CONTROL SHARE MEETING
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[X] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COMMERCIAL INTERTECH CORP.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CERTAIN FORWARD-LOOKING INFORMATION
CONCERNING COMMERCIAL INTERTECH CORP. AFTER THE
SPIN-OFF OF CUNO INCORPORATED ("CUNO")
FORWARD-LOOKING INFORMATION
The information herein contains certain forward-looking statements and
information relating to the Company after giving effect to the previously
declared spin-off of CUNO. When used in this document, the words "anticipate,"
"believe," "estimate" and "expect" and similar expressions, as they relate to
the Company or its management, are intended to identify forward-looking
statements.
For forward-looking information concerning the Company's wholly-owned
subsidiary, CUNO, reference is made to the Registration Statement on Form 10
filed by CUNO with the Securities and Exchange Commission (the "Commission")
on July 30, 1996 under the heading "Projections".
GENERAL
The Company was the sole preparer of the projected financial information
(the "Projections") set forth herein. The Projections are derived from
presentations by management to the Board of Directors of the Company in
connection with its review of the Company's strategic plan and have been
updated to reflect anticipated results of Component Engineering, Inc., a
recent acquisition, and a Company program to reduce general corporate and
operating unit overhead. The Projections are further based on the Company's
estimated results of operations for the Company under the hypothetical
assumptions described below in "Assumptions." The Company does not intend to
update or otherwise revise the Projections to reflect events or circumstances
existing or arising after the date hereof or to reflect the occurrence of
unanticipated events, even if any or all of the underlying assumptions do not
prove to be valid. Furthermore, the Company does not intend to update or
revise the Projections to reflect changes in general economic or industry
conditions. These Projections are qualified in their entirety by and should be
read in conjunction with the information and financial statements (and notes
thereto) included in the Company's Annual Report on Form 10-K for the year
ended October 31, 1995 and its Quarterly Report on Form 10-Q for the quarter
ended April 30, 1996.
The Company does not as a matter of course publicly disclose projected
financial information. The Projections were prepared by the Company and are
qualified by and subject to the assumptions set forth below and the other
information contained herein. The Projections were not prepared with a view
toward compliance with published guidelines of the Commission, the American
Institute of Certified Public Accountants or any other regulatory or
professional agency or body, generally accepted accounting principles or
consistency with the Company's audited financial statements.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, will continue
to file periodic reports and other information with the Commission relating to
the Company's business, financial statements and other matters. Such filings
will not
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include projected financial information. The assumptions described herein are
those that the Company believes are most significant to the Projections;
however, not all of the assumptions used in preparing the Projections have
been set forth herein.
THE PROJECTIONS ARE BASED UPON A NUMBER OF ASSUMPTIONS AND ESTIMATES THAT,
WHILE PRESENTED WITH NUMERICAL SPECIFICITY AND CONSIDERED REASONABLE BY THE
COMPANY WHEN TAKEN AS A WHOLE, INHERENTLY ARE SUBJECT TO SIGNIFICANT BUSINESS,
ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE
BEYOND THE CONTROL OF THE COMPANY, AND ARE BASED UPON SPECIFIC ASSUMPTIONS
WITH RESPECT TO FUTURE BUSINESS DECISIONS, SOME OR ALL OF WHICH WILL CHANGE.
PROJECTIONS ARE NECESSARILY SPECULATIVE IN NATURE AND IT CAN BE EXPECTED THAT
THE ASSUMPTIONS OF THE PROJECTIONS WILL NOT PROVE TO BE VALID. ACCORDINGLY,
THE PROJECTIONS ARE ONLY AN ESTIMATE. ACTUAL RESULTS WILL VARY FROM THE
PROJECTIONS AND THE VARIATIONS MAY BE MATERIAL. CONSEQUENTLY, THE INFORMATION
HEREIN SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER
PERSON OF RESULTS THAT WILL ACTUALLY BE ACHIEVED.
METHODOLOGY
Revenues were projected based on the Company's estimates of volumes of
shipments of the Company's products, changes in the Company's product mix and
pricing assumptions for the projected periods. Projected costs were developed
by the Company after reviewing each process component of the Company's
operations such as raw material purchasing, as well as its corporate functions
such as sales and marketing, human resources, and accounting and finance,
among others. The projections do not include extraordinary or nonrecurring
charges arising in connection with United Dominion's tender offer and the
spin-off of CUNO. The weighted average shares have been calculated on the
assumption that the Company's outstanding preferred shares do not convert into
common shares prior to the spin-off of CUNO.
