-----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, Pxb8w/xZcXQ5iPO6CUWZwxMFdXaOv1ocpvA4DM1xV69Gm1SEm6aSLrHPZkEijYei /HG/b6pmwMlsHOGBHsPr2A== 0000082811-98-000023.txt : 19980810 0000082811-98-000023.hdr.sgml : 19980810 ACCESSION NUMBER: 0000082811-98-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980807 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGAL BELOIT CORP CENTRAL INDEX KEY: 0000082811 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 390875718 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07283 FILM NUMBER: 98679082 BUSINESS ADDRESS: STREET 1: 200 STATE ST CITY: BELOIT STATE: WI ZIP: 53511 BUSINESS PHONE: 6083648800 MAIL ADDRESS: STREET 1: 200 STATE STREET CITY: BELOIT STATE: WI ZIP: 53511-6254 FORMER COMPANY: FORMER CONFORMED NAME: BELOIT TOOL CORP DATE OF NAME CHANGE: 19730522 FORMER COMPANY: FORMER CONFORMED NAME: RECORD A PUNCH CORP DATE OF NAME CHANGE: 19690320 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 Quarter Ended June 30, 1998 ------------------------------------------------------------ Commission File Number 1-7283 ------------------------------------------------------- REGAL-BELOIT CORPORATION - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0875718 - ----------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 200 State Street, Beloit, Wisconsin 53511-6254 - ----------------------------------------------------------------------------- (Address of principal executive offices) (608) 364-8800 - ----------------------------------------------------------------------------- (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 --- --- Indicate the number of shares outstanding of each of the issuers classes of common stock as of the latest practicable date. 20,903,940 Shares, Common Stock, $.01 Par Value - ----------------------------------------------------------------------------- 1 REGAL-BELOIT CORPORATION FORM 10-Q For Quarter Ended June 30, 1998 INDEX Page No. PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Balance Sheet . . . . . . . . . . . 3 Statement of Income . . . . . . . . . . . . . 4 Condensed Statement of Cash Flows . . . . . . 5 Notes to Financial Statements . . . . . . . . 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . 7-9 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders. . . 9 Item 6 - Reports on Form 8-K. . . . . . . . . . . . . 10 Signature . . . . . . . . . . . . . . . . . . . . . . 10 2
PART I FINANCIAL INFORMATION 1. Financial Statements -------------------- REGAL-BELOIT CORPORATION CONDENSED BALANCE SHEET (In Thousands of Dollars) (From Audited (Unaudited) Statements) ------------- ------------- June 30, 1998 Dec. 31, 1997 ------------- ------------- ASSETS Current Assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 2,781 $ 3,351 Receivables, less reserves of $2,697 in 1998 and $2,620 in 1997 . . . . . . . . . . . . . . . . . . . 72,164 69,660 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 89,971 85,527 Other current assets . . . . . . . . . . . . . . . . . . . . 15,196 14,021 --------- --------- Total Current Assets. . . . . . . . . . . . . . . . . . . 180,112 172,559 --------- --------- Property, Plant and Equipment at Cost. . . . . . . . . . . . . 240,505 233,614 Less - accumulated depreciation. . . . . . . . . . . . . . . (91,247) (82,355) --------- --------- Net Property, Plant and Equipment . . . . . . . . . . . . 149,258 151,259 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,084 151,358 Other Noncurrent Assets. . . . . . . . . . . . . . . . . . . . 10,348 10,449 --------- --------- Total Assets. . . . . . . . . . . . . . . . . . . . . . . $488,802 $485,625 ========= ========= LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 20,314 $ 23,590 Federal and state income taxes . . . . . . . . . . . . . . . 1,648 5,696 Other current liabilities. . . . . . . . . . . . . . . . . . 33,533 42,646 --------- --------- Total Current Liabilities. . . . . . . . . . . . . . . 55,495 71,932 --------- --------- Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . . 192,240 192,261 Deferred Income Taxes. . . . . . . . . . . . . . . . . . . . . 32,327 31,726 Other Noncurrent Liabilities . . . . . . . . . . . . . . . . . 285 279 Shareholders' Investment: Common stock, $.01 par value, 50,000,000 shares authorized, 20,902,440 issued in 1998 and 20,830,226 issued in 1997. . . . . . . . . . . . . . . 209 208 Additional paid-in capital . . . . . . . . . . . . . . . . . 40,736 38,904 Retained earnings. . . . . . . . . . . . . . . . . . . . . . 167,435 150,357 Cumulative Translation Adjustments . . . . . . . . . . . . . 75 (42) --------- --------- Total Shareholders Investment. . . . . . . . . . . . . . 208,455 189,427 --------- --------- Total Liabilities and Shareholders' Investment. . . . $488,802 $485,625 ========= ========= See accompanying notes.
