SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended August 31, 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 Identification No.)
incorporation or organization)
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of October 31, 1995, 9,827,012 common shares were outstanding, and the
aggregate market value of the common shares held by nonaffiliates of the
Registrant (based upon the closing sale price of $12.38 for these shares on the
New York Stock Exchange) was approximately $122 million.
Certain sections of the definitive proxy statement to be filed for the Annual
Meeting of Stockholders to be held on January 9, 1996 are incorporated by
reference to Part III.
PART I
Item 1. Business
(a) General Development of the Company
The Company was incorporated under the name of Soss Manufacturing Company
in 1909 as a manufacturer of a line of concealed hinges sold to the
hardware, furniture and home building trades and subsequently developed
hinges and other stampings for the infant automotive industry. The Company
went public in 1937 and had its shares traded on the American Stock
Exchange.
In 1958, the Company began to diversify its interests through the
acquisition of a number of businesses. It presently groups its businesses
into three industry segments: Fluid Controls and Construction Products;
Test, Measurement and Control; and Farm Equipment. From sales of $5,000,000
in 1958, 90 percent of which were derived from the production of automobile
parts, the Company has grown to its present size and diversified structure
with less than five percent automotive business.
The Company changed its name in January 1969 to SOS Consolidated Inc. to
help alleviate confusion between the parent company and its automotive
division. In April 1969, the Company's shares were listed for trading on
the New York Stock Exchange. In January 1978, the Company adopted the name
Core Industries Inc, as being more representative of its operations.
Various acquisitions, primarily in the electronics industry, contributed to
the Company's sales growth in the 1980s. However, in 1992, after several
years of declining earnings, the Company divested three unprofitable
electronics subsidiaries and instituted a plan to become a more focused
business. Since then, the Company has made four acquisitions related to
existing businesses and has sold two unrelated operations. In October 1995,
the Company announced plans to dispose of Cherokee International, Inc., its
wholly-owned power supply manufacturer, and classified the subsidiary as a
discontinued operation. The Company plans to accelerate growth in its focus
businesses through new products and sales channel initiatives as well as
making selected, strategic acquisitions in its focus areas.
Under the Company's method of operation and control, each division operates
as a separate and autonomous entity with its own manufacturing,
engineering, accounting, sales staff and distribution network. Personnel at
Corporate office direct overall policies and perform services for all
divisions in the areas of financial and treasury control, manufacturing
consultation, information systems and marketing. Corporate office maintains
control over the divisions through direct contact, reviews of budgets and
reports, internal auditing and involvement in formal planning. In addition,
Corporate develops and implements strategic options to increase shareholder
value and responds to division results and opportunities.
(b) Industry Segments
The Company is engaged principally in the manufacture of specialty products
for commercial and industrial use. Required industry segment financial
information is set forth in the notes to consolidated financial statements
incorporated herein by reference. The Company operates in three segments:
Fluid Controls and Construction Products; Test, Measurement and Control;
and Farm Equipment.
FLUID CONTROLS AND CONSTRUCTION PRODUCTS
Fluid Controls and Construction Products and services cover a broad range from
valve and pipeline strainers for various fluid control applications to molded
plastic parts, metal stampings and hinges, and mechanical contracting. This
group serves the Heating, Ventilation and Air Conditioning ("HVAC") market as
well as the chemical and petrochemical processing industry, the paper and food
processing industry, the commercial construction market, and general industry.
2
The Core Fluid Controls Group (CFCG) consists of Mueller Steam Specialty,
Hendrix, OGASCO, Associated Piping Equipment, Mueller West, and Mueller Asia. In
addition to possessing a worldwide reputation for specialty valves, CFCG
believes that it is the largest manufacturer of pipeline strainers and check
valves in the world. Pipeline strainers catch objects larger than 40 microns and
prevent them from damaging machinery. Strainers and valves are used in various
kinds of industrial processes and plants, essentially wherever piping systems
exist. Mueller Steam Specialty is the largest division of the Core Fluid
Controls Group and manufactures four primary product lines: strainers and
specialty valves, check valves, butterfly valves, and plug valves. CFCG believes
that it carries a product line that is more extensive than its competitors and
CFCG's ability to design, build, and ship products in a short time-frame is
well-known in the industry.
Business is derived largely from quoting new jobs as well as from stocking
distributors and retrofit orders. Valves designed by CFCG are outsourced from
approximately 65 foundries throughout the world. Once castings are received at
CFCG's North Carolina plant, CFCG machines, assembles, tests, and packages the
valves to meet a wide variety of specifications. Orders are typically processed
within a week of their receipt.
CFCG expects to grow by developing or acquiring new products to sell through its
existing channels and by developing or acquiring new channels and market areas
for its products. New products range from sophisticated butterfly and check
valves to valve actuators.