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PROJECTION PERIODS PRESENTED
The Company's Projections are for fiscal 1996 and 1997.
The following table sets forth financial projections and other data for
fiscal 1996 and 1997. The projections were compiled by each of the Company's
operating groups and reviewed and adjusted by management. Current prevailing
foreign exchange rates were used in translating projected results of the
international operations.
COMMERCIAL INTERTECH CORP.
FISCAL 1993 THROUGH 1997 FORECAST
U.S. DOLLARS ($000)
YEAR ENDED OCTOBER 31,
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1993 1994 1995 1996 1997
ACTUAL ACTUAL ACTUAL FORECAST FORECAST
-------- -------- -------- -------- --------
Income Statement Data:
Net Sales.................. $317,806 $373,820 $459,137 $475,094 $500,801
Gross Profit............... 89,135 106,866 122,052 126,821 137,266
Operating Income........... 27,048 29,851 34,410 37,720 48,950
Interest (Expense)......... (5,463) (4,246) (6,221) (6,579) (10,350)
Other Income............... 1,566 155 2,190 1,878 369
Income Before Taxes........ 23,151 25,760 30,379 33,019 38,969
Net Income Before
Extraordinary Items....... 14,716 17,812 24,282 23,609 27,903
Note: Excludes Extraordinary and Nonrecurring Charges Resulting from United
Dominion's Tender Offer and the Spin-off of CUNO
Other Data:
Depreciation and
Amortization.............. $ 7,426 $ 7,428 $ 9,087 $ 9,310 $ 11,576
Capital Expenditures....... 6,338 19,446 31,794 23,359 17,641
Weighted Average Shares
Primary.................. 15,096 15,327 15,582 14,971 13,912
Diluted.................. 17,571 17,852 18,012 17,465 16,400
Earnings Per Share (Before
Extraordinary Items)
Primary.................. $ 0.84 $ 1.03 $ 1.42 $ 1.44 $ 1.86
Diluted.................. 0.78 0.95 1.30 1.31 1.65
Balance Sheet Data: (Before
Extraordinary Items)
Total Assets............... $212,306 $285,079 $315,796 $372,167 $347,499
Working Capital............ 24,225 58,173 46,672 83,430 89,774
Long-Term Debt............. 72,479 71,845 69,869 112,701 103,904
Shareholders' Equity....... 19,194 47,362 70,943 84,266 108,752
ASSUMPTIONS
In developing the Projections, the Company has made certain assumptions
relating to its business. The major assumptions pertaining to its markets,
sales, prices, strategy and costs, selling, general and administrative
expenses, interest expense, taxes and capital expenditures are outlined below.
In addition, the Company did not take into account when formulating the
Projections the effect of unforeseeable events such as labor disputes, new
technologies or competitors, material changes in political or economic
conditions, changes in legislation or regulations, or any changes in generally
accepted accounting principles, the result of any of which alone or in the
aggregate may have a material effect on the Company's business, financial
condition, results of operations or prospects.
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Economic conditions vary widely among the countries in which the Company
conducts business. Assessments of local economic factors have been used
independently to forecast revenues and financial results for each business
unit. Taken as a whole, economic growth is generally expected to range from 3
percent to 4 percent per annum over the forecast period. For certain of the
business units, however, industry growth trends are expected to lag general
economic activity and projections in these areas have been prepared
accordingly. Additional revenue growth has been incorporated in the forecasts,
where appropriate, to account for new product introductions, planned entries
into new market segments and the recent acquisition of Component Engineering,
Inc.
Consolidated sales are expected to increase to $475.1 million in 1996,
representing a modest increase of $16.0 million or 3.5 percent over the
previous year. It is anticipated that revenues will reach $500.8 million in
1997 for a year-over-year increase of $25.7 million or 5.5 percent. Weak
business conditions in the truck and transportation, mining equipment,
construction equipment and forestry equipment industry segments are expected
to result in sluggish growth in U.S. revenues for both the Hydraulic Systems
and Building Systems and Metal Products Groups over the two-year forecast
period. Sales increases are projected to be much stronger, however, for the
Company's marine and recreational business where new product lines were
launched in 1996. Year-over-year growth is also expected to be strong for the
industrial and specialty hydraulics business in the United Kingdom. Sales
volume is projected to increase at moderate rates over the two-year period in
the Astron Division as this business unit continues to struggle with generally
weak economic conditions in Europe.
