-----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, B6BW2fuR67hGmj9bAsRF6FYq+e3bsN2S+GhOBFF0kieBfAufmrA9puUjn7Zq0lb6 7V1wsajMLjcIizjXjJTPnQ== 0000950124-96-005031.txt : 19961118 0000950124-96-005031.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950124-96-005031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96663369 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 FORM 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 September 30, 1996 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 November 11, 1996 Common Stock (one class): 8,637,003 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, 1995. 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)
9/30/96 12/31/95 ------- -------- ASSETS (Unaudited) CURRENT ASSETS: CASH $ 15,227 $ 19,792 ACCOUNTS RECEIVABLE (NET) 140,784 113,346 INVENTORIES 54,408 50,723 OTHER CURRENT ASSETS 16,565 15,843 ----------- ----------- TOTAL CURRENT ASSETS 226,984 199,704 PROPERTY, PLANT & EQUIPMENT: LAND, BUILDINGS & IMPROVEMENTS 63,387 57,986 MACHINERY & EQUIPMENT 272,913 211,707 ----------- ----------- SUBTOTAL 336,300 269,693 LESS: ACCUMULATED DEPRECIATION (76,044) (63,928) ----------- ----------- NET PROPERTY, PLANT & EQUIPMENT 260,256 205,765 OTHER ASSETS: GOODWILL (NET) 32,667 33,299 JOINT VENTURES, INVESTMENTS & OTHER 54,951 54,705 ----------- ----------- TOTAL OTHER ASSETS 87,618 88,004 ----------- ----------- TOTAL ASSETS $ 574,858 $ 493,473 =========== ===========
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)
9/30/96 12/31/95 ------- -------- LIABILITIES (Unaudited) CURRENT LIABILITIES: CURRENT PORTION LONG-TERM DEBT $ 983 $ 1,086 NOTES PAYABLE-BANKS 14,385 14,921 ACCOUNTS PAYABLE 76,396 52,774 ACCRUED LIABILITIES 29,496 35,210 ------------ ----------- TOTAL CURRENT LIABILITIES 121,260 103,991 LONG-TERM LIABILITIES: LONG-TERM DEBT, NET OF CURRENT 295,489 233,389 OTHER LONG-TERM LIABILITIES 18,126 20,666 ------------ ----------- TOTAL LONG-TERM LIABILITIES 313,615 254,055 STOCKHOLDERS' EQUITY COMMON STOCK, $.50 PAR VALUE; 4,301 4,290 AUTHORIZED 25,000,000; OUTSTANDING 8,601,796 IN 1996 AND 8,579,976 IN 1995 PAID-IN CAPITAL 64,762 64,381 RETAINED EARNINGS 75,380 66,256 OTHER STOCKHOLDERS' EQUITY (4,460) 500 ------------ ----------- TOTAL STOCKHOLDERS' EQUITY 139,983 135,427 ------------ ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 574,858 $ 493,473 ============ ===========
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 NINE MONTHS ENDED 09/30/96 09/30/95 09/30/96 09/30/95 -------- -------- -------- -------- (Unaudited) (Unaudited) NET SALES $ 132,545 $ 124,495 $ 440,501 $ 312,786 COST OF SALES & EXPENSES: COST OF SALES 111,116 105,444 361,951 256,030 SELLING AND ADMINISTRATIVE EXPENSES 11,078 8,438 39,415 25,604 RESEARCH & DEVELOPMENT EXPENSES 4,986 3,710 13,432 10,371 ---------- ----------- ----------- ---------- OPERATING INCOME 5,365 6,903 25,703 20,781 OTHER EXPENSE (INCOME): INTEREST EXPENSE 5,059 4,461 15,652 7,127 INTEREST INCOME (384) (362) (1,008) (489) OTHER (INCOME) EXPENSE (45) 9 (28) 425 ---------- ----------- ----------- ---------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST, AND JOINT VENTURES 735 2,795 11,087 13,718 PROVISION FOR INCOME TAXES 23 895 3,032 4,646 MINORITY INTEREST 110 149 320 472 EQUITY IN (INCOME) OF JOINT VENTURES (1,744) (538) (3,969) (2,612) ---------- ----------- ----------- ---------- NET INCOME $ 2,346 $ 2,289 $ 11,704 $ 11,212 ========== =========== =========== ========== NET INCOME PER SHARE $0.27 $0.27 $1.35 $1.30 AVERAGE SHARES OUTSTANDING 8,645,041 8,610,864 8,642,598 8,599,392
The accompanying notes are an integral part of these consolidated statements. 4 6 WALBRO CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; In thousands) NINE MONTHS ENDED 9/30/96 9/30/95 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 11,704 $ 11,212 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: DEPRECIATION & AMORTIZATION 20,201 13,568 (GAIN) LOSS ON DISPOSITION OF ASSETS (94) 144 MINORITY INTEREST (234) 479 (INCOME) OF JOINT VENTURES (3,969) (2,612) (GAIN) ON BUSINESS INTERUPT INSURANCE (700) CHANGES IN ASSETS AND LIABILITIES: DEFERRED INCOME TAXES 175 (393) DEFERRED PENSION OBLIGATIONS & OTHER (1,498) 1,450 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 14,027 13,996 ACCOUNTS RECEIVABLE, NET (28,597) (16,645) INVENTORIES (4,548) (279) PREPAID EXPENSES AND OTHER (5,894) (2,497) ------------ ----------- TOTAL ADJUSTMENTS (10,431) 6,511 ------------ ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,273 17,723 CASH FLOWS FROM INVESTING ACTIVITIES: PURCHASE OF FIXED ASSETS (70,453) (33,319) ACQUISITIONS, NET OF CASH ACQUIRED 0 (124,176) PURCHASE OF OTHER ASSETS (3,238) (6,665) INVESTMENT IN JOINT VENTURES & OTHER (259) (5,634) PROCEEDS FROM DISPOSAL OF ASSETS 3,533 115 ------------ ----------- NET CASH USED IN INVESTING ACTIVITIES (70,417) (169,679) CASH FLOWS FROM FINANCING ACTIVITIES: NET BORROWINGS UNDER LINE-OF-CREDIT AGREEMENTS 68,692 62,321 DEBT REPAYMENTS 0 (1,793) PROCEEDS FROM ISSUANCE OF DEBT 110,526 PROCEEDS FROM ISSUANCE OF COMMON STOCK & OPTIONS 392 157 CASH DIVIDENDS PAID (2,578) (2,569) ------------ ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 66,506 168,642 EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,927) (904) ------------ ----------- NET INCREASE (DECREASE) IN CASH (4,565) 15,782 CASH BEGINNING BALANCE 19,792 4,540 ------------ ----------- CASH ENDING BALANCE $ 15,227 $ 20,322 ============= ===========
The accompanying notes are an integral part of these consolidated statements. 5 7 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) ACQUISITION OF DYNO INDUSTRIER FUEL SYSTEMS BUSINESS On July 27, 1995, the Company, through certain of its wholly-owned subsidiaries, acquired the Fuel Systems Business of Dyno Industrier A.S, Oslo, Norway ("Dyno"). Dyno supplies plastic fuel tanks to most European vehicle manufacturers through production facilities in Belgium, France, Germany, Norway, Spain and the United Kingdom. This acquisition was accounted for as a purchase and, accordingly, the operating results of Dyno have been included in the accompanying financial statements since the date of the acquisition. The results of operations for the three months and nine months ended September 30, 1996 include the results of Dyno, while the results of operations for the three months and nine months ended September 30, 1995 only include the results of Dyno after July 27, 1995. Assuming the acquisition had taken place as of the beginning of 1995, the consolidated pro forma results of operations of the Company for the three months and nine months ended September 30, 1995 would have been as follows, after giving effect to certain adjustments consisting principally of management's estimates of depreciation and amortization expense resulting from the market valuation of Dyno net assets acquired, interest expense on acquisition debt and related tax adjustments (Unaudited; in thousands, except per share data):
Three Months Nine Months Ended 9/30/95 Ended 9/30/95 ------------- ------------- Net Sales $138,338 $434,461 Net Income 1,681 9,725 Net Income Per Share .19 1.13
6 8 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
as of Sept. 30, 1996 --------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ --------------- ------------ (in thousands, except share data) ASSETS CURRENT ASSETS Cash $ 52 $ 11,893 $ 3,282 $ - $ 15,227 Accounts receivable, net 82,170 58,093 521 - 140,784 Inventories 25,206 26,354 2,501 347 54,408 Prepaid expenses and other (83,059) 12,163 91,103 (9,070) 11,137 Deferred and refundable income taxes 561 803 4,064 - 5,428 ----------------------------------------------------------------------- Total current assets 24,930 109,306 101,471 (8,723) 226,984 ----------------------------------------------------------------------- PLANT AND EQUIPMENT, NET 110,696 141,501 7,950 109 260,256 ----------------------------------------------------------------------- OTHER ASSETS: Funds held for construction 1,102 - - - 1,102 Joint ventures 11,422 17,952 - - 29,374 Investments 122,532 29,063 111,536 (256,984) 6,147 Goodwill, net 14,912 7,063 (87) 10,779 32,667 Notes receivable - - 199,331 (198,595) 736 Deferred income taxes - 278 - - 278 Other 8,403 2,794 6,931 (814) 17,314 ----------------------------------------------------------------------- Total other assets 158,371 57,150 317,711 (445,614) 87,618 ----------------------------------------------------------------------- Total assets $293,997 $307,957 $427,132 $(454,228) $574,858 ======================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 555 $ 20 $ 408 $ - $ 983 Bank and