Management believes there are a number of attractive acquisition targets in the
highly fragmented specialty valve and strainer market in addition to the
recently acquired Hendrix (FY 1994) and OGASCO (FY 1995). As a complementary
acquisition, Hendrix brought fabricating expertise and new market areas to CFCG.
The Company plans to use CFCG's purchasing and distribution strength to improve
Hendrix's operations. The Company also plans to use OGASCO's products which have
a strong international presence to develop a stronger overall international
presence for CFCG in the oil and gas processing industry. In turn, it is hoped
that Hendrix will provide a conduit to potential new customers through its valve
fabrication capabilities and its strong position in the southwest United States.
There can be no assurance that the Company's plans with respect to Hendrix and
OGASCO can be realized.
CFCG is also expanding its distribution network through internal efforts. Soss
of Singapore, a Core subsidiary that formerly performed zinc die casting, has
become Mueller Asia and now functions as the sales and stocking distribution
center for the Pacific Rim territory. Mueller Asia is also scheduled to begin
some manufacturing activities by the end of the 1996 fiscal year. CFCG has also
launched Associated Piping Equipment, a division that distributes lower priced
valves and strainers that compete with discount importers. To expand
distribution, CFCG is evaluating strategic sales initiatives in South America
and Mexico and is reviewing the benefits of adding direct sales employees in its
major markets.
Other companies in the fluid control and construction segment are Poly-Craft,
Universal Industrial Products (UIP), and the Robert Carter Corporation.
Poly-Craft and UIP each represent less than five percent of Core's total sales
and all three account for less than five percent of Core's total earnings.
There is substantial competition in the markets served by this product segment,
and in certain instances, the Company competes with companies whose financial
resources are greater.
This product segment's backlog aggregated $21,400,000 at August 31, 1995, as
compared to $10,250,000 at August 31, 1994. It is anticipated that substantially
all of the backlog will be filled during the year ending August 31, 1996. In
general, this product segment business is not seasonal in nature.
The primary raw materials used by this product segment are steel coil and sheet,
castings made of various metals, resins and plastics. The Company generally
obtains these materials from several sources, including foreign suppliers, and
materials are readily available.
The Company holds certain patents relative to this product segment which,
although of value, do not play a significant part in the Company's operations.
The Company also has registered certain product trademarks which are considered
to be of value.
3
TEST, MEASUREMENT AND CONTROL
The Test, Measurement and Control group is Core's second largest segment. The
Company believes it is the leading producer of selected electrical test,
measurement, and control products. Sales are primarily made through dealers and
manufacturer's representatives in the United States and abroad. This group
serves the electrical, construction, and maintenance market; the HVAC industry;
factory automation companies; general industry; and computer and
telecommunications manufacturers. Core's recent acquisition of Promax, a
manufacturer of refrigerant recycling and recovery products, was intended to
strengthen the Company's presence in the HVAC market.
Amprobe has been recognized as a leader in quality test equipment for
professionals in the electrical, HVAC, construction, and maintenance markets.
Amprobe primarily manufacturers hand-held devices, which are used by
professionals for testing and measuring electrical properties in various field
applications. Amprobe believes that its products have a reputation for being
reliable and competitively priced. Primary products include clamp-on units,
multi-meters (volt/amp/ohmmeters), circuit tracers, harmonic analyzers,
ultrasonic leak detectors, and refrigerant recovery products (through the
acquisition of Promax). All sales are made through distributors. Amprobe's
advertising is targeted directly to consumers to create demand at the
distributor level. Amprobe performs primarily light assembly and calibration in
its ISO 9000 certified plant in Lynbrook, New York, and conducts research and
development activities in Denver, Colorado.
Amprobe's new product development efforts include updating traditional products,
enhancing the features of existing products, and introducing new products such
as circuit tracers, harmonic analyzers, ultrasonic leak detectors, and
refrigerant recovery products. Known in the industry for its clamp-on products,
Amprobe is growing and believes that it is gaining market share in this mature
product niche. Amprobe believes that it faces comparatively little competition
in the wire-tracer market, and through its Promax acquisition intends to develop
a stronger presence in the refrigerant recycling and recovery product market. In
January 1995, Amprobe acquired Promax, a manufacturer of oil-less refrigerant
recovery products. The Company believes that oil-less recovery offers a number
of performance advantages over competitive systems. This product line is sold
through its HVAC distribution channels.
GSE operates in three areas: measurement and control products (including torque
sensors), "tech-motive" tools, and scales and weighing systems. GSE's
measurement and control products are used in a wide variety of applications and
industries. GSE provides process controllers and monitors for process operations
and sensors and systems testing equipment for measuring forces such as torque.
