-----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, Cz+gCq18Tgq+UaldmainYdKtKvtPyJXsOq6T10i3EkATeSB8ShfGLIGNLMY4p1AK r97WjydPkkn/s0OFM/XhTA== /in/edgar/work/20000614/0001036050-00-001121/0001036050-00-001121.txt : 20000919 0001036050-00-001121.hdr.sgml : 20000919 ACCESSION NUMBER: 0001036050-00-001121 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELCO REMY INTERNATIONAL INC CENTRAL INDEX KEY: 0001046859 STANDARD INDUSTRIAL CLASSIFICATION: [3714 ] IRS NUMBER: 351909253 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13683 FILM NUMBER: 655128 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 MAIL ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 10-Q 1 0001.txt FORM 10-Q FOR DELCO REMY ================================================================================ UNITED STATES 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 April 30, 2000 COMMISSION FILE NO. 1-13683 DELCO REMY INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) DELAWARE 35-1909253 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2902 ENTERPRISE DRIVE ANDERSON, INDIANA 46013 (Address of principal executive offices) (Zip Code)
(765) 778-6499 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes X No --- --- INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. Number of common shares outstanding Class as of June 6, 2000 - ---------------------- ------------------------------------ Common Stock - Class A 18,118,058 Common Stock - Class B 6,278,055 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES INDEX
PART I FINANCIAL INFORMATION Page Item 1 Financial Statements (Unaudited) Condensed Consolidated Statements of Operations................ 3 Condensed Consolidated Balance Sheets.......................... 4 Condensed Consolidated Statements of Cash Flows................ 5 Notes to Condensed Consolidated Financial Statements........... 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................... 19 PART II OTHER INFORMATION Item 5 Other Information.............................................. 23 Item 6 Exhibits and Reports on Form 8-K............................... 23 SIGNATURES ............................................................... 24
2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES (UNAUDITED)
THREE-MONTH PERIOD NINE-MONTH PERIOD ENDED APRIL 30 ENDED APRIL 30 ---------------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------------- (IN THOUSANDS OF DOLLARS, EXCEPT FOR SHARE AMOUNTS) Net sales $274,861 $248,826 $812,087 $703,935 Cost of goods sold 210,330 196,305 629,384 562,932 ---------------------------------------------------------- Gross profit 64,531 52,521 182,703 141,003 Selling, general and administrative expenses 31,084 27,142 92,840 73,918 Amortization of goodwill and intangibles 1,603 1,015 4,511 3,351 ---------------------------------------------------------- Operating income 31,844 24,364 85,352 63,734 Interest expense and other non-operating expenses (12,760) (12,695) (36,682) (34,363) ---------------------------------------------------------- Income before income taxes, minority interest in income of subsidiaries and income (loss) from unconsolidated joint ventures 19,084 11,669 48,670 29,371 Income taxes 7,249 4,550 18,491 11,456 Minority interest in income of subsidiaries (1,626) (746) (5,053) (2,328) Income (loss) from unconsolidated joint ventures (10) 1,801 (46) 3,828 ---------------------------------------------------------- Net income $ 10,199 $ 8,174 $ 25,080 $ 19,415 ========================================================== Basic earnings per common share $0.42 $0.34 $1.04 $0.81 ========================================================== Diluted earnings per common share $0.39 $0.32 $0.97 $0.75 ========================================================== See Notes to Condensed Consolidated Financial Statements
3 Condensed Consolidated Balance Sheets DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES (UNAUDITED)
April 30, JULY 31, 2000 1999 --------------------------- --------------------------- (in thousands of dollars) Assets Current assets: Cash and cash equivalents $ 15,343 $ 15,309 Trade accounts receivable, net 168,785 147,988 Other receivables 16,529 15,496 Inventories 276,126 232,165 Deferred income taxes 15,336 14,997 Other current assets 5,952 2,903 --------------------------- --------------------------- Total current assets 498,071 428,858 Property and equipment 288,387 258,727 Less accumulated depreciation 81,241 63,532 --------------------------- --------------------------- Property and equipment, net 207,146 195,195 Deferred financing costs 9,864 11,192 Goodwill (net of accumulated amortization) 167,838 137,429 Investments in joint ventures 5,903 4,756 Other assets 6,340 5,233 --------------------------- --------------------------- Total assets $895,162 $782,663 =========================== =========================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $137,144 $119,339 Accrued interest payable 11,752 11,603 Accrued restructuring charges 5,493 5,866 Other liabilities and accrued expenses 48,424 37,105 Current debt 5,010 12,596 --------------------------- --------------------------- Total current liabilities 207,823 186,509 Deferred income taxes 4,569 4,568 Long-term debt, less current portion 500,641 434,931 Post-retirement benefits other than pensions 23,685 21,050 Accrued pension benefits - 2,719 Other noncurrent liabilities 3,603 3,545 Commitments and contingencies Minority interest in subsidiaries 24,292 19,821 Stockholders' equity: Common stock: Class A shares 182 182 Class B shares 63 63 Paid-in capital 104,176 104,176 Retained earnings 37,232 12,152 Accumulated other comprehensive loss (10,718) (6,516) Stock purchase plan (386) (537) --------------------------- --------------------------- Total stockholders' equity 130,549 109,520 --------------------------- --------------------------- Total liabilities and stockholders' equity $895,162 $782,663 =========================== =========================== See Notes to Condensed Consolidated Financial Statements
4 Condensed Consolidated Statements of Cash Flows DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES (UNAUDITED)