other borrowings - 14,385 - - 14,385 Accounts payable 29,442 55,865 4,260 (13,171) 76,396 Accrued liabilities 11,287 15,807 3,106 (1,564) 28,636 Dividends payable - - 860 - 860 ----------------------------------------------------------------------- Total current liabilities 41,284 86,077 8,634 (14,735) 121,260 ----------------------------------------------------------------------- LONG-TERM LIABILITIES Long-term debt, less current portion 165,573 92,730 266,768 (229,583) 295,488 Pension obligations - 3,719 9,835 - 13,554 Deferred income taxes - 1,337 1,912 - 3,249 Minority interest - 1,324 - - 1,324 ----------------------------------------------------------------------- Total long-term liabilities 165,573 99,110 278,515 (229,583) 313,615 ----------------------------------------------------------------------- STOCKHOLDERS' EQUITY Common stock, $.50 par value; authorized 25,000,000; outstanding 8,601,796 in 1996; 8,579,976 in 1995 - 19,403 4,301 (19,403) 4,301 Paid-in capital - 72,040 64,762 (72,040) 64,762 Retained earnings 86,217 32,011 75,380 (118,228) 75,380 Deferred compensation - - (375) - (375) Minimum pension liability adjustment - - (63) - (63) Unrealized gain on securities available for sale - - 828 - 828 Cumulative translation adjustments 923 (684) (4,850) (239) (4,850) ----------------------------------------------------------------------- Total stockholders' equity 87,140 122,770 139,983 (209,910) 139,983 ----------------------------------------------------------------------- Total liabilities and stockholders' equity $293,997 $307,957 $427,132 $(454,228) $574,858 =======================================================================
7 9 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
as of December 31, 1995 --------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ --------------- ------------ (in thousands, except share data) ASSETS CURRENT ASSETS Cash $ 75 $ 19,219 $ 498 $ - $ 19,792 Accounts receivable, net 20,598 51,455 49,116 (7,823) 113,346 Inventories 24,416 25,342 965 - 50,723 Prepaid expenses and other 8,519 2,264 678 (495) 10,966 Deferred and refundable income taxes 349 464 4,064 - 4,877 ------------------------------------------------------------------------ Total current assets 53,957 98,744 55,321 (8,318) 199,704 ------------------------------------------------------------------------ PLANT AND EQUIPMENT, NET 85,437 111,190 9,030 108 205,765 ------------------------------------------------------------------------ OTHER ASSETS: Funds held for construction 1,102 - - - 1,102 Joint ventures 10,181 13,285 - - 23,466 Investments 144,588 295 101,386 (237,045) 9,224 Goodwill, net 15,254 18,045 - - 33,299 Notes receivable - - 189,134 (188,674) 460 Deferred income taxes - 2,805 - - 2,805 Other 8,352 1,987 7,309 - 17,648 ------------------------------------------------------------------------ Total other assets 179,477 36,417 297,829 (425,719) 88,004 ------------------------------------------------------------------------ Total assets $318,871 $246,351 $362,180 $(433,929) $493,473 ======================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 555 $ 123 $ 408 $ - $ 1,086 Bank and other borrowings - 14,921 - - 14,921 Accounts payable 27,113 36,988 2,057 (13,384) 52,774 Accrued liabilities 13,278 15,360 6,029 (315) 34,352 Dividends payable - - 858 - 858 ------------------------------------------------------------------------ Total current liabilities 40,946 67,392 9,352 (13,699) 103,991 ------------------------------------------------------------------------ LONG-TERM LIABILITIES Long-term debt, less current portion 204,435 45,387 205,448 (221,881) 233,389 Pension obligations 618 4,455 10,029 - 15,102 Deferred income taxes - 2,003 1,924 - 3,927 Minority interest - 1,637 - - 1,637 ------------------------------------------------------------------------ Total long-term liabilities 205,053 53,482 217,401 (221,881) 254,055 ------------------------------------------------------------------------ STOCKHOLDERS' EQUITY Common stock, $.50 par value; authorized 25,000,000; outstanding 8,601,796 in 1996; 8,579,976 in 1995 - 19,392 4,290 (19,392) 4,290 Paid-in capital - 78,633 64,381 (78,633) 64,381 Retained earnings 72,301 23,993 66,256 (96,294) 66,256 Deferred compensation - - (817) - (817) Minimum pension liability adjustment - - (63) - (63) Unrealized gain on securities available for sale - - 827 - 827 Cumulative translation adjustments 571 3,459 553 (4,030) 553 ------------------------------------------------------------------------ Total stockholders' equity 72,872 125,477 135,427 (198,349) 135,427 ------------------------------------------------------------------------ Total liabilities and stockholders' equity $318,871 $246,351 $362,180 $(433,929) $493,473 ========================================================================
