-----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, SnkNUyf+K561ntyBnMNy/Y1/aibsT4T4PgbQGtMfeP2C7IkzYbmQpkCyOppAEN6c nSuAX6Ud02R1xly84iWFRw== 0000950124-97-002955.txt : 19970520 0000950124-97-002955.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950124-97-002955 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALBRO CORP CENTRAL INDEX KEY: 0000104174 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 381358966 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11567 FILM NUMBER: 97606884 BUSINESS ADDRESS: STREET 1: 6242 GARFIELD ST CITY: CASS CITY STATE: MI ZIP: 48726 BUSINESS PHONE: 5178722131 MAIL ADDRESS: STREET 1: 6432 GARFIELD ST CITY: CASS CITY STATE: MI ZIP: 48726 10-Q 1 10-Q 1 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 March 31, 1997 Commission File Number 0-6955 WALBRO CORPORATION (Exact name of registrant as specified in its charter) Delaware (State of incorporation) 38-1358966 (I.R.S. Employer ID No.) 6242 Garfield Street, Cass City, MI 48726 (Address of principal executive offices) (Zip Code) (517) 872-2131 Registrant's telephone number, including area code Indicate by check mark whether 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 (of for such shorter period that the registrant was required to file such reports) and 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 May 9, 1997 Common Stock (one class): 8,652,737 2 PART I FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS INTRODUCTION TO THE CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated financial statements of Walbro Corporation and subsidiaries (the "Company") 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 normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated financial statements of the Company should be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K as filed with the Securities and Exchange Commission for the year ended December 31, 1996. The financial information presented reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for interim periods presented. The results for the interim periods are not necessarily indicative of the results to be expected for the year. 1 3 WALBRO CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
3/31/97 12/31/96 ------- -------- ASSETS (Unaudited) CURRENT ASSETS: CASH $ 20,471 $ 18,213 ACCOUNTS RECEIVABLE (NET) 145,932 126,509 INVENTORIES 47,554 50,588 OTHER CURRENT ASSETS 15,446 16,206 ------------ ------------ TOTAL CURRENT ASSETS 229,403 211,516 PROPERTY, PLANT & EQUIPMENT: LAND, BUILDINGS & IMPROVEMENTS 78,864 74,931 MACHINERY & EQUIPMENT 285,618 285,376 ------------ ------------ SUBTOTAL 364,482 360,307 LESS: ACCUMULATED DEPRECIATION (85,685) (80,420) ------------ ------------ NET PROPERTY, PLANT & EQUIPMENT 278,797 279,887 OTHER ASSETS: GOODWILL (NET) 35,387 35,998 JOINT VENTURES, INVESTMENTS & OTHER 68,514 62,248 ------------ ------------ TOTAL OTHER ASSETS 103,901 98,246 ------------ ------------ TOTAL ASSETS $ 612,101 $ 589,649 ============ ============
The accompanying notes are an integral part of these consolidated balance sheets. 2 4 WALBRO CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
3/31/97 12/31/96 ------- -------- LIABILITIES (Unaudited) CURRENT LIABILITIES: CURRENT PORTION LONG-TERM DEBT $ 1,068 $ 1,089 NOTES PAYABLE-BANKS 21,785 22,072 ACCOUNTS PAYABLE 70,215 77,939 ACCRUED LIABILITIES 39,332 42,141 ----------- ---------- TOTAL CURRENT LIABILITIES 132,400 143,241 LONG-TERM LIABILITIES: LONG-TERM DEBT, NET OF CURRENT 261,359 291,723 OTHER LONG-TERM LIABILITIES 18,360 16,952 ----------- ---------- TOTAL LONG-TERM LIABILITIES 279,719 308,675 COMPANY-OBLIGATED MANDATORILY REDEEMABLE CON- VERTIBLE PREFERRED SECURITIES OF WALBRO CAPITAL TRUST HOLDING SOLELY CONVERTIBLE DEBENTURES 69,000 -- STOCKHOLDERS' EQUITY COMMON STOCK, $.50 PAR VALUE; 4,326 4,326 AUTHORIZED 25,000,000; OUTSTANDING 8,652,737 IN 1997 AND 8,652,737 IN 1996 PAID-IN CAPITAL 65,674 65,674 RETAINED EARNINGS 75,536 74,039 OTHER STOCKHOLDERS' EQUITY (14,554) (6,306) ----------- ---------- TOTAL STOCKHOLDERS' EQUITY 130,982 137,733 ----------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 612,101 $ 589,649 =========== ==========
The accompanying notes are an integral part of these consolidated balance sheets. 3 5 WALBRO CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data)
