-----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, KFj5JZLGVgK6wuDjcPMbyzt0yzSd2k0mgXX2UGYX31xDh2lPzd2PJlz7MU5G8BOs XbD8LYeXnoYky6PdpqlgqQ== 0000740868-98-000014.txt : 19980812 0000740868-98-000014.hdr.sgml : 19980812 ACCESSION NUMBER: 0000740868-98-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980627 FILED AS OF DATE: 19980730 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: 98674332 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 June 27, 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 July 17, 1998, there were outstanding 12,450,444 common shares, no par value. EXCEL INDUSTRIES, INC. Index
Page No. PART I Financial Information Consolidated Balance Sheet - June 27, 1998 and December 27, 1997 1 Consolidated Statement of Income - Quarter Ended June 27, 1998 and June 28, 1997, Six Months Ended June 27, 1998 and June 28, 1997 2 Consolidated Statement of Shareholders' Equity - Six Months Ended June 27, 1998 and June 28, 1997 3 Consolidated Statement of Cash Flows - Six Months Ended June 27, 1998 and June 28, 1997 4 Notes to Consolidated Financial Statements 5-7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 PART II Other Information 13 Signatures 14 Financial Data Schedules Exhibit 27
EXCEL INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) (in thousands)
June 27, December 27, 1998 1997 ASSETS Current assets Cash and short-term investments $ 839 $ 2,317 Marketable securities 25,746 24,420 Accounts receivable 150,220 140,910 Customer tooling to be billed 25,323 22,356 Inventories 40,999 40,929 Prepaid expenses 12,422 14,929 Total current assets 255,549 245,861 Property, plant and equipment, less accumulated depreciation of (1998 - $132,488; 1997 - $119,361) 163,931 160,968 Other assets 51,216 50,968 $ 470,696 $457,797 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 82,793 $ 85,469 Accrued liabilities 50,153 41,170 Current portion of debt 2,235 2,672 Total current liabilities 135,181 129,311 Long-term debt 104,800 105,943 Other long-term liabilities 36,776 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, 12,450, in 1997, 12,414 115,331 114,730 Retained earnings 78,608 70,585 Total shareholders' equity 193,939 185,315 $470,696 $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 June 27, June 28, 1998 1997 Net sales $247,237 $264,474 Cost of goods sold 218,587 227,375 Gross profit 28,650 37,099 Selling, administrative and engineering expenses 18,898 20,694 Operating income 9,752 16,405 Interest expense (2,051) (2,902) Other income, net 1,020 445 Income before income taxes 8,721 13,948 Provision for taxes on income 2,965 4,881 Net income $ 5,756 $ 9,067 Net income per share: Basic $ .46 $ .85 Diluted $ .46 $ .75 Cash dividends per share $ .125 $ .125 Six Months Ended June 27, June 28, 1998 1997 Net sales $478,231 $515,690 Cost of goods sold 422,001 447,593 Gross profit 56,230 68,097 Selling, administrative and engineering expenses 36,134 39,617 Operating income 20,096 28,480 Interest expense (4,329) (5,671) Other income, net 1,104 835 Income before income taxes 16,871 23,644 Provision for taxes on income 5,736 8,275 Net income $ 11,135 $ 15,369 Net income per share: Basic $ .90 $ 1.43 Diluted $ .88 $ 1.28 Cash dividends per share $ .25 $ .25 The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 27, 1998 AND JUNE 28, 1997 (in thousands)
MINIMUM PENSION COMMON RETAINED LIABILITY SHARES EARNINGS ADJUSTMENT Balance at December 27, 1997 $114,730 $ 70,585 $ -- Net income 11,135 Dividends (3,112) Share options exercised 125 Shares issued under employee stock purchase plan 476 Balance at June 27, 1998 $115,331 $ 78,608 $ -- Balance at December 28, 1996 $ 92,187 $ 58,653 $ (160) Net income 15,369 Dividends (2,682) Share options exercised 22 Shares issued under employee stock purchase plan 156 Cumulative translation adjustment Balance at June 28, 1997 $ 92,365 $ 71,340 $ (160) EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 27, 1998 AND JUNE 28, 1997 (in thousands) CUMULATIVE TRANSLATION ADJUSTMENT TOTAL Balance at December 27, 1997 $ -- $185,315 Net income 11,135 Dividends (3,112) Share options exercised 125 Shares issued under employee stock purchase plan 476 Balance at June 27, 1998 $ -- $193,939 Balance at December 28, 1996 $ 45 $150,725 Net income 15,369 Dividends (2,682) Share options exercised 22 Shares issued under employee stock purchase plan 156 Cumulative translation adjustment (193) (193) Balance at June 28, 1997 $ (148) $163,397 The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (in thousands)
