-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S8ZHkZFXKaErfTfFhbRgqVpAmMClrjQnG02NFCLxwznq6BMTL7vkC+72LmDmb4LY krFz2NWgsVWguqBSwK3GcA== 0000899243-95-000746.txt : 19951118 0000899243-95-000746.hdr.sgml : 19951118 ACCESSION NUMBER: 0000899243-95-000746 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951109 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE INTERNATIONAL INC CENTRAL INDEX KEY: 0000055642 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 741058689 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07765 FILM NUMBER: 95589045 BUSINESS ADDRESS: STREET 1: 9600 WEST GULF BANK DR CITY: HOUSTON STATE: TX ZIP: 77040 BUSINESS PHONE: 7134661176 MAIL ADDRESS: STREET 1: P O BOX 40010 CITY: HOUSTON STATE: TX ZIP: 77240 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE VALVE CORP DATE OF NAME CHANGE: 19700909 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 COMMISSION FILE NUMBER 0-2115 KEYSTONE INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) TEXAS 74-1058689 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9600 WEST GULF BANK DRIVE, HOUSTON, TEXAS 77040 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 466-1176 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 --- --- As of November 1, 1995, the number of shares of common stock outstanding was 35,409,631 excluding 464,384 treasury shares. ================================================================================ PART I FINANCIAL INFORMATION KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES --------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED -------------------- --------------------- SEPTEMBER 30, SEPTEMBER 30, -------------------- --------------------- 1995 1994 1995 1994 --------- --------- --------- ---------- Net Sales $147,264 $135,896 $437,579 $390,663 Cost and Expenses: Cost of sales 88,223 80,526 262,833 228,739 Selling, general and administrative 39,455 40,254 120,645 116,436 Severance related costs - - 8,458 - Plant closure and related costs - 53 2,931 4,053 Interest expense 1,503 1,384 4,646 4,037 Interest income (193) (172) (816) (1,204) Translation loss 237 259 71 991 Other (income) expense, net (296) 1,624 (1,429) (879) -------- -------- -------- -------- Income before Income Taxes 18,335 11,968 40,240 38,490 Provision for Income Taxes 6,784 4,548 14,889 14,626 -------- -------- -------- -------- Net Income $ 11,551 $ 7,420 $ 25,351 $ 23,864 ======== ======== ======== ======== Weighted Average Outstanding and Equivalent Shares 35,393 35,274 35,352 35,233 ======== ======== ======== ======== Earnings Per Share $ .33 $ .21 $ .72 $ .68 ======== ======== ======== ======== Cash Dividends Per Share $ .185 $ .185 $ .555 $ .555 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. 2
KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES --------------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- (AMOUNTS IN THOUSANDS) SEPTEMBER 30, DECEMBER 31, 1995 1994 ------------ ------------ (UNAUDITED) (AUDITED) ASSETS Current Assets: Cash and cash equivalents $ 12,531 $ 18,688 Receivables 150,299 131,532 Inventories 166,151 157,807 Prepayments and other 4,981 4,625 -------- -------- 333,962 312,652 -------- -------- Property, Plant and Equipment 314,291 302,727 Less - Accumulated Depreciation 168,885 154,164 -------- -------- 145,406 148,563 -------- -------- Other Assets 33,163 35,055 -------- -------- $512,531 $496,270 ======== ======== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Current maturities and short-term bank borrowings $ 17,963 $ 19,050 Accounts payable and accrued liabilities 104,052 103,283 Income taxes payable 6,767 4,635 -------- -------- 128,782 126,968 -------- -------- Long-Term Liabilities: Long-Term Debt 59,443 60,455 Deferred Income Taxes 10,700 6,575 Other Long-Term Liabilities 17,258 15,873 -------- -------- 87,401 82,903 -------- -------- Shareholders' Investment: Common stock $1.00 par value, 50 million shares authorized 35,873 35,845 Additional paid-in capital 112,285 111,615 Retained earnings 152,448 146,131 Treasury stock, at cost (7,318) (8,067) Unamortized restricted stock grant expense (3,449) (4,307) Foreign currency translation adjustments 6,509 5,182 -------- -------- 296,348 286,399 -------- -------- $512,531 $496,270 ======== ========