THREE MONTHS ENDED 03/31/97 03/31/96 -------- -------- (Unaudited) NET SALES $ 154,019 $ 152,966 COST OF SALES & EXPENSES: COST OF SALES 129,821 124,178 SELLING AND ADMINISTRATIVE EXPENSES 12,368 14,163 RESEARCH & DEVELOPMENT EXPENSES 3,350 4,957 ------------- ------------- OPERATING INCOME 8,480 9,668 OTHER EXPENSE (INCOME): INTEREST EXPENSE 5,775 5,055 INTEREST INCOME (131) (168) OTHER (INCOME) EXPENSE (1,089) (6) ------------- ------------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST, AND JOINT VENTURES 3,925 4,787 PROVISION FOR INCOME TAXES 1,380 1,286 MINORITY INTEREST 984 98 EQUITY IN (INCOME) OF JOINT VENTURES (801) (1,131) ------------- ------------- NET INCOME $ 2,362 $ 4,534 ============= ============= NET INCOME PER SHARE $0.27 $0.53 AVERAGE SHARES OUTSTANDING 8,674,447 8,620,942
The accompanying notes are an integral part of these consolidated statements. 4 6 WALBRO CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) THREE MONTHS ENDED 03/31/97 03/31/96 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) NET INCOME $ 2,362 $ 4,534 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: DEPRECIATION & AMORTIZATION 8,180 7,251 (GAIN) LOSS ON DISPOSITION OF ASSETS 123 125 MINORITY INTEREST 110 98 (INCOME) OF JOINT VENTURES (801) (1,131) CHANGES IN ASSETS AND LIABILITIES: DEFERRED INCOME TAXES 108 244 PENSION OBLIGATIONS & OTHER (592) (165) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (4,182) 7,620 ACCOUNTS RECEIVABLE, NET (20,412) (22,457) INVENTORIES 1,646 (1,224) PREPAID EXPENSES AND OTHER (578) (4,160) ------------ ------------ TOTAL ADJUSTMENTS (16,398) (13,799) ------------ ------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (14,036) (9,265) CASH FLOWS FROM INVESTING ACTIVITIES: PURCHASE OF FIXED ASSETS (14,232) (12,491) PURCHASE OF OTHER ASSETS (206) (376) INVESTMENT IN JOINT VENTURES & OTHER (2,654) (245) PROCEEDS FROM DISPOSAL OF ASSETS 24 0 ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (17,068) (13,112) CASH FLOWS FROM FINANCING ACTIVITIES: BORROWINGS UNDER LINES-OF-CREDIT 32,187 42,555 REPAYMENTS UNDER LINES-OF-CREDIT (61,562) (21,900) DEBT REPAYMENTS (143) (552) PROCEEDS FROM ISSUANCE OF STOCK & OPTIONS 69,000 392 FINANCING FEES PAID (3,241) (328) CASH DIVIDENDS PAID (865) (858) ------------ ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 35,376 19,309 EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,014) (204) ------------ ------------ NET INCREASE (DECREASE) IN CASH 2,258 (3,272) CASH BEGINNING BALANCE 18,213 19,792 ------------ ------------ CASH ENDING BALANCE $ 20,471 $ 16,520 ============ ============
The accompanying notes are an integral part of these consolidated statements. 5 7 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) PREFERRED SECURITIES OFFERING In February 1997, the Company completed an offering of 2,760,000 shares or $69 million of Convertible Preferred Securities of Walbro Capital Trust, a wholly-owned subsidiary of the Company, at a face value of $25 per share and an interest rate of 8% per annum. The preferred securities are convertible into common stock of the Company at the option of the security holder anytime after April 4, 1997. Each share of preferred stock will yield 1.1737 shares of common stock of the Company upon conversion. Net proceeds of the offering were approximately $66 million and were used to repay a portion of the Company's credit facility. (2) EARNINGS PER SHARE During 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which changes the calculation of earnings per share to be more consistent with countries outside of the United States. In general, the statement requires two calculations of earnings per share to be disclosed, basic EPS and diluted EPS. Basic EPS is to be computed using only weighted average shares outstanding. Diluted EPS is to be computed using the average share price for the period when calculating the dilution of options and warrants. This statement must be adopted by the Company in its December 31, 1997 consolidated financial statements and early adoption is not permitted. If this statement had been adopted for the periods presented, the net income and per share amounts would have been as follows (unaudited: in thousands, except per share data):
Three Months Ended ------------------ March 31, March 31, 1997 1996 ---- ---- Net income $2,362 $4,534 Basic net income per share $0.27 $0.53 Diluted net income per share $0.27 $0.53
