-----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, MG8RnoxFi4tKZFXYxLOpOVsr9+aYmn2EI0DSG/5WcGgZa0a/3eDEIAnyQ9KZSIcA YnU4ceihyJFVDTgrB8y3LQ== 0000031348-96-000009.txt : 19960715 0000031348-96-000009.hdr.sgml : 19960715 ACCESSION NUMBER: 0000031348-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960712 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECHLIN INC CENTRAL INDEX KEY: 0000031348 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 060330448 STATE OF INCORPORATION: CT FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04651 FILM NUMBER: 96593822 BUSINESS ADDRESS: STREET 1: 100 DOUBLE BEACH RD CITY: BRANFORD STATE: CT ZIP: 06405 BUSINESS PHONE: 2034815751 MAIL ADDRESS: STREET 1: 100 DOUBLE BEACH ROAD CITY: BRANFORD STATE: CT ZIP: 06405 FORMER COMPANY: FORMER CONFORMED NAME: ECHLIN MANUFACTURING CO DATE OF NAME CHANGE: 19820602 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark one) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 1996 ------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- Commission file no. 1-4651 ------- ECHLIN INC. - --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Connecticut 06-0330448 - ------------------------------------------- ---------------------- (State of incorporation) (I.R.S. employer identification no.) 100 Double Beach Road Branford, Connecticut 06405 - ------------------------------------------- ---------------------- (Address of principal executive offices) (Zip code) (203) 481-5751 --------------------------------------- (Registrant's telephone number, including area code) - --------------------------------------------------------------------------- (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 ---- ---- (APPLICABLE ONLY TO CORPORATE ISSUERS) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of class Outstanding at June 30, 1996 - ------------------------- ---------------------------- Common stock, $1 par value 61,454,789 ECHLIN INC. INDEX
PART I. FINANCIAL INFORMATION Page - ------------------------------ ---- Item 1. Financial Statements Consolidated balance sheets at May 31, 1996 and August 31, 1995. 3 Consolidated statements of income for the three months ended May 31, 1996 and May 31, 1995; for the nine months ended May 31, 1996 and May 31, 1995. 4 Consolidated statements of cash flows for the nine months ended May 31, 1996 and 1995. 5 Notes to consolidated financial statements at May 31, 1996. 6-7 Item 2. Management's Financial Analysis 8-9 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11
2 PART I: FINANCIAL INFORMATION ECHLIN INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data)
May 31, August 31, 1996 1995 ----------- ---------- (unaudited) (A) ASSETS Current assets: Cash and cash equivalents $ 9,474 $ 27,700 Accounts receivable, less-allowance for doubtful accounts of $5,616 and $8,088 428,193 340,406 Inventories, at lower of cost (first-in, first-out) or market: Raw materials and component parts 174,786 169,024 Work in process 88,804 83,494 Finished goods 426,691 426,267 ---------- ---------- Total inventories 690,281 678,785 Other current assets 43,527 29,593 ---------- ---------- Total current assets 1,171,475 1,076,484 ---------- ---------- Property, plant and equipment, at cost 1,116,339 976,699 Accumulated depreciation (515,503) (451,171) ---------- ---------- Property, plant and equipment, net 600,836 525,528 ---------- ---------- Marketable securities 81,397 102,462 ---------- ---------- Intangible assets, net 224,148 187,592 ---------- ---------- Other assets 89,760 68,942 ---------- ---------- Total assets $2,167,616 $1,961,008 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks $ 26,435 $ 20,810 Current portion of long-term debt 4,718 4,146 Accounts payable, trade 215,266 201,692 Accrued taxes on income 35,236 43,208 Accrued liabilities 184,539 215,902 ---------- ---------- Total current liabilities 466,194 485,758 ---------- ---------- Long-term debt 621,046 482,169 ---------- ---------- Deferred income taxes 110,240 83,814 ---------- ---------- Shareholders' equity: Preferred stock, without par value: Authorized 1,000,000 shares, issued none - - Common stock, $1 par value: Authorized 150,000,000 shares, issued 61,717,278 and 59,893,824 61,717 59,894 Capital in excess of par value 349,728 334,191 Retained earnings 630,105 563,024 Foreign currency translation adjustment (68,419) (44,847) Treasury stock, at cost, 270,264 shares (2,995) (2,995) ---------- ---------- Total shareholders' equity 970,136 909,267 ---------- ---------- Total liabilities and shareholders' equity $2,167,616 $1,961,008 ========== ==========
See notes to consolidated financial statements. (A) The balance sheet at August 31, 1995 has been derived from the audited financial statements at that date. 3 ECHLIN INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data)
Three Months Ended Nine Months Ended May 31, May 31, ---------------------- --------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $839,616 $745,064 $2,281,782 $1,993,811 Cost of goods sold 619,538 532,357 1,685,508 1,418,944 -------- -------- ---------- --------- Gross profit on sales 220,078 212,707 596,274 574,867 Selling and administrative expenses 146,731 134,470 420,000 396,180 -------- -------- ---------- -------- Income from operations 73,347 78,237 176,274 178,687 -------- -------- ---------- -------- Interest expense 10,908 11,586 33,090 28,265 Interest income 2,617 4,645 7,775 11,597 -------- -------- ---------- -------- Interest expense, net 8,291 6,941 25,315 16,668 -------- -------- ---------- -------- Income before taxes 65,056 71,296 150,959 162,019 Provision for taxes 22,119 23,528 51,326 53,466 -------- -------- ---------- -------- Net income $ 42,937 $ 47,768 $ 99,633 $ 108,553 ======== ======== ========== ======== Average shares outstanding 61,435 59,539 61,392 59,438 ======== ======== ========== ======== Earnings per share $0.70 $0.81 $1.62 $1.83 ======== ======== ========== ======== Dividends per share $0.22 $0.205 $0.63 $0.585 ======== ======== ========== ========
