1
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 NOVEMBER 30, 1995
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-10023
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SUDBURY, INC.
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(Exact name of Registrant as specified in its Charter)
DELAWARE 34-1546292
- ------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30100 CHAGRIN BOULEVARD, SUITE 203
CLEVELAND, OHIO 44124
- -------------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (216) 464-7026
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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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13,
or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable
date: COMMON SHARES, $0.01 PAR VALUE, AS OF JANUARY 5, 1996: 10,574,133
2
INDEX
SUDBURY, INC. AND SUBSIDIARIES
PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
as of November 30, 1995 and May 31, 1995 3 - 4
Condensed Consolidated Statements of
Operations for the three-month periods
ended November 30, 1995 and November 30,
1994 5
Condensed Consolidated Statements of
Operations for the six-month periods
ended November 30, 1995 and November 30,
1994 6
Condensed Consolidated Statements of
Cash Flows for the six-month periods
ended November 30, 1995 and November 30,
1994 7
Notes to Condensed Consolidated
Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11 - 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 20
3
PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
SUDBURY, INC. AND SUBSIDIARIES
ASSETS
NOVEMBER 30, MAY 31,
1995 1995
(UNAUDITED) (AUDITED)
----------- ---------
(DOLLARS IN THOUSANDS)
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 39 $ 3,548
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE 44,056 41,800
INVENTORIES 20,458 18,124
DEFERRED TAXES AND OTHER 7,727 7,276
-------- --------
TOTAL CURRENT ASSETS 72,280 70,748
PROPERTY, PLANT AND EQUIPMENT
LAND AND LAND IMPROVEMENTS 2,284 2,263
BUILDINGS 17,441 17,334
MACHINERY AND EQUIPMENT 60,403 53,580
-------- --------
80,128 73,177
LESS ACCUMULATED DEPRECIATION 22,673 18,931
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 57,455 54,246
OTHER ASSETS 5,297 4,643
-------- --------
$135,032 $129,637
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS - (CONTINUED)
SUDBURY, INC. AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
NOVEMBER 30, MAY 31,
1995 1995
(UNAUDITED) (AUDITED)
----------- ---------
(DOLLARS IN THOUSANDS)
CURRENT LIABILITIES
TRADE ACCOUNTS PAYABLE $ 24,910 $ 25,891
ACCRUED COMPENSATION AND EMPLOYEE BENEFITS 12,360 14,286
OTHER ACCRUED EXPENSES 12,752 14,131
CURRENT MATURITIES OF LONG-TERM DEBT 557 678
-------- --------
TOTAL CURRENT LIABILITIES 50,579 54,986
LONG-TERM DEBT 20,035 17,978
OTHER LONG-TERM LIABILITIES 11,824 12,121
STOCKHOLDERS' EQUITY
COMMON STOCK - PAR VALUE $0.01 PER
SHARE; AUTHORIZED 20,000,000 SHARES;
10,573,782 (10,289,883 AT MAY 31,
1995) SHARES ISSUED AND OUTSTANDING 106 103
ADDITIONAL PAID-IN CAPITAL 23,348 22,076
RETAINED EARNINGS 29,977 23,210
MINIMUM PENSION LIABILITY ADJUSTMENT - NET (837) (837)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 52,594 44,552
-------- --------
$135,032 $129,637
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
THREE MONTHS ENDED
------------------------------
NOVEMBER 30, NOVEMBER 30,
1995 1994
(UNAUDITED) (UNAUDITED)
----------- -----------
(In thousands, except per share amounts)
Net sales $ 76,560 $ 74,355
Costs of products sold 63,345 61,777
-------- --------
GROSS PROFIT 13,215 12,578
Selling and administrative expenses 6,272 6,479
-------- --------
OPERATING INCOME 6,943 6,099
Interest expense - net (508) (759)
Other (expense) income (11) 59
-------- --------
Income before income taxes 6,424 5,399
Income tax expense 2,344 1,974
-------- --------
NET INCOME $ 4,080 $ 3,425
======== ========
Net income per share:
Primary and fully diluted $ .32 $ .27
======== ========
Common shares and common share equivalents:
Primary and fully diluted 12,869 12,722
======== ========
See notes to condensed consolidated financial statements.