(3) INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. Inventories include raw material and component parts, work-in-process and 8 finished products. Work-in-process and finished products inventories include material, labor and manufacturing overhead costs. Inventories are comprised of the following:
March 31, December 31, 1997 1996 ---- ---- (in thousands) Raw materials and components $23,343 $23,964 Work-in-process 9,572 10,620 Finished products 14,639 16,004 ------- ------- $47,554 $50,588 ------- -------
9 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
as of Mar. 31, 1997 --------------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ -------------- ------------ (in thousands, except share data) ASSETS CURRENT ASSETS Cash $ 2,540 $ 17,525 $ 406 $ - $ 20,471 Accounts receivable, net 79,090 66,077 765 - 145,932 Accounts receivable, intercompany (101,525) (15,207) 128,410 (11,678) - Inventories 24,235 20,692 2,627 - 47,554 Prepaid expenses and other 3,556 5,478 600 - 9,634 Deferred and refundable income taxes 1,076 1,290 3,446 - 5,812 -------------------------------------------------------------------------- Total current assets 8,972 95,855 136,254 (11,678) 229,403 -------------------------------------------------------------------------- PLANT AND EQUIPMENT, NET 126,480 144,316 7,893 108 278,797 -------------------------------------------------------------------------- OTHER ASSETS: Funds held for construction 1,140 - - - 1,140 Joint ventures 12,794 17,656 - - 30,450 Investments 110,646 24,709 100,061 (229,600) 5,816 Goodwill, net 23,125 12,408 (146) - 35,387 Notes receivable 1,116 72,471 205,181 (275,451) 3,317 Deferred income taxes - 1,844 4,871 - 6,715 Other 9,038 2,326 9,712 - 21,076 -------------------------------------------------------------------------- Total other assets 157,859 131,414 319,679 (505,051) 103,901 -------------------------------------------------------------------------- Total assets $293,311 $371,585 $463,826 $(516,621) $612,101 ========================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 598 $ 61 $ 409 $ - $ 1,068 Bank and other borrowings - 21,785 - - 21,785 Accounts payable 30,708 50,694 2,453 (13,640) 70,215 Accrued liabilities 18,397 18,911 7,141 (5,982) 38,467 Dividends payable - 874 865 (874) 865 -------------------------------------------------------------------------- Total current liabilities 49,703 92,325 10,868 (20,496) 132,400 -------------------------------------------------------------------------- LONG-TERM LIABILITIES Long-term debt, less current portion 171,529 82,176 310,587 (302,933) 261,359 Pension obligations - 2,131 7,970 - 10,101 Deferred income taxes - 3,402 3,419 - 6,821 Minority interest - 1,438 - - 1,438 -------------------------------------------------------------------------- Total long-term liabilities 171,529 89,147 321,976 (302,933) 279,719 -------------------------------------------------------------------------- REDEEMABLE PREFERRED STOCK - 69,000 - - 69,000 STOCKHOLDERS' EQUITY Common stock, $.50 par value; authorized 25,000,000; outstanding 8,652,737 in 1997; 8,652,737 in 1996 - 19,853 4,326 (19,853) 4,326 Paid-in capital - 74,684 65,674 (74,684) 65,674 Retained earnings 72,059 35,334 75,536 (107,393) 75,536 Deferred compensation - - (668) - (668) Minimum pension liability adjustment - - - - - Unrealized gain on securities available for sale - - 593 - 593 Cumulative translation adjustments 20 (8,758) (14,479) 8,738 (14,479) -------------------------------------------------------------------------- Total stockholders' equity 72,079 121,113 130,982 (193,192) 130,982 -------------------------------------------------------------------------- Total liabilities and stockholders' equity $293,311 $371,585 $463,826 $(516,621) $612,101 ==========================================================================
10 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