"tech-motive" tools are a line of direct current electric nutrunners and
electronic controllers for accurate fastening in manufacturing or repair
applications. Scales and weighing systems consist of programmable scales and
controllers used for accurate measurement, parts counting, or weight-based
processes.
GSE manufactures numerous torque measuring devices and has the exclusive license
to a non-contact torque sensing technology. Non-contact torque measurement has
two important applications--electronic power steering in vehicles and predictive
maintenance in industrial applications such as oil drilling. In electronic power
steering, a non-contact torque sensor measures the torque generated by turning a
steering wheel and translates it into directions to move the vehicle's wheels.
Electronic power steering systems are lighter, more efficient, more accurate,
and less expensive than hydraulic power steering systems. Management believes
that significant additional revenues from this application may be developed over
the next several years, but there can be no assurance that technological
obstacles can be overcome or that sufficient market acceptance can be achieved
to permit this application to make a significant contribution to this segment's
revenues or earnings.
"tech-motive" products represent GSE's second major growth area. Their nutrunner
products provide accurate, reliable fastening and offer significant performance
advantages over other fastener systems products such as pneumatic tools.
Although the overall market is fairly mature, DC electric systems are growing
and taking market share from other systems. Additionally, GSE is benefitting
from the worldwide macro trend toward superior manufacturing quality and the
increased emphasis on the importance of quality in safety-related applications.
4
GSE's programmable scales and weighing systems is its third growth area. GSE
seeks to continue to grow in this area by expanding its research and development
effort to remain a technology leader, and introduce new products that provide
greater value than competing systems.
GSE's primary strategy is to become the technology leader in applying controlled
strain gage technology to high performance tooling, torque sensing, and
programmable weighing systems. Through new product development, GSE seeks to
grow in its existing markets and penetrate related markets. GSE also seeks to
expand its presence in Europe, largely by increasing the distribution of its
scale systems.
Great Lakes/Eglinton (GLE) is the other unit in the test, measurement and
control group. It accounts for less than five percent of Core's total sales and
earnings. GLE's products include high precision carbide tooling.
There is substantial competition in the markets served by this market segment,
and in certain instances, the Company competes with companies whose financial
resources are greater.
The backlog of this segment aggregated $5,000,000 at August 31, 1995, as
compared to $6,000,000 at August 31, 1994. It is anticipated that substantially
all of the backlog will be shipped during the year ending August 31, 1996. In
general, the business of this product segment is not highly seasonal in nature.
This segment's products are made principally from purchased electronic
components and materials which are readily available from numerous sources.
The Company holds important patents related to its "tech-motive" tool product
line. Other patents relative to this product segment, although of value, do not
play a significant part in the Company's operations, although the exclusive
right to distribute the non-contact torque sensing technology in the Americas
and Europe has strong potential. The Company also has licenses and has
registered certain product trademarks, which are considered to be of value.
FARM EQUIPMENT
The Farm Equipment segment has, in recent years, represented a profitable and
strong growth area for Core. Core believes it is the leading producer of tillage
equipment in the high plains region and a leading manufacturer of grain augers.
Although farm equipment is a traditionally seasonal business, certain sales
strategies significantly reduce seasonal fluctuations. Sales are made through
dealers and distributors primarily in the High Plains and Midwest United States,
as well as in Canada.
Sunflower is among the world's leading producers of high-quality disc harrows,
and its grain drills and other tillage equipment are also known for their
quality, reliability and value. This equipment is used to prepare land for
seeding and for seeding operations. Tillage equipment usually represents 10 to
15 percent of a dealer's sales. The primary market for Sunflower equipment is
the high plains states of Texas, Colorado, Nebraska, Kansas, and the Dakotas.
Secondary market areas include the Midwest, and Sunflower is working to expand
into the delta region of the South. Sunflower also has limited international
sales to countries such as Canada and Australia.
Sunflower equipment is sold through a direct sales force and an independent
dealership network of more than 400 dealers. Within this 400 dealership network,
Sunflower believes it has approximately an 18 percent share of all tillage
equipment sold. Sunflower enhances its dealer relationships by training and
educating its dealers and by providing outstanding customer service.
Sunflower has benefitted from the 1990 Farm Bill, which required farmers on
erosion-prone soil to maintain a certain percentage of residue. Sunflower
manufactures several conservation tillage tools which protect topsoil from
erosion. Sunflower is continually implementing product design changes to comply
with conservation tillage regulations.
5
Feterl Mfg. Co. (Feterl) and Richardton Manufacturing form the remainder of
Core's Farm Equipment segment. Neither business accounts for more than five
percent of Core's total sales, although Feterl accounts for slightly more than
five percent of total earnings.
There is substantial competition in the markets served by this product segment,
and in certain instances, the Company competes with companies whose financial
resources are greater.