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PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
SIX MONTHS ENDED
------------------------------
NOVEMBER 30, NOVEMBER 30,
1995 1994
(UNAUDITED) (UNAUDITED)
----------- -----------
(In thousands, except per share amounts)
Net sales $147,773 $142,075
Costs of products sold 123,537 119,022
-------- --------
GROSS PROFIT 24,236 23,053
Selling and administrative expenses
12,679 12,646
------- --------
OPERATING INCOME 11,557 10,407
Interest expense - net (966) (1,559)
Other income 66 52
-------- --------
Income before income taxes 10,657 8,900
Income tax expense 3,890 3,256
-------- --------
NET INCOME $ 6,767 $ 5,644
======== ========
Net income per share:
Primary and fully diluted $ .53 $ .45
======== ========
Common shares and common share equivalents:
Primary and fully diluted 12,851 12,641
======== ========
See notes to condensed consolidated financial statements.
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PART I, ITEM 1 - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SUDBURY, INC. AND SUBSIDIARIES
SIX MONTHS ENDED
------------------------------
NOVEMBER 30, NOVEMBER 30,
1995 1994
(UNAUDITED) (UNAUDITED)
----------- -----------
(Dollars in thousands)
OPERATING ACTIVITIES:
Net income $ 6,767 $ 5,644
Items included not affecting cash:
Depreciation and amortization 4,758 4,239
Deferred taxes (1,136) 2,359
Other 259 835
Changes in operating assets and liabilities (9,649) (1,675)
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 999 11,402
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (7,511) (6,713)
Proceeds from sale of property, plant,
equipment and other - net 166 202
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (7,345) (6,511)
FINANCING ACTIVITIES:
Borrowings, refinancings and repayments:
Long-term borrowings 38,000 140,952
Reductions of debt (36,280) (146,677)
Common stock issued 1,073 598
Tax benefit from stock option transactions 44 111
-------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,837 (5,016)
-------- --------
DECREASE IN CASH (3,509) (125)
Cash and cash equivalents at beginning of
period 3,548 245
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 39 $ 120
======== ========
See notes to condensed consolidated financial statements.
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PART I, ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUDBURY, INC. AND SUBSIDIARIES
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments of a normal recurring nature considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended November 30, 1995 are not necessarily indicative of the results
that may be expected for the fiscal year ending May 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
May 31, 1995.
Certain amounts for the six months ended November 30, 1994 have been
reclassified to conform to the presentation at November 30, 1995.
NOTE B -- INVENTORIES
The components of inventories are summarized as follows (in thousands):
November 30, May 31,
1995 1995
------------ -------
Raw materials and supplies $ 7,488 $ 7,474
Work in process 8,579 7,217
Finished products 4,797 3,875
------- -------
Total at FIFO 20,864 18,566
Less excess of FIFO cost over LIFO values 406 442
------- -------
$20,458 $18,124
======= =======
NOTE C -- CONTINGENCIES
The Company is party to a number of lawsuits and claims arising out of
the conduct of its business, including those relating to commercial
transactions, product liability and environmental, safety and health matters.
All operating locations acquired by the Company since 1984 operate in a
variety of locations and industries where environmental situations could exist
based on current or past operations. Certain operating and non-operating
subsidiaries of the Company have been named as potentially responsible parties
("PRPs") liable for cleanup of known environmental conditions. For known
situations, the Company, with the assistance of environmental engineers and
consultants, has accrued amounts to cover estimated future environmental
expenditures. The Company has initiated corrective action and/or preventative
environmental projects to ensure the safe and lawful operation of its
facilities. It is possible, however, that future environmental expenditures
may be more or less than accrued amounts, or there could exist unknown
environmental situations at existing or previously owned businesses for which
the future cost is not known or accrued at November 30, 1995.
- 8 -
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PART I, ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUDBURY, INC. AND SUBSIDIARIES
NOTE C -- CONTINGENCIES (CONTINUED)
While the ultimate result of the above contingencies cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the consolidated financial position, results of
operations, or liquidity of the Company.