NINE-MONTH PERIOD ENDED APRIL 30, --------------------------------------- 2000 1999 ---------------- ---------------- (IN THOUSANDS OF DOLLARS) Operating activities: Net income $ 25,080 $ 19,415 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 20,777 13,614 Amortization 4,511 3,351 Minority interest in income of subsidiaries 5,053 2,328 (Income) loss from unconsolidated joint ventures 46 (3,828) Deferred income taxes - 5,547 Post-retirement benefits other than pensions 2,635 2,871 Accrued pension benefits (2,739) (1,679) Non-cash interest expense 1,321 1,207 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 2,695 (19,167) Inventories (25,448) (14,955) Accounts payable 10,400 19,042 Other current assets and liabilities 2,307 (6,816) Accrued restructuring charges (373) (11,322) Other non-current assets and liabilities, net (2,989) (1,652) ---------------- ---------------- Net cash provided by operating activities 43,276 7,956 INVESTING ACTIVITIES: Acquisitions, net of cash acquired (67,646) (41,748) Purchases of property and equipment (28,779) (18,023) ---------------- ---------------- Net cash used in investing activities (96,425) (59,771) FINANCING ACTIVITIES: Net borrowings under revolving line of credit and other 54,933 51,802 Distributions to minority interests (1,200) - ---------------- ---------------- Net cash provided by financing activities 53,733 51,802 Effect of exchange rate changes on cash (550) (390) ---------------- ---------------- Net increase (decrease) in cash and cash equivalents 34 (403) Cash and cash equivalents at beginning of period 15,309 8,113 ---------------- ---------------- Cash and cash equivalents at end of period $ 15,343 $ 7,710 ================ ================ See Notes to Condensed Consolidated Financial Statements
5 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN THOUSANDS OF DOLLARS) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended April 30, 2000 are not necessarily indicative of the results that may be expected for the full fiscal year. The balance sheet at July 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended July 31, 1999 in Form 10-K. 2. ADDITIONAL BALANCE SHEET INFORMATION APRIL 30, JULY 31, Inventory: 2000 1999 -------------------- -------------------- Raw material $138,569 $121,725 Work-in-process 50,286 50,725 Finished goods 87,271 59,715 -------------------- -------------------- Total $276,126 $232,165 ==================== ====================
3. COMPREHENSIVE INCOME The Company's other comprehensive income consists of unrealized gains and losses on the translation of the assets and liabilities of its foreign operations. Comprehensive income was $5,302 and $8,760 for the three- month periods ending April 30, 2000 and 1999, respectively, and $20,878 and $19,906 for the nine- month periods ending April 30, 2000 and 1999, respectively. The unrealized other comprehensive net loss of $4,202 in the first three quarters of fiscal 2000 primarily reflects the weakening of the Irish Punt, Hungarian Forint and Belgian Franc against the U.S. Dollar, partially offset by the strengthening of the South Korean Won against the U.S. Dollar between July 31, 1999 and April 30, 2000. 6 4. EARNINGS PER SHARE Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the period plus potential dilutive instruments, including stock options, warrants and the stock purchase plan. The following table sets forth the numerator and denominator for the computation of basic and diluted earnings per share:
THREE-MONTH PERIOD NINE-MONTH PERIOD ENDED APRIL 30, ENDED APRIL 30, -------------------------------------- --------------------------------------- 2000 1999 2000 1999 ------------------ ------------------- ------------------- ------------------- Numerator: Net income $ 10,199 $ 8,174 $ 25,080 $ 19,415 ================== =================== =================== =================== DENOMINATOR: Denominator for basic earnings per share (weighted average shares) 24,240,713 23,859,570 24,223,913 23,825,522 Effect of dilutive securities: Warrants 1,679,726 1,679,787 1,679,759 1,679,805 Stock purchase plan and stock options 79,445 305,450 84,541 367,391 ------------------ ------------------- ------------------- ------------------- Denominator for diluted earnings per share (weighted average shares and assumed conversions) 25,999,884 25,844,807 25,988,213 25,872,718 ================== =================== =================== ===================
5. RESTRUCTURING CHARGES In May 1998, the Company offered an incentive separation payment to DRA hourly employees through a voluntary employee termination program (VTEP). By the program's completion date on July 10, 1998, 337 employees had accepted the Company's offer. A charge of $26,515 was recorded for these separation costs, $9,975 of which were paid in fiscal year 1998, $11,565 of which were paid in fiscal year 1999 and $1,109 of which were paid in the first three quarters of fiscal year 2000. Approximately $2,541 are to be paid in the fourth quarter of fiscal year 2000 and $1,325 are to be paid in fiscal year 2001. 7 The following table summarizes the status of the reserves for restructuring charges:
Termination Exit/Impairment Benefits Costs Total ------------------ ---------------------- ------------------ Reserve at July 31, 1999 $4,975 $ 891 $5,866 Payments and charges in the three month period ended October 31, 1999 (455) (8) (463) ------------------ ---------------------- ------------------ Reserve at October 31, 1999 4,520 883 5,403 Payments and charges in the three month period ended January 31, 2000 (605) (21) (626) ------------------ ---------------------- ------------------ Reserve at January 31, 2000 3,915 862 4,777 Payments and charges in the three month period ended April 30, 2000 (49) (285) (334) Reserve established in acquisition of business 1,050 - 1,050 ------------------ ---------------------- ------------------ Reserve at April 30, 2000 $4,916 $ 577 $5,493 ================== ====================== ==================
