-----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, LioHLSzf/+NtUw0NXKhna/pJO/fL3NRG6dw9gReP6RhfkYr1GZy4fUi/Gzp0zwDY QNYdGkjRLl+Jg9C/YBGusQ== 0000740868-96-000011.txt : 19960813 0000740868-96-000011.hdr.sgml : 19960813 ACCESSION NUMBER: 0000740868-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXCEL INDUSTRIES INC CENTRAL INDEX KEY: 0000740868 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 351551685 STATE OF INCORPORATION: IN FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08684 FILM NUMBER: 96608249 BUSINESS ADDRESS: STREET 1: 1120 N MAIN ST STREET 2: P O BOX 3118 CITY: ELKHART STATE: IN ZIP: 46515-3118 BUSINESS PHONE: 2192642131 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ________________________ For the quarterly period ended June 29, 1996 Commission File No. 1-8684 Excel Industries, Inc. (Exact name of registrant as specified in its charter) Indiana 35-1551685 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1120 North Main Street, Elkhart, IN 46514 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (219) 264-2131 Indicate by an "X" 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 issuer's classes of common stock, as of the latest practicable date. At July 10, 1996, there were issued and outstanding 10,711,299 common shares, no par value. EXCEL INDUSTRIES, INC. Index
Page Number PART I Financial Information Consolidated Balance Sheets - June 29, 1996 and December 30, 1995 1 Consolidated Statements of Income - Quarter Ended June 29, 1996 and July 1, 1995 Six Months Ended June 29, 1996 and July 1, 1995 2 Consolidated Statements of Shareholders' Equity Six Months Ended June 29, 1996 and July 1, 1995 3 Consolidated Statements of Cash Flows - Six Months Ended June 29, 1996 and July 1, 1995 4 Notes to Consolidated Financial Statements 5-7 Management's Discussion and Analysis of Financial Condition and Results of Operation 8-10 PART II Other Information 11 Signatures 12
EXCEL INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in thousands)
June 29, December 30, 1996 1995 ASSETS Current assets Cash and short-term investments $ 11,952 $ 391 Marketable securities 22,475 37,416 Accounts receivable 156,375 85,751 Customer tooling to be billed 23,309 26,090 Inventories 50,018 27,298 Prepaid expenses 9,494 7,018 Total current assets 273,623 183,964 Property, plant and equipment, less accumulated depreciation (1996 - $79,368; 1995 - $70,536) 158,726 68,997 Goodwill 32,651 6,356 Other assets 11,086 10,201 $476,086 $269,518 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 95,472 $ 57,811 Accrued liabilities 49,128 25,536 Current portion of debt 10,496 9,164 Total current liabilities 155,096 92,511 Long-term debt 131,732 24,021 Other long-term liabilities, primarily employee benefits 42,882 18,669 Commitments and contingent liabilities --- --- Shareholders' equity Preferred shares - no par value, 1,000 shares authorized, none issued --- --- Common shares - authorized 20,000 shares without par value; issued 1996 - 11,008; 1995 - 11,003 95,224 95,157 Warrants 1,500 -- Retained earnings 54,992 44,412 Minimum pension liability adjustment, net of tax (659) (659) Cumulative translation adjustment (88) -- Treasury shares, at cost, 300 shares (4,593) (4,593) Total shareholders' equity 146,376 134,317 $476,086 $269,518 NOTE: The balance sheet at December 30, 1995 has been derived from the audited financial statements at that date.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (thousands, except per share amounts)
Quarter Ended June 29, July 1, 1996 1995 Net sales $274,148 $158,749 Cost of goods sold 238,161 143,387 Gross profit 35,987 15,362 Selling, administrative and engineering expenses 19,827 8,580 Operating income 16,160 6,782 Other income (expense): Interest expense (2,989) (837) Other income, net 30 512 Income before income taxes 13,201 6,457 Provision for taxes on income 5,148 2,389 Net income $ 8,053 $ 4,068 Net income per share: Primary $ 0.75 $ 0.38 Fully diluted $ 0.66 $ 0.35 Cash dividends per share $ 0.11 $ 0.11 Six Months Ended June 29, July 1, 1996 1995 Net sales $424,755 $320,738 Cost of goods sold 372,865 288,363 Gross profit 51,890 32,375 Selling, administrative and engineering expenses 27,750 16,973 Operating income 24,140 15,402 Other income (expense): Interest expense (3,798) (1,672) Disposal of Canadian facility -- 1,582 Other income, net 430 1,075 Income before income taxes 20,772 16,387 Provision for taxes on income 7,836 6,063 Net income $ 12,936 $ 10,324 Net income per share: Primary $ 1.21 $ 0.97 Fully diluted $ 1.07 $ 0.87 Cash dividends per share $ 0.22 $ 0.22