Under the terms of the January 1992 employment agreement with Jacques
R. Sardas, Chairman, President and Chief Executive Officer of the Company, if
Mr. Sardas' employment is terminated for cause, or due to Mr. Sardas' death,
disability or voluntary resignation before the end of his 1992 employment
agreement in January 1996, the Company is obligated to pay to Mr. Sardas, in
cancellation of his currently exercisable 1,764,706 stock options issued under
his 1992 stock option agreement ("1992 Stock Options"), the appraised value of
the shares underlying the 1992 Stock Options as determined by an investment
banking firm or appraiser mutually acceptable to the Company and Mr. Sardas,
less the exercise price thereof. The appraised value of the shares underlying
the 1992 Stock Options may differ from the trading price of the Company's
Common Stock. The Company is the beneficiary of a key-man life insurance
policy on Mr. Sardas' life in the amount of $14,000,000. The proceeds of this
policy would be used to help fulfill the Company's obligation in the event of
Mr. Sardas' death.
In July 1995, the Company and Mr. Sardas entered into an employment
agreement ("1996 Employment Agreement") which extends Mr. Sardas' employment
subsequent to the expiration of his 1992 employment agreement through January
1998. Under the 1996 Employment Agreement, Mr. Sardas has the right to sell to
the Company the Common Stock underlying the 1992 Stock Options (the "Option
Stock") in five separate approximately semi-annual installments commencing
February 7, 1996, through January 13, 1998. The purchase price for the Option
Stock is the per share fair market value on the purchase date based on quoted
prices on the principal stock exchange on which the Company's Common Stock is
traded ("Fair Market Value"). Mr. Sardas generally may delay his right to sell
any installment of the Option Stock until the next succeeding purchase date.
If at that next succeeding purchase date Mr. Sardas does not tender such shares
of Option Stock, the Company will have no further repurchase obligation for
such shares. Under the terms of the 1996 Employment Agreement, if Mr. Sardas'
employment is terminated other than for cause or due to Mr. Sardas' death or
disability, the Company is obligated to pay to Mr. Sardas, at Mr. Sardas'
election at that time or at the next installment purchase date, the Fair Market
Value of the Option Stock. Alternatively, in such event, if Mr. Sardas does
not exercise such election, he or his estate or representative will maintain
the right to sell the Option Stock in installments as noted above. If the 1996
Employment Agreement is terminated by the Company for cause, then the Company
has the right to purchase the Option Stock for the Fair Market Value thereof
subject to Mr. Sardas' right to decline to tender such shares. In the event he
declines to tender such shares, the Company's obligation to purchase the Option
Stock will terminate.
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PART I, ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUDBURY, INC. AND SUBSIDIARIES
NOTE D -- SUBSEQUENT EVENT
On December 29, 1995, the Company completed the sale of its South Coast
Terminals, Inc. ("South Coast") subsidiary to an affiliate of KMCO, Inc.
Proceeds from the sale of $18,250,000 are subject to certain purchase price
adjustments for final working capital balances. The proceeds were used to
reduce certain indebtedness of South Coast and the Company and may be used to
provide additional funds for the future growth and expansion of the Company's
core businesses. The Company is in the process of finalizing its calculation
of the gain on the sale.
For the year ended May 31, 1995, South Coast had sales of $23,484,000
and total assets at May 31, 1995 of $16,558,000 which accounted for
approximately 8% and 13% of the Company's consolidated revenues and total
assets, respectively.
- 10 -
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PART I, ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS - THREE MONTHS ENDED NOVEMBER 30, 1995 COMPARED TO THREE
MONTHS ENDED NOVEMBER 30, 1994
SALES. The Company's net sales for the second quarter of fiscal 1996
increased by 3% to $76.6 million from $74.4 million in the prior year's
quarter. The increase in sales came principally from the Company's Industrial
Powder Coatings ("IPC") subsidiary whose sales increased by $3.1 million or 27%
over the prior year period as a result of the ramp up of production at its
blank coating facility in Louisville, Kentucky. In the second quarter, the
blank coating facility sales were $4.0 million of which $3.1 million
represented the pass through of steel blank material cost. Partially
offsetting this increase were reductions in IPC's sales volume due to
automotive model changeover affecting its coil spring coating business. The
remaining companies' sales as a whole were down by $.9 million when compared to
the prior year period generally reflecting a slowing in the overall economy.