6. ACQUISITIONS On March 10, 2000, Reman Holdings, Inc., a wholly owned subsidiary of the Company, purchased 100% of the capital shares of M&M Knopf Auto Parts, Inc. ("Knopf") from certain shareholders. The purchase price of approximately $61,000, net of cash acquired and including the payoff of certain debt of Knopf, was funded through proceeds from the Company's Senior Credit Facility and is subject to certain adjustments. The acquisition will be accounted for under the purchase method. Accordingly, the assets and liabilities were recorded based upon their fair values at the date of acquisition and resulting goodwill of approximately $34,000 will be amortized over 30 years. The purchase price is subject to an additional contingent payment of cash and/or common stock of the Company in fiscal year 2005, subject to the achievement by Knopf of certain earnings goals. The amount of this payment can not currently be determined. This additional contingent purchase price, if any, will increase the goodwill recorded for the acquisition and will be amortized over its remaining useful life. Results of operations for Knopf are included in the Company's financial statements effective March 1, 2000. Knopf is engaged in automotive component recovery and exchange. In April 2000, the Company acquired Elmot-DR, Sp.z.o.o., a Polish manufacturer of starters and alternators for the OEM and aftermarket in Europe, for approximately $675. In August 1999, the Company acquired Engine Master, a remanufacturer of engines located in Dallas, Texas, for approximately $5,700. 8 The unaudited pro forma consolidated results of operations, assuming the acquisitions of Williams Technologies, Inc. (Williams) (acquired on November 13, 1998), Remy Korea Limited (Remy Korea) (additional 31% interest acquired on June 25, 1999) and Knopf had been consummated as of the beginning of the preceding year, are as follows:
Nine Months Ended Nine Months Ended April 30, 2000 April 30, 1999 ----------------- ----------------- Net sales $853,655 $782,108 Net income 29,578 27,557 Basic earnings per share 1.22 1.16 Diluted earnings per share 1.14 1.07
The pro forma consolidated financial information has been prepared for comparative purposes only and does not purport to present what the Company's consolidated results of operations would actually have been if the operations were combined during the periods presented and is not intended to project future results or trends of operations. 7. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR SUBSIDIARIES The Company conducts a significant portion of its business through subsidiaries. The Senior Notes and the Senior Subordinated Notes are fully and unconditionally guaranteed, jointly and severally, by certain direct and indirect subsidiaries (the Subsidiary Guarantors). Certain of the Company's subsidiaries do not guarantee the Senior Notes or the Senior Subordinated Notes (the Non-Guarantor Subsidiaries). The claims of creditors of Non-Guarantor Subsidiaries have priority over the rights of the Company to receive dividends or distributions from such subsidiaries. Presented below is condensed consolidating financial information for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at April 30, 2000 and July 31, 1999 and for the three month and nine month periods ended April 30, 2000 and 1999. The equity method has been used by the Company with respect to investments in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in Non-Guarantor Subsidiaries. Separate financial statements for Subsidiary Guarantors are not presented based on management's determination that they do not provide additional information that is material to investors. 9 The following table sets forth the Guarantor and direct Non-Guarantor Subsidiaries:
GUARANTOR SUBSIDIARIES NON-GUARANTOR SUBSIDIARIES - --------------------------------------------------------------------------------------------------------- Delco Remy America, Inc. Delco Remy Hungary RT (formerly Autovill RT Ltd.) Nabco, Inc. Power Investments Canada Ltd. The A&B Group, Inc. Delco Remy UK Limited A&B Enterprises, Inc. Delco Remy International (Europe) GmbH Dalex, Inc. Remy India Holdings, Inc. A&B Cores, Inc. Remy Korea Holdings, Inc. R&L Tool Company, Inc. Alberta Ltd. MCA, Inc. of Mississippi World Wide Automotive Distributors, Inc. Power Investments, Inc. Kraftube, Inc. Franklin Power Products, Inc. Tractech (Ireland) Ltd. International Fuel Systems, Inc. Central Precision Limited Marine Drive Systems, Inc. Electro Diesel Rebuild BVBA Marine Corporation of America Electro Rebuild Tunisia S.A.R.L. (Tunisia) Powrbilt Products, Inc. Delco Remy Mexico, S. de R.L. de C.V. World Wide Automotive, Inc. Publitech, Inc. Ballantrae Corporation Delco Remy Brazil, Ltda. Tractech Inc. Western Reman Ltd. (Canada) Williams Technologies, Inc. Engine Rebuilders Ltd. Western Reman, Inc. Reman Transport Ltd. Engine Master, L.P. Delco Remy Remanufacturing M & M Knopf Auto Parts, Inc. Delco Remy Germany GmbH Remy Componentes S. de R. L. de C. V. Delco Remy Belgium BVBA Magnum Power Products, LLC Elmot-DR, Sp.z.o.o. - ---------------------------------------------------------------------------------------------------------
10 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED APRIL 30, 2000 (UNAUDITED) (IN THOUSANDS OF DOLLARS)
DELCO REMY INTERNATIONAL INC. NON- (PARENT SUBSIDIARY GUARANTOR COMPANY ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------------------------------------------------------------------------------------------- Net sales $ - $280,044 $97,377 $ (102,560)(a) $274,861 Cost of goods sold - 232,580 80,310 (102,560)(a) 210,330 ----------------------------------------------------------------------------------------------- Gross profit - 47,464 17,067 - 64,531 Selling, general and administrative expenses 3,231 20,611 7,242 - 31,084 Amortization of goodwill and intangibles 16 1,414 173 - 1,603 ----------------------------------------------------------------------------------------------- Operating (loss) income (3,247) 25,439 9,652 - 31,844 Interest expense and other non-operating expenses (7,585) (4,287) (888) - (12,760) ----------------------------------------------------------------------------------------------- Income (loss) before income taxes, minority interest in income of subsidiaries, loss from unconsolidated joint ventures and equity in earnings of subsidiaries (10,832) 21,152 8,764 - 19,084 Income taxes (benefit) (2,196) 8,079 1,366 - 7,249 Minority interest in income of subsidiaries - (655) (971) - (1,626) Loss from unconsolidated joint ventures - - (10) - (10) Equity in earnings of subsidiaries 18,835 - - (18,835)(b) - ----------------------------------------------------------------------------------------------- Net income (loss) $ 10,199 $ 12,418 $ 6,417 $(18,835) $ 10,199 ===============================================================================================
