-----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, GuHp8OXv15GcZRJosboFHPQ9I+XKCOrOL1RiiRYQg/sNJ+Mo2alj+lf+/FYbBA8c m2gjVg/6vM0wmoCbXusx4w== 0000740868-98-000004.txt : 19980521 0000740868-98-000004.hdr.sgml : 19980521 ACCESSION NUMBER: 0000740868-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980511 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXCEL INDUSTRIES INC CENTRAL INDEX KEY: 0000740868 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 351551685 STATE OF INCORPORATION: IN FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08684 FILM NUMBER: 98615055 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 Under Section 13 or 15(d) of the Securities Exchange Act of 1934 ____________________________ For the Quarterly Period Ended March 28, 1998 Commission File No. 1-8684 Excel Industries, Inc. (Exact name of registrant as specified in its charter) Indiana 35-1551685 (State or other jurisdiction (IRS Employer Identification of incorporation or organization) Number) 1120 North Main Street, Elkhart, Indiana 46514 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (219)264-2131 Indicate by "X" whether the registrant (a) 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 prior 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 April 17, 1998, there were outstanding 12,442,594 common shares, no par value. EXCEL INDUSTRIES, INC. Index
Page No. PART I Financial Information Consolidated Balance Sheet - March 28, 1998 and December 27, 1997 1 Consolidated Statement of Income - Quarter Ended March 28, 1998 and March 29, 1997 2 Consolidated Statement of Shareholders' Equity - Quarter Ended March 28, 1998 and March 29, 1997 3 Consolidated Statement of Cash Flows - Quarter Ended March 28, 1998 and March 29, 1997 4 Notes to Consolidated Financial Statements 5-8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II Other Information 12 Signatures 13 Letter Dated May 11, 1998 from Price Waterhouse LLP Regarding Change in Accounting Method Exhibit 18 Financial Data Schedules Exhibit 27
EXCEL INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) (in thousands)
March 28, December 27, 1998 1997 ASSETS Current assets Cash and short-term investments $ 1,558 $ 2,317 Marketable securities 23,997 24,420 Accounts receivable 148,467 140,910 Customer tooling to be billed 24,727 22,356 Inventories 39,995 40,929 Prepaid expenses 12,195 14,929 Total current assets 250,939 245,861 Property, plant and equipment, less accumulated depreciation of (1998 - $126,515; 1997 - $119,361) 164,531 160,968 Other assets 51,438 50,968 $466,908 $457,797 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 83,020 $ 85,469 Accrued liabilities 48,830 41,170 Current portion of debt 2,712 2,672 Total current liabilities 134,562 129,311 Long-term debt 105,317 105,943 Other long-term liabilities 37,546 37,228 Commitments and contingent liabilities -- -- Shareholders' equity Preferred shares - no par value, authorized 1,000 shares, none issued -- -- Common shares - no par value, authorized 20,000 shares; issued and outstanding in 1998, 115,074 114,730 12,434, in 1997, 12,414 Retained earnings 74,409 70,585 Total shareholders' equity 189,483 185,315 $466,908 $457,797 NOTE: The balance sheet at December 27, 1997 has been derived from the audited financial statements at that date. The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (thousands, except per share amounts)
Quarter Ended March 28, March 29, 1998 1997 Net sales $230,994 $251,216 Cost of goods sold 203,414 220,218 Gross profit 27,580 30,998 Selling, administrative and engineering expenses 17,236 18,923 Operating income 10,344 12,075 Interest expense (2,278) (2,769) Other income, net 84 390 Income before income taxes 8,150 9,696 Provision for taxes on income 2,771 3,394 Net income $ 5,379 $ 6,302 Net income per share: Basic $ .43 $ .59 Diluted $ .43 $ .53 Cash dividends per share $ .125 $ .125 The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) FOR THE QUARTER ENDED MARCH 28, 1998 AND MARCH 29, 1997 (in thousands)
MINIMUM PENSION COMMON RETAINED LIABILITY SHARES EARNINGS ADJUSTMENT Balance at December 27, 1997 $114,730 $ 70,585 $ -- Net income 5,379 Dividends (1,555) Share options exercised 19 Shares issued under employee stock purchase plan 325 Balance at March 28, 1998 $115,074 $ 74,409 $ -- Balance at December 28, 1996 $ 92,187 $ 58,653 $ (160) Net income 6,302 Dividends (1,341) Share options exercised 5 Shares issued under employee stock purchase plan 66 Cumulative translation adjustment Balance at March 29, 1997 $ 92,258 $ 63,614 $ (160) CUMULATIVE TRANSLATION ADJUSTMENT TOTAL Balance at December 27, 1997 $ -- $185,315 Net income 5,379 Dividends (1,555) Share options exercised 19 Shares issued under employee stock purchase plan 325 Balance at March 28, 1998 $ -- $189,483 Balance at December 28, 1996 $ 45 $150,725 Net income 6,302 Dividends (1,341) Share options exercised 5 Shares issued under employee stock purchase plan 66 Cumulative translation adjustment (172) (172) Balance at March 29, 1997 $ (127) $155,585 The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (in thousands)