Six Months Ended June 27, June 28, 1998 1997 Cash flows from operating activities Net income $ 11,135 $ 15,369 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 15,783 18,451 Deferred income taxes and other (382) (3,145) Changes in current assets and liabilities, excluding effect of acquisition: Accounts receivable and other (6,803) (21,403) Inventories and customer tooling (3,037) (6,628) Accounts payable and accrued liabilities 6,307 22,411 Total adjustments 11,868 9,686 Net cash provided by operating activities 23,003 25,055 Cash flows from investing activities Purchase of property, plant and equipment (19,064) (16,398) Investment in marketable securities (1,326) (9,965) Business acquired -- (2,415) Proceeds from sale of product line -- 2,926 Net cash used for investing activities (20,390) (25,852) Cash flows from financing activities Issuance of common shares 601 178 Maturities of long-term debt (1,580) (1,347) Dividends (3,112) (2,682) Net cash used for financing activities (4,091) (3,851) Net change in cash and short-term investments (1,478) (4,648) Cash and short-term investments at beginning of year 2,317 6,580 Cash and short-term investments at end of second quarter $ 839 $ 1,932 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)
June 27, December 27, 1998 1997 Raw materials $22,597 $23,591 Work in process and finished goods 19,738 18,674 LIFO Reserve (1,336) (1,336) $40,999 $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. 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 (notes) which were converted into common shares in October, 1997. Net income used to compute diluted earnings per share in 1997 included an add-back of $358,000 for the second quarter and $716,000 for the first six months for the after-tax effect of interest on the convertible notes. Shares used to compute net income per share data are as follows (amounts in thousands):
Quarter Ended Six Months Ended June 27, June 28, June 27, June 28, 1998 1997 1998 1997 Basic 12,443 10,726 12,434 10,724 Exercise of options and warrants 205 177 195 164 Conversion of notes -- 1,665 -- 1,665 Diluted 12,648 12,568 12,629 12,553
Note 4 - Comprehensive Income Net income as reported does not differ materially from comprehensive income as defined in SFAS No. 130 "Reporting Comprehensive Income". Note 5 - Contingencies A chemical cleaning compound, trichloroethylene (TCE), was 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 was named as one of nine potentially responsible parties (PRPs) in the contamination of this site. On August 21, 1996 the United States Department of Justice lodged with the United States District Court for the Northern District of Indiana (the Court) 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 the Indiana Department of Environmental Management would bring Excel's total obligation to approximately $3.4 million, which has been accrued by the Company. On June 9, 1998, the Court accepted the consent decree as filed and accordingly the Company funded in early July its obligation for the remedial clean-up. 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 June 27, 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. Note 7 - Acquisitions In March, 1998, the Company signed a definitive agreement to acquire 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 transaction is effective July 1, 1998 and is expected to close in August, 1998. 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 June 27, 1998 Compared to Quarter Ended June 28, 1997 Sales in the second quarter of 1998 decreased 6.5% or $17.3 million to $247.2 million from $264.5 million in 1997. Sales for the light vehicle products segment were $185.4 million in the second quarter of 1998 compared to $206.0 million in the 1997 period. North American light vehicle build was down 3.8% in the second quarter of 1998 compared to the same period in 1997. Sales in 1998 were reduced by $3.8 million because of the strikes at General Motors. Our largest customer, Ford Motor Company, discontinued 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 $7.4 million in revenue in the 1997 second period. Sales were further affected by approximately $1.2 million for customer selling price reductions associated with long-term supply agreements. The remainder of the decrease was primarily 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 $61.8 million in 1998 from $58.5 million in 1997. Gross profit was $28.7 million in the current quarter or 11.6% of sales, down from $37.1 million or 14.0% of sales in the second quarter of 1997. The lower gross margins were primarily due to the startup costs and below-cost pricing on a major seat track program at the Stockton, Illinois plant ($3.1 million), the strikes at General Motors ($800,000), lower sales volumes in the light vehicle products segment ($2.6 million), and the effects of the selling price reductions due to long-term supply agreements ($1.2 million). These reductions were offset by higher sales volumes in the RV/MT/HT products segment ($600,000) and product mix ($600,000). 