- ------------------------------------------------------------------------------- (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income of consolidated subsidiaries. 11 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED APRIL 30, 2000 (UNAUDITED) (IN THOUSANDS OF DOLLARS)
DELCO REMY INTERNATIONAL INC. NON- (PARENT SUBSIDIARY GUARANTOR COMPANY ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------------------------------------------------------------------------------------------- Net sales $ - $821,502 $279,612 $ (289,027)(a) $812,087 Cost of goods sold - 691,697 226,714 (289,027)(a) 629,384 ----------------------------------------------------------------------------------------------- Gross profit - 129,805 52,898 - 182,703 Selling, general and administrative expenses 9,900 60,420 22,520 - 92,840 Amortization of goodwill and intangibles 94 3,728 689 - 4,511 ----------------------------------------------------------------------------------------------- Operating (loss) income (9,994) 65,657 29,689 - 85,352 Interest expense and other non-operating expenses (21,538) (12,979) (2,165) - (36,682) ----------------------------------------------------------------------------------------------- Income (loss) before income taxes, minority interest in income of subsidiaries, loss from unconsolidated joint ventures and equity in earnings of subsidiaries (31,532) 52,678 27,524 - 48,670 Income taxes (benefit) (8,992) 20,995 6,488 - 18,491 Minority interest in income of subsidiaries - (1,999) (3,054) - (5,053) Loss from unconsolidated joint ventures - - (46) - (46) Equity in earnings of subsidiaries 47,620 - - (47,620)(b) - ----------------------------------------------------------------------------------------------- Net income (loss) $ 25,080 $ 29,684 $ 17,936 $(47,620) $ 25,080 ===============================================================================================
- ------------------------------------------------------------------------------ (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income of consolidated subsidiaries. 12 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED) (IN THOUSANDS OF DOLLARS)
DELCO REMY INTERNATIONAL INC. NON- (PARENT SUBSIDIARY GUARANTOR COMPANY ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------------------------------------------------------------------------------------------ Net sales $ - $ 250,886 $ 70,940 $(73,000)(a) $248,826 Cost of goods sold - 211,008 58,297 (73,000)(a) 196,305 ------------------------------------------------------------------------------------------------ Gross profit - 39,878 12,643 - 52,521 Selling, general and administrative expenses 3,397 18,202 5,543 - 27,142 Amortization of goodwill and intangibles 15 893 107 - 1,015 ------------------------------------------------------------------------------------------------ Operating (loss) income (3,412) 20,783 6,993 - 24,364 Interest expense and other non-operating expenses (6,698) (4,587) (1,410) - (12,695) ------------------------------------------------------------------------------------------------ Income (loss) before income taxes, minority interest in income of subsidiaries, income from unconsolidated joint ventures and equity in earnings of subsidiaries (10,110) 16,196 5,583 - 11,669 Income taxes (benefit) (1,592) 4,575 1,567 - 4,550 Minority interest in income of subsidiaries - (416) (330) - (746) Income from unconsolidated joint ventures - - 1,801 - 1,801 Equity in earnings of subsidiaries 16,692 - - (16,692)(b) ------------------------------------------------------------------------------------------------ Net income (loss) $ 8,174 $ 11,205 $ 5,487 $(16,692) $ 8,174 ================================================================================================
- ---------------------------------------------------------------------- (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income of consolidated subsidiaries. 13 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED) (IN THOUSANDS OF DOLLARS)
DELCO REMY INTERNATIONAL INC. NON- (PARENT SUBSIDIARY GUARANTOR COMPANY ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------------------------------------------------------------------------------------------ Net sales $ - $709,114 $191,536 $(196,715)(a) $703,935 Cost of goods sold - 601,953 157,694 (196,715)(a) 562,932 ------------------------------------------------------------------------------------------------ Gross profit - 107,161 33,842 - 141,003 Selling, general and administrative expenses 8,475 50,231 15,212 - 73,918 Amortization of goodwill and intangibles 45 2,954 352 - 3,351 ------------------------------------------------------------------------------------------------ Operating (loss) income (8,520) 53,976 18,278 - 63,734 Interest expense and other non-operating expenses (20,529) (11,902) (1,932) - (34,363) ------------------------------------------------------------------------------------------------ Income (loss) before income taxes, minority interest in income of subsidiaries, income from unconsolidated joint ventures and equity in earnings of subsidiaries (29,049) 42,074 16,346 - 29,371 Income taxes (benefit) (3,926) 10,612 4,770 - 11,456 Minority interest in income of subsidiaries - (1,654) (674) - (2,328) Income from unconsolidated joint ventures - - 3,828 - 3,828 Equity in earnings of subsidiaries 44,538 - - (44,538)(b) - ------------------------------------------------------------------------------------------------ Net income (loss) $ 19,415 $ 29,808 $ 14,730 $ (44,538) $ 19,415 ================================================================================================
- ------------------------------------------------------------------------- (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income of consolidated subsidiaries. 14 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET APRIL 30, 2000 (UNAUDITED) (IN THOUSANDS OF DOLLARS)
