-----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, B+hyNJt1J1NMr9KaXsdPh2ZkvPbrpj4P4kcR3Y2nQrmM08YKQzmbm9yXH6C8sQLF LMetqAxpyHAtJf1+WZ5Vqw== 0000804151-00-000004.txt : 20000516 0000804151-00-000004.hdr.sgml : 20000516 ACCESSION NUMBER: 0000804151-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMO INDUSTRIES INC CENTRAL INDEX KEY: 0000804151 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 210733751 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09294 FILM NUMBER: 635525 BUSINESS ADDRESS: STREET 1: 1009 LENOX DR STREET 2: PO BOX 6550 CITY: LAWRENCEVILLE STATE: NJ ZIP: 08648-0550 BUSINESS PHONE: 6098967600 MAIL ADDRESS: STREET 1: 1009 LENOX DR STREET 2: PO BOX 6550 CITY: LAWRENCEVILLE STATE: NJ ZIP: 08648-0550 FORMER COMPANY: FORMER CONFORMED NAME: IMO DELAVAL INC DATE OF NAME CHANGE: 19890313 FORMER COMPANY: FORMER CONFORMED NAME: TRANSAMERICA DELAVAL INC /DE DATE OF NAME CHANGE: 19861207 10-Q 1 1ST QUARTER 2000 FORM 10-Q UNITED STATES 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 March 31, 2000 -------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-9294 Imo Industries Inc. (Exact name of registrant as specified in its charter) Delaware 21-0733751 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 997 Lenox Drive, Suite 111 Lawrenceville, New Jersey 08648 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 609-896-7600 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.01 Par Value--100 shares as of May 15, 2000. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Condensed Statements of Income (Unaudited) - Three months ended March 31, 2000 and April 2, 1999 Consolidated Condensed Balance Sheets - March 31, 2000 (Unaudited) and December 31, 1999 Consolidated Condensed Statements of Cash Flows (Unaudited) - Three months ended March 31, 2000 and April 2, 1999 Notes to Consolidated Condensed Financial Statements (Unaudited) - March 31, 2000 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings. Item 6. Exhibits and Reports on Form 8-K. SIGNATURES - ---------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Imo Industries Inc. and Subsidiaries Consolidated Condensed Statements of Income and Comprehensive Income (Dollars in thousands except per share amounts) Three Months Ended March 31, April 2, 2000 1999 - ---------------------------------------------------------------- - ---------------------------------------------------------------- (Unaudited) Net Sales $81,796 $74,499 Cost of products sold 55,085 50,731 - ---------------------------------------------------------------- Gross Profit 26,711 23,768 Selling, general and administrative expenses 14,622 12,897 Research and development expenses 1,190 1,202 - ---------------------------------------------------------------- Income From Operations 10,899 9,669 Other (income) expense, net (1,060) 103 Gain on sale of assets 276 --- Interest expense 4,766 4,258 - ---------------------------------------------------------------- Income From Continuing Operations Before Income Taxes and Extraordinary Item 7,469 5,308 Income tax expense 2,936 1,987 - ---------------------------------------------------------------- Income From Continuing Operations Before Extraordinary Item 4,533 3,321 Extraordinary item - loss on extinguishment of debt --- (216) - ---------------------------------------------------------------- Net Income $4,533 $3,105 ================================================================ Other comprehensive loss, net of taxes - Foreign currency translation adjustments (1,128) (1,427) - ---------------------------------------------------------------- Comprehensive Income $3,405 $1,678 ================================================================ The accompanying notes are an integral part of these consolidated condensed financial statements. Imo Industries Inc. and Subsidiaries Consolidated Condensed Balance Sheets (Dollars in thousands except par value amounts) March 31, December 31, 2000 1999 - ------------------------------------------------------------------------ (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 2,457 $ 2,898 Trade accounts and notes receivable, less allowance of $1,268 in 2000 and $1,348 in 1999 36,011 30,075 Inventories 62,511 57,844 Deferred income tax assets 12,155 11,972 Prepaid expenses and other current assets 3,045 3,051 - ------------------------------------------------------------------------ Total Current Assets 116,179 105,840 Property, plant and equipment, net of accumulated depreciation of $14,429 and $12,911, respectively 60,720 61,584 Net intangible assets, principally goodwill 179,762 180,746 Other assets 28,347 28,551 - ------------------------------------------------------------------------ Total Assets $ 385,008 $ 376,721 ======================================================================== - ------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable and current portion of long-term debt $ 12,230 $ 10,742 Trade accounts payable 23,129 21,854 Accrued expenses and other liabilities 39,126 34,487 - ------------------------------------------------------------------------ Total Current Liabilities 74,485 67,083 Long-term debt 161,089 159,624 Other liabilities 28,439 32,424 - ------------------------------------------------------------------------ Total Liabilities 264,013 259,131 - ------------------------------------------------------------------------ SHAREHOLDERS' EQUITY Preferred stock: $1.00 par value; 5,000,000 shares authorized and unissued --- --- Common stock: $.01 par value, 100 shares authorized and issued 1 1 Additional paid-in capital 120,751 120,751 Retained earnings (deficit) 4,081 (452) Cumulative foreign currency translation adjustments (3,838) (2,710) - ------------------------------------------------------------------------ Total Shareholders' Equity 120,995 117,590 - ------------------------------------------------------------------------ Total Liabilities and Shareholders' Equity $ 385,008 $ 376,721 ======================================================================== The accompanying notes are an integral part of these consolidated condensed financial statements. Imo Industries Inc. and Subsidiaries Consolidated Condensed Statements of Cash Flows (Dollars in thousands) Three Months Ended March 31, April 2, 2000 1999 - ------------------------------------------------------------------------------ (Unaudited) OPERATING ACTIVITIES Net income $ 4,533 $ 3,105 Adjustments to reconcile net income to net cash (used by) provided by continuing operations: Depreciation and amortization 3,204 2,706 Extraordinary item --- 216 Other (261) (11) Other changes in operating assets and liabilities: Accounts and notes receivable (6,270) (9,271) Inventories (5,061) 1,711 Accounts payable and accrued expenses 1,345 3,751 Other operating assets and liabilities 1,473 1,580 - ------------------------------------------------------------------------------ Net cash (used by) provided by continuing operations (1,037) 3,787 Net cash used by discontinued operations (888) (556) - ------------------------------------------------------------------------------ Net Cash (Used by) Provided by Operating Activities (1,925) 3,231 - ------------------------------------------------------------------------------ INVESTING ACTIVITIES Purchases of property, plant and equipment (1,405) (1,574) Proceeds from sale of businesses and property, plant and equipment 279 139 - ------------------------------------------------------------------------------ Net Cash Used by Investing Activities (1,126) (1,435) - ------------------------------------------------------------------------------ FINANCING ACTIVITIES Increase in notes payable 615 3,217 Increase (decrease) in long-term debt 2,383 (9,692) Payment of premium on notes repurchased and debt financing costs --- (210) - ------------------------------------------------------------------------------ Net Cash Provided by (Used by) Financing Activities 2,998 (6,685) - ------------------------------------------------------------------------------ Effect of exchange rate changes on cash (388) (1,055) - ------------------------------------------------------------------------------ Decrease in Cash and Cash Equivalents (441) (5,944) Cash and cash equivalents at beginning of period 2,898 6,230 - ------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Period $2,457 $ 286 ============================================================================== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 2,234 $ 2,035 Income taxes $ 589 $ 664 The accompanying notes are an integral part of these consolidated condensed financial statements. Imo Industries Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Unaudited with respect to March 31, 2000 and April 2, 1999 and the periods then ended.) NOTE A - SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles. For further information, refer to the consolidated financial statements and footnotes thereto included in Imo Industries Inc.'s (the "Company's") annual report on Form 10-K for the year ended December 31, 1999. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. NOTE B - INVENTORIES Inventories are summarized as follows: March 31, December 31, (in thousands) 2000 1999 ------------- ------------- (Unaudited) Finished products $ 28,034 $ 24,740 Work in process 12,132 14,277 Materials and supplies 23,509 19,904 --------- --------- 63,675 58,921 Less customers' progress payments (1,164) (1,077) --------- --------- $ 62,511 $ 57,844 ========= ========= NOTE C - NOTES PAYABLE AND LONG-TERM DEBT As of March 31, 2000, the Company had $8.7 million of outstanding standby letters of credit under the Company's existing credit agreement. The Company had $7.0 million in foreign short-term credit facilities with amounts outstanding at March 31, 2000 of $1.9 million. In addition, the Company had outstanding $74.2 million (net of unamortized discount of $0.8 million) of its 11.75% senior subordinated notes ("Notes") due in 2006, $34.6 million of term loan borrowings, $56.8 million in revolver borrowings and $5.0 million due