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, 1995
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, 1995 - 9,808,992 shares.
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
Second Quarter Ended Feb. 28
1995 1994
Net sales $55,652,000 $49,594,000
Cost of sales, exclusive
of depreciation
and amortization $37,240,000 $34,565,000
Depreciation and amortization 1,325,000 1,278,000
Selling, general and
administrative expenses 12,522,000 9,631,000
Interest expense 1,055,000 1,124,000
Other income (Note E) (241,000) (357,000)
$51,901,000 $46,241,000
Earnings before taxes
on income $3,751,000 $3,353,000
Taxes on income 1,390,000 1,210,000
Net earnings $2,361,000 $2,143,000
Net earnings per share (Note E) $.24 $.22
Dividends per share $.06 $.06
Average shares of
stock outstanding 9,809,000 9,799,000
<FN>
See notes to financial statements
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
Six Months Ended Feb. 28
1995 1994
Net sales $109,756,000 $103,602,000
Cost of sales, exclusive
of depreciation
and amortization $73,816,000 $72,853,000
Depreciation and amortization 2,617,000 2,544,000
Selling, general and
administrative expenses 24,724,000 19,855,000
Interest expense 2,127,000 2,266,000
Other income (Note E) (580,000) (1,887,000)
$102,704,000 $95,631,000
Earnings before taxes
on income $7,052,000 $7,971,000
Taxes on income 2,670,000 2,920,000
Net earnings $4,382,000 $5,051,000
Net earnings per share (Note E) $.45 $.52
Dividends per share $.12 $.12
Average shares of
stock outstanding 9,809,000 9,799,000
<FN>
See notes to financial statements
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
Feb. 28, 1995
(Unaudited) Aug. 31, 1994
CURRENT ASSETS:
Cash and cash equivalents $1,595,000 $14,643,000
Accounts receivable, less
collection allowances of
$1,070,000 in February
and $960,000 in August 54,629,000 47,444,000
Inventories 55,828,000 48,863,000
Prepaid expenses 686,000 808,000
Deferred taxes on income 1,837,000 2,027,000
TOTAL CURRENT ASSETS $114,575,000 $113,785,000
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements $1,295,000 $1,278,000
Buildings 18,653,000 18,161,000
Machinery and equipment 46,910,000 44,322,000
Total $66,858,000 $63,761,000
Less accumulated depreciation 38,519,000 36,377,000
TOTAL PROPERTY, PLANT
AND EQUIPMENT $28,339,000 $27,384,000
OTHER ASSETS:
Excess of cost over net
assets of companies acquired $9,743,000 $7,033,000
Investment in real estate
partnership 1,340,000 1,343,000
Note receivable 1,500,000 1,500,000
Prepaid pensions and other 5,484,000 5,342,000
TOTAL OTHER ASSETS $18,067,000 $15,218,000
$160,981,000 $156,387,000
<FN>
See notes to financial statements
LIABILITIES & STOCKHOLDERS' EQUITY
Feb. 28, 1995
(Unaudited) Aug. 31, 1994
CURRENT LIABILITIES:
Accounts payable $12,757,000 $11,485,000
Accrued payroll and other
expenses 12,333,000 12,817,000
Dividends payable 589,000 587,000
Taxes on income 723,000 1,585,000
Notes payable 1,307,000 --
Long-term debt due within
one year 4,610,000 4,610,000
TOTAL CURRENT LIABILITIES $32,319,000 $31,084,000
LONG-TERM DEBT,
less amount due within
one year 41,532,000 41,608,000
DEFERRED TAXES ON INCOME 1,930,000 1,770,000
ACCRUED EMPLOYEE BENEFITS 2,858,000 2,908,000
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1:
Authorized - 100,000 shares
Issued - none
Common stock, par value $1:
Authorized - 20,000,000 shares
Issued - 11,219,152 shares $11,219,000 $11,219,000
Additional paid-in capital 810,000 810,000
Retained earnings 76,230,000 73,025,000
Cumulative translation
adjustments 781,000 661,000
Treasury stock (1,410,160
shares) - at cost (6,698,000) (6,698,000)
TOTAL STOCKHOLDERS' EQUITY $82,342,000 $79,017,000
$160,981,000 $156,387,000
<FN>
See notes to financial statements
CORE INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended February 28
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $4,382,000 $5,051,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation $2,386,000 $2,404,000
Amortization 231,000 140,000
