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Mestek Inc – ‘10-Q’ for 6/30/95

As of:  Friday, 7/28/95   ·   For:  6/30/95   ·   Accession #:  65195-95-5   ·   File #:  1-00448

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  As Of                Filer                Filing    For·On·As Docs:Size

 7/28/95  Mestek Inc                        10-Q        6/30/95    2:22K

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Second Quarter 10-Q                                   13     46K 
 2: EX-27       FDS 2nd Quarter 10-Q                                   1      6K 


10-Q   —   Second Quarter 10-Q
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 6 -. Exhibits and Reports on Form 8-K
"Item 7 -. Submission of Matters to a Vote of Security Holders
3Item 1 -. Financial Statements
10Item 2 -. Management's Discussion and Analysis of Financial Condition and Results of Operation
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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended: June 30, 1995 Commission file number: 1- 448 MESTEK,INC. Pennsylvania Corporation I.R.S. Employer Identification No. 25 - 0661650 260 North Elm Street Westfield, Massachusetts 01085 Telephone: (413) 568-9571 The Registrant 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 and has been subject to such filing requirements for the past 90 days. The number of shares of Common Stock outstanding as of July 26, 1995 was 9,015,271.
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MESTEK, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 1994 INDEX Page No. PART I - FINANCIAL INFORMATION Condensed consolidated balance sheets at June 30, 1995 and December 31, 1994 Pages 3 - 4 Condensed consolidated statements of income for the three months ended June 30, 1995 and 1994 and the six months ended June 30, 1995 and 1994 Page 5 Condensed consolidated statements of cash flows for the six months ended June 30, 1995 and 1994 Page 6 Condensed consolidated statement of changes in shareholders' equity for the period from January 1, 1994 through June 30, 1995 Page 7 Notes to the condensed consolidated financial statements Pages 8 - 10 Management's Discussion and Analysis of Financial Condition and Results of Operations Page 10 PART II - OTHER INFORMATION Page 11 Item 6 - Exhibits and Reports on Form 8-K Item 7 - Submission of Matters to a Vote of Security Holders Statement of Computation of Per share Earnings Page 12 SIGNATURE Page 12 In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature.
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PART I - FINANCIAL INFORMATION Item 1 - Financial Statements MESTEK,INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, Dec. 31, 1995 1994 (Dollars in thousands) ASSETS Current Assets Cash and Cash Equivalents $ 2,218 $ 4,201 Accounts Receivable - less allowances of $1,844,000 and $1,440,000 respectively 34,897 35,306 Unbilled Accounts Receivable 197 124 Inventories 41,738 32,102 Other Current Assets 4,783 4,357 Total Current Assets 83,833 76,090 Property and Equipment (Net) 18,176 18,483 Equity Investments 8,760 8,643 Property held for sale 5,646 5,870 Other Assets and Deferred Charges - Net 11,297 11,344 Total Assets $ 127,712 $ 120,430 See the Notes to Condensed Consolidated Financial Statements. Continued on next page
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MESTEK, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (Unaudited) June 30, Dec., 31 1995 1994 (Dollars in thousands) LIABILITIES, AND SHAREHOLDERS' EQUITY Current Liabilities Current Portion of Long-Term Debt $ 1,034 $ 5,337 Short-Term Debt 13,525 - Accounts Payable 9,560 14,117 Accrued Salaries and Bonus 1,503 3,008 Accrued Commissions 1,657 1,833 Progress Billings in Excess of Cost and Estimated Earnings 2,825 2,721 Other Accrued Liabilities 12,200 12,446 Total Current Liabilities 42,304 39,462 Long-Term Debt 195 211 Deferred Compensation 23 25 Total Liabilities 42,522 39,698 Shareholders' Equity Common Stock - no par, stated value $0.05 per share, 9,610,135 shares 479 479 Paid in Capital 15,434 15,434 Retained Earnings 75,142 70,559 Treasury Shares, at cost, 594,864 and 574,424 common shares, respectively ( 5,009) ( 4,808) Cumulative Translation Adjustment ( 856) ( 932) Total Shareholders' Equity 85,190 80,732 Total Liabilities, and Shareholders' Equity $127,712 $120,430 See the Notes to Condensed Consolidated Financial Statements.