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. Selling, administrative and engineering expenses totaled $18.9 million in the second quarter of 1998, down from $20.7 million in the 1997 second quarter. Approximately $1.2 million of the decrease was due to a reduction in product development expenses, $700,000 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 $2,051,000 in 1998 down from $2,902,000 in the year ago second 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 $1,020,000 consists primarily of interest income on marketable debt securities of $388,000 and $500,000 for a state loan forgiven after all contractual requirements were met. The $445,000 in the 1997 second 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 Results of Operations: Six Months Ended June 27, 1998 Compared to Six Months Ended June 28, 1997 Sales in the first six months of 1998 decreased 7.3% or $37.5 million to $478.2 million from $515.7 million in 1997. Sales for the light vehicle products segment were $357.9 million in the first six months of 1998 compared to $402.6 million in the 1997 period. North American light vehicle build was similar in the comparative periods, but our largest customer, Ford Motor Company, discontinued 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 $14.5 million in revenue in the 1997 first half. Sales in 1998 were reduced by $3.8 million because of the strikes at General Motors. Also, approximately $4 million of the decrease was a result of the sale of the parking brake product line which was sold on May 3, 1997. Sales were further affected by approximately $2.7 million for customer selling price reductions associated with long-term supply agreements. The remainder of the decrease was primarily 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 $120.3 million in 1998 from $113.1 million in 1997. Gross profit was $56.2 million in the six months ended June 27, 1998 or 11.8% of sales, down from $68.1 million or 13.2% of sales in the same period of 1997. The lower gross margins were primarily due to the startup costs and below-cost pricing on a major seat track program at the Stockton, Illinois plant ($4.4 million), the strikes at General Motors ($800,000), lower sales volumes in the light vehicle products segment ($5.2 million), and the effects of the selling price reductions due to long-term supply agreements ($2.7 million). These reductions were partially offset by higher sales volumes in the RV/MT/HT products segment ($1.4 million) and product mix ($500,000). Selling, administrative and engineering expenses totaled $36.1 million in the first half of 1998, down from $39.6 million in the 1997 first half. Approximately $1.8 million of the decrease was due to the administrative costs of the facilities closed in late 1997, $1.2 million was due to a reduction in product development expenses and $600,000 was due to lower accruals for management incentive bonuses in 1998. Interest expense totaled $4,329,000 in 1998 down from $5,671,000 in the year ago first half. 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 $1,104,000 consists primarily of interest income on marketable debt securities of $745,000 and $500,000 for a state loan forgiven after all contractual requirements were met, less $245,000 for the Company's share of losses in its Brazilian joint venture. The $835,000 in the 1997 first half 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 six months ended June 27, 1998 cash flow from operations totaled $23.0 million of which $19.1 million was used for capital expenditures and an additional $3.1 million for dividends. Capital expenditures for the year are estimated to be $42 million. Cash and marketable securities amounted to $26.6 million at June 27, 1998, a decrease of $152,000 from December 27, 1997. At June 27, 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 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 transaction is effective July 1, 1998 and is expected to close in August, 1998. 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 and 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 4. Submission of Matters to a Vote of Security Holders At the annual Shareholders' Meeting on April 16, 1998, the shareholders elected the following in an uncontested election of Directors.
Authority For Withheld James O. Futterknecht, Jr. 10,310,808 524,142 Joseph A. Robinson 10,310,308 524,642 John G. Keane 10,308,755 526,195 Richard A. Place 10,306,457 528,493 James K. Sommer 10,309,182 525,768 Ralph R. Whitney, Jr. 10,300,507 534,443
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: July 29, 1998 s/ James O. Futterknecht, Jr. James O. Futterknecht Chairman, President and Chief Executive Officer Date: July 29, 1998 s/ Joseph A. Robinson Joseph A. Robinson Senior Vice President, Secretary and Chief Financial Officer Date: July 29, 1998 s/ Ike K Eikelberner Ike K. Eikelberner Vice President, Corporate Controller and Chief Accounting Officer
EX-27 2
5 1,000 6-MOS JAN-02-1999 JUN-27-1998 839 25,746 151,721 1,501 40,999 255,549 296,419 132,488 470,696 135,181 0 0 0 115,331 78,608 470,696 478,231 478,231 422,001 458,135 (1,104) 0 4,329 16,871 5,736 11,135 0 0 0 11,135 .90 .88
-----END PRIVACY-ENHANCED MESSAGE-----