FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 0-20704
ACX TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1208699
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16000 Table Mountain Parkway, Golden, Colorado 80403
(Address of principal executive offices) (Zip Code)
(303) 271-7000
(Registrant's telephone number, including area code)
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 [ ]
There were 27,913,312 shares of common stock outstanding as of
August 8, 1996.
ACX TECHNOLOGIES, INC.
CONSOLIDATED INCOME STATEMENT
(In thousands, except share data)
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Net sales $183,987 $169,235 $361,125 $325,119
Costs and expenses:
Cost of goods sold 142,585 128,776 281,063 249,849
Marketing, general and
administrative 19,507 19,237 39,095 37,502
Research and
development 3,771 4,763 7,394 9,210
Total operating
expenses 165,863 152,776 327,552 296,561
Operating income 18,124 16,459 33,573 28,558
Other income - net 24 51 41 140
Interest expense - net (2,182) (2,221) (3,788) (4,672)
Income from continuing
operations before income
taxes 15,966 14,289 29,826 24,026
Income tax expense 6,200 5,550 11,900 9,400
Income from continuing
operations 9,766 8,739 17,926 14,626
Discontinued operations:
Income (loss) from
discontinued operations
of Golden Aluminum
Company -- 1,180 (5,033) 3,943
Loss on disposal of
Golden Aluminum Company -- -- (70,000) --
Net income (loss) $9,766 $9,919 ($57,107) $18,569
Net income (loss) per
share of common stock:
Income from continuing
operations $0.34 $0.32 $0.63 $0.53
Income (loss) from
discontinued operations -- 0.04 (2.62) 0.14
Net income (loss) per
share $0.34 $0.36 ($1.99) $0.67
Weighted average shares
outstanding 28,813 27,686 28,645 27,566
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
June 30, December 31,
1996 1995
ASSETS
Current assets
Cash and cash equivalents $18,783 $52,686
Accounts and notes receivable 80,123 98,061
Inventories:
Finished 39,330 41,228
In process 28,022 41,712
Raw materials 27,897 34,560
Total inventories 95,249 117,500
Deferred tax asset 17,893 7,275
Other assets 10,947 16,986
Net current assets of discontinued
operations (Note 1) 60,123 --
Total current assets 283,118 292,508
Properties, at cost less accumulated
depreciation and amortization of
$263,179 in 1996 and $322,263 in 1995 260,260 426,832
Other assets 63,467 66,146
Noncurrent assets of discontinued
operations (Note 1) 112,121 --
Total assets $718,966 $785,486
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt $ 10,000 $ --
Other current liabilities 124,367 123,707
Total current liabilities 134,367 123,707
Long-term debt 100,000 100,000
Deferred income taxes -- 22,970
Accrued postretirement benefits 27,501 27,008
Other long-term liabilities 25,247 23,427
Shareholders' equity
Preferred stock, non-voting, $0.01 par
value, 20,000,000 shares authorized and
no shares issued or outstanding -- --
Common stock, $0.01 par value
100,000,000 shares authorized and
27,906,000 and 26,917,000 issued and
outstanding at June 30, 1996, and
December 31, 1995 280 269
Paid-in capital 442,874 441,220
Retained earnings (deficit) (12,355) 45,587
Cumulative translation adjustment and
other 1,052 1,298
Total shareholders' equity 431,851 488,374
Total liabilities and shareholders'
equity $718,966 $785,486
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Six months ended
June 30,
1996 1995
Cash flows from operating activities:
Net income (loss) ($57,107) $18,569
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Loss on disposal of discontinued
operations, net of tax 70,000 --
Depreciation and amortization 24,648 24,330
Change in deferred income taxes 603 1,406
Change in accrued postretirement
benefits 493 618
Change in current assets and
current liabilities (43,586) (18,160)
Change in deferred items and
other (960) (558)
Net cash provided by (used in)
operating activities (5,909) 26,205
Cash flows used in investing
activities:
Additions to properties (29,190) (24,075)
Other (1,796) 7,515
Net cash used in investing
activities (30,986) (16,560)
Cash flows provided by (used in)
financing activities:
Short-term borrowings (repayments) 2,514 (3,600)
Proceeds from long-term debt --- 819
Other 478 2,604
Net cash provided by (used in)
financing activities 2,992 (177)
Cash and cash equivalents:
Net increase (decrease) in cash and
cash equivalents (33,903) 9,468
Balance at beginning of period 52,686 9,777
Balance at end of period $18,783 $19,245
See Notes to Consolidated Financial Statements.