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MESTEK, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 (In thousands, except per share amounts) Net Sales $ 48,604 $ 42,541 $ 98,684 $ 89,334 Net Service Revenues 3,875 3,614 7,554 6,864 Total Revenues 52,479 46,155 106,238 96,198 Cost of Goods Sold 34,718 30,523 70,669 64,066 Cost of Service Revenues 2,286 2,212 4,559 4,321 Gross Profit 15,475 13,420 31,010 27,811 Selling Expense 7,091 6,279 13,875 12,826 General and Administrative Expense 3,187 2,895 6,440 5,891 Engineering Expense 1,483 1,371 2,812 2,705 Operating Profit 3,714 2,875 7,883 6,389 Interest Expense ( 186) ( 168) ( 243) ( 362) Amortization Expense ( 17) ( 12) ( 30) ( 25) Gain on Sale of Investment - - 850 - Other Income (Expense) - net( 232) ( 146) ( 591) ( 553) Income Before Income Taxes 3,279 2,549 7,869 5,449 Income Taxes 1,375 954 3,286 2,132 Net Income $ 1,904 $ 1,595 $ 4,583 $ 3,317 Earnings per Common Share $ .21 $ .17 $ .51 $ .36 Weighted Average Shares Outstanding 9,019 9,189 9,025 9,196 See the Notes to Condensed Consolidated Financial Statements.
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MESTEK, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 6 Months Ended June 30, 1995 1994 (Dollars in thousands) Cash Flows from Operating Activities: Net Income $ 4,583 $ 3,317 Adjustments to Reconcile Net Income to Net Cash Provided by (Used In) Operating Activities: Depreciation and Amortization 1,807 2,407 Provision for Losses on Accounts Receivable 404 507 Change in Assets & Liabilities: Cash Flows Provided (Used) by Changes In: Accounts Receivable 5 8,135 Unbilled Accounts Receivable ( 73) ( 398) Inventories ( 9,636) ( 3,227) Other Assets ( 525) 2,083 Accounts Payable ( 4,557) ( 1,075) Progress Billings 104 578 Other Accruals ( 1,927) ( 5,533) Deferred Compensation ( 2) ( 2) Net Cash Provided by (Used in) Operating Activities ( 9,817) 6,792 Cash Flows from investing Activities: Capital Expenditures ( 1,247) ( 1,896) Net Cash (Used in) Investing Activities ( 1,247) ( 1,896) Cash Flows from Financing Activities: Net Borrowings Under Line of Credit Agreement 8,525 1,285 Proceeds from issuance of Debt (Net) 5,000 - Principal Payments Under Long Term Debt Obligations ( 4,319) ( 7,000) Repurchase of Common Stock ( 201) ( 229) Redemption of $5.00 Non-Voting Preferred Stock - ( 6) Cumulative Translation Adjustments 76 218 Net Cash Provided by (Used in) Financing Activities 9,081 ( 6,168) Net Increase (Decrease) in Cash and Cash Equivalents (1,983) ( 1,272) Cash and Cash Equivalents - Beginning of Period 4,201 3,573 Cash and Cash Equivalents - End of Period $ 2,218 $ 2,301 See the Notes to Condensed Consolidated Financial Statements.