3
REGAL-BELOIT CORPORATION STATEMENT OF INCOME (In Thousands of Dollars, Except Per Share Data) (Unaudited) --------------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Net Sales . . . . . . . . . . . . . . $ 138,981 $ 143,610 $ 276,799 $ 214,180 Cost of Sales . . . . . . . . . . . . 97,691 102,202 195,771 152,401 ---------- ---------- --------- ---------- Gross Profit . . . . . . . . . . . 41,290 41,408 81,028 61,779 Operating Expenses . . . . . . . . . . 19,320 19,545 39,190 27,854 ---------- ---------- ---------- ---------- Income from Operations . . . . . . 21,970 21,863 41,838 33,925 Interest Expense . . . . . . . . . . . 3,011 4,077 5,999 4,130 Interest Income . . . . . . . . . . . 66 256 196 619 ---------- ---------- ---------- ---------- Income Before Taxes . . . . . . . . 19,025 18,042 36,035 30,414 Provision for Income Taxes . . . . . . 7,346 7,235 13,942 11,901 ---------- ---------- ---------- ---------- Net Income . . . . . . . . . . . . $ 11,679 $ 10,807 $ 22,093 $ 18,513 ========== ========== ========== ========== Per Share of Common Stock: Earnings Per Share . . . . . . . . $ .56 $ .52 $ 1.06 $ .89 ========== ========== ========== ========== Earnings Per Share-Assuming Dilution. . . . $ .55 $ .51 $ 1.04 $ .87 ========== ========== ========== ========== Cash Dividends Declared . . . . . . $ .12 $ .12 $ .24 $ .24 ========== ========== ========== ========== Average Number of Shares Outstanding . . . . . . . . 20,898,356 20,807,058 20,879,926 20,790,398 ========== ========== ========== ========== Average Number of Shares-Assuming Dilution . . . . . 21,348,761 21,252,978 21,338,957 21,250,583 ========== ========== ========== ========== See accompanying notes. 4
REGAL-BELOIT CORPORATION CONDENSED STATEMENT OF CASH FLOWS (In Thousands of Dollars) (Unaudited) ------------------------- Six Months Ended June 30, ------------------------- 1998 1997 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,093 $ 18,513 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation, amortization and deferred income taxes. . . . . . 11,886 8,224 Change in assets and liabilities: Current assets, other than cash . . . . . . . . . . . . . . . (8,056) 10,084 Current liabilities, other than notes payable . . . . . . . . (15,444) (5,013) --------- ---------- Net cash provided from operating activities . . . . . . . 10,479 31,808 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment, net of retirements . . (7,217) (6,352) Business acquisition . . . . . . . . . . . . . . . . . . . . . . . --- (279,224) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 356 --------- ---------- Net cash used in investing activities . . . . . . . . . . . . . (6,850) (285,220) CASH FLOWS FROM FINANCING ACTIVITIES: Additions to long-term debt. . . . . . . . . . . . . . . . . . . . --- 242,000 Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . (18) (16,287) Dividends to shareholders. . . . . . . . . . . . . . . . . . . . . (5,006) (4,974) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823 1,060 --------- ---------- Net cash provided from (used in) financing activities . . . . . (4,201) 221,799 EFFECT OF EXCHANGE RATE ON CASH. . . . . . . . . . . . . . . . . . . 2 (64) --------- ---------- Net (decrease) in cash and cash equivalents. . . . . . . . . . . . (570) (31,677) Cash and cash equivalents at beginning of period . . . . . . . . . 3,351 38,402 --------- ---------- Cash and cash equivalents at end of period . . . . . . . . . . . . $ 2,781 $ 6,725 ========= ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during year for: Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,067 $ 3,329 Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,090 $ 3,402 See accompanying notes.