to Ameridrives International, L.P., whose majority shareholders are also the majority shareholders of the Company. During the first quarter of 1999, the Company purchased, in the open market at a premium, Notes in the face amounts of $3.5 million. As a result of the early extinguishment of these Notes, extraordinary charges of $0.2 million was recognized in the first quarter of 1999. NOTE D - SEGMENT INFORMATION The Company classifies its continuing operations into two business segments: Fluid Handling and Industrial Positioning. Detailed information regarding products by segment is contained in the section entitled "Business" included in Part I, Item I of the Company's 1999 Form 10-K Report. Information about the business of the Company by business segment is presented below: Three Months Ended (Dollars in thousands) March 31, April 2, 2000 1999 - -------------------------------------------------------------- Net Sales Fluid Handling $ 23,489 $ 26,454 Industrial Positioning 58,307 48,045 - ------------------------------------------------------------ Total net sales $ 81,796 $ 74,499 ============================================================ Segment operating income Fluid Handling $ 5,430 $ 5,496 Industrial Positioning 7,727 5,941 - ------------------------------------------------------------ Total segment operating income $ 13,157 $ 11,437 - ------------------------------------------------------------ Unallocated corporate expenses (2,226) (1,893) Gain on sale of assets 276 --- Other non-operating 979 (4) Net interest expense (4,717) (4,232) - ------------------------------------------------------------ Income from continuing operations before Income taxes and extraordinary item $7,469 $5,308 ============================================================ A reconciliation of segment operating income to income from operations follows: Three Months Ended (Dollars in thousands) March 31, April 2, 2000 1999 - -------------------------------------------------------------- Segment operating income $ 13,157 $ 11,437 Unallocated corporate expenses (2,226) (1,893) Other (income) expense (32) 125 - ------------------------------------------------------------ Income from operations $ 10,899 $9,669 ============================================================ NOTE E - CONTINGENCIES Legal Proceedings The Company and one of its subsidiaries are two of a large number of defendants in a number of lawsuits brought in various jurisdictions by approximately 4,500 claimants who allege injury caused by exposure to asbestos. Although neither the Company nor any of its subsidiaries has ever been a producer or direct supplier of asbestos, it is alleged that the industrial and marine products sold by the Company and the subsidiary named in such complaints contained components which contained asbestos. Suits against the Company and its subsidiary have been tendered to its insurers, who are defending under their stated reservation of rights. In addition, the Company and the subsidiary are named in cases, involving approximately 32,000 claimants, which were "administratively dismissed" by the U.S. District Court for the Eastern District of Pennsylvania. Cases that have been "administratively dismissed" may be reinstated only upon a showing to the Court that (i) there is satisfactory evidence of an asbestos-related injury; and (ii) there is probative evidence that the plaintiff was exposed to products or equipment supplied by each individual defendant in the case. The Company believes that it has adequate insurance coverage or has established appropriate reserves to cover potential liabilities related to these cases. The Company is a defendant in a lawsuit brought in the United States District Court for the District of New Jersey alleging failure in performance of equipment sold in 1986 by the Company's former Deltex division. The complaint seeks damages in excess of $12 million. On June 2, 1999, the Court granted a summary judgment motion filed by the Company which effectively dismissed all claims. Plaintiffs have appealed this judgment to the United States Court of Appeals for the Third Circuit. The Company is a defendant in a lawsuit in the Supreme Court of British Columbia alleging breach of contract arising from the sale of a steam turbine delivered by the Company's former Delaval Turbine Division and claiming damages in excess of $1 million dollars. The Company believes that there are legal and factual defenses to the claim and intends to defend the action vigorously. The Company was a defendant in a lawsuit in the Circuit Court of Cook County, Illinois alleging performance shortfalls in products delivered by the Company's former Delaval Turbine Division. The Company has reached an agreement on December 7, 1999, with the plaintiff settling all claims between the parties. However, a co-defendant, Federal Insurance Company, continues to pursue its counterclaim against the Company for attorney's fees it alleges it incurred in its role as surety for the project from which the litigation arose. The