This product segment's backlog aggregated $3,800,000 at August 31, 1995, as
compared to $4,450,000 at August 31, 1994. It is anticipated that substantially
all of the backlog will be shipped during the first quarter of fiscal 1996.
While the sales of certain individual products are seasonal in nature, the
operations of this product segment are not highly seasonal on an overall basis.
The farm economy has been, historically, very cyclical and can be significantly
affected by the general economy and the weather. As is customary in the farm
equipment industry, the Company makes many sales with seasonal dating payment
terms to its farm equipment customers.
The primary raw material used by the businesses within this product segment is
standard sheet steel which is readily available from numerous sources.
The Company holds various patents relating to the products of this segment
which, although of value, do not play a significant part in the Company's
operations. The Company also has registered certain product trademarks which are
considered to be of value.
(c) Employment
At August 31, 1995, there were approximately 2,260 people employed by the
Company in its operations, of whom 1,910 were employed in the United
States. The discontinued Cherokee operation employed 829 of the 2,260
people at August 31, 1995.
(d) Other
While the Company places a high emphasis on the development of new and
improved products, research and development activities did not represent
significant expenditures during the past three years.
Compliance with federal, state and local provisions which have been enacted
or adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, is not expected to
have a material effect upon the capital expenditures, earnings and
competitive position of the Company.
6
Item 2. Properties
Listed below are the major properties of the Company:
Square Owned Expiration
Foot or Date of Product
Location Area Leased Lease Group(s)
- -------------------- ------ ------ ----- -----------------------------
Bridgeport, MI 23,000 Owned Test, measurement and control
Farmington Hills, MI 36,000 Owned Test, measurement and control
Lynbrook, NY 49,000 Owned Test, measurement and control
Southfield, MI 8,000 Leased 1999 Test, measurement and control
Denver, CO 18,000 Leased 1996 Test, measurement and control
Beloit, KS (Note A) 88,000 Leased 1996 Farm Equipment
Cawker City, KS 51,000 Owned Farm Equipment
Richardton, ND 37,000 Owned Farm Equipment
Salem, SD 108,500 Owned Farm Equipment
Houston, TX 32,000 Owned Fluid Controls and Const. Prod.
18,000 Leased 1996
Lumberton, NC 144,000 Owned Fluid Controls and Const. Prod.
St. Pauls, NC 216,000 Owned Fluid Controls and Const. Prod.
Phoenix, AZ 14,000 Leased 1996 Fluid Controls and Const. Prod.
Pioneer, OH 66,400 Owned Fluid Controls and Const. Prod.
Wauseon, OH 47,000 Owned Fluid Controls and Const. Prod.
Singapore 26,700 Owned Fluid Controls and Const. Prod.
9,300 Leased 2006
Bloomfield Hills, MI 12,000 Leased 2001 Corporate Offices
All of the above properties are substantially utilized, are suitable for the
Company's needs and have sufficient productive capacity. The above listing
excludes property of discontinued operations which are in the process of being
sold.
Note A: This leased production facility was financed by the proceeds
of industrial development revenue bonds. The Company may purchase the
facility under favorable terms upon satisfaction of the lease. As
required by generally accepted accounting principles, the lease has
been treated as a purchase by the Company.
Item 3. Legal Proceedings
Although the Company is involved in certain litigation incidental and related to
its business, there are presently no pending material legal proceedings
involving the Company not covered by insurance.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of 1995 to a vote of security
holders through a solicitation of proxies or otherwise.
7
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
At August 31, 1995, there were approximately 2,158 shareholders of record of the
common stock of Core Industries Inc.
The Company's common stock is traded on the New York Stock Exchange. The
following table indicates the high and low sales prices of the common stock of
the Company, and the dividends paid per share for the periods indicated:
Market Price
Year Ended ------------------
August 31, 1994 High Low Dividends
--------------- ------- ------- ---------
First quarter $15-1/2 $11-3/4 $ .06
Second quarter 18-3/8 13-3/8 .06
Third quarter 14-7/8 10-1/2 .06
Fourth quarter 11-1/2 10 .06
-----
$ .24
=====
Market Price
Year Ended ------------------
August 31, 1995 High Low Dividends
--------------- ------- ------- ---------
First quarter $11-1/8 $ 8-5/8 $ .06
Second quarter 12-1/2 9-1/2 .06
Third quarter 12-5/8 10 .06
Fourth quarter 12-5/8 9-3/4 .06
-----
$ .24
=====
Note A: Under the Company's debt agreements with insurance companies,
retained earnings of approximately $21 million were available for
dividends at August 31, 1995 subject to future earnings levels.