ACX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Discontinued Aluminum Operations
On April 24, 1996, the Board of Directors of ACX Technologies,
Inc. (ACX Technologies or the Company) adopted a plan to dispose
of the assets of Golden Aluminum Company (Golden Aluminum). The
disposition is expected to be completed within one year and is
expected to result in an estimated after-tax loss of
approximately $70 million, including approximately $11.5 million
of after-tax losses associated with ongoing activities of Golden
Aluminum through the disposition date. Accordingly, the
historical results for Golden Aluminum and the estimated loss
through the disposition date have been classified as discontinued
operations for all periods presented in the consolidated
statement of income.
Selected financial data for Golden Aluminum, in thousands, are
summarized as follows:
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Revenues $38,550 $72,795 $ 71,243 $143,867
Income (loss) from
operations
before income taxes $ - $ 1,980 ($ 8,033) $ 6,843
Income tax (expense)
benefit - (800) 3,000 (2,900)
Income (loss) from
operations - 1,180 ( 5,033) 3,943
Loss on disposal before
income taxes - - (92,000) -
Loss on operations during
disposition period before
income taxes - - (18,000) -
Income tax benefit - - 40,000 -
Net income (loss) $ - $ 1,180 ($75,033) $ 3,943
Per common share:
Net income (loss) from
operations $ - $ 0.04 ($ 0.18) $ 0.14
Estimated loss on disposal - - ( 2.44) -
Net income (loss) $ - $ 0.04 ($ 2.62) $ 0.14
The assets and liabilities of Golden Aluminum which are held for
sale have been separately identified on the
June 30, 1996 consolidated balance sheet as net current or
noncurrent assets of discontinued operations. The consolidated
balance sheet at December 31, 1995 has not been restated. The
consolidated statement of cash flows for the six months ended
June 30, 1996 and 1995 has not been restated for the discontinued
operation and therefore, includes sources and uses of cash for
Golden Aluminum.
Significant estimates have been made by management with respect
to the loss on disposal of Golden Aluminum. Actual results could
differ from these estimates making it reasonably possible that a
change in these estimates could occur in the near term.
Note 2. Restructuring Charges
During the fourth quarter of 1995, the Company recorded a charge
of $8.0 million primarily related to the elimination of certain
non-strategic operations and cost reduction measures. Of this
amount, $1.7 million related to costs associated with the
elimination of 43 positions within Golden Aluminum's metal
procurement function and Golden Technologies' ceramic research
and development activities. These positions were eliminated in
the fourth quarter of 1995. Prior to the second quarter 1996,
$1.2 million was paid. In the second quarter of 1996, $0.5
million was paid and charged against the accrual. The remaining
restructuring charge of $6.3 million related primarily to non-
cash exit costs associated with the decision to sell Lauener
Engineering.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
On April 24, 1996, the Board of Directors of ACX Technologies,
Inc. (ACX Technologies or the Company) adopted a plan to dispose
of the assets of the Company's aluminum business, Golden Aluminum
Company (Golden Aluminum). Consequently, the results of Golden
Aluminum are reported as discontinued operations on the
consolidated income statement of ACX Technologies. The assets
and liabilities of Golden Aluminum which are held for sale have
been separately identified on the June 30, 1996 consolidated
balance sheet as net current or noncurrent assets of discontinued
operations. The consolidated balance sheet at December 31, 1995
has not been restated. The consolidated statement of cash flows
for the six months ended June 30, 1996 and 1995 has not been
restated for the discontinued operations and therefore, includes
sources and uses of cash for Golden Aluminum.
Results from Continuing Operations
Consolidated net sales for the six months and three months ended
June 30, 1996, increased $36.0 million or 11.1 percent and $14.8
million or 8.7 percent, respectively, when compared to the same
periods in 1995. The 1996 acquisition of Gravure Packaging, Inc.
located in Richmond, Virginia, by Graphic Packaging Corporation
(Graphic Packaging) and additional sales volume at some Coors
Ceramics Company (Coors Ceramics) locations contributed nearly 90
percent of the sales growth experienced in both periods.
Consolidated gross margin (gross profit as a percent of net
sales) for the six month period decreased from 23.2 percent in
1995 to 22.2 percent in 1996; the three month period experienced
a similar decrease from 23.9 percent in 1995 to 22.5 percent in
1996. The largest factor in the decline was Coors Ceramics'
advanced electronic package division which continued to
experience a decline in sales and margins. These declines were
offset, in part, by improved margins at Coors Ceramics'
structural division and at Graphic Packaging.
For the six months ended June 30, 1996, consolidated operating
income increased $5.0 million or 17.6 percent over the 1995
amount of $28.6 million. For the three months ended June 30,
1996, the increase was $1.7 million or 10.1 percent to $18.1
million. On a year-to-date and quarterly basis, Graphic
Packaging was favorably impacted by its 1996 acquisition of the
Richmond facility. In the six month and quarter-only periods
ending June 30, 1996, Coors Ceramics experienced volume growth in
its structural division. However in the quarter-only period, the
operating income growth in structural products was more than
offset by the diminished sales to the telecommunications market.