as of December 31, 1996 --------------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ -------------- ------------ (in thousands, except share data) ASSETS CURRENT ASSETS Cash $ 299 $ 17,779 $ 135 $ - $ 18,213 Accounts receivable, net 67,944 57,823 742 - 126,509 Accounts receivable, intercompany (81,610) 115 101,752 (20,257) - Inventories 25,219 22,884 2,485 - 50,588 Prepaid expenses and other 4,464 5,851 920 - 11,235 Deferred and refundable income taxes 509 1,016 3,446 - 4,971 ------------------------------------------------------------------------------ Total current assets 16,825 105,468 109,480 (20,257) 211,516 ------------------------------------------------------------------------------ PLANT AND EQUIPMENT, NET 121,084 150,699 7,995 109 279,887 ------------------------------------------------------------------------------ OTHER ASSETS: Funds held for construction 1,140 - - - 1,140 Joint ventures 10,629 18,326 - - 28,955 Investments 118,673 24,723 104,084 (241,753) 5,727 Goodwill, net 23,238 12,877 (117) - 35,998 Notes receivable 1,074 - 204,884 (204,690) 1,268 Deferred income taxes - 543 4,871 - 5,414 Other 8,890 2,926 7,928 - 19,744 ------------------------------------------------------------------------------ Total other assets 163,644 59,395 321,650 (446,443) 98,246 ------------------------------------------------------------------------------ Total assets $301,553 $315,562 $439,125 $(466,591) $ 589,649 ============================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 598 $ 82 $ 409 $ - $ 1,089 Bank and other borrowings - 22,072 - - 22,072 Accounts payable 34,690 61,068 8,981 (26,800) 77,939 Accrued liabilities 17,046 16,498 10,633 (2,901) 41,276 Dividends payable - - 865 - 865 ------------------------------------------------------------------------------ Total current liabilities 52,334 99,720 20,888 (29,701) 143,241 ------------------------------------------------------------------------------ LONG-TERM LIABILITIES Long-term debt, less current portion 171,675 83,820 269,141 (232,913) 291,723 Pension obligations - 2,826 7,892 - 10,718 Deferred income taxes - 1,443 3,471 - 4,914 Minority interest - 1,320 - - 1,320 ------------------------------------------------------------------------------ Total long-term liabilities 171,675 89,409 280,504 (232,913) 308,675 ------------------------------------------------------------------------------ REDEEMABLE PREFERRED STOCK - - - - - STOCKHOLDERS' EQUITY Common stock, $.50 par value; authorized 25,000,000; outstanding 8,652,737 in 1997; 8,652,737 in 1996 - 19,853 4,326 (19,853) 4,326 Paid-in capital - 74,637 65,674 (74,637) 65,674 Retained earnings 77,524 33,569 74,039 (111,093) 74,039 Deferred compensation - - (967) - (967) Minimum pension liability adjustment - - - - - Unrealized gain on securities available for sale - - 688 - 688 Cumulative translation adjustments 20 (1,626) (6,027) 1,606 (6,027) ------------------------------------------------------------------------------ Total stockholders' equity 77,544 126,433 137,733 (203,977) 137,733 ------------------------------------------------------------------------------ Total liabilities and stockholders' equity $301,553 $315,562 $439,125 $(466,591) $ 589,649 ==============================================================================
11 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Three Months Ended Mar. 31, 1997 --------------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ -------------- ------------ (in thousands, except share data) NET SALES $ 83,462 $ 76,336 $ 340 $ (6,119) $154,019 COSTS AND EXPENSES: Cost of sales 69,021 66,641 278 (6,119) 129,821 Selling, administration & other expenses 8,162 5,293 2,263 - 15,718 --------------------------------------------------------------------------------- OPERATING INCOME (LOSS) 6,279 4,402 (2,201) - 8,480 OTHER EXPENSE (INCOME): Interest expense 4,009 1,737 6,335 (6,306) 5,775 Interest income (1,134) (899) (4,404) 6,306 (131) Foreign currency exchange loss(gain) 28 (71) 15 - (28) Other (1,038) (23) - - (1,061) --------------------------------------------------------------------------------- Income before provision for income taxes, minority interest, equity in (income) loss of joint ventures and subsidiaries 4,414 3,658 (4,147) - 3,925 Provision (credit) for income taxes 1,527 1,405 (1,552) - 1,380 Minority Interest - 984 - - 984 Equity in (income) loss of joint ventures (300) (501) - - (801) Equity in (income) of subsidiaries (1,793) (52) (4,957) 6,802 - --------------------------------------------------------------------------------- Net Income $ 4,980 $ 1,822 $ 2,362 $ (6,802) $ 2,362 =================================================================================