For the quarter, the overall increase in sales of $2.2 million came
from net new business of $8.8 million and price increases of $.8 million less
volume declines of $7.4 million on existing products. The $8.8 million of net
new business came principally from $4.0 million in sales from IPC's new blank
coating line and $2.0 million in sales at the Company's Wagner Castings Company
("Wagner") subsidiary for the Ford World Car program.
GROSS PROFIT. Gross profit as a percentage of net sales was 17.3% in
the second quarter of fiscal 1996 compared to 16.9% in the same quarter of
fiscal 1995. The increase in margin rate resulted from production efficiency
gains achieved by the Company's Wagner and Iowa Mold Tooling ("IMT")
subsidiaries.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses as a percentage of net sales decreased from 8.7% in the prior year
quarter to 8.2% for the current quarter due principally to higher sales. In
terms of dollars, expenses decreased by $.2 million due principally to the
favorable resolution of an environmental issue at the Company's Cast-Matic
subsidiary for which $.2 million had been previously reserved.
INTEREST EXPENSE. Interest expense decreased by $.3 million due to
significantly lower borrowing levels in the current period and a decrease in
the Company's interest rates under its credit facility which was entered into
in May 1995.
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PART I, ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS - SIX MONTHS ENDED NOVEMBER 30, 1995 COMPARED TO SIX
MONTHS ENDED NOVEMBER 30, 1994
SALES. The Company's net sales for the current six month period
increased by 4% to $147.8 million from $142.1 million in the prior year period.
The Company experienced sales growth at Wagner due to new automotive related
business and IPC as a result of the ramp up of production at its blank coating
facility. Overall, sales increased by $13.5 million from net new business of
which $4.0 million represented the pass through of steel blank material cost
and by $1.4 million as a result of price increases. These increases more than
offset a decrease in sales of existing products of $9.2 million.
GROSS PROFIT. Gross profit as a percentage of net sales was 16.4% for
the current six month period compared to 16.2% in the prior year period. The
increase in margin rate came from higher sales volumes and improved operating
efficiencies at Wagner and IMT.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses as a percentage of net sales decreased from 8.9% in the prior year
period to 8.6% for the current period due principally to higher sales. In
terms of dollars, such expenses were approximately flat when compared to the
prior year period.
INTEREST EXPENSE. Interest expense decreased by $.6 million due to
significantly lower borrowing levels in the current period and a decrease in
the Company's interest rates under its credit facility which was entered into
in May 1995.
AUTOMOTIVE AND LIGHT TRUCK MARKETS. Approximately 60% of the Company's
sales are dependent on the automotive and light truck markets in the United
States and Europe; therefore, related profits will be dependent on sales of
vehicles in these markets in the next twelve months. For the first six months
of the current year, sales in the automotive industry have been slightly below
those experienced in the prior year.
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PART I, ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUDBURY, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of fiscal 1996, operating activities provided
cash of $1.0 million compared to $11.4 million in the first six months of
fiscal 1995. The decrease in cash provided resulted principally from increases
in working capital and income tax payments.
Long-term debt (including current maturities) at November 30, 1995 was
$20.6 million, an increase of $1.9 million from May 31, 1995. Long-term debt
increased as a result of borrowings under the Company's revolving credit
agreement to finance capital expenditures and increases in working capital.
Long-term debt represents 28% of long-term debt plus stockholders' equity at
November 30, 1995 compared to 30% at May 31, 1995. At November 30, 1995, the
Company had the ability to borrow an additional $29.9 million under its
revolving credit facility.
In December 1995, the Company sold its South Coast subsidiary for
$18.25 million subject to final adjustments for working capital. The Company
used the proceeds to reduce certain long-term debt of South Coast and the
Company, and to provide a source of funds for future growth and expansion of
the Company's core businesses.