8 10 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Nine Months Ended Sept. 30, 1996 --------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ --------------- ------------ (in thousands, except share data) NET SALES $249,705 $212,287 $ 1,454 $(22,945) $440,501 COSTS AND EXPENSES: Cost of sales 202,308 181,529 1,059 (22,945) 361,951 Selling, administration & other expenses 27,176 18,104 7,567 - 52,847 ----------------------------------------------------------------------- OPERATING INCOME (LOSS) 20,221 12,654 (7,172) - 25,703 OTHER EXPENSE (INCOME): Interest expense 11,400 4,321 15,735 (15,804) 15,652 Interest income (3,269) (1,362) (12,181) 15,804 (1,008) Foreign currency exchange loss(gain) (113) 37 208 - 132 Other (7) 107 (260) - (160) ----------------------------------------------------------------------- Income before provision for income taxes, minority interest, equity in (income) loss of joint ventures and subsidiaries 12,210 9,551 (10,674) - 11,087 Provision (credit) for income taxes 3,244 3,559 (3,771) - 3,032 Minority Interest - 320 - - 320 Equity in (income) loss of joint ventures (632) (3,337) - - (3,969) Equity in (income) of subsidiaries (9,411) (336) (18,607) 28,354 - ----------------------------------------------------------------------- Net Income $ 19,009 $ 9,345 $ 11,704 $(28,354) $ 11,704 =======================================================================
9 11 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Nine Months Ended Sept. 30, 1995 ---------------------------------------------------------------------------- Walbro Corporation Consolidation Guarantor Nonguarantor (Parent and Elimination Consolidated Subsidiaries Subsidiaries Corporation) Entries Total ------------ ------------ ------------ --------------- ------------ (in thousands, except share data) NET SALES $248,449 $92,623 $ 1,474 $(29,760) $312,786 COSTS AND EXPENSES: Cost of sales 203,974 81,102 714 (29,760) 256,030 Selling, administration & other expenses 22,744 4,575 8,656 - 35,975 ------------------------------------------------------------------------ OPERATING INCOME (LOSS) 21,731 6,946 (7,896) - 20,781 OTHER EXPENSE (INCOME): Interest expense 6,354 1,552 5,888 (6,667) 7,127 Interest income (1,775) 636 (6,017) 6,667 (489) Foreign currency exchange loss(gain) (123) 52 491 - 420 Other 3 2 - - 5 ------------------------------------------------------------------------ Income before provision for income taxes, minority interest, equity in (income) loss of joint ventures and subsidiaries 17,272 4,704 (8,258) - 13,718 Provision (credit) for income taxes 5,988 1,059 (2,859) 458 4,646 Minority Interest - 472 - - 472 Equity in (income) loss of joint ventures (414) (2,198) - - (2,612) Equity in (income) of subsidiaries (5,841) - (17,070) 22,911 - ------------------------------------------------------------------------ Net Income $ 17,539 $ 5,371 $11,671 $(23,369) $ 11,212 ========================================================================
10 12 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Nine Months Ended Sept. 30, 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 $38,282 $31,010 $(68,019) $ - $ 1,273 ---------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment (24,433) (46,412) 392 - (70,453) Acquisitions, net of cash acquired - - - - - Purchase of other assets (2,301) (438) (499) - (3,238) Investment in joint ventures and other (13,744) 3,719 9,766 - (259) Proceeds/(payments) of intercompany note rec. - - - - - Proceeds from disposal of assets - 385 3,148 - 3,533 ---------------------------------------------------------------------- Net cash provided by(used in) investing activities (40,478) (42,746) 12,807 - (70,417) ---------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under revolving line-of-credit agreements 2,173 5,228 61,291 - 68,692 Debt repayments - - - - - Proceeds from issuance of long-term debt - - - - - Proceeds from issuance of common stock and options - - 392 - 392 Financing fees paid - - - - - Cash dividends paid - - (2,578) - (2,578) ---------------------------------------------------------------------- Net cash provided by(used in) financing activities 2,173 5,228 59,105 - 66,506 ---------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH - (818) (1,109) - (1,927) ---------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH (23) (7,326) 2,784 - (4,565) CASH AT BEGINNING OF YEAR 75 19,219 498 - 19,792 ---------------------------------------------------------------------- CASH AT END OF PERIOD $ 52 $11,893 $ 3,282 $ - $15,227 ======================================================================
11 13 WALBRO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Nine Months Ended Sept. 30, 1995 -------------------------------------------------------------------------- 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 $ 75,694 $13,549 $(50,359) $(21,161) $ 17,723 ------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment (29,810) (2,873) (636) - (33,319) Acquisitions, net of cash acquired (138,378) 14,262 (60) - (124,176) Purchase of other assets (3,857) 2,190 (4,998) - (6,665) Investment in joint ventures and other (11,038) 194 (15,961) 21,171 (5,634) Proceeds/(payments) of intercompany note rec. - - - - - Proceeds from disposal of assets 107 7 1 - 115 ------------------------------------------------------------------------ Net cash provided by(used in) investing activities (182,976) 13,780 (21,654) 21,171 (169,679) ------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under revolving line-of-credit agreements - (545) 62,866 - 62,321 Debt repayments (383) (1,410) - - (1,793) Proceeds from issuance of long-term debt 107,665 111 2,750 - 110,526 Proceeds from issuance of common stock and options - - 157 - 157 Financing fees paid - - - - - Cash dividends paid - - (2,569) - (2,569) ------------------------------------------------------------------------ Net cash provided by(used in) financing activities 107,282 (1,844) 63,204 - 168,642 ------------------------------------------------------------------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH - (894) - (10) (904) ------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH - 24,591 (8,809) - 15,782 CASH AT BEGINNING OF YEAR 75 2,525 1,940 - 4,540 ------------------------------------------------------------------------ CASH AT END OF PERIOD $ 75 $27,116 $ (6,869) $ - $ 20,322 ========================================================================
12 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations On July 27, 1995, the Company, through certain of its wholly-owned subsidiaries, acquired the Fuel Systems Business of Dyno Industrier A.S, Oslo, Norway ("Dyno" operating as Walbro Automotive Europe "WAE"). WAE supplies plastic fuel tanks to most European vehicle manufacturers through production facilities in Belgium, France, Germany, Norway, Spain and the United Kingdom. Dyno's sales, on a pro forma basis, were $210.2 million in 1995. Except as noted below, the results of operations for the three months and nine months ended September 30, 1996 include the results of WAE, while the results of operations for the three months and nine months ended September 30, 1995 only include the results of WAE after July 27, 1995. THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. THREE MONTHS ENDED SEPTEMBER 30, 1995 Net sales in the third quarter of 1996 increased 6.4% to $132.5 million compared to $124.5 million for the same period of 1995. Sales of automotive products increased 5.9% to $98.6 million for the third quarter of 1996 compared to $93.1 million for the same period of 1995, primarily because of the inclusion of Dyno sales in the WAE results for the entire 1996 period. Sales at WAE were $49.2 million in the third quarter of 1996 compared to $35.2 million for the two months in the third quarter of 1995. Sales of automotive products excluding WAE declined 14.7% to $49.4 million in the third quarter of 1996 compared to $57.9 million for the same period of 1995 due to lower sales of fuel pumps and fuel modules to the Company's second largest customer because of the customer's increased in-house