12 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Three Months Ended Mar. 31, 1996 --------------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ -------------- ------------ (in thousands, except share data) NET SALES $87,611 $ 71,572 $ 672 $ (6,889) $ 152,966 COSTS AND EXPENSES: Cost of sales 70,900 59,607 560 (6,889) 124,178 Selling, administration & other expenses 9,467 6,816 2,836 - 19,119 --------------------------------------------------------------------------- OPERATING INCOME (LOSS) 7,244 5,149 (2,724) - 9,669 OTHER EXPENSE (INCOME): Interest expense 3,964 1,790 4,875 (5,574) 5,055 Interest income (1,095) (574) (4,073) 5,574 (168) Foreign currency exchange loss(gain) (1) - 186 - 185 Other (349) 159 - - (190) --------------------------------------------------------------------------- Income before provision for income taxes, minority interest, equity in (income) loss of joint ventures and subsidiaries 4,725 3,774 (3,712) - 4,787 Provision (credit) for income taxes 1,707 1,099 (1,520) - 1,286 Minority Interest - 98 - - 98 Equity in (income) loss of joint ventures (338) (793) - - (1,131) Equity in (income) of subsidiaries (3,478) - (6,725) 10,203 - --------------------------------------------------------------------------- Net Income $ 6,834 $ 3,370 $ 4,533 $ (10,203) $ 4,534 ===========================================================================
13 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Three Months Ended Mar. 31, 1997 --------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ -------------- ------------ (in thousands, except share data) Net cash provided by (used in) operating activities $ 15,267 $ 8,273 $ (37,576) $ - $ (14,036) ------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment (8,192) (5,945) (95) - (14,232) Acquisitions, net of cash acquired - - - - - Purchase of other assets (359) 22 131 - (206) Investment in joint ventures and other (4,329) (164) 1,839 - (2,654) Proceeds/(payments) of intercompany note rec. - - - - - Proceeds from disposal of assets (1) 25 - - 24 ------------------------------------------------------------------------ Net cash provided by(used in) investing activities (12,881) (6,062) 1,875 - (17,068) ------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under revolving line-of-credit agreements - (1,813) (27,562) - (29,375) Debt repayments (145) 2 - - (143) Proceeds from issuance of long-term debt - (69,000) 69,000 - - Proceeds from issuance of stock and options - 69,000 - - 69,000 Financing fees paid - - (3,241) - (3,241) Cash dividends paid - - (865) - (865) ------------------------------------------------------------------------ Net cash provided by(used in) financing activities (145) (1,811) 37,332 - 35,376 ------------------------------------------------------------------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH - (654) (1,360) - (2,014) ------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH 2,241 (254) 271 - 2,258 CASH AT BEGINNING OF YEAR 299 17,779 135 - 18,213 ------------------------------------------------------------------------ CASH AT END OF PERIOD $ 2,540 $ 17,525 $ 406 $ - $ 20,471 ========================================================================
14 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Three Months Ended Mar. 31, 1996 ---------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ -------------- ------------ (in thousands, except share data) Net cash provided by (used in) operating activities $ 11,977 $ 572 $ (21,814) $ - $ (9,265) ----------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment (5,202) (6,863) (426) - (12,491) Acquisitions, net of cash acquired - - - - - Purchase of other assets (200) (178) 2 - (376) Investment in joint ventures and other (6,287) 2,544 3,498 - (245) Proceeds/(payments) of intercompany note rec. - - - - - Proceeds from disposal of assets - - - - - ----------------------------------------------------------------------- Net cash provided by(used in) investing activities (11,689) (4,497) 3,074 - (13,112) ----------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under revolving line-of-credit agreements - 1,555 19,100 - 20,655 Debt repayments (136) (416) - - (552) Proceeds from issuance of long-term debt - - - - - Proceeds from issuance of stock and options - - 392 - 