DELCO REMY INTERNATIONAL INC. NON- (PARENT SUBSIDIARY GUARANTOR COMPANY ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------------------------------------------------------------------------------ Assets Current assets: Cash and cash equivalents $ - $ (3,362) $ 18,705 $ - $ 15,343 Trade accounts receivable, net - 141,271 27,514 - 168,785 Other receivables - 7,332 9,197 - 16,529 Inventories - 223,843 54,576 (2,293)(c) 276,126 Deferred income taxes - 14,997 339 - 15,336 Other current assets - 2,700 3,252 - 5,952 ------------------------------------------------------------------------------------- Total current assets - 386,781 113,583 (2,293) 498,071 Property and equipment 40 208,122 80,225 - 288,387 Less accumulated depreciation 40 70,017 11,184 - 81,241 ------------------------------------------------------------------------------------- Property and equipment, net - 138,105 69,041 - 207,146 Deferred financing costs 7,533 2,331 - - 9,864 Goodwill, net - 145,346 22,492 - 167,838 Investments in affiliates 429,640 69,136 - (492,873)(a) 5,903 Other assets 1,759 656 3,925 - 6,340 ------------------------------------------------------------------------------------- Total assets $438,932 $742,355 $209,041 $(495,166) $895,162 ===================================================================================== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 589 $102,860 $ 33,695 $ - $137,144 Intercompany accounts (19,026) 34,299 (14,672) (601)(c) - Accrued interest payable 8,401 1,366 1,985 - 11,752 Accrued restructuring charges - 4,500 993 - 5,493 Other liabilities and accrued expenses 15,940 19,478 13,006 - 48,424 Current debt - 1,093 3,917 - 5,010 ------------------------------------------------------------------------------------- Total current liabilities 5,904 163,596 38,924 (601) 207,823 Deferred income taxes 4,560 - 9 - 4,569 Long-term debt, less current portion 285,000 198,434 17,207 - 500,641 Post-retirement benefits other than pensions - 23,685 - - 23,685 Accrued pension benefits - - - - - Other non-current liabilities 2,201 1,402 - - 3,603 Minority interest in subsidiaries - 10,868 13,424 - 24,292 Stockholders' equity: Common stock: Class A shares 182 78 (78) - 182 Class B shares 63 - - - 63 Paid-in capital 104,176 (61) 61 - 104,176 Subsidiary investment - 266,087 96,354 (362,441)(a) - Retained earnings (deficit) 37,232 78,266 53,858 (132,124)(b) 37,232 Accumulated other comprehensive loss - - (10,718) - (10,718) Stock purchase plan (386) - - - (386) ------------------------------------------------------------------------------------- Total stockholders' equity 141,267 344,370 139,477 (494,565) 130,549 ------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $438,932 $742,355 $209,041 $(495,166) $895,162 =====================================================================================
- ------------------------------------------------------------- (a) Elimination of investments in subsidiaries. (b) Elimination of investments in subsidiaries' earnings. (c) Elimination of intercompany profit in inventory. 15 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES Condensed Consolidating Balance Sheet JULY 31, 1999 (IN THOUSANDS OF DOLLARS)
DELCO REMY INTERNATIONAL INC. NON- (PARENT SUBSIDIARY GUARANTOR COMPANY ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------------------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ - $ (242) $ 15,551 $ - $ 15,309 Trade accounts receivable, net - 122,957 25,031 - 147,988 Other receivables - 6,657 8,839 - 15,496 Inventories - 193,264 40,543 (1,642)(c) 232,165 Deferred income taxes - 14,997 - - 14,997 Other current assets - 2,125 778 - 2,903 --------------------------------------------------------------------------------------- Total current assets - 339,758 90,742 (1,642) 428,858 Property and equipment 40 202,462 56,225 - 258,727 Less accumulated depreciation 40 55,664 7,828 - 63,532 --------------------------------------------------------------------------------------- Property and equipment, net - 146,798 48,397 - 195,195 Deferred financing costs 8,352 2,840 - - 11,192 Goodwill, net - 116,710 20,719 - 137,429 Investments in affiliates 381,250 14 5 (376,513)(a) 4,756 Other assets 2,411 858 1,964 - 5,233 --------------------------------------------------------------------------------------- Total assets $ 392,013 $606,978 $161,827 $(378,155) $782,663 ======================================================================================= Liabilities and stockholders' equity Current liabilities: Accounts payable $ 636 $ 90,185 $ 28,518 $ - $119,339 Intercompany accounts (19,626) 44,513 (24,286) (601)(c) - Accrued interest payable 9,001 2,592 10 - 11,603 Accrued restructuring charges - 5,866 - - 5,866 Other liabilities and accrued expenses (1,250) 27,622 10,733 - 37,105 Current debt - 1,227 11,369 - 12,596 --------------------------------------------------------------------------------------- Total current liabilities (11,239) 172,005 26,344 (601) 186,509 Deferred income taxes - 4,560 8 - 4,568 Long-term debt, less current portion 285,000 136,867 13,064 - 434,931 Post-retirement benefits other than pensions - 21,050 - - 21,050 Accrued pension benefits - 2,719 - - 2,719 Other non-current liabilities 2,216 1,329 - - 3,545 Minority interest in subsidiaries - 10,663 9,158 - 19,821 Stockholders' equity: Common stock: Class A shares 182 - - - 182 Class B shares 63 - - - 63 Paid-in capital 104,176 - - - 104,176 Subsidiary investment - 209,203 83,847 (293,050)(a) - Retained earnings (deficit) 12,152 48,582 35,922 (84,504)(b) 12,152 Accumulated other comprehensive loss - - (6,516) - (6,516) Stock purchase plan (537) - - - (537) --------------------------------------------------------------------------------------- Total stockholders' equity 116,036 257,785 113,253 (377,554) 109,520 --------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 392,013 $606,978 $161,827 $(378,155) $782,663 =======================================================================================
- ------------------------------------------------------------ (a) Elimination of investments in subsidiaries. (b) Elimination of investments in subsidiaries' earnings. (c) Elimination of intercompany profit in inventory. 16 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTH PERIOD ENDED APRIL 30, 2000 (UNAUDITED) (IN THOUSANDS OF DOLLARS)