The accompanying notes are an integral part of these financial statements. 3 KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES --------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (AMOUNTS IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED -------------------- SEPTEMBER 30, -------------------- 1995 1994 --------- --------- Cash Flows From Operating Activities: Net Income $ 25,351 $ 23,864 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 17,259 14,811 Amortization 4,146 4,617 Increase in deferred taxes 3,401 892 Gain on sale of interest in former subsidiary (4,578) - Gain on sale of property, plant and equipment, net (681) (5,612) Increase in receivables (17,776) (485) (Increase) decrease in prepayments and other assets (2,303) 1,284 Increase in inventories (7,067) (17,595) Increase in accounts payable and other liabilities 1,033 6,660 Increase (decrease) in income taxes payable 1,970 (5,289) -------- -------- Net Cash Provided by Operating Activities 20,755 23,147 -------- -------- Cash Flows From Investing Activities: Proceeds from sale of interest in former subsidiary 4,843 - Purchases of property, plant and equipment (14,381) (26,089) Proceeds from sale of property, plant and equipment 2,623 10,518 -------- -------- Net Cash Used by Investing Activities (6,915) (15,571) -------- -------- Cash Flows From Financing Activities: (Decrease) increase in short-term bank borrowings (559) 4,822 Payments of long-term debt (4,016) (3,889) Proceeds from long-term borrowings 1,785 3,926 Cash dividends paid (19,620) (19,361) Proceeds from stock plans and other 2,164 1,673 -------- -------- Net Cash Used by Financing Activities (20,246) (12,829) -------- -------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 249 615 -------- -------- Decrease in Cash and Cash Equivalents (6,157) (4,638) -------- -------- Cash and Cash Equivalents at Beginning of Period 18,688 19,873 -------- -------- Cash and Cash Equivalents at End of Period $ 12,531 $ 15,235 ======== ========
The accompanying notes are an integral part of these financial statements. 4 KEYSTONE INTERNATIONAL, INC. AND SUBSIDIARIES --------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (AMOUNTS IN THOUSANDS) (UNAUDITED) SEPTEMBER 30, 1995 AND 1994 --------------------------- (1) BASIS FOR PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------- The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, including significant accounting policies normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted. All adjustments which are, in the opinion of management, necessary to present a fair statement of the results of the interim periods have been included. It is suggested these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest Form 10-K. (2) ESTIMATES INVOLVED IN PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS --------------------------------------------------------------------- The Company's interim financial statements are prepared in accordance with the same accounting policies followed at year-end. Certain items in the financial statements can be determined on an interim basis only by making accounting estimates. The accuracy of such amounts is dependent upon facts that will exist and procedures that will be accomplished by the Company later in the year. Several of the significant accounting estimates related to the accompanying interim financial statements are set forth below. Inventories - The Company performs physical counts of its inventories at various times during the year. The amounts reflected as raw materials and parts, work-in- process, and components, sub-assemblies and finished goods as of September 30, 1995 and 1994, and thereby the related amounts for cost of sales, have been determined using the Company's normal accounting procedures. Past experience of the Company would indicate that no significant adjustment would be required should an actual count of the inventories have been made. The majority of the Company's domestic inventories (approximately 44% of consolidated inventories at December 31, 1994) are priced at cost using the LIFO (last-in, first-out) method. Since amounts for inventories under the LIFO method are based upon computations determined at year-end, the inventory at September 30, 1995 has been based on certain estimates of quantities and costs at December 31, 1995. Inventories at September 30, 1995 and December 31, 1994 are comprised of the following:
SEPTEMBER 30, DECEMBER 31, 1995 1994 -------------- ------------ Raw materials and parts $ 15,960 $ 16,526 Work-in-process 26,020 24,368 Components, sub-assemblies and finished goods 127,170 119,812 Less: LIFO Adjustment (2,999) (2,899) -------- -------- $166,151 $157,807 ======== ========
Income Taxes - The Company provides for income taxes for an interim period by making, at the end of the interim period, an estimate of the effective tax rate expected to be applicable for the full year, and applying that rate to the current year-to- date income before taxes. 5 (3) FOREIGN CURRENCY TRANSLATION AND COMMITMENTS -------------------------------------------- An analysis of changes in the foreign currency translation adjustments included in Shareholders' Investment is as follows:
Balance as of December 31, 1994 $5,182 Currency translation adjustments 2,042 Income tax adjustments (715) ------ Balance as of September 30, 1995 $6,509 ======
From time to time, the Company enters into forward exchange contracts and borrows in foreign currencies to mitigate the effect of exchange rate fluctuations on its operations. These hedging techniques limit exchange rate exposure and the resulting impact on the Company's reported margins. At September 30, 1995, the Company has obligations of $4,440 under forward exchange contracts primarily for French francs, Spanish pesetas and United States dollars with various settlement dates through 1995 and 1996. (4) PLANT CLOSURE AND RELATED COSTS ------------------------------- The nine month period ended September 30, 1995 includes a non-recurring charge of $2,931 for the closure of a manufacturing facility in Indiana. This is in addition to the $4,372 which was recorded in the year ended December 31, 1994. The costs recognized in the nine month period ended September 30, 1995 include incremental costs incurred at the facilities to which operations have been transferred. The Company has terminated approximately 155 employees from the plant, of which 58% were hourly workers involved in manufacturing processes and 42% were involved in engineering and administrative functions. The Company does not expect to incur any additional costs associated with the termination of operations at this facility. 5) WORKFORCE REDUCTION ------------------- In the first quarter of 1995, the Company announced plans to reduce total personnel costs by about $11,000 annually, or approximately 2% of net sales. This step, which was substantially completed by the end of the second quarter of 1995, reduced the Company's workforce by approximately 6%, or about 270 people. Severance related costs associated with these terminations of $8,458 were recorded in the first quarter of 1995. (6) EARNINGS PER SHARE ------------------ Earnings per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding. There is no significant difference between earnings per share on a primary and a fully diluted basis. (7) SALE OF ASSETS -------------- Gains of $3,152 and $2,135 were recognized in "Other (income) expense, net" in the first quarter and third quarter of 1995, respectively, in connection with the disposition of certain non-operational assets. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- The following table sets forth for the periods indicated (i) percentages which certain items reflected in the accompanying consolidated statements of income represent of total net sales of the Company and (ii) the percentage increase or decrease of amounts of such items as compared to the corresponding prior year period.
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ---------------------- ---------------------- PERCENTAGE % PERCENTAGE % OF NET SALES INC. OF NET SALES INC. -------------- -------------- 1995 1994 (DEC.) 1995 1994 (DEC.) ------ ------ ------ ------ ------ ------ Net Sales 100.0 100.0 8.4 100.0 100.0 12.0 Cost and Expenses: Cost of sales 59.9 59.3 9.6 60.1 58.6 14.9 Selling, general and administrative 26.8 29.6 (2.0) 27.6 29.8 3.6 Severance related costs - - - 1.9 - * Plant closure and related costs - - - .7 1.0 * Interest expense 1.0 1.0 8.6 1.0 1.0 15.1 Interest income (.2) (.1) 12.2 (.2) (.3) (32.2) Translation loss .2 .2 * - .3 * Other (income) expense, net (.2) 1.2 * (.3) (.3) * Income before Income Taxes 12.5 8.8 53.2 9.2 9.9 4.5 Provision for Income Taxes 4.7 3.3 49.2 3.4 3.8 1.8 Net Income 7.8 5.5 55.7 5.8 6.1 6.2
* percentage not meaningful 7 RESULTS OF OPERATIONS (AMOUNTS IN THOUSANDS) Net sales for the three and nine month periods ended September 30, 1995, increased 8.4% and 12.0%, respectively, over the same periods of the prior year. Shown below is an analysis of net sales.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 ------------------------ ------------------------ INC. (DEC.) IN NET SALES INC. (DEC.) IN NET SALES ------------------------ ------------------------ $ % $ % -------- --------- ------- --------- Domestic: Internal Growth (Decrease) $(2,005) (3.6) $ 6,455 3.9 ------- ------- International: Internal Growth 9,923 12.4 25,457 11.4 Exchange Rate Effect 3,450 4.3 15,004 6.7 ------- ------- Total International 13,373 16.7 40,461 18.1 ------- ------- Total Net Sales Increase $11,368 8.4 $46,916 12.0 ======= =======