Quarter Ended March 28, March 29, 1998 1997 Cash flows from operating activities Net income $ 5,379 $ 6,302 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 7,848 9,178 Deferred income taxes and other (273) 1,592 Changes in current assets and liabilities, excluding effect of acquisition: Accounts receivable and other (4,823) (8,707) Inventories and customer tooling (1,437) 529 Accounts payable and accrued liabilities 5,211 15,258 Total adjustments 6,526 17,850 Net cash provided by operating activities 11,905 24,152 Cash flows from investing activities Purchase of property, plant and equipment (11,290) (8,686) Investment in marketable securities 423 (11,358) Business acquired -- (2,741) Net cash used for investing activities (10,867) (22,785) Cash flows from financing activities Issuance of common shares 344 71 Maturities of long-term debt (586) (654) Dividends (1,555) (1,341) Net cash used for financing activities (1,797) (1,924) Net change in cash and short-term investments (759) (557) Cash and short-term investments at beginning of year 2,317 6,580 Cash and short-term investments at end of first quarter $ 1,558 $ 6,023 Supplemental Schedule of Noncash Activities: In connection with the restructuring reserve established for plant closures in March, 1997, goodwill was increased by $5,400, which is net of income taxes. The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 of dollars)
March 28, December 27, 1998 1997 Raw materials $21,868 $23,591 Work in process and finished goods 19,463 18,674 LIFO Reserve (1,336) (1,336) $39,995 $40,929
Note 3 - Net Income per Share: At the end of 1997, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". All earnings per share amounts reported herein have been restated to comply with this Statement. Basic net income per share is computed using the weighted average number of shares outstanding during the period. Shares used to compute basic net income per share were 12,425,000 for 1998 and 10,722,000 for 1997. Diluted earnings per share assumes, when dilutive, the exercise of common share options and warrants outstanding and the conversion of the outstanding 10% convertible subordinated notes which were converted into common shares in October, 1997. Shares used to compute diluted earnings per share included the number of shares used for basic net income per share plus 1,665,000 in 1997 for the conversion of the notes and 187,000 in 1998 and 150,000 in 1997 for the exercise of options and warrants. Net income used to compute diluted earnings per share in 1997 included an add-back of $358,000 for the after-tax effect of interest on the convertible notes. Note 4 - Comprehensive Income Net income does not materially differ from comprehensive income. Note 5 - Contingencies A chemical cleaning compound, trichloroethylene (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. In early 1992, the United States Environmental Protection Agency (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. A 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 the Indiana Department of Environmental Management (IDEM), and a declaration that eight defendant PRPs are liable for any future costs incurred by the EPA and IDEM in connection with the site. On August 21, 1996 the United States Department of Justice lodged with the United States District Court for the Northern District of Indiana a proposed partial consent decree which specifies payment of Federal Past Response Costs from certain PRPs which for Excel amounted to approximately $3.2 million which together with amounts due IDEM would bring Excel's total obligation to approximately $3.4 million, which has been accrued by the Company. Comments objecting to the consent decree were lodged with the United States Department of Justice (USDOJ) and the Court. In responding to those objections, USDOJ restated its support for the consent decree to the Court on May 23, 1997. The consent decree has not yet been accepted by the Court. 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. The Company believes that adequate provisions have been recorded for its costs and its anticipated share of the EPA Costs and that its cash on hand, unused lines of credit or cash from operations are sufficient to fund any required expenditures. The Company has been named a PRP for costs at seven other disposal sites. The remedial investigations and feasibility studies have been completed, and the results of those studies have been provided to the appropriate agencies. The studies indicated a range of viable remedial approaches, but agreement has not yet been reached with the authorities 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 March 28, 1998 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 6 - Accounting Change The Company has historically depreciated plant and equipment using accelerated depreciation methods for both financial and tax reporting purposes. A survey conducted by the Company confirmed that the straight-line method of depreciation is the predominant method used throughout the automotive supply industry. Accordingly, for new capital expenditures for the 1998 fiscal year and thereafter, the Company has adopted the straight-line method of depreciation for financial reporting purposes. The Company expects a favorable effect