DELCO REMY INTERNATIONAL INC. NON- (PARENT SUBSIDIARY GUARANTOR COMPANY ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 25,080 $ 29,684 $ 17,936 $(47,620)(a) $ 25,080 Adjustments to reconcile net income to net cash flows provided by (used in) operating activities: Depreciation - 15,560 5,217 - 20,777 Amortization 94 3,728 689 - 4,511 Minority interest in income of subsidiaries - 1,999 3,054 - 5,053 Loss from unconsolidated joint ventures - - 46 - 46 Equity in earnings of subsidiary (47,620) - - 47,620(a) - Post-retirement benefits other than pensions - 2,635 - - 2,635 Accrued pension benefits - (2,739) - - (2,739) Non-cash interest expense 819 502 - - 1,321 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable - 449 2,246 - 2,695 Inventories - (17,162) (8,286) - (25,448) Accounts payable (47) 7,710 2,737 - 10,400 Other current assets and liabilities 14,555 (7,352) (4,896) - 2,307 Intercompany accounts 73,880 (80,280) 6,400 - - Accrued restructuring charges - (1,366) 993 - (373) Other non-current assets and liabilities, net 419 (5,382) 1,974 - (2,989) ----------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 67,180 (52,014) 28,110 - 43,276 INVESTING ACTIVITIES: Acquisitions, net of cash acquired (67,180) - (466) - (67,646) Purchases of property and equipment - (12,539) (16,240) - (28,779) ----------------------------------------------------------------------------------------------- Net cash used in investing activities (67,180) (12,539) (16,706) - (96,425) FINANCING ACTIVITIES: Net borrowings (repayments) under revolving line of credit and other - 61,433 (6,500) - 54,933 Distributions to minority interests - - (1,200) - (1,200) ----------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities - 61,433 (7,700) - 53,733 Effect of exchange rate changes on cash - - (550) - (550) ----------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents - (3,120) 3,154 - 34 Cash and cash equivalents at beginning of period - (242) 15,551 - 15,309 ----------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ - $ (3,362) $ 18,705 $ - $ 15,343 ===============================================================================================
- ----------------------------------------------------------- (a) Elimination of equity in earnings of subsidiaries. 17 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED) (IN THOUSANDS OF DOLLARS)
DELCO REMY INTERNATIONAL INC. NON- (PARENT SUBSIDIARY GUARANTOR COMPANY ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $ 19,415 $ 29,808 $ 14,730 $(44,538) $ 19,415 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 20 10,750 2,844 - 13,614 Amortization 45 2,954 352 - 3,351 Minority interest in income of subsidiaries - 1,654 674 - 2,328 Income from unconsolidated joint ventures - - (3,828) - (3,828) Equity in earnings of subsidiaries (44,538) - - 44,538(a) - Deferred income taxes 791 4,814 (58) - 5,547 Post-retirement benefits other than pensions - 2,871 - - 2,871 Accrued pension benefits - (1,679) - - (1,679) Non-cash interest expense 819 388 - - 1,207 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable - (19,474) 307 - (19,167) Inventories - (6,349) (8,606) - (14,955) Accounts payable 496 15,102 3,444 - 19,042 Intercompany accounts 62,169 (50,212) (11,957) - - Other current assets and liabilities (6,082) (1,741) 1,007 - (6,816) Accrued restructuring charges - (11,322) - - (11,322) Other non-current assets and liabilities, net 5,334 (14,322) 7,336 - (1,652) -------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 38,469 (36,758) 6,245 - 7,956 INVESTING ACTIVITIES: Acquisitions, net of cash acquired (38,469) - (3,279) - (41,748) Purchases of property and equipment - (12,924) (5,099) - (18,023) -------------------------------------------------------------------------------------------- Net cash used in investing activities (38,469) (12,924) (8,378) - (59,771) FINANCING ACTIVITIES: Net borrowings under revolving line of credit and other - 49,575 2,227 - 51,802 -------------------------------------------------------------------------------------------- Net cash provided by financing activities - 49,575 2,227 - 51,802 Effect of exchange rate changes on cash - - (390) - (390) -------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents - (107) (296) - (403) Cash and cash equivalents at beginning of period - 125 7,988 - 8,113 -------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ - $ 18 $ 7,692 $ - $ 7,710 ============================================================================================
- -------------------------------------------------------------- (a) Elimination of equity in earnings of subsidiaries. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED APRIL 30, ENDED APRIL 30, ------------------------------------------------ -------------------------------------------- 2000 1999 2000 1999 ----------------------- ----------------------- ---------------------- -------------------- (Thousands of Dollars) AMOUNT % AMOUNT % AMOUNT % AMOUNT % ------------ --------- ----------- ---------- ----------- --------- ----------- ------- Net sales $274,861 100.0% $248,826 100.0% $812,087 100.0% $703,935 100.0% Cost of goods sold 210,330 76.5% 196,305 78.9% 629,384 77.5% 562,932 80.0% ------------ --------- ----------- ---------- ----------- --------- ----------- ------- Gross profit 64,531 23.5% 52,521 21.1% 182,703 22.5% 141,003 20.0% Selling, engineering and administrative expenses 31,084 11.3% 27,142 10.9% 92,840 11.4% 73,918 10.5% Amortization of goodwill and intangibles 1,603 0.6% 1,015 0.4% 4,511 0.6% 3,351 0.4% ------------ --------- ----------- ---------- ----------- --------- ----------- ------- Operating income 31,844 11.6% 24,364 9.8% 85,352 10.5% 63,734 9.1% Interest expense and other non-operating expenses (12,760) (4.6)% (12,695) (5.1)% (36,682) (4.5)% (34,363) (4.9)% Income taxes 7,249 2.7% 4,550 1.8% 18,491 2.3% 11,456 1.6% Minority interest (1,626) (0.6)% (746) (0.3)% (5,053) (0.6)% (2,328) (0.3)% Income (loss) from unconsolidated joint ventures (10) 0.0% 1,801 0.7% (46) 0.0% 3,828 0.5% ------------ --------- ----------- ---------- ----------- --------- ----------- ------- Net income $ 10,199 3.7% $ 8,174 3.3% $ 25,080 3.1% $ 19,415 2.8% ============ ========= =========== ========== =========== ========= =========== =======