production. Sales to this customer in the third quarter of 1996 declined $12.4 million to $10.0 million and this level is expected to continue in the fourth quarter of 1996. These reduced sales were partially offset by increased sales of fuel modules to the Company's largest customer because of higher production by the customer, sales of additional applications to that customer and increased dollar content per vehicle produced by that customer. Sales of small engine products increased 7.2% to $26.8 million for the third quarter of 1996 compared to $25.0 million for the same period in 1995. $1.2 million of the increase was the result of increased sales of ignition systems (up 56.7%) due to new contracts with existing customers and $0.6 million of the increase was due to increased carburetor sales in China (up 49.9%) because of the continued rapid growth of the sale of two-wheeled vehicles on which the Company's 13 15 carburetors were used. Sales of carburetors in the U.S. were flat for the third quarter. Increased sales of float feed carburetors were offset by lower sales of diaphragm carburetors during the quarter. Sales of diaphragm carburetors were below normal seasonal levels due to poor weather conditions. The drought in the Southeast and Southwest U.S. and cold, wet spring conditions in other areas resulted in reduced demand for handheld power equipment. Sales of diaphragm carburetors also declined in Japan by 18.5% because of lower demand and because of the lower yen-dollar exchange rate. The sales in yen for the third quarter of 1996 decreased by 8.6% and the yen weakened by 9.9% against the dollar compared to the same period in 1995. Sales to the aftermarket increased 12.5% to $6.3 million for the third quarter of 1996 compared to $5.6 million for the same period in 1995. Sales of aftermarket products were low in the third quarter of 1995 because of a fire in the aftermarket distribution center. Cost of sales for the third quarter of 1996 increased 5.4% to $111.1 million compared to $105.4 million for the same period of 1995, while cost of sales as a percent of net sales improved to 83.8% compared to 84.7% for the same 1995 period. Cost of sales as a percent of sales at WAE was 89.8% for the third quarter of 1996 compared to 91.4% for the two months ended September 30, 1995. For automotive products, gross margin increased because of higher sales volumes of fuel tanks and fuel rails, partially offset by lower fuel pump and fuel module volumes. In small engine products, gross margin decreased primarily because of lower diaphragm carburetor volume, partially offset by higher volume of ignition system products. Selling and administrative ("S & A") expenses increased 27.1% (increased 12.5% without WAE) for the third quarter of 1996 compared to the third quarter of 1995. S & A increased as a percent of sales (from 7.0% in the third quarter of 1995 to 8.4% for the third quarter of 1996) because of start-up costs for the Company's new plastic fuel tank facility near Sao Paulo, Brazil; its new carburetor facility in Tianjin, China; and its new diecast facility in Tucson, Arizona. S & A for WAE includes operations for three months in the third quarter of 1996 versus two months for the 1995 period. Research and development ("R & D") expenses increased 34.4% (increased 6.3% without WAE). Most of the increased R & D expenses were incurred by WAE as increased levels of R & D were required to support new plastic tank programs. The level of effort expended to develop new products to meet U.S. EPA regulations for automotive evaporative emissions and for small engine exhaust emissions has not changed. Interest expense increased because of borrowings for the WAE acquisition and increased borrowings for additional working capital required to 14 16 support sales growth and for capital expenditures. A description of the borrowings for the WAE acquisition is provided under Liquidity and Capital Resources. Provision for income taxes was lower for the third quarter of 1996 compared to the same period in 1995 because of lower taxable income and a reduced year-to-date effective tax rate resulting from research and development tax credits. The tax rate is expected to stay at the lower level in the fourth quarter of 1996. The equity in income from joint ventures in the third quarter