392 Financing fees paid - - (328) - (328) Cash dividends paid - - (858) - (858) ----------------------------------------------------------------------- Net cash provided by(used in) financing activities (136) 1,139 18,306 - 19,309 ----------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH - (357) 153 - (204) ----------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH 152 (3,143) (281) - (3,272) CASH AT BEGINNING OF YEAR 75 19,219 498 - 19,792 ----------------------------------------------------------------------- CASH AT END OF PERIOD $ 227 $ 16,076 $ 217 $ - $ 16,520 =======================================================================
15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations THREE MONTHS ENDED MARCH 31, 1997 VS. THREE MONTHS ENDED MARCH 31, 1996 Net sales in the first quarter of 1997 increased 0.7% to $154.0 million compared to $153.0 million for the same period of 1996. Sales of automotive products declined slightly to $113.7 million for the first quarter of 1997 compared to $114.4 million for the same period of 1996. Sales of small engine products increased 1.3% to $31.5 million for the first quarter of 1997 compared to $31.1 million for the same period of 1996. Sales of automotive products were lower than expected for the first quarter of 1997 because of continued in-sourcing of fuel pumps and fuel modules by a major U.S. customer and because of the strong U.S. dollar currency impact on foreign sales. The in-sourcing represented an $11.0 million decline in sales for the first quarter of 1997 compared to the same period of 1996 and the in-sourcing decline is expected to be completed by the end of the second quarter of 1997. Sales of plastic fuel tanks in Europe for the first quarter of 1997 increased by only 0.8% because of foreign currency exchange rates. Without the currency effect European sales would have increased by approximately 10%. Sales of plastic fuel tanks in Brazil, which began initial production in November 1996, added $3.0 million to sales for the first quarter of 1997. Sales of small engine products increased as a result of higher sales of ignition system products partially offset by lower sales of small engine carburetors in the U.S. Shipments to U.S. original equipment customers were lower because of customer's high inventories of lawn-and-garden equipment due to last year's poor spring and summer sales. Sales of small engine products increased by 8.5% in Japan in spite of the lower yen exchange rate. Without the currency effect Japan sales would have increased by approximately 24%. Sales to the aftermarket increased 15.3% to $6.8 million for the first quarter of 1997 compared to $5.9 million for the same period of 1996. Increased sales of automotive products to aftermarket customers more than offset a small decline in small engine carburetor aftermarket sales. Cost of sales for the first quarter of 1997 increased 4.5% to $129.8 million compared to $124.2 million for the same period of 1996, while cost of sales as a 16 percent of net sales was 84.3% compared to 81.2% for the same 1996 period resulting in a gross margin decline of 3.1 percentage points. The automotive products gross margin decline resulted from lower volume of fuel pumps and fuel modules in the U.S., lower volume of plastic fuel tanks in the two largest plants in Europe and new plant start-up costs in Brazil. In addition, automotive products gross margin was $2 million lower because it included some engineering costs in 1997 that were included in research and development costs in 1996. The small engine products gross margin decline resulted from lower volume of carburetors and new plant start-up costs in China. Selling and administrative ("S & A") expenses decreased 11.4% for the first quarter of 1997 compared to the first quarter of 1996. S & A expenses declined as a result of cost control programs in most areas of the Company. S & A expenses as a percent of net sales were 8.0% for the first quarter of 1997 compared to 9.1% for the same period of 1996. Research and development ("R & D") expenses decreased 32.4%. As reported above, $2.0 million of engineering expenses were included in cost of sales that were reported as R & D expenses in first quarter of 1996. If the $2.0 million of engineering expenses were included as R & D expense in 1997, R & D would