8
Item 6. Selected Financial Data
A summary of selected financial data follows:
Year Ended August 31,
------------------------------------------------------------------------
1991 1992 1993 1994 1995
------------ ------------ ------------ ------------ ------------
Net sales $164,702,000 $146,571,000 $156,615,000 $166,260,000 $187,897,000
Earnings from
continuing
operations
(Note B) 7,123,000 (596,000) 7,900,000 9,209,000 10,693,000
Net earnings
(loss) 1,625,000 (26,368,000) 8,565,000 10,006,000 3,828,000
Net earnings per
common share:
Continuing
operations $ 0.73 $(0.06) $0.81 $0.94 $1.09
Net earnings
(loss) 0.17 (2.70) 0.88 1.02 0.39
Cash dividends
declared per
share 0.48 0.30 0.24 0.24 0.24
As of August 31:
Total assets $189,046,000 $156,583,000 $151,277,000 $156,387,000 $146,247,000
Long-term debt 52,298,000 50,146,000 47,134,000 41,608,000 32,609,000
Note A: Effective September 23, 1993, the Company sold its Du-Al
Manufacturing Division, a manufacturer of front end loaders, back hoes
and other equipment sold to the construction and farm industries.
Effective May 31, 1994, the Company sold its Pioneer Industries
Division, a manufacturer of metal doors and frames for the
construction industry. The businesses sold had approximately
$9,000,000 of sales in FY 1994 prior to disposition and approximately
$20,000,000 of sales in FY 1993.
Other income for the year ended August 31, 1994 includes pretax gain of
$1,475,000 (total of $.09 per share) related to the sale of the Du-Al Division.
Note B: Effective February 29, 1992, the Company adopted a formal plan to
divest three major electronics-related subsidiaries. The three
operations, Anilam Electronics, FlexStar and Hilton Industries,
produced machine tool controls, disk-drive test equipment and tantalum
capacitors, respectively, were accounted for as discontinued
operations. Appropriate provisions were recorded for (a) the estimated
losses of the discontinued operations through their expected disposal
dates, (b) reduction of assets to their net realizable values and (c)
the anticipated liabilities relating to the disposals. The total
provision amounted to $20,859,000, net of income tax benefit of
$7,315,000. Selected information related to these discontinued
operations follows:
1991 1992(a)
------------ ------------
Sales $ 42,796,000 $ 16,291,000
Net earnings (loss) (6,350,000) (4,015,000)
Net earnings (loss) per share (0.65) (0.41)
9
On October 6, 1995, the Company adopted a formal plan to divest its wholly-owned
electronics-related subsidiary, Cherokee International, Inc. and its
subsidiaries ("Cherokee") effective August 31, 1995. Cherokee represented a
separate line of business producing electronic power supplies to distinct
customers and has been accounted for as a discontinued operation. Appropriate
provisions were recorded in the fourth quarter of fiscal 1995 for (a) the
estimated losses for the discontinued operation through its expected disposal
date, (b) reduction of assets to their net realizable values, and (c) the
anticipated liabilities related to the disposal. The total provision amounted to
$6,500,000, net of income tax benefit of $3,500,000.
Selected information related to Cherokee's operations prior to discontinuance
follows:
1993 1994 1995
------------ ------------ ------------
Sales $ 50,431,000 $ 53,193,000 $ 44,669,000
Pretax income (loss) 1,315,000 1,845,000 (285,000)
Income taxes 650,000 1,048,000 80,000
Net income (loss) 665,000 797,000 (365,000)
Earnings (loss) per share 0.07 0.08 (0.04)
The net assets of the discontinued Cherokee operation held for sale have been
included in the Balance Sheet at August 31, 1995 under the caption "Net Assets
Held for Sale." Interest expense was allocated based on debt incurred to finance
Cherokee since its acquisition. The Company expects to dispose of all the net
assets within one year.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
During 1995 the Company continued its strong improvement trend which began in
1992 after Core took dramatic action to restructure operations and refocus
management. Management's commitment to improving shareholder value was
demonstrated in 1995 by sales and earnings improvements, acquisitions, new
product introductions and actions to discontinue a business.
Effective August 31, 1995, the Company's Board of Directors adopted a formal
plan to divest its wholly-owned electronics-related subsidiary, Cherokee
International, Inc. and its subsidiaries ("Cherokee"). Cherokee represented a
fundamentally separate line of business that produced electronic power supplies
for distinct customers. It has been accounted for as a discontinued operation.
Appropriate provisions were recorded in the fourth quarter of fiscal 1995 for
(a) the estimated losses for the discontinued operation through its expected
disposal date, (b) reduction of assets to their net realizable values, and (c)
the anticipated liabilities related to the disposal. The total provision
amounted to $6,500,000, net of income tax benefit of $3,500,000. The Company is
reviewing sales alternatives for Cherokee and expects to dispose of the
operation during fiscal 1996.