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[Enlarge/Download Table] MESTEK, INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) For the period January 1, 1994 through June 30, 1995 $5.00 Cumulative Additional Cumulative Convertible Common Paid In Retained Treasury Translation Preferred Stock Capital Earnings Shares Adjustment Total Balance - January 1, 1994 $ 7,209 $ 387 $ 8,323 $ 61,261 $ (3,203) $ ( 660) $ 73,317 Net Income 9,298 9,298 Cash Dividends: Common Stock Repurchased (1,605) ( 1,605) Conversion of $5.00 Convertible Preferred (7,203) 92 7,111 - Redemption of $5.00 Convertible Preferred ( 6) ( 6) Cumulative Translation Adjustment ( 272) ( 272) Balance - December 31, 1994 $ 0 $ 479 $ 15,434 $ 70,559 $ (4,808) $ ( 932) $ 80,732 Net Income 4,583 4,583 Cumulative Translation Adjustment 76 76 Common Stock Repurchased ( 201) ( 201) Balance - June 30, 1995 $ 0 $ 479 $ 15,434 $ 75,142 $ ( 5,009) $ ( 856) $( 85,190) See the Notes to the Condensed Consolidated Financial Statements.
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MESTEK, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries. In the opinion of management, the financial statements include all material adjustments, necessary for a fair presentation of the Company's financial position, results of operations and cash flows. The results of this interim period are not necessarily indicative of results for the entire year. Inventories Inventories are valued at the lower of cost or market. Cost of inventories is determined principally by the last-in, first-out (LIFO) method. Income Taxes Provisions for income tax in the amounts of $1,375,000 and $954,000, have been recorded for the three months ended June 30, 1995 and 1994, respectively. Property Held for Sale The condensed consolidated financial statements include, under the heading Property Held for Sale, manufacturing facilities in Northvale, New Jersey and Scranton, Pennsylvania. These properties are carried at cost which is less than estimated net realizable values. Note 2 - Business Acquisitions On November 1, 1994, pursuant to a motion approved by the United States Bankruptcy Court for the District of New Mexico, the Company acquired substantially all of the inventory, accounts receivable, and fixed tangible and intangible assets of Aztec Sensible Cooling, Inc. (Aztec) a manufacturer of evaporative cooling and other customer air handling equipment in Albuquerque, New Mexico. The purchase price for the assets acquired was $1,372,000. This acquisition was accounted for as a purchase. Accordingly, the Company has included the results of this acquired business in its consolidated statement of operations for the period starting with the acquisition date. Note 3 - Property and Equipment June 30, Dec. 31, 1995 1994 Land $ 750,000 $ 750,000 Buildings 11,194,000 10,662,000 Leasehold Improvements 2,966,000 2,873,000 Equipment 35,064,000 34,442,000 49,974,000 48,727,000 Accumulated Depreciation (31,798,000) (30,244,000) $ 18,176,000 $ 18,483,000
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Note 4 - Debt June 30, Dec. 31, 1995 1994 Long Term Debt: Senior Notes $ 1,000,000 $ 1,000,000 Note Payable American Standard, Inc. - 1,903,000 Note Payable Eafco, Inc. - 2,400,000 Other Bonds and Notes Payable 229,000 245,000 1,229,000 5,548,000 Less Current Maturities (1,034,000) (5,337,000) $ 195,000 $ 211,000 Short Term Debt: Revolving Loan Agreement $ 8,525,000 $ - Note Payable - Bank 5,000,000 - $ 13,525,000 $ - On January 1, 1992, the Company entered into a Revolving Loan Agreement and Letter of Credit Facility (the "Agreement") with a commercial bank. The Agreement, which had been extended through June 30, 1995, was recently extended through June 30, 1996. It provides $38 million of unsecured revolving credit and standby letter of credit capacity. Borrowings under the Agreement bear interest at a floating rate based on the bank's prime rate less 1.25%, or LIBOR plus 1.5% at the discretion of the borrower, and may be used for working capital or acquisition purposes, or to retire previously incurred debt. Note 5 - Earnings Per Common Share Earnings per share have been computed using the weighted average number of common shares outstanding. The weighted average number of common shares outstanding includes shares which would have been issued upon the conversion of the $5.00 Convertible Preferred Stock for the 1994 periods. As explained in Note 6, the $5 Convertible Preferred Stock was eliminated in 1994. Note 6 - Shareholders Equity On April 25, 1994, a Notice of Redemption was sent to all holders of the Company's $5.00 Convertible Preferred Stock, in accordance with its terms, announcing a redemption by the Company of all shares of Convertible Preferred stock outstanding and unconverted on June 24, 1994. Pursuant to the notice, all but 64 shares were converted into 1,838,259 shares of common shares of common stock on June 24, 1994. The remaining 64 shares were redeemed on June 24, 1994. The Company continues its program of selective "open market" purchases of its common stock in 1995. 6,000 common shares were acquired in this manner in the three month period ended June 30, 1995, and are accounted for as treasury shares. On January 2, 1995 the Company announced that its Board of Directors had authorized a common stock buyback program under which the Company would purchase common shares from holders of fewer than 100 shares on a direct basis at market prices. In the second quarter of 1995, 1,075 of such shares were acquired by the Company under this program, which has now expired, and are accounted for as treasury shares.