of 1996 was $1.7 million, $1.2 million higher than the comparable period in 1995. Stronger European auto market sales and increased sales in South America caused increased income at Marwal Systems (France) and Marwal Brasil, respectively. Net income for the third quarter of 1996 was $2.35 million, an increase of 2.6% compared to $2.29 million for the same period last year, as a result of the reasons described above. Net income per share for the third quarter of both 1996 and 1995 was $.27. NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. NINE MONTHS ENDED SEPTEMBER 30, 1995 Net sales for the first nine months of 1996 increased 40.8% to $440.5 million compared to $312.8 million for the same period of 1995. WAE sales for the first nine months of 1996 were $158.0 compared to $35.2 million for the same period of 1995 which included sales for only two months during the period. Net sales for the first nine months of 1996 excluding WAE sales in both periods increased 1.8%. Sales of automotive products increased 61.0% to $329.8 million for the 1996 nine month period compared to $204.8 million for the same 1995 period (1.3% increase excluding WAE sales). The increased automotive product sales, excluding WAE sales, were primarily the result of increased sales during the second quarter of 1996, partially offset by lower sales during the third quarter of 1996 for the reasons stated above. Sales of small engine products increased 2.7% to $88.7 million for the first nine months of 1996 compared to $86.4 million for the same period of 1995. The increased small engine product sales were the result of increased sales of ignition systems products and carburetors in China, mostly offset by declines in diaphragm carburetors in the U.S. and Japan for the reasons stated above. Sales to the aftermarket decreased 4.7% to $18.3 million for the first nine months of 1996 compared to $19.2 million for the same period of 1995. Sales of automotive products declined during the first six months of 1996 because of increased in-house production by one of the Company's aftermarket customers. 15 17 Cost of sales for the first nine months of 1996 increased 41.4% to $362.0 million compared to $256.0 million for the same period of 1995 (0.5% increase without WAE). Cost of sales as a percent of net sales was 82.2% (79.6% without WAE) for the first nine months of 1996 compared to 81.9% for the same period of 1995. The improved gross margin, without WAE, for the first nine months of 1996 was achieved in the second and third quarters for the reasons stated above. S & A expenses increased by 52.3% (increased 14.3% without WAE) for the first nine months of 1996 compared to the same period of 1995. The increase in S & A expenses for the nine month period was due to the same reasons stated above for the third quarter of 1996. R & D expenses increased by 29.5% (decreased 0.2% without WAE) for the first nine months of 1996 compared to the same period of 1995 for the reasons stated above. The provision for income taxes was 34.7% lower for the first nine months of 1996 compared to the same period of 1995 because of lower taxable income and a lower effective tax rate of 28.2% for the 1996 nine month period compared to 35.1% for the same 1995 period. The lower effective tax rate resulted from research and development tax credits. The equity in income from joint ventures was $4.0 million for the first nine months of 1996 compared to the 1995 income of $2.6 million for the same period because of the increased sales and improved profitability at Marwal Systems (France), Marwal Brasil and Mitsuba-Walbro (Japan) during the first nine months of 1996 which more than offset the start-up costs at Korea Automotive Fuel Systems. Net income for the first nine months of 1996 was $11.7 million, an increase of 4.4% compared to net income of $11.2 million for the same period of 1995. The increase was due to the reasons described above. Net income per share was $1.35 for the first nine months of 1996 compared to $1.30 for the first nine months of 1995. Foreign Currency Transactions Approximately 51% of the Company's sales during the first nine months of 1996 were derived from international manufacturing operations in Europe, Asia and Mexico. The financial position and the results of operations of the Company's subsidiaries in Europe (36% of sales), Japan (4% of sales) and China (1% of sales) are measured in the local currency of the countries in which they operate and translated into U.S. dollars. The effects of foreign currency 16 18 fluctuations in Europe, 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 (3% 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 46% of the Company's assets at September 30, 1996, 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, Japan, Korea and Mexico. 