For the three months ended September 30, 1995, cost of sales as a percentage of net sales increased to 59.9% from 59.3% a year ago. For the nine months ended September 30, 1995, cost of sales as a percentage of net sales increased to 60.1% from 58.6% in 1994. These increases were primarily the result of lower pricing initiated in the first half of 1994 relating to basic quarter- turn valves and actuators, a decline in gross margins in the Company's Specialty Products unit due to a decrease in demand for certain higher margin products, and a decline in gross margins in the Asia Pacific region resulting from increased competition and an increase in the mix of lower margin project business. For the three months ended September 30, 1995, selling, general and administrative expenses decreased 2% from the same period in 1994. For the nine months ended September 30, 1995, selling, general and administrative expenses increased 3.6% compared to the same period in 1994. Excluding translation effects, selling, general and administrative expenses decreased 4.0% and were flat in the quarter and year-to-date periods, respectively, while sales in local currencies have increased 5.7% and 7.9%, respectively, compared to the same periods in 1994. The decrease in the three month period ended September 30, 1995 compared to the same period in 1994 is due primarily to a reduction in expenses in the Company's Safety and Environmental unit and the consolidation and reduction in the number of sales offices in 1994 and early 1995. These decreases were partially offset by increases attributable to the Company's growth in the Asia Pacific region. In the first quarter of 1995, the Company announced plans to reduce total personnel costs by about $11,000 annually, or approximately 2% of net sales. This step reduced the Company's workforce by approximately 6%, or about 270 people. Severance related costs associated with these terminations of $8,458 were recorded in the first quarter of 1995. Interest expense for the three month and nine month periods ended September 30, 1995 increased compared to the same periods in 1994, primarily due to an increase in average short-term bank borrowings and the effect of higher interest rates. Interest income was flat in the three month period and decreased in the nine month period ended September 30, 1995 as compared to the same periods in 1994. The decrease in the nine month period is due primarily to the 1994 recognition of interest income from a note receivable that was paid off in April 1995. The nine month period ended September 30, 1995 includes a non-recurring charge of $2,931 for the closure of a manufacturing facility in Indiana. This is in addition to the $4,372 which was recorded in the year ended December 31, 1994. The costs recognized in the nine month period ended September 30, 1995 include incremental costs incurred at the facilities to which operations have been transferred. The Company has terminated approximately 155 employees from the plant, of which 58% were hourly workers involved in manufacturing processes and 42% were involved in engineering and administrative functions. The Company does not expect to incur any additional costs associated with the termination of operations at this facility. 8 Other (income) expense, net generally represents amortization of intangible assets and debt costs, as well as exchange gains and losses related to currency fluctuations. In the three and nine month periods ended September 30, 1995, other (income) expense, net also includes gains of $2,135 and $5,287, respectively, related to the disposition of certain non-operational assets. The nine month period ended September 30, 1994 included a gain of $4,652 related to the sale of the Company's former facility in South Korea. The Company's effective income tax rate was 37% for the three and nine month periods ended September 30, 1995, as compared to 38% for the corresponding periods a year ago. LIQUIDITY AND CAPITAL RESOURCES (AMOUNTS IN THOUSANDS) At September 30, 1995, the Company had working capital of $205,180 compared to $185,684 at December 31, 1994. Management is not aware of any potential impairments to the Company's liquidity and believes its internal and external sources of cash will provide the necessary funds with which to meet its expected obligations. 9 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits. (b) Reports on Form 8-K None. (27) Financial Data Schedule 10 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. KEYSTONE INTERNATIONAL, INC. DATE: November 9, 1995 By: /s/ Mark E. Baldwin -------------------------------------- Mark E. Baldwin Vice President and Chief Financial Officer By: /s/ J. Gordon Beittenmiller -------------------------------------- J. Gordon Beittenmiller Corporate Controller 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1994 JAN-01-1995 SEP-30-1995 12,531 0 156,414 6,115 166,151 333,962 314,291 168,885 512,531 128,782 0 35,873 0 0 260,475 512,531 437,579 437,579 262,833 391,936 757 0 4,646 40,240 14,889 25,351 0 0 0 25,351 .72 .72
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