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Note 7 - Other Transactions On March 3, 1995, the Company, through its Delaware-based subsidiary, West Homestead Joint Venture Corporation, concluded the sale of its remaining 30% partnership interest in Mesta International (formerly Mesta Engineering Company) to Shougang Mechanical Equipment Co. of Pennsylvania, Inc., a U.S. subsidiary of a Chinese industrial company, for $850,000 in cash and the assumption of all liabilities of Mesta International. The Company reported a gain on the transaction in the first quarter of 1995 of $850,000. Note 8 - Subsequent Events On July 5, 1995, Mestek's wholly-owned subsidiary The Hydrotherm Corporation closed the sale of its real property located in Northvale, New Jersey for $2,450,000, in notes payable over three years secured by the property, personal and corporate guarantees, and other security. The Company expects to report a nominal loss on the transaction. On July 12, 1995, the Company purchased the operating assets of Cox Manufacturing Co., Inc. of Ridgeville, Indiana for approximately $500,000.00 in a bulk sales transaction. The Company has leased a portion of the Cox facility to manufacture the radiant heating and furnace product line of Cox. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operation Total Revenues in the Company's HVAC segment during the second quarter of 1995 were increased relative to the second quarter of 1994, by $4,674,000, or 11.4%, reflecting the effect of improved economic conditions in the commercial and industrial construction marketplaces. Gross profit margins for the HVAC segment were relatively unchanged at 27.7%. Operating income for this segment was up $431,000, or 21.9%, from the second quarter of 1994, traceable principally to the increase in volume. During the second quarter of 1995, Total Revenues, for the Company's Equipment Handling Segment grew by 74.4% relative to the second quarter of 1994 reflecting this segment's continued success with its new product offerings and the generally healthy climate affecting this relatively cyclical segment. For the Company as a whole, Selling, General and Administrative, and Engineering costs, taken together as a percentage of Total Revenues, were slightly reduced from 22.8% to 22.4%. Operating profit for the second quarter of 1995, for the Company as a whole, was increased by $839,000, or 29.2%, reflecting the effects of increased HVAC volume and improved performances from the Company's Equipment Handling and Computer Systems segments. The Company's total debt increased during the quarter ended June 30, 1995 by $10,287,000, due to the combined effects of a seasonal increase in HVAC inventories, and a reduction in trade payables. The growth in inventories during the second quarter which was somewhat more pronounced than in prior years, is traceable in part to the relocation of certain manufacturing operations in 1995.