Fiscal 1995 Compared with Fiscal 1994
Consolidated sales from continuing operations were up 13% to $187,897,000 over
1994 sales of $166,260,000. Earnings from continuing operations were
$10,693,000, or 16% better than 1994. Included in 1994 earnings was a net gain
of $915,000 ($.09 per share) related to the sale of a division. Excluding this
item, earnings from continuing operations increased 29% in 1995 compared to
1994.
Approximately 67% of the sales increase and 60% of the earnings before tax
increase was attributable to the Test, Measurement and Control Group. Fluid
Controls and Construction sales increased 3% with profits growing almost 25%.
Excluding 1994's gain on the sale of the division, Farm Equipment earnings
increased 11% on a 15% sales increase.
Overall gross profit margins improved strongly from 33.1% to 35.6% as a result
of favorable product mix changes and new product introductions. The increase in
selling, general and administrative expenses from 21.2% of sales
10
to 22.9% relates primarily to key units where there were increased investments
in research and development, and promotional and selling costs related to new
products and entering new markets.
Other income in 1994 includes the $1.475 million pretax gain related to the sale
of the Company's Du-Al division. Interest expense declined 12.2% in 1995 from
1994 as borrowings were reduced by $9 million.
Fiscal 1994 Compared with Fiscal 1993
Consolidated sales from continuing operations were up 6% to $166,260,000 over
1993 sales of $156,615,000. Excluding the unusual gain on the sale of the Du-Al
division in 1994, earnings increased 7%.
Approximately 72% of the sales increase and 47% of the earnings before tax
increase was attributable to the Test, Measurement and Control Group. Excluding
Du-Al sales and earnings, the Farm Segment sales grew 15% and profits increased
17%. Excluding the results of the sold Pioneer division, Fluid Controls and
Construction sales increased 15% with earnings approximately the same in each
year.
The overall gross profit percent and selling, general and administrative costs
as a percent of sales remained constant relative to 1993.
Other income in 1994 includes the $1.475 million pretax gain related to the sale
of the Company's Du-Al division, while other income in 1993 also includes
unusual items - a litigation settlement of approximately $500,000 and $300,000
in gains on property disposals. Interest expense declined 16.5% in 1994 from
1993 primarily due to decreased borrowings.
PRODUCT GROUP DETAIL
Fluid Controls and Construction Products Group
(In Thousands) 1993 1994 1995
------- ------- -------
Sales $72,907 $78,745 $80,732
Earnings before taxes 9,400 8,624 10,766
Ongoing businesses (a)
Sales $61,182 $70,390 $80,732
Earnings before taxes 9,599 9,571 10,766
(a) Excluding unit sold in 1994
Sales and earnings before taxes in 1995 increased 15% and 12%, respectively,
over the prior year after excluding the Pioneer division which was sold in 1994.
This increase was due to the improved performance of Core's Fluid Controls Group
which benefitted from recent acquisitions and expanded distribution efforts.
Test, Measurement and Control Group
(In Thousands) 1993 1994 1995
------- ------- -------
Sales $42,237 $49,229 $63,819
Earnings before taxes 4,957 5,328 6,928
Sales and earnings before taxes had strong improvements over the last two years
with sales and earnings in 1995 both increasing 30% over 1994. All three units
within the Group showed strong improvement benefitting from new product
introductions and expanded market penetrations.
11
Farm Equipment Group
(In Thousands) 1993 1994 1995
------- ------- -------
Sales $41,471 $38,286 $43,346
Earnings before taxes 5,942 7,257 6,075
Ongoing Businesses(a)
Sales $32,678 $37,724 $43,346
Earnings before taxes 4,658 5,449 6,075
(a) Excluding unit sold in 1994
On an ongoing business basis this segment has shown 15% increases in sales the
past two years with improvements in earnings compared to prior periods of 11% in
1995 and 17% in 1994. The strong performance in 1995 came in spite of
unfavorable weather conditions during the latter half of the fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
One of the Company's financial strengths is its ability to generate cash from
its operating activities. In 1995, the Company again experienced positive
operating cash flow as operating activities provided $8.5 million. Cash flow
generation has been enhanced by the Company's ongoing efforts to improve
operating efficiencies, make cost reductions, and effectively utilize working
capital.
During 1995 the Company exercised its maximum allowable prepayment options and
reduced 10% long-term debt by $9 million. Accordingly, debt as a percentage of
capital employed was reduced to 31.5% from 36.9% at the end of the previous
year.
The Company continued to invest in the future during 1995 by making two
strategic acquisitions at a total cost of $4.8 million and making capital
expenditures of $5 million in continuing operations. The majority of capital
expenditures were focused at those units where the Company has the greatest
growth potential. The Company plans to invest $7 to 8 million in capital
expenditures in 1996, excluding business acquisitions.