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995 (in thousands of dollars)
MINIMUM PENSION COMMON RETAINED LIABILITY SHARES WARRANTS EARNINGS ADJUSTMENT Balance at 12/30/95 $95,157 $ -- $44,412 $(659) Net income 12,936 Dividends (2,356) Issue warrants for 381,000 shares 1,500 Cumulative translation adjustment Shares issued under employee stock purchase plan 67 Balance at 6/29/96 $95,224 $1,500 $54,992 $(659) Balance at 12/31/94 $94,831 $ -- $32,854 $(587) Net income 10,324 Dividends (2,351) Purchase of 9,900 treasury shares Shares issued under employee stock purchase plan 136 Balance at 7/1/95 $94,967 $ -- $40,827 $(587) CUMULATIVE TRANS. TREASURY ADJ. SHARES TOTAL Balance at 12/30/95 $ -- $(4,593) $134,317 Net income 12,936 Dividends (2,356) Issue warrants for 381,000 shares 1,500 Cumulative translation adjustment (88) (88) Shares issued under employee stock purchase plan 67 Balance at 6/29/96 $(88) $(4,593) $146,376 Balance at 12/31/94 $ -- $(4,455) $122,643 Net income 10,324 Dividends (2,351) Purchase of 9,900 treasury shares (138) (138) Shares issued under employee stock purchase plan 136 Balance at 7/1/95 $ -- $(4,593) $130,614 /TABLE EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands of dollars)
Six Months Ended June 29, July 1, 1996 1995 Cash flows from operating activities Net income $ 12,936 $ 10,324 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 11,563 7,227 Deferred income taxes and other 1,688 631 Gain on disposal of Canadian facility -- (1,582) Changes in current assets and liabilities Accounts receivable and other (6,417) (1,062) Inventories and customer tooling 13,380 (5,573) Accounts payable and accrued liabilities 7,469 6,546 Total adjustments 27,683 6,187 Net cash provided by operating activities 40,619 16,511 Cash flows from investing activities Purchase of property, plant and equipment (12,034) (12,245) Investment in marketable securities 14,941 1,364 Business acquired (58,984) -- Proceeds from disposal of Canadian facility -- 6,306 Net cash used for investing activities (56,077) (4,575) Cash flows from financing activities Issuance of common shares 67 136 New debt 100,000 -- Maturities of long-term debt (70,692) (575) Dividends (2,356) (2,351) Purchase of treasury shares -- (138) Net cash from (for) financing activities 27,019 (2,928) Net change in cash and short-term investments 11,561 9,008 Cash and short-term investments at beginning of year 391 175 Cash and short-term investments at end of second quarter $ 11,952 $ 9,183
Supplemental Schedule of Noncash Investing and Financing Activities: In connection with the purchase of Atwood, the Company had certain noncash costs totaling $3 million, including the issuance of warrants valued at $1.5 million. EXCEL INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation: The financial statements have been prepared from the unaudited financial records of the Company. In the opinion of management, the financial statements include all adjustments consisting only of normal recurring adjustments necessary for a fair presentation of the results of operations and financial position for the interim periods. Note 2 - Inventories: Inventories consist of the following: (in thousands)
June 29, December 30, 1996 1995 Raw materials $25,727 $16,911 Work in process and finished goods 25,047 11,143 LIFO reserve (756) (756) $50,018 $27,298
Note 3 - Net Income per Share: Primary net income per share is computed using the weighted average number of shares outstanding during the period. In computing fully diluted earnings per share, the conversion of the Company's 10% Convertible Subordinated Notes is also assumed except when the effect of the conversion is anti-dilutive. Shares used to compute net income per share data are as follows (amounts in thousands):
Quarter Ended Six Months Ended June 29, July 1, June 29, July 1, 1996 1995 1996 1995 Primary 10,708 10,684 10,708 10,682 Fully-diluted 12,979 12,955 12,978 12,953