Gain on sale of division -- (915,000)
(Increase) decrease in assets:
Accounts receivable (5,617,000) (14,000)
Inventories (5,953,000) (275,000)
Prepaid expenses 151,000 272,000
Taxes on income (862,000) (330,000)
Deferred taxes on income 350,000 470,000
Increase (decrease) in
liabilities:
Accounts payable 368,000 (1,876,000)
Accrued payroll and
other expenses (521,000) (1,102,000)
TOTAL ADJUSTMENTS ($9,467,000) ($1,226,000)
NET CASH PROVIDED BY
(USED FOR)
OPERATING ACTIVITIES ($5,085,000) $3,825,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ($3,249,000) ($2,068,000)
Proceeds from sale of division -- 5,898,000
Acquisition of businesses (3,505,000) --
Other 44,000 35,000
NET CASH FROM (USED IN)
INVESTING ACTIVITIES ($6,710,000) $3,865,000
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Cash dividends paid ($1,177,000) ($1,175,000)
Reductions in long-term debt (76,000) --
Net payments on short-term
bank loans -- (900,000)
NET CASH USED IN FINANCING
ACTIVITIES ($1,253,000) ($2,075,000)
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (13,048,000) 5,615,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 14,643,000 651,000
CASH AND CASH EQUIVALENTS,
END OF PERIOD $1,595,000 $6,266,000
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $2,115,000 $2,243,000
Income taxes paid $3,379,000 $2,111,000
<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, 1994, for a description of
accounting policies and other detailed footnote information.
NOTE C - Inventories
February 28 August 31,
1995 1994
Raw materials and supplies $29,938,000 $25,976,000
Work in process 10,267,000 8,940,000
Finished goods 15,623,000 13,947,000
$55,828,000 $48,863,000
NOTE D - Acquisitions
Effective January 1, 1995, the Company purchased two
Companies. Core's Amprobe Instrument Division purchased Promax
Industries, Inc., a manufacturer of refrigerant recycling and
recovery products for the heating, ventilating, and air
conditioning (HVAC) industry. Core's Fluid Control Group
purchased Oil and Gas Specialties, Inc. (OGASCO), which designs
and fabricates skid-mounted pipeline metering systems and
fabricated strainers.
These acquisitions were accounted for as purchases, and
accordingly, the operating results of the acquired businesses
have been included in the Company's financial statements from
January 1, 1995. The pro forma results of operations, as if the
operations of the acquired businesses had been included from
September 1, 1994, would not differ materially from the amounts
reported in the consolidated statement of earnings. The total
cost of the above acquisitions was approximately $4,800,000,
including short-term notes payable of $1,307,000.
NOTE E - Sale of Division
In last year's first quarter, 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, after tax).
This gain is included in other income on the Statement of
Earnings for the six months ended February 28, 1994.
NOTE F - Product Segment Information
The Company classifies its products and services into three
general segments. Financial information by segment is summarized
below.
1995
Earnings (Loss)
Before
Net Sales Income Taxes
Second quarter ended Feb. 28:
Electronics $ 25,613,000 $ 1,620,000
Farm equipment 10,920,000 1,454,000
Fluid controls and
construction products 19,119,000 2,579,000
Corporate unallocated - (847,000)
Interest expense - (1,055,000)
Total $ 55,652,000 $ 3,751,000
Six months ended Feb. 28:
Electronics $ 50,148,000 $ 2,756,000
Farm equipment 21,276,000 2,964,000
Fluid controls and
construction products 38,332,000 5,288,000
Corporate unallocated - (1,829,000)
Interest expense - (2,127,000)
Total $109,756,000 $ 7,052,000
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 (A)
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 (A)
<F1>
Note A: Includes first quarter 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 1995, the Company's net
sales increased 6% to $109,756,000. Net earnings for the first
six months of fiscal 1995 were $4,382,000, or $.45 per share.