THREE MONTHS ENDED APRIL 30, 2000 COMPARED TO THREE MONTHS ENDED APRIL 30, 1999 Net Sales Net sales of $274.9 million in the third quarter of fiscal year 2000 increased $26.0 million, or 10.5%, from the third quarter of fiscal year 1999. This improvement was due to sales generated by businesses acquired in fiscal 2000 (Knopf and Engine Master) and the fourth quarter of fiscal 1999 (the additional 31% interest in Remy Korea) and higher demand from automotive and heavy duty OEM customers and for powertrain/drive train products in the aftermarket. These increases were partially offset by lower shipments of electrical products in the aftermarket. Gross Profit Gross profit of $64.5 million increased $12.0 million, or 22.9%, and as a percentage of sales improved from 21.1% in the third quarter of 1999 to 23.5% in the third quarter of 2000. The growth in gross profit dollars reflects the sales growth discussed above. The improvement in margins was due to the benefits of lean manufacturing initiatives, realization of cost efficiencies generated by the OEM restructuring, leveraging of fixed manufacturing costs and growth in the higher margin aftermarket. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses increased $3.9 million, or 14.5%, and as a percentage of sales increased from 10.9% to 11.3% due to the effect of acquisitions, aftermarket marketing initiatives and enterprise-wide system implementations. Operating Income Operating income of $31.8 million increased $7.5 million, or 30.7%, and as a percentage of sales improved from 9.8% in the third quarter of fiscal year 1999 to 11.6% in fiscal year 2000. This 19 improvement reflects the sales and gross margin issues discussed above, partially offset by higher SG&A expenses. Interest Expense and Other Non-operating Expenses Interest expense of $12.2 million compares with $12.7 million in the third quarter of fiscal 1999. The average debt balance was up year over year due to acquisitions and higher capital spending, partially offset by improved cash flow from operating activities. Recent interest rate increases by the Fed will not begin to effect the Company's overall cost of funds until the fourth quarter due to LIBOR locks currently in place. Income Taxes Income tax expense in the third quarter of fiscal year 2000 was $7.2 million compared to $4.6 million in the comparable period last year. The Company's consolidated effective income tax rate of 38.0% was down from 39.0% due to the implementation of various tax planning initiatives and the effect of the acquisition of certain foreign subsidiaries. Minority Interest in Income of Subsidiaries and Income (Loss) From Unconsolidated Joint Ventures The year over year change in these items primarily reflects the Company's acquisition of a majority ownership of Remy Korea in the fourth quarter of fiscal 1999. This subsidiary was accounted for under the equity method prior to that. NINE MONTHS ENDED APRIL 30, 2000 COMPARED TO NINE MONTHS ENDED APRIL 30, 1999 Net Sales Net sales of $812.1 million in the first nine months of fiscal year 2000 increased $108.2 million, or 15.4%, from the comparable period of fiscal year 1999. This increase was due to the effect of the acquisitions discussed above, the acquisition of Williams in the second quarter of fiscal 1999 and higher demand across all major product lines and markets. Gross Profit Gross profit of $182.7 million increased $41.7 million, or 29.6%, and as a percentage of sales improved from 20.0% to 22.5%. The growth in gross profit dollars reflects the sales growth discussed above. The improvement in margins was due to the benefits of lean manufacturing initiatives, realization of cost efficiencies generated by the OEM restructuring, leveraging of fixed manufacturing costs and growth in the higher margin aftermarket. Selling, General and Administrative Expenses SG&A expenses increased $18.9 million, or 25.6%, and as a percentage of sales increased from 10.5% to 11.4% due to the effect of acquisitions, aftermarket marketing initiatives and enterprise-wide system implementations. Operating Income Operating income of $85.4 million increased $21.6 million, or 33.9%, and as a percentage of sales improved from 9.1% in the first three quarters of fiscal year 1999 to 10.5% in fiscal year 2000. This improvement reflects the sales and gross margin issues discussed above, partially offset by higher SG&A expenses. Interest Expense and Other Non-operating Expenses Interest expense of $35.8 million compares with $34.4 million in the first three quarters of fiscal 1999. The average debt balance was up year over year due to acquisitions and higher capital spending, partially offset by improved cash flow from operating activities. 20 Recent rate increases by the Fed will not begin to effect the Company's overall cost of funds until the fourth quarter due to LIBOR locks currently in place. Income Taxes Income tax expense in the first three quarters of fiscal year 2000 was $18.5 million compared to $11.5 million in the comparable period last year. The Company's consolidated effective income tax rate of 38.0% was down from 39.0% due to the implementation of various tax planning initiatives and the effect of the acquisition of certain foreign subsidiaries. Minority Interest in Income of Subsidiaries and Income (Loss) From Unconsolidated Joint Ventures The year over year change in these items primarily reflects the Company's acquisition of a majority ownership of Remy Korea in the fourth quarter of fiscal 1999. This subsidiary was accounted for under the equity method prior to that. LIQUIDITY AND CAPITAL RESOURCES The Company's short-term liquidity needs include required debt service, including capital lease payments, day to day operating expenses, working capital requirements and the funding of capital expenditures. Long-term liquidity requirements include principal payments of long-term debt and the funding of acquisitions. The Company's principal sources of cash to fund its short-term liquidity needs consist of cash generated by operations and borrowing under the Senior Credit Facility. As of April 30, 2000, borrowings under the Senior Credit Facility were $159.9 million and utilization of letters of credit totaled $12.2 million, leaving $127.9 million available under the $300 million facility. In the first nine