of the change on net income for the fiscal year ending January 2, 1999 to be approximately $1.2 million or $.08 per share. Note 7 - Acquisitions In March, 1998, the Company signed a definitive agreement to acquire on July 1, 1998 for cash 70 percent of Schade GmbH & Co. KG, Plettenberg, Germany, a privately held long-time automotive OEM supplier with which it has had a nine-year non-equity technological alliance. The Company will purchase all shares of Schade insiders for approximately $10 million and add approximately $15 million of capital to increase shareholders equity. The remaining 30 percent of Schade is owned by Hella KG Hueck & Co., another international OEM supplier. Schade has sales and manufacturing operations in Germany, Portugal, Spain, the United Kingdom and the Czech Republic. It has annual sales of more than $275 million in encapsulated window modules, door frames, modular doors, outside trim and injection molded plastic components. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company has two lines of business to distinguish activities for the light vehicle products segment separate from the recreational vehicle, mass transit and heavy truck products segment (RV/MT/HT). The light vehicle products segment normally experiences reduced sales volumes in the months of July, August and December as vacation periods, model changeover and start-up and holidays affect the number of production days. The RV/MT/HT products segment is seasonal in that sales in the quarter October through December are normally at reduced levels. Material Changes in Results of Operations: Quarter Ended March 28, 1998 Compared to Quarter Ended March 29, 1997 Sales in the first quarter of 1998 decreased 8% or $20.2 million to $231.0 million from $251.2 million in 1997. Sales for the light vehicle products segment were $172.5 million in the first quarter of 1998 compared to $196.7 million in the 1997 period. The decrease was due to the discontinuance of several programs in production in the 1997 period. North American light vehicle build was similar in the comparative periods, but our largest customer, Ford Motor Company, dropped its long-running Aerostar van and Thunderbird/Cougar programs in mid-1997 and ended its production of F-Series light trucks with vent windows. These programs accounted for approximately $7 million in revenue in the 1997 first period. Approximately $4 million of the decrease was due to the parking brake product line which was sold in May, 1997. Sales were further affected by approximately $1.5 million for customer selling price reductions associated with long-term supply agreements. The remainder of the decrease was due to changes in customers product mix, predominantly lower passenger car production and higher light truck and sport utility vehicles. For the RV/MT/HT products segment sales increased to $58.5 million in 1998 from $54.5 million in 1997. Gross profit was $27.6 million in the current quarter or 11.9% of sales, down from $31.0 million or 12.3% of sales in the first quarter of 1997. The lower gross margins were due to lower sales volumes in the light vehicle products segment ($2.5 million), the effects of the selling price reductions due to long-term supply agreements ($1.5 million) and increased launch costs for new products ($600,000). These reductions were offset by higher sales volumes in the RV/MT/HT products segment ($800,000) and product mix ($400,000). The Company has historically depreciated plant and equipment using accelerated depreciation methods for both financial and tax reporting purposes. A survey conducted by the Company confirmed that the straight-line method of depreciation is the predominant method used throughout the automotive supply industry. Accordingly, for capital expenditures for the 1998 fiscal year and thereafter, the Company has adopted the straight-line method of depreciation for financial reporting purposes. The Company expects a favorable effect of the change on net income for the fiscal year ending January 2, 1999 to be approximately $1.2 million or $.08 per share. Selling, administrative and engineering expenses totaled $17.2 million in the first quarter of 1998, down from $18.9 million in the 1997 first quarter. Approximately $1.1 million of the decrease was due to the administrative costs of the facilities closed in late 1997 and $300,000 was due to lower accruals for management incentive bonuses in 1998. Interest expense totaled $2,278,000 in 1998 down from $2,769,000 in the year ago first quarter. The decrease was due to the conversion of the 10% convertible subordinated notes into common shares of the Company in October, 1997. Other income of $84,000, consists of primarily interest income on marketable debt securities less $245,000 for the Company's share of losses in its Brazilian joint venture. The $390,000 in the 1997 first quarter was primarily interest income on marketable securities. Provision for taxes on income was at an effective rate of 34% for 1998, down from 35% in 1997. The reduction was due to increased tax credits expected for 1998. Material Changes in Financial Condition: For the quarter ended March 28, 1998 cash flow from operations totaled $11.9 