Included in last year's first half results was a $.09 per share
gain from the sale of a division; excluding this gain, net
earnings were up 5%.
For the second quarter of fiscal 1995, net sales increased
12% to $55,652,000 compared to $49,594,000 for the corresponding
quarter in the prior year. This year's second quarter net
earnings were $2,361,000, or $.24 per share, up 10% from last
year's net earnings of $2,143,000, or $.22 per share.
For the first six months of fiscal 1995, the Company's
Electronics Group provided 46% of total sales; the Farm Equipment
Group, 19% of total sales; and the Fluid Controls and
Construction Products Group, 35% of sales. The performance of
the Electronics Group in both the first and second quarters this
year was adversely affected by the Group's Cherokee subsidiary
which had sales and earnings lower than the prior year because a
large customer significantly cut back on orders due to inventory
reductions. Excluding the Cherokee division, sales and pretax
earnings grew 25% and 17%, respectively, in the Electronics Group
compared to last year's first half. The Farm Equipment Group had
a 24% increase in sales and a 20% increase in earnings in the
first six months this year (excluding prior year's gain on sale
of Du-Al) continuing to benefit from the strong farm economy.
The sales and earnings of the Fluid Controls and Construction
Products Group increased 19% and 11%, respectively, compared with
last year's first six months (excluding the sold Pioneer
division) primarily due to the improved performance of its fluid
control products.
Overall gross margins on net sales for the first six months
of fiscal 1995 improved to 32.7% from 29.7% last year as a result
of product mix changes. The increase in selling, general and
administrative expenses from 19.2% of sales to 22.5% in this
year's first six months relates primarily to increased
investments in research and development and higher promotional
and selling costs related to new products and entering new
markets.
Interest expense declined 6% in this year's first six months
compared with last year due to reduced borrowings. Other income
for the six months ended February 28, 1994 includes a $1,475,000
gain related to the sale of the Company's Du-Al division.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1995, the Company had working capital of
$82.3 million and a current ratio of 3.5 to 1, and the Company's
capital employed (total debt and equity) amounted to $128
million. Capital consisted of 36% debt and 64% equity, an
improvement from 39% of total capital employed a year ago.
Management believes its current cash position, cash flows
from operations, along with its borrowing capacity, are adequate
to fund its strategies for future growth, including working
capital, expenditures for manufacturing expansion and
efficiencies, and acquisition activities. At the Company's
current dividend rate of $.06 per share, annual dividend payments
would approximate $2.4 million. Under the Company's debt
agreements with insurance companies, retained earnings of
approximately $22 million are available for dividends, subject to
future earnings levels.
Beginning this fiscal year the Company began using a new and
integrated financial measurement system called "Economic Value
Added" (EVA). EVA measures profit after a charge for the capital
employed. Extensive market research has shown this measure to
have a high correlation with long-term stock market valuation.
Thus, a framework is provided for resource allocation and
compensation decisions that focus more directly on creation of
shareholder value.
PART II - OTHER INFORMATION
Items 1 through 5 of Part II are omitted because they are
not applicable or because they are not required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed for the
three months ended February 28, 1995.
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)
/s/ RAYMOND H. STEBEN, JR.
Date: April 3, 1995 --------------------------
Raymond H. Steben, Jr.
Vice President-Finance
and Chief Financial
Officer
/s/ THOMAS G. HOOPER
Date: April 3, 1995 --------------------------
Thomas G. Hooper
Treasurer and Controller
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
*27 Financial Data Schedule
*Filed herewith