have increased by 7.9% as efforts were expanded to develop new products to meet EPA regulations for small engine exhaust emissions. Interest expense increased 14.2% for the first quarter of 1997 compared to the same period in 1996 because of higher borrowings for additional working capital and for capital expenditures. Other income was $1.1 million for the first quarter of 1997 compared to zero for the first quarter of 1996. The increase was due to higher royalty income from the Company's joint ventures. Provision for income taxes was 7.3% higher for the first quarter of 1997 compared to the same period of 1996 of a larger amount of R & D tax credits available in 1996 resulting in a lower effective tax rate. Minority Interest increased by $0.9 million in the first quarter of 1997 compared to the same period of 1996 because of the preferred dividends due on the Convertible Preferred Securities of Walbro Capital Trust issued in February 1997. The equity in income from joint ventures in the first quarter of 1997 was $0.8 million versus the comparable period income of $1.1 million in 1996, because of lower profitability at Marwal Systems (France) and Marwal Brasil as these joint ventures began paying royalties to the Company. 17 Net income for the first quarter of 1996 was $2.4 million, a decrease of 46.7% compared to $4.5 million for the same period last year, as a result of the reasons described above. Net income per share for the first quarter of 1997 was $.27 compared with $.53 for the same 1996 period. Foreign Currency Transactions Approximately 52% of the Company's sales during the first three months of 1997 were derived from international manufacturing operations in Europe, Asia, South America and Mexico. The financial position and the results of operations of the Company's subsidiaries in Europe (35% of sales), Japan (5% of sales), South America (2% of sales) and China (1% of sales) are measured in local currency of the countries in which they operate and translated into U.S. dollars. The effects of foreign currency fluctuations in Europe, South America, Japan and China are somewhat mitigated by the fact that expenses are generally incurred in the same currencies in which sales are generated and the reported income of these subsidiaries will be higher or lower depending on a weakening or strengthening of the U.S. dollar. For the Company's subsidiary in Singapore (2% of sales) the expenses are generally incurred in the local currency, but sales are generated in U.S. dollars; therefore, results of operations are more directly influenced by a weakening or strengthening of the local currency. The Company's subsidiary in Mexico (7% of sales) operates as a maquiladora, or contract manufacturer, where certain direct manufacturing expenses are incurred in the local currency and sales are generated in U.S. dollars. Thus, results of operations of the Company's subsidiary in Mexico are also more directly influenced by a weakening or strengthening of the local currency. Approximately 52% of the Company's assets at March 31, 1997, are based in its foreign operations and are translated into U.S. dollars at foreign currency exchange rates in effect as of the end of each period. Accordingly, the Company's consolidated shareholders' equity will fluctuate depending upon the weakening or strengthening of the U.S. dollar. In addition, the Company has equity investments in unconsolidated joint ventures in France, Brazil, Mexico, Japan and Korea. The Company's reported income from these joint ventures will be higher or lower depending upon a weakening or strengthening of the U.S. dollar. The Company's strategy for management of currency risk relies primarily upon the use of forward currency exchange contracts to manage its exposure to foreign currency fluctuations related to its firm transaction commitments in foreign currencies. 