (1)Includes pretax gain of $1,475,000 (total of $.09 per share) related to the sale of Core's Du-Al Division. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the first six months of fiscal 1994, the Company's net sales increased 11% to $103,602,000. Net earnings for the first six months of fiscal 1994 were $5,051,000, or $.52 per share. Included in this year's first half results was a net favorable $.09 per share related to the sale of the Company's Du-Al division in the first quarter; excluding this gain, net earnings were up $.08 per share or 23%. For the second quarter of fiscal 1994, net sales increased 6% to $49,594,000 compared to $46,875,000 for the corresponding quarter in the prior year. This year's second quarter net earnings were $2,143,000, or $.22 per share, up 22% from last year's net earnings of $1,761,000, or $.18 per share. For the first six months of fiscal 1994, the Company's Electronics Group provided 48% of total sales; the Farm Equipment Group, 16% of total sales; and the Fluid Controls and Construction Products Group, 36% of sales. The Electronics Group reported strong improvement compared with the prior year comparable six month and second quarter periods with sales increases of 22% and 14%, and earnings increases of 27% and 39%, respectively. All the major units in the Electronics Group contributed to the improvement which was accomplished primarily through operating efficiencies, responsiveness to customer requirements, and several new product introductions. First half sales of the Farm Equipment Group fell 7% but earnings rose 1% as compared to the strong performance of the prior year's first six months. These results exclude the gain on the sale of Du-Al. The Fluid Controls and Construction Products Group, compared with the prior year, had a 17% reduction in second quarter earnings on a nominal sales increase. The Group experienced continued soft industrial markets and severe winter weather conditions, both of which contributed to reductions in gross margins. Overall gross profit margins on net sales for the first six months of fiscal 1994 decreased to 29.7% from 31.4% last year, primarily due to margin pressures on the units in the Fluid Controls and Construction Products Group as noted above. Selling, general and administrative expenses decreased to 19.2% of sales from 20.6% in the prior year's first six months as a result of focused cost reduction programs. Interest expense declined 16% in this year's first half primarily due to reduced borrowings. Other income for the six months ended February 28, 1994 includes the $1,475,000 first quarter gain related to the sale of the Company's Du-Al division. LIQUIDITY AND CAPITAL RESOURCES During the first half of fiscal 1994, the Company increased its cash and short-term investments $5,615,000. The sources of this increase were $3,825,000 from operating activities, $5,898,000 from the sale of the Company's Du-Al division, offset by capital expenditures, reduction of bank debt and dividends. At February 28, 1994, the Company had working capital of $86,257,000 with a current ratio of 4.5 to 1 compared to working capital of $81,007,000 and a current ratio of 3.9 to 1 at the beginning of the fiscal year. The improved current ratio reflects the Company's profitable operations and the sale of the Company's Du-Al division. The Company's internal sources of funds are supplemented with unsecured bank credit facilities totaling $15 million (nothing outstanding at February 28, 1994). Management believes sufficient additional credit is available from banks and other sources should the need arise. Management also believes the Company's cash flow is more than sufficient to meet payments on maturing debt, capital expenditures and dividends. Stockholders' equity amounted to $74,849,000 or $7.64 per share at February 28, 1994, with total capital employed (total debt and equity) amounting to $123 million consisting of 39% debt and 61% equity. At the Company's current quarterly dividend rate of $.06 per share, annual dividend payments would approximate $2,350,000. Under the Company's debt agreements with insurance companies, retained earnings of approximately $17 million are available for dividends, subject to future earnings levels. PART II - OTHER INFORMATION Items 1, 2, 3, and 5 of Part II are omitted because they are not applicable or because they are not required. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A report on the annual meeting of shareholders of the Company held on January 11, 1994 was published on January 20, 1994. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - None (b) Form 8-K dated January 11, 1994 reported change in Company's certifying accountants. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CORE INDUSTRIES INC (Registrant) Date: March 25, 1994 /s/ Raymond H. Steben,Jr. Raymond H. Steben, Jr. Vice President-Finance and Chief Financial Officer Date: March 25, 1994 /s/ Thomas G. Hooper Thomas G. Hooper Treasurer and Controller