million and $11.3 million was used for capital expenditures and an additional $1.6 million for dividends. Capital expenditures for the year are estimated to be $42 million. Cash and short-term marketable securities amounted to $25.6 million at March 28, 1998, a decrease of $1.2 million from December 27, 1997. At March 28, 1998, the Company had available unused lines of credit of approximately $55 million. For the remainder of 1998 the Company expects its current cash balances, operating cash flow and available credit lines to be sufficient to finance operating cash needs, capital expenditures, the acquisition of Schade and any environmental clean-up requirements. In March, 1998, the Company signed a definitive agreement to acquire on July 1, 1998 for cash 70 percent of Schade GmbH & Co. KG, Plettenberg, Germany, a privately held long-time automotive OEM supplier with which it has had a nine-year non-equity technological alliance. The Company will purchase all shares of Schade insiders for approximately $10 million and add approximately $15 million of capital to increase shareholders equity. The remaining 30 percent of Schade is owned by Hella KG Hueck & Co., another international OEM supplier. Schade has sales and manufacturing operations in Germany, Portugal, Spain, the United Kingdom and the Czech Republic. It has annual sales of more than $275 million in encapsulated window modules, door frames, modular doors, outside trim and injection molded plastic components. The Company entered into a 1994 Supply Agreement with Ford Motor Company which requires the absorption of the effects of inflation and requires specified price reductions or productivity offsets to price reductions. The Company believes that this type of agreement is typical in the automotive supply business, and the Company's ability to maintain gross margins at or near their present levels will be dependent on its ability to substantially offset the effects of this and other such agreements through productivity improvements, cost reduction programs and implementation of value analysis/value engineering programs, which reduce part weight and system costs to the customer. The Company has started a program to ensure year 2000 compliance (Y2K) issues. This program addresses software applications computer controlled manufacturing processes as well as obtaining assurance that vendors supplying services and materials will be Y2K compliant. Costs to administer this program are estimated not to exceed $250,000. Forward-Looking Statements This report contains certain forward-looking statements which involve certain risks and uncertainties. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those anticipated. Potential risks and uncertainties include economic factors, concentration of a substantial percentage of sales in a few major OEM customers, and other business factors. Readers are cautioned not to place undue reliance on those forward-looking statements which speak only as of the date of this report. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 18. Letter dated May 11, 1998 from Price Waterhouse LLP regarding change in accounting method. (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirement 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: May 11, 1998 s/ James O. Futterknecht James O. Futterknecht Chairman, President and Chief Executive Officer Date: May 11, 1998 s/ Joseph A. Robinson Joseph A. Robinson Senior Vice President, Secretary and Chief Financial Officer Date: May 11, 1998 s/ Ike K Eikelberner Ike K. Eikelberner Vice President, Corporate Controller and Chief Accounting Officer
EX-18 2 Exhibit 18 May 11, 1998 To the Board of Directors of Excel Industries, Inc. We have been furnished with a copy of the Company's Form 10-Q for the quarter ended March 28, 1998. Note 6 therein describes a change in the method of depreciation of plant and equipment from predominantly accelerated methods, declining balance, to the straight-line method. It should be understood that the preferability of one acceptable method of depreciation accounting over another has not been addressed in any authoritative literature and in arriving at our opinion expressed below, we have relied on management's business planning and judgment. Based upon our discussions with management and the stated reasons for the change, we believe that such change represents, in your circumstances, the adoption of a preferable alternative accounting principle for depreciation in conformity with Accounting Principles Board Opinion No. 20. We have not made an audit in accordance with generally accepted auditing standards of the financial statements of Excel Industries, Inc. for the three-month periods ended March 28, 1998 or March 29, 1997 and, accordingly, we express no opinion thereon or on the financial information filed as part of the Form 10-Q of which this letter is to be an exhibit. Yours very truly, S/Price Waterhouse LLP EX-27 3
5 1000 3-MOS JAN-2-1999 MAR-28-1998 1558 23997 149891 1424 39995 250939 291046 126515 466908 134562 0 0 0 115074 74409 466908 230994 230994 203414 220650 (84) 0 2278 8150 2771 5379 0 0 0 5379 .43 .43
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