18 Liquidity and Capital Resources As of March 31, 1997, the Company had outstanding $22.9 million in short-term debt, including current portion of long-term debt, and $261.4 million in long-term debt. The approximate minimum principal payments required on the Company's long-term debt in each of the five fiscal years subsequent to December 31, 1996 are $1.1 million in 1997, $7.7 million in 1998, $7.4 million in 1999, $121.6 million in 2000, $7.6 million in 2001 and $147.5 million thereafter. At March 31, 1997, the Company had available to it approximately $41 million under its credit facility with a group of commercial banks. In February 1997, the Company completed an offering of 2,760,000 shares or $69 million of Convertible Preferred Securities of Walbro Capital Trust. The net proceeds were used to pay down borrowings on the credit facility. The Company's plans for 1997 capital expenditures for facilities, equipment and tooling total approximately $60 million. The Company intends to finance the capital expenditures with the credit facility and cash from operations. Management believes that the Company's long-term cash needs will continue to be provided principally by operating activities supplemented, to the extent required, by borrowing under the Company's existing and future credit facilities. Management expects to replace these credit facilities as they expire with comparable facilities. As of March 31, 1997, accounts receivable amounted to $145.9 million, an increase of $10.9 million, compared to March 31, 1996. The increase was due to longer collection periods. The average collection period at March 31, 1997 was 85.3 days compared to 79.4 days at March 31, 1996. The higher average collection period was due to more foreign sales with longer payment terms. Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995 The statements contained in this discussion that are not historical facts are forward-looking statements subject to the safe harbor created by the Securities Litigation Reform Act of 1995. The Company cautions readers of this discussion that a number of important factors could cause the Company's actual consolidated results for 1997 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. These important factors include, without limitation, changes in demand for automobiles and light trucks, relationships with significant customers, price pressures, the timing and structure of future acquisitions or dispositions, impact of environmental regulations, continued availability of 19 adequate funding sources, currency and other risks inherent in international sales, and general economic and business conditions. These important factors and other factors which could affect the Company's results are more fully disclosed in the Company's filings with the Securities and Exchange Commission. Readers of this discussion are referred to such filings. 20 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibit is filed with this report: Exhibit No. 27.1 Financial Data Schedule (b) Reports on Form 8-K The only report of Form 8-K filed by the Company during the quarter ended March 31, 1997 was filed on January 7, 1997 reporting Item 7. Financial statements filed with the report on Form 8-K were: Financial Statements of Marwal Systems S.N.C. The following Financial Statements of Marwal Systems S.N.C. as of December 31, 1995, 1994, and 1993 and for the years ended December 31, 1995, 1994, and 1993 were included: Letter of Confirmation Report of Independent Public Accountants for 1995 Balance Sheet as of December 31, 1995 Income Statement for the year ended December 31, 1995 Notes to the Financial Statements for 1995 Report of Independent Public Accountants for 1994 Balance Sheet as of December 31, 1994 Income Statement for the year ended December 31, 1994 Notes to the Financial Statements for 1994 Report of Independent Public Accountants for 1993 Balance Sheet as of December 31, 1993 Income Statement for the year ended December 31, 1993 Notes to the Financial Statements for 1993 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. WALBRO CORPORATION (Registrant) Dated: May 13, 1997 /s/ L. E. Althaver ------------------------------------ L. E. Althaver, Chairman, President and Chief Executive Officer Dated: May 13, 1997 /s/Michael A. Shope ------------------------------------ Michael A. Shope Chief Financial Officer and Treasurer 22 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ------- ----------- 27.1 Financial Data Schedule EX-27 2 EX-27
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 20,471 0 145,932 0 47,554 229,403 364,482 85,685 612,101 132,400 261,359 69,000 0 4,326 126,656 612,101 154,019 154,019 129,821 129,821 14,629 0 5,644 3,925 1,380 2,362 0 0 0 2,362 0.27 0.27
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