months of fiscal 2000, cash provided by operating activities was $43.3 million compared to $8.0 million in the comparable period of fiscal 1999. This improvement reflects increased earnings and depreciation, a smaller increase in net working capital from year-end and lower restructuring payments and charges. Accounts receivable declined $2.7 million versus a $19.2 million increase in 1999. The $25.4 million increase in inventories reflects a seasonal build-up in the aftermarket, which should begin to decline in the fourth quarter. Accounts payable increased $10.4 million due to production levels and the timing of payments. The Company's net trade cycle, including accounts receivable, inventory and accounts payable days, declined compared with both year-end and third quarter 1999. Acquisitions in fiscal 2000 consisted of Knopf ($61.0 million), Engine Master and Elmot, and in fiscal 1999 consisted primarily of Williams. Capital expenditures of $28.8 million in the first three quarters compares with $18.0 million in the comparable period of fiscal 1999. The increase was due to enterprise-wide system implementations and equipment supporting new products and customers. Total capital spending in fiscal 2000 is expected to be approximately to $35.0 million. The increase in net borrowings under the Company's revolving line of credit and other debt of $54.9 million through three quarters reflects the extent to which cash used for acquisitions and capital expenditures exceeded cash generated by operating activities. In late May 2000, the Company, as part of ongoing competitiveness initiatives, offered an incentive separation payment to DRA hourly employees. The offer expires in July 2000. The cost of this program, which is dependent on the number and seniority level of employees accepting the separation payment, will be recorded in the fourth quarter of fiscal 2000. The Company believes that cash generated from operations, together with the amounts available under the Senior Credit Facility, will be adequate to meet its debt service requirements, capital expenditures and working capital needs for the foreseeable future, although no assurance can be given in this regard. The Company's future operating performance and ability to service, extend, or refinance its indebtedness will be 21 subject to future economic conditions and to financial, business and other factors that are beyond the Company's control. SEASONALITY The Company's business is moderately seasonal, as its major OEM customers historically have one- to two-week summer shutdowns of operations during the fourth fiscal quarter. In addition, the Company typically has shut down its own operations for one week each July, depending on backlog, scheduled maintenance and inventory buffers, as well as an additional week during the December holidays. Consequently, the Company's second and fourth quarter results reflect the effects of these shutdowns. IMPACT OF YEAR 2000 In prior years, the Company discussed the nature and progress of its plans to become Year 2000 ready. In December 1999, the Company completed its remediation and testing of all major information technology based systems. As a result of those planning and implementation efforts, the Company experienced no significant disruptions in mission critical information technology and non- information technology systems and believes those systems successfully responded to the Year 2000 date change. The Company expensed approximately $2.0 million in connection with remediating its systems. The Company is not aware of any material problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout calendar year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. FOREIGN SALES A portion of the Company's sales are derived from sales made to customers in foreign countries. Because of these foreign sales, the Company's business is subject to the risks of doing business abroad, including currency exchange rate fluctuations, limits on repatriation of funds, compliance with foreign laws and other economic and political uncertainties. 22 PART II OTHER INFORMATION ITEM 5. OTHER INFORMATION DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS From time to time, the Company makes oral and written statements that may constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the "Act") or by the SEC in its rules, regulations and releases. The Company desires to take advantage of the "safe harbor" provisions in the Act for forward-looking statements made from time to time, including, but not limited to, the forward-looking statements relating to the future performance of the Company contained in Management's Discussion and Analysis, and Notes to Condensed Consolidated Financial Statements and other statements made in this Form 10-Q and in other filings with the SEC. The Company cautions readers that any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks including, but not limited to risks associated with the uncertainty of future financial results, acquisitions, additional financing requirements, development of new products and services, the effect of competitive products or pricing, the effect of economic conditions and other uncertainties. Due to these uncertainties, the Company cannot assure readers that any forward-looking statements will prove to have been correct. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule (Filed via EDGAR only) (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended April 30, 2000. 23 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. DELCO REMY INTERNATIONAL, INC. ------------------------------ (Registrant) Date: June 12, 2000 By: /s/ J. Timothy Gargaro ---------------------- J. Timothy Gargaro Senior Vice President and Chief Financial Officer Date: June 12, 2000 By: /s/ David E. Stoll ------------------ David E. Stoll Vice President and Controller Chief Accounting Officer 24 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOR DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUL-31-2000 AUG-01-1999 APR-30-2000 15,343 0 171,435 2,650 276,126 498,071 288,387 81,241 895,162 207,823 500,641 0 0 245 130,304 895,162 812,087 812,087 629,384 629,384 97,351 1,200 35,769 48,670 18,491 25,080 0 0 0 25,080 1.04 .97
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