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 operations in foreign countries, to manage certain of its firm transaction commitments in foreign currencies and to hedge its equity investment in certain foreign joint ventures. Liquidity and Capital Resources As of September 30, 1996, the Company had outstanding $15.4 million in short-term debt, including current portion of long-term debt, and $295.5 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, 1995 are $1.1 million in 1996, $1.3 million in 1997, $7.9 million in 1998, $7.6 million in 1999, $64.6 million in 2000 and $152.0 million thereafter. The net purchase price of the acquisition of Dyno's Fuel Systems Business was approximately $114 million (approximately $130 million less approximately $16 million cash acquired by the Company). The Company financed the acquisition through the combination of an issuance of $110 million in aggregate principal amount of its 9 7/8% Senior Notes due 2005 and a new 17 19 $135 million secured Credit Facility with a group of commercial banks. At September 30, 1996, the Company had available to it approximately $9 million under the Credit Facility. In the first nine months of 1996, net working capital increased by $10.0 million and cash used for investing activities was $70.4 million. Financing activities provided $66.5 million with the remaining cash generated from operations. In the first nine months of 1995, net working capital increased by $3.9 million, net of acquisition, while cash used for investing activities was $169.8 million. Financing activities provided $168.6 million with the remaining cash generated from operations. The Company's plans for 1996 capital expenditures for facilities, equipment and tooling total approximately $80 million, of which approximately $70 million has been spent in the first nine months of 1996. The major projects include new blow molding machines for plastic fuel tanks, expansion of the Ossian, Indiana plant and new plants in Meriden, Connecticut, Belgium and Brazil. The Company intends to finance the remaining capital expenditures with the new 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 September 30, 1996, accounts receivable amounted to $140.8 million, an increase of $9.9 million, compared to $130.9 million at September 30, 1995. The increase was due to longer collection periods due to revised payment terms with certain customers. The average collection period at September 30, 1996 was 89.2 days compared to the average collection period at September 30, 1995 of 77.8 days. 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 1996 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 18 20 dispositions, the integration of the Dyno acquisition into the Company's overall business, impact of environmental regulations, continued availability of adequate funding sources, currency and other risks inherent in international sales, and general economic and business conditions. These important factors and other factors which would 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. 19 21 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 There were no reports on Form 8-K filed during the quarter. 20 22 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: November 13, 1996 /s/ L. E. Althaver ------------------------------------- L. E. Althaver, Chairman and Chief Executive Officer Dated: November 13, 1996 /s/ Michael A. Shope ------------------------------------- Michael A. Shope Chief Financial Officer and Treasurer 21 23 Exhibit Index ------------- Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 15,227 0 140,784 0 54,408 226,984 336,300 76,044 574,858 121,260 295,489 0 0 4,301 135,682 574,858 440,501 440,501 361,951 361,951 52,819 0 14,644 11,087 3,032 11,704 0 0 0 11,704 1.35 1.35
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