Interest expense - net for the first half of 1996 was $3.8
million compared to $4.7 million in the 1995 period; a favorable
change of $0.9 million. Interest expense - net for the second
quarter of 1996 and 1995 was $2.2 million. The reduction of
interest expense in the six month period of 1996 related to
reduced short-term borrowings during the first quarter of 1996
when compared to same period in 1995. Additionally, increased
interest income was recorded during the first half of 1996 as
compared to 1995 due to the investment of positive cash balances.
Liquidity and Capital Resources
The Company's liquidity is generated from both internal and
external sources and is used to fund short-term working capital
needs, capital expenditures and acquisitions. Internally
generated liquidity is measured by net cash from operations as
discussed below and working capital. At June 30, 1996, the
Company's working capital (excluding the net current assets of
the discontinued operation) was $88.6 million with a current
ratio of 1.7 to 1. The Company considers its working capital
sufficient to meet its anticipated short-term requirements. For
long-term requirements, the Company has access to a $125 million
unsecured, committed revolving credit facility under which $10.0
million was borrowed at June 30, 1996.
Net cash used by operations for the six months ended June 30,
1996 was $5.9 million. Contributing to this usage was an
increase in working capital at Coors Ceramics and Graphic
Packaging to support increased sales. Golden Aluminum's
inventories increased $5.2 million since year-end 1995. Capital
expenditures of $29.2 million in the first six months of 1996
accounted for the majority of the net cash used in investing
activities. Coors Ceramics incurred approximately 60 percent of
these expenditures. The remainder was spent at Graphic Packaging
and Golden Technologies. In addition, in connection with the
acquisition of the Richmond facility by Graphic Packaging in
first quarter 1996, the Company used $7.5 million to reduce short-
term borrowings. Offsetting this use in the year-to-date period
was the borrowing of $10.0 million under the committed credit
facility.
Segment Information
The Company's continuing operations include two reportable
business segments -- Coors Ceramics and Graphic Packaging. The
ceramics segment includes operations that manufacture advanced
technical ceramic products. The packaging segment produces high-
value consumer and industrial flexible packaging and folding
cartons. In addition, the Company operates Golden Technologies
Company, Inc. (Golden Technologies), which includes operations
that produce high-fructose corn syrup, refined corn starch and
other food ingredients, operations that are developing
biodegradable polymers and photovoltaics and a real estate
partnership. Net sales and operating income for the second
quarter and six months of 1996 and 1995 are summarized by segment
below:
Second Quarter Only
(in thousands)
Operating
Net Sales Income(Loss)
1996 1995 1996 1995
Coors Ceramics $71,027 $69,679 $11,947 $13,503
Graphic Packaging 91,752 80,482 11,208 9,397
Golden Technologies 21,208 19,074 (3,439) (4,047)
Corporate - - (1,592) (2,394)
$183,987 $169,235 $18,124 $16,459
Year-To-Date
(in thousands)
Operating
Net Sales Income(Loss)
1996 1995 1996 1995
Coors Ceramics $145,415 $133,555 $24,599 $23,084
Graphic Packaging 174,117 153,994 18,764 17,193
Golden Technologies 41,593 37,570 (6,109) (7,092)
Corporate - - (3,681) (4,627)
$361,125 $325,119 $33,573 $28,558
COORS CERAMICS
Coors Ceramics reported a slight increase in sales for second
quarter 1996 compared to second quarter 1995; sales were up $1.3
million or 1.9 percent from $69.7 million to $71.0 million.
Operating income decreased $1.6 million from $13.5 million in
1995 to $11.9 million in 1996. Although the structural division
continued to experience volume gains in fluid dispensing, power
generation and pulp and paper markets, this performance was
offset by the diminished sales volume in the telecommunications
market of advanced ceramic packages.
During the first six months of 1996, Coors Ceramics' sales
increased $11.9 million or 8.9 percent from $133.6 million in the
comparable 1995 period to $145.4 million. The increase came
primarily from volume gains in the structural division
experienced in fluid dispensing, power generation and pulp and
paper markets. Additionally, sales of structural ceramics to the
semi-conductor industry are up over 1995, although the rate of
growth has slowed. Lastly, sales to the oilfield market
increased over those reported in the 1995 period. Offsetting
these increases was a significant decline in sales of advanced
ceramic packages primarily to the telecommunications industry.
Operating income increased 6.6 percent or $1.5 million in the
1996 six month period when compared to the same period in 1995.
Contributing to this increase was the strong performance in the
structural division, offset in large part by the negative results
posted in the advanced ceramic packages division. The 1996
outlook is for continued demand in structural products and
softness in the electronics and advanced ceramic package
segments. These market conditions may result in Coors Ceramics
reporting 1996 operating income of less than the record $47.4
million reported in 1995.