The Company has an active program to complement internal growth with acquisition
of product lines and companies that meet the Company's selective criteria. It is
expected that this effort will require the significant expenditure of funds over
the next few years.
At August 31, 1995, the Company had working capital of $80.3 million with a
current ratio of 3.9 to 1. Management believes its current cash position, cash
flows from operations, expected cash proceeds from divesting its Cherokee unit,
along with its borrowing capacity, are adequate to fund its strategies for
future growth, including working capital, expenditures for manufacturing
expansion and efficiencies, new product development and acquisition activities.
At the Company's current quarterly dividend rate of $.06 per share, future
annual dividend payments would approximate $2.4 million. Under the Company's
debt agreements with insurance companies, retained earnings of approximately
$20.6 million are available for dividends, subject to future earnings levels.
Item 8. Financial Statements and Supplementary Data
The financial statements of the Company and the report of independent
accountants thereon of Coopers & Lybrand L.L.P., independent auditors for the
Company, which appears in the Annual Report, are identified in Item 14(a)(1) of
this report, and are incorporated by reference in this Item 8 (see Exhibit 13).
Other financial statement schedules are filed pursuant to Item 14(a)(2) and
exhibits are filed pursuant to Item 14(a)(3) of this report.
12
Selected quarterly financial data for the years 1995 and 1994 appear in Note 12
to the financial statements on F-15 of the Annual Report (see Exhibit 13). Such
data is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 10. Directors and Executive Officers of the Registrant
Directors
The information required by this item is incorporated by reference to a
definitive proxy statement involving the election of directors which is filed by
the Company pursuant to Regulation 14A within 120 days after the close of its
fiscal year.
Executive Officers of the Registrant
The following information is provided as to the Executive Officers of the
Company:
Percentage of
Company's
Outstanding
Common Common
Shares Shares
Beneficially Beneficially
Capacities Owned as of Owned as of
Name Age in Which Served 11/13/95 11/13/95
- ------------ --- ------------------------- ------------ ------------
David R. 49 President and Chief Executive Officer since 105,358 1.0%
Zimmer* March 1992 (previously President and Chief
Executive Officer of New Venture Gear, Inc.
since January 1990; previously Vice President
and General Manager of Electronics Products
for Acustar, Inc., a subsidiary of Chrysler
since 1988)
Lawrence J. 53 Executive Vice President since October 1990 34,816 **
Murphy* (previously Vice President-Finance, three
years)
Raymond H. 56 Vice President and Chief Financial Officer 30,052 **
Steben, Jr.* since July 1993 (previously Director of
MultiFinancial Services since 1992;
previously President of RHS Industries
since 1989; previously Vice President-
Finance, and Chief Financial Officer of
Bundy Corporation since 1981)
Thomas G. 51 Treasurer and Controller since October 1990 13,435 **
Hooper* (previously Controller since 1981)
James P.
Dixon* 51 Vice President-Planning since January 1994 12,975 **
(previously Vice President-Marketing, since
October 1990; previously Manager-Marketing
Services, since April 1990; previously
President of Smart House, two years)
*Elected by the Board of Directors on January 10, 1995
**Less than 1%
13
Item 11. Executive Compensation
The information required by this item is incorporated by reference to a
definitive proxy statement involving the election of directors which is filed by
the Company pursuant to Regulation 14A within 120 days after the close of its
fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to a
definitive proxy statement involving the election of directors which is filed by
the Company pursuant to Regulation 14A within 120 days after the close of its
fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference to a
definitive proxy statement involving the election of directors which is filed by
the Company pursuant to Regulation 14A within 120 days after the close of its
fiscal year.
14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements, all of which are incorporated herein by reference.
Pages in
Annual Report
-------------
Report of Management F-1*
Report of Independent Accountants F-2*
Consolidated Balance Sheets as of August 31, 1994 and 1995 F-3*
Consolidated Statements of Earnings for the Years Ended
August 31, 1993, 1994 and 1995 F-4*
Consolidated Statements of Stockholders' Equity for the Years Ended
August 31, 1993, 1994 and 1995 F-5*
Consolidated Statements of Cash Flows for the Years Ended
August 31, 1993, 1994 and 1995 F-6*
Notes to Consolidated Financial Statements for the Years Ended
August 31, 1993, 1994 and 1995 F-7-F-15*
*See Exhibit 13 to Form 10-K
(a) 2. Financial Statement Schedules
Pages in 10-K
-------------
(A) Consent of Independent Accountants EX-23
(B) Schedule Index:
Schedule II - Valuation and Qualifying Accounts 15
Schedules other than those listed are omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
(a) 3. Exhibits
The exhibits are listed on the accompanying Index to Exhibits.