For the six months ended November 30, 1995, capital expenditures were $7.5
million compared with $6.7 million in the prior year period. Capital
expenditures for the remainder of the year are expected to be higher than the
rate experienced in the first six months as the Company expects to incur
capital expenditures of approximately $25 million in fiscal 1996. Major
projects in fiscal 1996 include Wagner's $12 million ductile iron modernization
project and IPC's electrodeposition coatings plant in Mexico.
The Company believes that funds available under its current bank facility
and funds generated from operations will be sufficient to satisfy its
anticipated operating needs and capital improvements for the next twelve
months.
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PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
Certain litigation was disclosed in the Company's annual report on Form
10-K for the year ended May 31, 1995. There have been no material developments
in the described cases for the fiscal quarter ended November 30, 1995, other
than as discussed below.
In connection with confirmation of the Company's bankruptcy Plan of
Reorganization, the Company intervened and dismissed a pending derivative
action brought in 1985 by John H. Bennett, a stockholder of the Company. The
plaintiff appealed this dismissal and certain related orders to the United
States Court of Appeals for the Sixth Circuit. By order entered June 27, 1995,
the Sixth Circuit Court of Appeals dismissed the appeals as moot. The time for
further appeals by the plaintiff has expired concluding the litigation.
In October 1989, the United States filed a Complaint, UNITED STATES V
RALPH RIEHL, JR., ET AL, in the United States District Court for the Western
District of Pennsylvania ("District Court") against TransPlastics, Inc., a
non-operating subsidiary of the Company, seeking approximately $3.3 million of
costs allegedly incurred by the United States Environmental Protection Agency
("U.S. EPA"), as well as prejudgment interest and declaratory relief for future
cleanup costs at the Millcreek Dump Superfund Site in Millcreek Township,
Pennsylvania. In fiscal 1995, the federal government and TransPlastics, Inc.
entered into a settlement agreement by which the U.S. EPA agreed to accept
$500,000 in settlement of its pending claims at this site, which was within the
amount previously accrued by the Company. The agreement includes a provision
granting TransPlastics contribution protection for matters addressed in the
settlement. Following a mandatory notice period, the agreement was submitted
to the District Court. On November 20, 1995, the settlement agreement was
approved by the District Court, concluding TransPlastics' involvement in this
litigation. Payment of this claim was made in December 1995.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company held on September
28, 1995, the stockholders considered and voted on: (1) the election of seven
directors for one-year terms expiring in 1996 or until their successors have
been duly elected and qualified; (2) a resolution proposed by the Board of
Directors that the stockholders approve the Company's 1995 Stock Option Plan
and (3) a resolution ratifying the action of the Board of Directors in
selecting and appointing Ernst & Young LLP as independent auditors for the
Company for the fiscal year ending May 31, 1996.
All of management's nominees for directors as listed in the proxy
statement were elected by the following votes:
- 14 -
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PART II - OTHER INFORMATION
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - CONTINUED
Cloyd J. Abruzzo For 7,683,649
Withheld 21,079
Jerry A. Cooper For 7,683,649
Withheld 21,079
Preston Heller, Jr. For 7,682,377
Withheld 22,351
James A. Karman For 7,683,449
Withheld 21,279
David A. Preiser For 7,670,635
Withheld 34,093
Jacques R. Sardas For 7,682,534
Withheld 22,194
Thomas F. Slater For 7,683,649
Withheld 21,079
The proposal to approve the Company's 1995 Stock Option Plan was passed by the following vote:
Shares Voted For 6,280,237
Shares Voted Against 1,008,077
Abstentions 141,360
The proposal to ratify the appointment of Ernst & Young LLP as the Company's independent auditors was passed by the
following vote:
Shares Voted For 7,676,431
Shares Voted Against 22,394
Abstentions 5,902
ITEM 5. - OTHER INFORMATION
Effective December 29, 1995, the Company sold the capital stock of its
wholly-owned subsidiary, South Coast Terminals, Inc. ("South Coast"), a Texas
corporation. The disposition of South Coast was consummated in accordance with
the terms of an Agreement and Plan of Merger ("the Agreement") dated as of
December 22, 1995 by and among the Company, South Coast and an affiliate of
KMCO, Inc., a Texas corporation.