See notes to consolidated financial statements. 4 ECHLIN INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Nine Months Ended May 31, --------------------- 1996 1995 ---- ---- Cash flows from operating activities: Net income $ 99,633 $108,553 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 69,794 58,849 Changes in assets and liabilities, excluding acquisitions' balance sheets: Accounts receivable (125,667) (39,032) Inventories 10,500 (98,123) Other current assets (9,101) (14,236) Accounts payable (1,948) 13,169 Taxes on income 22,140 20,765 Accrued liabilities (20,491) (17,956) Other (4,015) (7,259) -------- -------- Cash provided by operating activities 40,845 24,730 -------- -------- Cash flows from financing activities: Long-term and short-term borrowings 547,387 552,995 Long-term and short-term repayments (418,823) (328,850) Sale of accounts receivables 55,000 - Proceeds from common stock issuances 2,332 4,083 Dividends paid (38,286) (34,771) -------- -------- Cash provided by financing activities 147,610 193,457 -------- -------- Cash flows from investing activities: Capital expenditures, net (71,493) (72,773) Sales of marketable securities 21,065 10,488 Net assets of businesses acquired (149,491) (199,352) -------- -------- Cash used for investing activities (199,919) (261,637) -------- -------- Impact of foreign currency changes on cash (6,762) 3,990 -------- -------- Decrease in cash and cash equivalents (18,226) (39,460) Cash and cash equivalents at beginning of period 27,700 53,816 -------- -------- Cash and cash equivalents at end of period $ 9,474 $14,356 ======== ========
See notes to consolidated financial statements. 5 ECHLIN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. - ------- The accompanying unaudited 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 Rule 10-01 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 statement have been included. Operating results for the nine-month period ended May 31, 1996 are not necessarily indicative of the results that may be expected for the year ending August 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the company's Annual Report on Form 10-K for the year ended August 31, 1995. NOTE 2. - ------- During December 1995, the company acquired the outstanding common stock of the American Electronic Components, Inc. (AEC), an Indiana-based designer, manufacturer and marketer of motor vehicle electronic components, by issuing 1,459,187 shares of common stock. In January 1996, the company acquired the outstanding common stock of Plains Plastics, Inc., by issuing 229,450 shares of common stock. Plains Plastics is a custom plastic extruder located in Kansas. Both transactions were accounted for as poolings of interests and as a result the financial statements for the nine months ended May 31, 1996 include AEC's and Plains Plastics' results of operations. Since the acquisitions did not have a material impact on the company, prior years' results were not restated. During December 1995, the company purchased Handy & Harman's Automotive Segment, based in Michigan, for approximately $65 million. The purchased business manufactures fuel-delivery system components for motor vehicles. The acquisition was accounted for using the purchase method. Note 3. Borrowing Arrangements: - -------------------------------- Commercial paper, domestic notes payable and notes with a German Bank at May 31, 1996, have been classified as long-term debt because of the company's intent to refinance this debt on a long-term basis and the availability of such financing under the terms of the company's revolving credit agreement (RCA). The weighted average interest rates on commercial paper and domestic notes payable at May 31, 1996, were 5.33 and 5.48 percent, respectively, while the German notes payable accrued interest at 3.66 percent. 6 ECHLIN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont.'d) Note 3. Borrowing Arrangements (cont.'d) - ---------------------------------------- In May 1996, the company renegotiated its RCA with twelve banking institutions to provide availability, through September 1, 2001, of maximum borrowings of $700,000,000. The previous agreement provided for maximum borrowings of $530,000,000 and was due to expire on March 1, 2000. At May 31, 1996, there were no borrowings under the RCA. During February 1996, the company renewed its agreement with a financial institution to sell, without recourse, undivided fractional interests in designated pools of accounts receivable. This new agreement allows for the sale of up to $200,000,000 in receivables through March 1999. Accounts receivable at May 31, 1996 and August 31, 1995 are net of $180,000,000 and $125,000,000, respectively, representing receivables sold. 7 ECHLIN INC. MANAGEMENT'S FINANCIAL ANALYSIS Results of Operations: - ---------------------- For the three and nine months ended May 31, 1996, net sales increased 13 percent and 14 