Note 4 - Contingencies A chemical cleaning compound, trichlorethylene (TCE), has been found in the soil and groundwater on the Company's property in Elkhart, Indiana, and in 1981, TCE was found in a well field of the City of Elkhart in close proximity to the Company's facility. The Company has been named as one of nine potentially responsible parties (PRPs) in the contamination of this site. The United States Environmental Protection Agency (EPA) and the Indiana Department of Environmental Management (IDEM) have conducted a preliminary investigation and evaluation of the site and have undertaken temporary remedial action in the nature of air-stripping towers. In early 1992, the EPA issued a Unilateral Order under Section 106 of the Comprehensive Environmental Response, Compensation and Liability Act which required the Company and other PRPs to undertake remedial work. The Company and the other PRPs have reached an agreement regarding the funding of groundwater monitoring and the operation of the air-strippers as required by the Unilateral Order. The Company was required to install and operate a soil vapor extraction system to remove TCE from the Company's property. The Company has installed and is operating the equipment pursuant to the Unilateral Order. In addition, the EPA and IDEM have asserted a claim for reimbursement of their investigatory costs and the costs of installing and operating the air-strippers on the municipal well field (the EPA Costs). On February 22, 1993, the United States filed a lawsuit in the United States District Court for the Northern District of Indiana against eight of the PRPs, including the Company. On July 20,1993, IDEM joined in the lawsuit. The lawsuit seeks recovery of the costs of enforcement, prejudgment interest and an amount in excess of $6.8 million, which represents costs incurred to date by the EPA and IDEM, and a declaration that the eight defendant PRPs are liable for any future costs incurred by the EPA and IDEM in connection with the site. The Company does not believe the annual cost to the Company of monitoring groundwater and operating the soil vapor extraction system and the air-strippers will be material. Each of the PRPs, including the Company, is jointly and severally liable for the entire amount of the EPA Costs. Certain PRPs, including the Company, are currently attempting to negotiate an agreed upon allocation of such liability. The Company believes that adequate provisions have been recorded for its costs and its anticipated share of EPA Costs and that its cash on hand, unused lines of credit or cash from operations are sufficient to fund any required expenditures. The EPA has also named the Company as a PRP for costs at three other disposal sites. The remedial investigations and feasibility studies have been completed, and the results of those studies forwarded to the EPA. The studies indicated a range of viable remedial approaches, but agreement has not yet been reached with the EPA on the final remediation approach. Furthermore, the PRPs for these sites have not reached an agreement on the allocation of costs between the PRPs. The Company believes it either has no liability as a responsible party or that adequate provisions have been recorded for current estimates of the Company's liability and estimated legal costs associated with the settlement of these claims. It is reasonably possible that the Company's recorded estimate of its obligation may change in the near term. There are claims and pending legal proceedings against the Company and its subsidiaries with respect to taxes, workers' compensation, warranties and other matters arising out of the ordinary conduct of the business. The ultimate result of these claims and proceedings at June 29, 1996 is not determinable, but, in the opinion of management, adequate provision for anticipated costs has been made or insurance coverage exists to cover such costs. Note 5 - Acquisition On April 3, 1996, the Company completed the purchase of all of the outstanding common shares of Anderson Industries, Inc. (Anderson) for approximately $62,562,000 including five-year warrants for 381,000 shares of Excel common stock exercisable at $13.25 per share and expenses of the transaction. The Company also assumed approximately $85 million of Anderson's debt. On April 1, 1996, the Company entered into a $120,000,000 Credit Agreement to facilitate the completion of this acquisition. On May 3, 1996, the Company borrowed $100,000,000 