The aggregate consideration paid to the Company in exchange for the
outstanding capital stock of South Coast was $18.25 million which is subject to
certain purchase price adjustments for final working capital balances as
defined in the Agreement. The Company used the proceeds to reduce the certain
indebtedness of South Coast and the Company, and to provide additional funds
for future growth and expansion of the Company's core businesses. The
aggregate consideration received by the Company was determined through arm's
length negotiations between representatives of the purchaser and the Company.
The Company did not, nor to the knowledge of the Company, did any affiliate,
director or officer of the Company have any material relationship with the
purchaser prior to the disposition of South Coast.
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PART II - OTHER INFORMATION
ITEM 5. - OTHER INFORMATION - CONTINUED
The following pro forma financial information is included herein:
(i) Pro Forma Condensed Consolidated Balance Sheet (Unaudited) as
of November 30, 1995.
(ii) Pro Forma Condensed Consolidated Statement of Operations
(Unaudited) for the fiscal year ended May 31, 1995.
(iii) Pro Forma Condensed Consolidated Statement of Operations
(Unaudited) for the six months ended November 30, 1995.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SUDBURY, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
HISTORICAL PRO FORMA
NOVEMBER 30, PRO FORMA NOVEMBER 30,
1995 ADJUSTMENT (A) 1995
----------- -------------- -----------
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ 39 $ 7,882 $ 7,921
Account receivable, net 44,056 (3,256) 40,800
Inventories 20,458 (1,082) 19,376
Deferred taxes and other 7,727 (140) 7,587
-------- -------- --------
TOTAL CURRENT ASSETS 72,280 3,404 75,684
PROPERTY, PLANT AND EQUIPMENT, NET
Land and land improvements 2,284 (880) 1,404
Buildings 17,441 (12,102) 5,339
Machinery and equipment 60,403 (8,305) 52,098
-------- -------- --------
80,128 (21,287) 58,841
Less accumulated depreciation 22,673 (8,108) 14,565
-------- -------- --------
TOTAL PROPERTY PLANT
AND EQUIPMENT 57,455 (13,179) 44,276
OTHER ASSETS 5,297 5,297
-------- -------- --------
TOTAL ASSETS $135,032 $ (9,775) $125,257
======== ========= ========
<FN>
(A) To reflect: (1) the sale of South Coast Terminals, Inc. for cash
proceeds of $18,250,000 (2) the payment of $10,368,000 of
indebtedness, (3) the accrual of legal, consulting and certain other
costs related to the disposition, and (4) the franchise tax liability
related to the disposition. The availability of capital loss
carryforwards will result in no federal income tax expense from the
disposition.
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PART II - OTHER INFORMATION
ITEM 5. - OTHER INFORMATION - CONTINUED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SUDBURY, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
HISTORICAL PRO FORMA
NOVEMBER 30, PRO FORMA NOVEMBER 30,
1995 ADJUSTMENT (A) 1995
----------- -------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Trade accounts payable $ 24,910 $ (1,147) $ 23,763
Accrued compensation and
employee benefits 12,360 (427) 11,933
Other accrued expenses 12,752 361 13,113
Current maturities of debt 557 (287) 270
-------- -------- --------
TOTAL CURRENT LIABILITIES 50,579 (1,500) 49,079
LONG-TERM DEBT 20,035 (10,092) 9,943
OTHER LONG-TERM LIABILITIES 11,824 300 12,124
STOCKHOLDERS' EQUITY
Common stock - par value
$0.01 per share; authorized
20,000,000 shares; 10,573,782
shares issued and outstanding 106 106
Additional paid-in capital 23,348 23,348
Retained earnings 29,977 1,517 31,494
Minimum pension liability
adjustment - net (837) (837)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 52,594 1,517 54,111
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $135,032 $ (9,775) $125,257
======== ======== ========
<FN>
(A) To reflect: (1) the sale of South Coast Terminals, Inc. for cash proceeds
of $18,250,000 (2) the payment of $10,368,000 of indebtedness, (3) the
accrual of legal, consulting and certain other costs related to the
disposition, and (4) the franchise tax liability related to the
disposition. The availability of capital loss carryforwards will result in
no federal income tax expense from the disposition.