(b) 4. Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
15
CORE INDUSTRIES INC AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED AUGUST 31, 1993, 1994 AND 1995
Column A Column B Column C Column D Column E
- ------------- ---------- ---------------------- ----------- -----------
(1) (2)
Charged
Balance at Charged to to Other Balance
Beginning Costs and Accounts- Deductions- at End
of Period Expenses Describe Describe of Period
---------- ---------- --------- ----------- ---------
(Note B) (Note A)
Allowance for
doubtful
accounts,
deducted from
accounts
receivable in
the balance
sheet:
1993 $1,100,000 $360,000 $490,000 $ 970,000
========== ======== ======== ==========
1994 $ 970,000 $480,000 $490,000 $ 960,000
========== ======== ======== ==========
1995 $ 960,000 $300,000 $120,000 $120,000 $1,020,000
========== ======== ======== ======== ==========
Note A: Accounts written off.
Note B: Discontinued operations.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: November 15, 1995 CORE INDUSTRIES INC
----------------- --------------------
By: /s/ THOMAS G. HOOPER
--------------------
Thomas G. Hooper, Treasurer and Controller
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.
CHIEF EXECUTIVE OFFICER:
/s/ DAVID R. ZIMMER November 15, 1995
- --------------------------------------- -----------------
David R. Zimmer, President and Director Date
CHIEF FINANCIAL OFFICER:
/s/ RAYMOND H. STEBEN, JR. November 15, 1995
- --------------------------------------- -----------------
Raymond H. Steben, Jr., V.P.-Finance Date
OTHER DIRECTORS:
/s/ JAY A. ALIX November 15, 1995
- --------------------------------------- -----------------
Jay A. Alix Date
/s/ RICHARD P. KUGHN November 15, 1995
- --------------------------------------- -----------------
Richard P. Kughn Date
/s/ HAROLD M. MARKO November 15, 1995
- --------------------------------------- -----------------
Harold M. Marko Date
/s/ LAWRENCE J. MURPHY November 15, 1995
- --------------------------------------- -----------------
Lawrence J. Murphy, Exec. Vice President Date
/s/ ALAN E. SCHWARTZ November 15, 1995
- --------------------------------------- -----------------
Alan E. Schwartz Date
/s/ ROBERT G. STONE, JR. November 15, 1995
- --------------------------------------- -----------------
Robert G. Stone, Jr. Date
17
INDEX TO EXHIBITS
Exhibit Description
- ------- ------------------------------------------------------------
3(a) Restated Certificate of Incorporation of Company and
amendments thereto**
3(b) By-Laws, as amended, of the Company**
10(a) 1991 Director Discounted Stock Option Plan**
10(b) 1988 Director Discounted Stock Option Plan (Incorporated by
reference to Appendix B to Company's Proxy Statement dated
November 23, 1988 filed pursuant to Regulation 14)
10(d) Preferred Share Purchase Rights (Incorporated by reference to
Company's Form 8-K Report dated September 28, 1988)
10(e) Deferred Compensation for Non-Employee Directors**
10(f) Employment Agreement dated March 3, 1992 between the Company and
David R. Zimmer**
10(g)(1) 9.75 Percent Note Agreement dated August 1, 1987 between the
Company and The Northwestern Mutual Life Insurance Company**
10(g)(2) Amendment dated as of March 15, 1989 to the Agreement dated
August 1, 1987 between the Company and The Northwestern Mutual
Life Insurance Company**
10(g)(3) Amendment dated as of March 15, 1989 to the Agreement dated
August 1, 1987 between the Company and The Northwestern Mutual
Life Insurance Company**
10(h)(1) 10.02 Percent Note Agreements dated as of March 15, 1989
between the Company and The Northwestern Mutual Life
Insurance Company/Allstate Life Insurance Company**
10(h)(2) Amendment dated as of March 15, 1992 to the Agreement dated
as of March 15, 1989 between the Company and The Northwestern
Mutual Life Insurance Company/Allstate Life Insurance Company**
10(i) 1993 Performance Incentive Plan (Incorporated by reference
to Appendix A to Company's Proxy Statement dated November
23, 1993 filed pursuant to Regulation 14)
10(j) 1993 Stock Bonus Plan (Incorporated by reference to Appendix
A to Company's Proxy Statement dated November 23, 1993 filed
pursuant to Regulation 14)
*11 Calculations of Earnings Per Share
*13 Financial Statements included in Annual Report to Stockholders
*21 Subsidiaries of the Company (Page 17)
*23 Consent of Coopers & Lybrand L.L.P.
*27 Financial Data Schedule
**Incorporated by reference to exhibits to the 1992 Form 10-K
*Filed herewith
Note: The Exhibits attached to this report will be furnished to requesting
security holders upon payment of a reasonable fee to reimburse the
Company for expenses incurred by the Company in furnishing such
Exhibits.
18