GRAPHIC PACKAGING
Graphic Packaging's 1996 second quarter sales of $91.8 million
increased $11.3 million over the 1995 second quarter. The
acquisition of the Richmond facility contributed $10.4 million of
this increase. Folding carton sales exclusive of the Richmond
facility increased $1.5 million, primarily related to sales of
high-impact cereal packaging. The flexible division's sales were
down $0.7 million to $38.4 million for the quarter. Second
quarter 1996 operating income improved $1.8 million, of which
approximately one-half related to the Richmond facility. The
remaining increase was attributable to improved production
efficiencies in the folding carton division offset in part by the
start up of new presses and costs related to facility expansions.
Graphic Packaging reported sales of $174.1 million for the first
six months of 1996, an increase of $20.1 million or 13.1 percent
over the 1995 first half. Operating income for the 1996 year-to-
date period improved $1.6 million to $18.8 million. The
acquisition of the Richmond facility contributed $21.1 million to
the net sales increase and $1.6 million to operating income.
Although the remaining folding carton and flexible operations
were down slightly in sales, Graphic Packaging was able to
maintain 1996 operating income for these plants at the 1995
operating income level through increased production efficiencies
in its folding carton division, offset in part by higher costs
associated with expanded facilities and the start up of new
presses. Graphic Packaging believes it is on track to achieve
its eighth consecutive year of sales and earnings growth in 1996.
GOLDEN TECHNOLOGIES
Golden Technologies reported sales for the second quarter of 1996
of $21.2 million compared to the $19.1 million reported in the
year earlier period. For the same period in 1996 the operating
loss was $3.4 million. This compared favorably to the loss
reported in the 1995 second quarter of $4.0 million and was the
result of increased volume and sale prices of commodity by-
products.
Net sales for the six months ended June 30, 1996, were $41.6
million compared to $37.6 million recorded in 1995. This $4.0
million increase (10.7 percent) was the result of increased
volume and prices in sales of commodity by-products. Sales for
the corn wet milling business were unchanged from the first six
months of 1995. The operating loss for 1996 was $6.1 million or
$1.0 million less than the loss reported in the first six months
of 1995. Contributing to this change was the favorable volume
and prices experienced in the sales of by-products and the timing
of sales recorded by the real estate partnership. Golden
Technologies continues to evaluate opportunities to commercialize
its development efforts in biodegradable polymers and solar
energy systems.
Forward-Looking Statements
Some of the statements in this Form 10-Q Quarterly Report, as
well as statements by the Company in periodic press releases,
oral statements made by the Company's officials to analysts and
shareholders in the course of presentations about the Company and
conference calls following quarterly earnings releases,
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-
looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from
any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include,
among other things, (i) general economic and business conditions;
(ii) changes in industries in which the Company does business,
such as beverage, telecommunications, automotive and
semiconductor; (iii) the loss of major customers; (iv) the loss
of market share and increased competition in certain markets; (v)
industry shifts to alternative materials, such as replacement of
ceramics by plastics and competitors offering products with
characteristics similar to the Company's products; (vi) changes
in consumer buying habits; (vii) governmental regulation
including environmental laws; and (viii) other factors over which
the Company has little or no control.
These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K
for the year ended December 31, 1995. The accompanying financial
statements have not been examined by independent accountants in
accordance with generally accepted auditing standards, but in the
opinion of management of ACX Technologies, such financial
statements include all adjustments necessary to summarize fairly
the Company's financial position and results of operations. All
adjustments made to the interim financial statements presented
are of a normal recurring nature. The results of operations for
the second quarter ended June 30, 1996, may not be indicative of
results that may be expected for the year ending December 31,
1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Document Description
2.1 Plan of disposition of Golden Aluminum
Company. (Incorporated by reference to Exhibit
2.1 to Form 10-Q filed on May 3, 1996, file No.
0-20704)
3.1 Articles of Incorporation of Registrant.
(Incorporated by reference to Exhibit 3.1 to
Form 10 filed on October 6, 1992, file No.
0-20704)
3.1A Articles of Amendment to Articles of
Incorporation of Registrant. (Incorporated by
reference to Exhibit 3.1A to Form 8 filed on
December 3, 1992, file No. 0-20704)
3.2 Bylaws of Registrant, as amended.
(Incorporated by reference to Exhibit 3.2 to
Form 10-K filed on March 8, 1994, file number
0-20704)
4 Form of Stock Certificate of Common Stock.
(Incorporated by reference to Exhibit 4 to Form
10-K filed on March 7, 1996, file No. 0-20704)
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the
quarter ended June 30, 1996.
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.
Date: August 8, 1996 By Jed J. Burnham
(Chief Financial Officer and
Treasurer)
Date: August 8, 1996 By Gail A. Constancio
(Controller and Principal
Accounting Officer)