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Management regards the Company's current capital structure and banking relationships as fully adequate to meet foreseeable future needs. As described in the Notes to the Condensed Consolidated Financial Statements, the Company recently extended its principal lending arrangement, the Revolving Loan Agreement and Letter of Credit Facility, which provides $38 million of unsecured revolving credit and standby letter of credit capacity, through June 30, 1996. The Company has not paid dividends on its common stock since 1979. As described in Note 8 to the Condensed Consolidated Financial Statements, the Company purchased the assets of Cox Manufacturing Co., Inc., on July 12, 1995, for approximately $500,000. The Company believes the products acquired from Cox, a radiant heating product line and a furnace product line, will benefit from both manufacturing and distribution synergies with the Company's existing HVAC product lines. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Statement of Computation of Per Share Earnings ... Page 13 (b) Registrant did not file a Form 8-K during the quarter for which this report is filed. Item 7 - Submission of Matters to a Vote of Security Holders The Company held its Annual Meeting of Shareholders on May 24, 1995. The following Directors were re-elected to serve until the next Annual Meeting: A. Warne Boyce E. Herbert Burk William J. Coad Peter Glynn-Jones Winston R. Hindle, Jr. David W. Hunter David R. Macdonald John E. Reed Stewart B. Reed The shareholders voted to affirm the appointment of Grant Thornton as independent auditors for the Company for the fiscal year ending December 31, 1995.
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The shareholders voted to amend the Articles of Incorporation as follows: The current text of Article 5 of the Company's Articles of Incorporation shall be deleted in its entirety and be amended to read in full as follows: "The authorized Capital Stock of the Corporation is 20,000,000 shares of common stock without part value (the "Common Stock") and 10,000,000 shares of preferred stock without par value (the "Preferred Stock"). A description of each class of Capital Stock which the Corporation shall have the authority to issue and a statement of the designations, powers, preferences, qualifications, limitations, restrictions and special or relative rights in respect of each class or series of any class are as follows: I. THE PREFERRED STOCK The shares of Preferred Stock may be issued from time to time in one or more series or classes. The Board of Directors of the Corporation is hereby authorized to fix the designations and powers, preferences and relative, participating, optional, special or other rights, if any, and qualifications, limitations or other restrictions thereof, including, without limitation, dividend rights and preferences over dividends on Common Stock or any series or classes of Preferred Stock, the dividend rate (and whether dividends are cumulative), conversion rights, if any, voting rights, rights and terms of redemption, if any, (including sinking fund provisions, if any) redemption price and liquidation preferences of any wholly unissued series or class of Preferred Stock and the number of shares constituting any such series or class and the designation thereof, or any of them; and to increase or decrease the number of shares of any series or class subsequent to the issue of shares of that series or class, but not below the number of shares of such series or class then outstanding. II.THE COMMON STOCK Except for and subject to those rights expressly granted to the holders of any series or class of the Preferred Stock pursuant to Section I of this Article 5th and except as may be provided by applicable law, the holders of Common Stock shall have exclusively all other rights of shareholders." Such amendment became effective when filed in the Commonwealth of Pennsylvania on June 23, 1995.
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MESTEK, INC. SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE 3 Months Ended 6 Months Ended June 30, June 30, 1995 1994 1995 1994 (Amounts in thousands, except earnings per common shares) Net income $ 1,904 $ 1,595 $ 4,583 $ 3,317 Less: dividends on Preferred Stock - - - - Net income for earnings per share $ 1,904 $ 1,595 $ 4,583 $ 3,317 Weighted average number of common shares outstanding 9,019 7,451 9,025 7,404 Common share equivalents resulting from conversion of the $5.00 Convertible Preferred Stock - 1,738 - 1,792 Total Common shares and common share equivalents 9,019 9,189 9,025 9,196 Earnings per common share $ .21 $ .17 $ .51 $ .36 SIGNATURE 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. MESTEK,INC. (Registrant) Date: July 26, 1995 Stephen M. Shea Stephen M. Shea Senior Vice President - Finance (Chief Financial Officer)

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘10-Q’ Filing    Date First  Last      Other Filings
6/30/9691110-Q
12/31/951110-K,  NT 10-K
Filed on:7/28/95
7/26/95113
7/12/951011
7/5/9510
For Period End:6/30/95110
6/23/9512
5/24/9511DEF 14A
3/3/9510
1/2/959
12/31/942710-K,  NT 10-K
11/1/948
6/30/9428
6/24/949
4/25/949
1/1/9427
1/1/929
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