Company believes that there are legal and factual defenses to the claim and intends to defend the action vigorously. On June 3, 1997, the Company was served with a complaint in a case brought in the Superior Court of New Jersey which alleges damages in excess of $10 million incurred as a result of losses under a Government Contract Bid transferred in connection with the sale of the Company's former Electro-Optical Systems business. The Electro-Optical Systems business was sold in a transaction that closed on June 2, 1995. The sales contract provided certain representations and warranties as to the status of the business at the time of sale. The complaint alleges that the Company failed to provide notice of a "reasonably anticipated loss" under a bid that was pending at the time of the transfer of the business and therefore a representation was breached. The contract was subsequently awarded to the Company's Varo subsidiary and thereafter transferred to the buyer of the Electro-Optical Systems business. The Company believes that there are legal and factual defenses to the claims and intends to defend the action vigorously. The operations of the Company, like those of other companies engaged in similar businesses, involve the use, disposal and clean up of substances regulated under environmental protection laws. In a number of instances the Company has been identified as a Potentially Responsible Party by the U.S. Environmental Protection Agency, with respect to the disposal of hazardous wastes at a number of facilities that have been targeted for clean-up pursuant to CERCLA or similar state law. Similarly, the Company has received notice that it is one of a number of defendants named in an action filed in the United States District Court, for the Southern District of Ohio Western Division by a group of plaintiffs who are attempting to allocate a share of cleanup costs, for which they are responsible, to a large number of additional parties, including the Company. Although CERCLA and corresponding state law liability is joint and several, the Company believes that its liability will not have a material adverse effect on the financial condition of the Company since it believes that it either qualifies as a de minimis or minor contributor at each site. Accordingly, the Company believes that the portion of remediation costs that it will be responsible for will not be material. The Company is also involved in various other pending legal proceedings arising out of the ordinary course of the Company's business. None of these legal proceedings is expected to have a material adverse effect on the financial condition of the Company. With respect to these proceedings and the litigation and claims described in the preceding paragraphs, management of the Company believes that it either will prevail, has adequate insurance coverage or has established appropriate reserves to cover potential liabilities. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adversely to the Company, there could be a material adverse effect on the financial condition of the Company. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The following paragraphs provide Management's discussion and analysis of the significant factors which have affected the Company's consolidated results of operations and financial condition during the three months ended March 31, 2000. This section should be read in conjunction with the Company's 1999 Form 10-K Management's Discussion and Analysis of Financial Condition and Results of Operations. Recent Events Sierra International Inc. Acquisition: On December 1, 1999, the Company purchased the stock of Sierra International Inc. ("Sierra") from Echlin Inc., a subsidiary of Dana Corporation. Sierra sells and distributes replacement parts for marine and power equipment applications and marine hose products. Sierra has become part of the Company's Industrial Positioning segment. Results of Operations The Company's continuing businesses are grouped into two business segments for management and segment reporting purposes: Fluid Handling and Industrial Positioning. Three Months Ended March 31, 2000 Compared to Three Months Ended April 2, 1999 - ------------------------------------------------------------------------------ Sales. Net sales from continuing operations for the first quarter of 2000 were $81.8 million compared with $74.5 million in the comparable 1999 period. First quarter 2000 net sales decreased 11.2% for the Fluid Handling segment and increased 21.4% for the Industrial Positioning segment, respectively, compared to the prior year period. The decrease in the Fluid Handling segment is due to the downturn of the crude oil business in Canada and South America and unfavorable currency fluctuations of the Swedish Krona. The increase in the Industrial Positioning segment is due to the purchase of Sierra on November 30, 1999, and market share gains at Boston Gear. Gross Profit. Gross profit increased as a percentage of sales to 32.7% for the first quarter of 2000 compared with 31.9% in the first quarter of 1999, as a result of productivity improvements in each segment. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased as a percentage of sales to 17.9% for the first quarter of 2000 compared with 17.3% in the first quarter of 1999, due to management additions at the Company's Industrial Positioning segment and at the corporate office. Interest Expense. Average borrowings in the first quarter of 2000 were approximately $0.7 million higher than the first quarter of 1999, due to borrowings for the purchase of Sierra. Total interest expense was $4.8 million for the first quarter of 2000 compared with $4.3 million for the same period in 1999. Provision for Income Taxes. Income tax expense for continuing operations was $2.9 million and $2.0 million for the first quarters of 2000 and 1999, respectively. These amounts represent both current tax expense for foreign income taxes and deferred federal income taxes, as the Company is utilizing existing U.S. net operating loss carryforwards with its U.S. earnings. Extraordinary Item. There were no extraordinary items during the first quarter of 2000. During the first quarter of 1999, the Company purchased, in the open market at a premium, Notes in the face amount of $3.5 million. As a result of the early extinguishment of these Notes, an extraordinary charge of $0.2 million was recognized in the first quarters of 1999. Net Income (Loss). The net income in the first quarter of 2000 was $4.5 million compared with net income of $3.1 million in the comparable 1999 period. Liquidity and Capital Resources Short-term and Long-term Debt As of March 31, 2000, the Company had $8.7 million of outstanding standby letters of credit under the Company's existing credit agreement. The Company had $7.0 million in foreign short-term credit facilities with amounts outstanding at March 31, 2000 of $1.9 million. In addition, the Company had outstanding $74.2 million (net of unamortized discount of $0.8 million) of its 11.75% senior subordinated notes ("Notes") due in 2006, $34.6 million of term loan borrowings, $56.8 million in revolver borrowings and $5.0 million due to Ameridrives International, L.P., whose majority shareholders are also the majority shareholders of the Company. Cash Flow The Company's operating activities used net cash of $1.6 million in the first quarter of 2000 compared with cash provided of $3.2 million in the comparable 1999 period. The cash used by operating activities in 2000 was attributable to the increase in working capital in the period. Cash and cash equivalents were $2.5 million at March 31, 2000 compared with $2.9 million at December 31, 1999. Management believes that cash flow from operations and cash available from unused credit facilities will be sufficient to meet the Company's foreseeable liquidity needs. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical matters, the matters discussed in this Form 10-Q Report are forward-looking statements based on current expectations and involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements under the following headings: (i) Legal Proceedings - the future impact of legal proceedings on the financial condition of the Company; and, (ii) "Results of Operations" - the future performance of various programs and foreign market conditions in each segment and the impact of such programs and foreign market conditions on future sales and on operating income. The Company wishes to caution the reader that, in addition to the matters described above, various factors such as delays in contracts from key customers, demand and market acceptance risk for new products, continued or increased competitive pricing and the effects of under-utilization of plants and facilities, particularly in Europe, and the impact of worldwide economic conditions on demand for the Company's products, could cause results to differ materially from those in any forward-looking statement. The Company is filing this report pursuant to the filing requirements related to the 11.75% Senior Subordinated Notes due in 2006. PART II. OTHER INFORMATION Item 1. Legal Proceedings. For information regarding certain pending lawsuits, reference is made to the Company's Form 10-K for the year ended December 31, 1999, which is incorporated herein by reference, and to Note E in Part I of this Form 10-Q Report. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: The following exhibits are being filed as part of this Report: (b) Reports on Form 8-K: None 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. Imo Industries Inc. (Registrant) Date: May 15, 2000 /s/ JOHN A. YOUNG John A. Young Chief Financial Officer Date: May 15, 2000 /s/ G. SCOTT FAISON G. Scott Faison Corporate Controller EX-27 2 03/31/00 FDS
5 1,000 3-MOS DEC-31-2000 MAR-31-2000 2,457 0 37,279 (1,268) 62,511 116,179 75,149 (14,429) 385,008 74,485 161,089 0 0 1 120,994 385,008 81,796 81,796 55,085 55,085 0 0 4,766 7,469 2,936 4,533 0 0 0 4,533 0.00 0.00
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