percent, respectively, over the corresponding periods of a year ago. This sales growth was primarily due to acquisitions, the introduction of new products and price increases. Net sales of comparable operations, those part of Echlin for at least twelve months, rose 4 and 3 percent for the three- and nine- month periods, respectively, reflecting price increases and the introduction of new products, partially offset by the impact of translation. The third quarter's unit volume rose .3 percent while for the nine months unit volume declined .9 percent. A pickup in business in May offset unit volume declines in March and April of this year. Domestic comparable operations were up 3 percent for the quarter and 2 percent for the nine months, reflecting the positive impact of price increases and the introduction of new products. Although net sales increased, there has been a general slowdown in the North American market. This is primarily attributed to vehicle owners postponing maintenance and repairs, partly due to weather conditions; customers paring inventories; and vehicle manufacturers cutting production. Foreign comparable operations increased 6 percent over both the three- and nine-month periods of a year ago. Non-U.S. businesses have shown improved sales growth due to unit volume gains, price increases and the introduction of new products. Sales for the quarter declined $9.1 million due to the impact of a stronger U.S. dollar in relation to the German mark and British pound and the Mexican peso devaluation. For the nine months, translation decreased sales by $15.6 million as a result of the Mexican peso devaluation along with the strengthening of the U.S. dollar in relation to the British pound. The quarter's gross profit to sales percentage decreased to 26.2, as compared to the prior year's 28.5, while the nine month's gross profit to sales percentage decreased to 26.1 from 28.8 for the same period last year. Excluding the impact of acquisitions, the gross profit-to-sales for the quarter declined 2.1 percentage points from last year, while for the nine months the percentage was down 1.7 points. These declines are primarily a result of unabsorbed overhead costs caused by lower production hours and reduced inventory purchases. Although selling and administrative expenses increased for the three- and nine-month periods, they declined as a percentage of 8 ECHLIN INC. MANAGEMENT'S FINANCIAL ANALYSIS (cont.'d) sales. For the third quarter they declined to 17.5 percent from 18.0 percent a year ago, while for the nine-month period expenses declined to 18.4 percent vs. 19.9 percent last year. The dollar increase for both periods was primarily due to expense levels generated by acquisitions during the past year and higher research and development spending. Net interest expense for the three-month period increased $1,350,000, while for the nine-month period it increased $8,647,000 as compared to the prior year, primarily due to higher domestic average debt levels resulting from recent acquisitions. Liquidity and Sources of Capital: - --------------------------------- During the first nine months of fiscal 1996 and 1995, operations provided cash flow of $40,845,000 and $24,730,000, respectively. The improvement was primarily due to the company's ongoing inventory reduction efforts offset, in part, by accounts receivable increases from higher sales. Net debt levels increased $128,564,000 from year-end primarily due to current-year business acquisitions. Total debt to total capital was 40 percent at May 31, 1996, up from 38 percent a year ago and 36 percent at August 31, 1995. In May 1996, the company renegotiated its revolving credit agreement with twelve banking institutions to provide availability, through September 1, 2001, of maximum borrowings of $700,000,000. The previous agreement provided for maximum borrowings of $530,000,000 and was due to expire on March 1, 2000. At May 31, 1996, there were no borrowings under the RCA. During February, the company sold an additional $55 million of accounts receivable, without recourse, under its borrowing arrangement with a financial institution. The proceeds were used to repay existing short-term domestic obligations. During the nine months of this fiscal year, foreign currency translation changes have reduced equity by $23,572,000. This primarily reflects a reduction in the U.S. dollar value of the net assets invested in Mexico, Germany and the United Kingdom. 9 ECHLIN INC. PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. - ------------------------------------------ During the quarter ended May 31, 1996, the company did not file a Report on Form 8-K. 10 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. Echlin Inc. Date: July 11, 1996 Kenneth T. Flynn, Jr. ------------- -------------------------- Kenneth T. Flynn, Jr. Assistant Corporate Controller Date: July 11, 1996 Jon P. Leckerling ------------- -------------------------- Jon P. Leckerling Vice President, General Counsel and Corporate Secretary 11 EX-27 2
5 This schedule contains summary financial information extracted from the Company's SEC form 10-Q for the quarterly period ended May 31, 1996 and is qualified in its entirety by reference to such financial statements. 1000 9-MOS AUG-31-1996 MAY-31-1996 9474 0 433809 5616 690281 1171475 1116339 515503 2167616 466194 0 0 0 61717 908419 2167616 2281782 2281782 1685508 420000 0 0 25315 150959 51326 99633 0 0 0 99633 1.62 1.62
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