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18
PART II - OTHER INFORMATION
ITEM 5. - OTHER INFORMATION - CONTINUED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SUDBURY, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
HISTORICAL PRO FORMA
FISCAL YEAR ENDED PRO FORMA FISCAL YEAR ENDED
MAY 31, 1995 ADJUSTMENT ( A) MAY 31, 1995
----------------- --------------- ------------------
Sales $305,435 $(23,484) $281,951
Cost of sales 254,472 (17,241) 237,231
-------- -------- --------
GROSS PROFIT 50,963 (6,243) 44,720
SG&A 28,333 (2,708) 25,625
-------- -------- --------
OPERATING PROFIT 22,630 (3,535) 19,095
Interest expense - net (2,974) 1,621 (1,353)
Other income 292 (7) 285
-------- -------- --------
Income before income taxes 19,948 (1,921) 18,027
Income taxes (benefit) 6,376 (701) 5,675
-------- -------- --------
NET INCOME $ 13,572 $ (1,220) $ 12,352
======== ======== ========
Net income per share:
Primary $ 1.07 $ (.10) $ .97
======== ======== ========
Fully diluted $ 1.07 $ (.10) $ .97
======== ======== ========
Common shares and equivalents:
Primary 12,651 12,651 12,651
======== ======== ========
Fully diluted 12,670 12,670 12,670
======== ======== ========
<FN>
(A) To reflect: (1) the elimination of the results of operations for the fiscal year ended May 31, 1995 for South Coast Terminals,
Inc. and (2) the reduction of interest expense due to the repayment of indebtedness.
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19
PART II - OTHER INFORMATION
ITEM 5. - OTHER INFORMATION - CONTINUED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SUDBURY, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
HISTORICAL PRO FORMA
SIX MONTHS ENDED PRO FORMA SIX MONTHS ENDED
NOVEMBER 30, 1995 ADJUSTMENT ( A) NOVEMBER 30, 1995
----------------- --------------- -----------------
Sales $147,773 $(11,828) $135,945
Cost of sales 123,537 (8,860) 114,677
-------- -------- --------
GROSS PROFIT 24,236 (2,968) 21,268
SG&A 12,679 (1,289) 11,390
-------- -------- --------
OPERATING PROFIT 11,557 (1,679) 9,878
Interest expense - net (966) 606 (360)
Other income 66 (2) 64
-------- -------- --------
Income before income taxes 10,657 (1,075) 9,582
Income taxes (benefit) 3,890 (392) 3,498
-------- -------- --------
NET INCOME $ 6,767 $ (683) $ 6,084
======== ======== ========
Net income per share:
Primary and fully diluted $ .53 $ (.05) $ .47
======== ======== ========
Common shares and equivalents:
Primary and fully diluted 12,851 12,851 12,851
======== ======== ========
<FN>
(A) To reflect: (1) the elimination of the results of operations for the six months ended November 30, 1995 for South Coast
Terminals, Inc. and (2) the reduction of interest expense due to the repayment of indebtedness and investment of cash proceeds.
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20
PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three months
ended November 30, 1995.
EXHIBIT INDEX
EXHIBIT SEQUENTIAL PAGE NUMBER
- ------- ----------------------
(2) Agreement and Plan of Merger Among
South Coast Delaware, Inc., Sudbury,
Inc. and South Coast Terminals, Inc.
dated as of December 22, 1995 22
(10) Employment Agreement between
Mark E. Brody and Sudbury, Inc. 63
(11) Statement re: Computation of
Per Share Earnings 73
(27) Financial Data Schedule 75
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21
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.
SUDBURY, INC.
(Registrant)
By: /s/Jacques R. Sardas
----------------------------
Jacques R. Sardas
Chairman of the Board
and Chief Executive Officer
By: /s/Mark E. Brody
----------------------------
Mark E. Brody
Vice President and
Chief Financial Officer
(Chief Accounting Officer)
Date: January 16, 1996
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