in 7.78% Senior Notes payable for 15 years in semi-annual installments beginning in 2000. Anderson, located in Rockford, Illinois, is a holding company whose main asset is Atwood Industries, Inc. Atwood Industries manufactures products for the automotive, manufactured housing and recreational vehicle industries and is headquartered in Rockford, Illinois. The acquisition of Anderson was accounted for as a purchase. Accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of net assets acquired has been accounted for as goodwill and is being amortized over 35 years using the straight line method. This allocation was based on preliminary estimates and may be revised at a later date. The accompanying consolidated statements of income include the operating results of Anderson since the effective date of the acquisition. Pro forma unaudited consolidated operating results of the Company and Anderson for the six months ended June 29, 1996 and July 1, 1995, assuming the acquisition had been made as of the beginning of 1996 and 1995, are summarized below (in thousands except per share amounts):
Six months ended June 29, July 1, 1996 1995 Net sales $522,569 $537,619 Net income 14,608 6,102 Net income per share, primary 1.36 0.57 Net income per share, fully diluted 1.20 0.53
Net income for the six months ended July 1, 1995, includes a charge which reduced net income by $4,978,000 for a warranty issue on a component part manufactured by Atwood that was recalled by a major automotive customer. The unaudited pro forma financial information presented is not necessarily indicative either of the results of operations that would have occurred had the transactions been completed on the indicated dates or of future results of operations of the combined companies. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Material Changes in Financial Condition: Cash flow from operations totalled $40.6 million for the six months ended June 29, 1996 which was in part attributed to the completion of customer tooling projects and the concerted effort to reduce inventories. Capital expenditures in the first six months totalled $12.0 million of the total budgeted $37.0 million for the year. On April 3, 1996, the Company completed the purchase of all of the outstanding common shares of Anderson Industries, Inc. (Anderson) for approximately $62,562,000 including five-year warrants for 381,000 shares of Excel common stock exercisable at $13.25 per share and expenses of the transaction. The Company also assumed approximately $85 million of Anderson's debt. On April 1, 1996 the Company entered into a $120,000,000 Credit Agreement to facilitate the completion of this acquisition. On May 3, 1996 the Company issued 7.78% Senior Notes for $100,000,000. Interest only is payable in quarterly installments until 2000 at which time principal and interest payments will be made to 2015. Anderson, located in Rockford, Illinois, is a holding company whose main asset is Atwood Industries, Inc. Atwood Industries manufactures products for the automotive, manufactured housing and recreational vehicle industries and is headquartered in Rockford, Illinois. Cash and short-term marketable securities amounted to $34.4 million at June 29, 1996, a decrease of $3.4 million from December 30, 1995. Material Changes in Results of Operations: Quarter Ended June 29, 1996 Compared to Quarter Ended July 1, 1995 Sales in the second quarter of 1996 increased 73% or $115.4 million to $274.1 million from the $158.7 million in 1995. The acquisition of Atwood added $109.3 million in 1996. Gross profit was $36.0 million in the current quarter or 13.1% of sales, a large improvement over the $15.4 million or 9.7% of sales in the second quarter of 1995. Part of the increase was due to product mix as a result of the Atwood operations having gross profits of $16.7 million or 15.2% of sales. Also, costs were eliminated as a result of better capacity utilization in our Lawrenceburg, Tennessee, Pikeville, Tennessee and Toledo, Ohio automotive divisions. In addition, the second quarter of 1995 had launch costs for new products. Selling, administrative and engineering expenses totalled $19.8 million or 7.2% of sales in the second quarter, up from $8.6 million or 5.4% of sales in the 1995 second quarter. The increase was due to the addition of the Atwood expenses ($9.9 million), implementing management information systems in the Atwood facilities and increasing accruals for management incentive programs. Interest expense totalled $2,989,000 in 1996 up from $837,000 in the year ago second quarter due to the increased long-term debt outstanding including new Senior Notes issued in connection with the Anderson acquisition. Other income of $30,000 is primarily interest income on marketable debt securities offset by the recognition of our equity in losses of our Brazilian joint venture. This was lower than the $512,000 for the 1995 second quarter which included gains on miscellaneous sales of assets as well as earnings from marketable securities. Provision for taxes on income was at an effective rate of 39% for the 1996 second quarter compared to 37% for the same quarter in 1995. The increase was due to the effect of the increased blended state income tax rates which resulted from the inclusion of Atwood Industries operating results. Material Changes in Results of Operations: Six Months Ended June 29, 1996 Compared to Six Months Ended July 1, 1995 Sales in the first half of 1996 increased 32.5% or $104.1 million to $424.8 million from the $320.7 million in 1995. The increased sales reflect the addition of Atwood less the reduced sales experienced in the first quarter due to lower passenger car production. Gross profit was $51.9 million in the current half or 12.2% of sales up from gross profit of $32.4 million or 10.1% of sales in the first half of 1995. The increase in gross profit in the half was due to product mix as a result of the Atwood operations having gross profits of $16.7 million or 15.2% of sales and continued cost reduction efforts. Selling, administrative and engineering expenses totalled $27.8 million in the first half up from $17.0 million in the 1995 first half. The increase was due to the addition of the Atwood expense ($9.9 million), implementing management information systems at the Atwood facilities and increasing accruals for management incentive programs. Interest expense totalled $3,798,000 in 1996 up from $1,672,000 in the year ago first half due to the increased long-term debt outstanding including new Senior Notes issued in connection with the Anderson acquisition. Included in income in 1995 is a gain on the disposition of Excel Metalcraft, Ltd., located in Aurora, Ontario in the amount of $1,582,000 which amounts to 9 cents per share after income taxes. This gain includes the return to profits of $970,000 of the restructuring reserve which was created in 1992. The final phase of the restructuring has now been completed with the sale of the shares of Metalcraft. Other income of $430,000 consists primarily of interest income on marketable debt securities offset by the recognition of our equity in losses of our Brazilian joint venture. Other income in 1995 of $1,075,000 was higher due to having more earnings from investments in marketable securities. Provision for taxes on income was at an effective rate of 37.7% for 1996, up slightly from 37% in 1995. The increase was due to the effect of the increased blended state income tax rates which resulted from the inclusion of Atwood Industries operating results in the second quarter. PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (a) The following exhibit is being filed herewith: (27) Financial Data Schedule (b) The Registrant filed its Current Report on Form 8-K, reporting the acquisition of all of the common shares of Anderson Industries, Inc. on April 3, 1996. On May 13, 1996, the Registrant filed Amendment No. 1 to such Form 8-K, reporting the financial information with respect to such acquisition required under Rules 3-05 and 11 of Regulation S-X. 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 hereunto duly authorized. EXCEL INDUSTRIES, INC. (Registrant) Date: August 12, 1996 s/ James O. Futterknecht James O. Futterknecht Chairman, President and Chief Executive Officer Date: August 12, 1996 s/ Joseph A. Robinson Joseph A. Robinson Secretary/Treasurer and Chief Financial Officer EX-27 2
5 6-MOS DEC-28-1996 JUN-29-1996 11,952 22,475 157,798 1,423 50,018 273,623 238,094 79,368 476,086 155,096 0 0 0 95,224 51,152 476,086 424,755 424,755 372,865 400,615 (430) 0 3,798 20,772 7,836 12,936 0 0 0 12,936 1.21 1.07
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