Operating income is forecasted to reach $37.7 million in 1996, up nearly 10
percent from the previous year. Profits in the Hydraulic Systems Group are
expected to be adversely affected in 1996 by disruptions resulting from a
relocation to a new manufacturing facility; costs incurred to establish
marketing, engineering and prototype testing activities for entry into new
automotive and material handling market segments; distressed business
conditions for capital goods markets in South America; and a number of other
general operational difficulties. Operating income is expected to hold steady
in the Metal Stampings Division for 1996 while price adjustments and
manufacturing cost improvements will result in higher profits for the Astron
Division despite the lack of significant growth in unit volume.
Operating income is expected to improve to nearly $49.0 million in 1997 for
a year-over-year gain of $11.3 million or 30 percent. Increased sales volume,
cost savings from recent investments in technologically advanced production
equipment, continuing improvements for the German businesses, and steady
performances by the remaining operating units are expected to contribute to
improved operating results for the Hydraulic Systems Group in 1997. Moderate
gains in operating income are also forecasted for the Metal Stamping and
Astron Divisions as revenues improve over those in 1996. Also included in the
forecasted operating income for 1997 are additional benefits of $3.5 million
to be derived from a program to reduce general corporate and operating unit
overhead costs.
Interest expense is projected to increase from $6.6 million in 1996 to $10.6
million in 1997 primarily as a result of additional debt incurred late in 1996
to finance a share repurchase program. It is expected that up to 2.5 million
of the common shares outstanding will be acquired by the Company under this
program. The effective tax was unusually low in 1995 at 20 percent reflecting
the favorable impact of loss indemnification associated with the hydraulic
operations in Germany. The effective rate of 28 percent which is projected for
1996 is more indicative of an expected normalized rate for future periods.
Capital expenditures are expected to amount to $23.4 million in 1996 and
$17.6 million in 1997. Most of the spending will occur in the Hydraulic
Systems Group for plant expansions at two locations, increased machining
capacity in certain product lines, tooling for new product introductions,
technologically advanced manufacturing systems to effect cost savings, and
general replacement needs. The Astron Division will also expand manufacturing
capabilities during this period by investing in production equipment for new
operations located in the Czech Republic.
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The Company believes that cash flow from operations, combined with funds
available from short-term and long-term borrowings, will be sufficient to meet
requirements for working capital, capital expenditures, debt service and other
operating needs over the forecast period.
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# # #
The following is a list of the names and shareholdings of individuals who
may be deemed to be "participants" in the solicitation of proxies or
revocation of agent designations by Commercial Intertech in opposition to
United Dominion and OAC's solicitation of proxies for a "control share"
meeting and their solicitation of agent designations to call a special meeting
(information with respect to shareholdings includes common shares, shares
issuable pursuant to options exercisable within 60 days, and preferred
shares): Paul J. Powers (329,041 shares); Mark G. Kachur (32,086 shares);
Bruce C. Wheatley (34,714 shares); Hubert Jacobs van Merlen (13,103 shares);
John Gilchrist (32,032 shares); William J. Bresnahan (300 shares); Charles B.
Cushwa III (220,380 shares); William W. Cushwa (238,925 shares); John M.
Galvin (5,750 shares); Richard J. Hill (10,397 shares); Neil D. Humphrey
(6,635 shares); William E. Kassling (5,000 shares); Gerald C. McDonough (4,500
shares); C. Edward Midgley (10,000 shares); George M. Smart (2,750 shares);
Don E. Tucker (136,855 shares); Robert A. Calcagni (58,463 shares); Gilbert M.
Manchester (33,994 shares), and Steven J. Hewitt (23,880 shares). Commercial
Intertech has engaged Goldman, Sachs & Co. as its financial adviser in
connection with the United Dominion tender offer and the solicitations described
above. Goldman, Sachs & Co. will receive certain fees in connection with its
services. Certain partners and employees of Goldman, Sachs & Co. may assist in
the solicitation of proxies on behalf of Commercial Intertech's Board of
Directors. In the normal course of business, Goldman, Sachs & Co. regularly buys
and sells securities, including Commercial Intertech securities on its own
account and for the account of its customers, which transactions may result from
time to time in Goldman, Sachs & Co. having a net long or net short position in
Commercial Intertech securities.
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