5 REGAL-BELOIT CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998 1. BASIS OF PRESENTATION The condensed financial statements include the accounts of Regal-Beloit Corporation and its wholly owned subsidiaries and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested these statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. 2. INVENTORIES Cost for approximately 82% of the Company's inventory is determined using the last-in, first-out (LIFO) inventory valuation method. The approximate percentage distribution between major classes of inventories is as follows: 6-30 12-31 1998 1997 ---- ----- Raw Material 14% 13% Work-in Process 24% 23% Finished Goods 62% 64% 3. ACQUISITION The Statement of Income incorporates, after March 26, 1997, the results of operations of Marathon Electric Manufacturing Corporation, which was acquired by the Company on March 26, 1997. Marathon Electric operations did not have a material impact on the Statement of Income in the first quarter of 1997. 4. IMPACT OF NEW ACCOUNTING PRONOUNCEMENT Financial Accounting Standard No. 130 ("SFAS 130"), "Reporting Comprehensive Income," establishes standards for the reporting and display of comprehensive income and its components. Adoption of SFAS 130 is required by the Company as of the December 31, 1998 statements. The impact for the second quarter of 1998 was $10,000 of additional comprehensive income relating to the cumulative translation adjustment recorded, resulting in net comprehensive income of $11,689,000 for the quarter. The impact for the first six months of 1998 was $117,000 of additional comprehensive income relating to the cumulative translation adjustment, resulting in net comprehensive income of $22,210,000. 6 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations ----------------------------------- RESULTS OF OPERATIONS - --------------------- Net sales for the second quarter of 1998 were $138,981,000, 3.2% lower than net sales of $143,610,000 in 1997's second quarter. Net sales for the second quarter of the Company's Electrical Group were $67,402,000, 4.5% lower than in 1997's second quarter. The Electrical Group sales decrease was due to the inclusion of three days of March 1997 sales, approximately $3,000,000, in the second quarter of 1997, the three days occurring immediately after the Company's acquisition of Marathon Electric on March 26, 1997. Excluding the $3,000,000, 1998 second quarter sales of the Electrical Group were virtually unchanged from a year earlier. Mechanical Group second quarter 1998 net sales of $71,579,000 were 2.0% below sales of $73,014,000 in comparable 1997, due primarily to lower sales to the agricultural market, one of the many markets the Group serves. Net sales for the six months ended June 30, 1998, were $276,799,000, a 29.2% increase above net sales of $214,180,000 in the first half of 1997. Electrical Group 1998 net sales were $132,469,000 for the same period, representing 48% of total Company sales. On a pro-forma basis assuming Marathon Electric had been acquired January 1, 1997, comparable six months 1997 Electrical Group sales would have been $133,432,000. The small decrease was due primarily to lower sales to Asian markets. Mechanical Group six months 1998 net sales were $144,330,000, a .5% increase from sales of $143,584,000 in comparable 1997. Mechanical Group net sales comprised 52% of total Company sales. Income from operations in the second quarter of 1998 was $21,970,000, a small increase from the prior year. For the first half of 1998 income from operations was $41,838,000, 23.3% greater than in comparable 1997, due primarily to the March 26, 1997 acquisition of Marathon Electric. As a percent of net sales, income from operations was 15.8% and 15.1% for 1998's second quarter and first six months, respectively, as compared to 15.2% and 15.8% for the comparable second quarter and first six months of 1997, respectively. The higher second quarter 1998 operating margin was due to improved Electrical Group gross profit margin, which resulted primarily from favorable commodity prices on raw materials and a favorable mix of products sold. The lower first half 1998 operating margin as compared to 1997 resulted primarily from the lower operating margins of the acquired Marathon Electric as compared to those of the Mechanical Group. Interest expense of the Company of $3,011,000 in the second quarter of 1998 was $1,066,000 (26.1%) lower than in comparable 1997 due to reduced long-term debt outstanding. Interest expense for the first six months of 1998 was $1,869,000 higher than in comparable 1997 due to the March 26, 1997 acquisition of Marathon Electric financed primarily with long-term debt. Interest income was lower in both the second quarter and first half of 1998 versus the comparable periods of 1997 due primarily to the utilization of invested cash in the 1997 acquisition. 7 Net income in the second quarter of 1998 of $11,679,000, or $.56 per share ($.55 assuming dilution), was $872,000 (8.1%) higher than the $10,807,000, or $.52 per share ($.51 assuming dilution), earned a year ago. The improvement was due to higher margins in the Company's Electrical Group. Net income for the six months ended June 30, 1998, was $22,093,000, or $1.06 per share ($1.04 assuming dilution), $3,580,000 (19.3%) greater than the $18,513,000, or $.89 per share ($.87 assuming dilution), earned in comparable 1997. In addition to the improved income before taxes, the Company benefited from lower effective income tax rates in 1998 as compared to 1997. The Company is currently in the process of implementing the required changes to its computer software programs and operating systems to be Year 2000 compliant and expects to complete these changes in 1998. The Company is also communicating with its suppliers and customers concerning Year 2000 compliance. Management believes the costs to become Year 2000 compliant will not be material to the Company's financial condition or results of operations. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital at June 30, 1998 was $124,617,000, 23.8% higher than $100,672,000 at December 31, 1997. The change was due primarily to modest increases in accounts receivable and inventories coupled with reductions in current liabilities. The Company's current ratio increased to 3.2:1 at June 30, 1998 from 2.4:1 at year-end 1997. At June 30, 1998, the Company's outstanding long-term debt was $192,240,000, virtually unchanged from December 31, 1997. The outstanding debt was borrowed under the Company's $225,000,000 unsecured revolving credit facility (the "Facility"). At June 30, 1998, the Company had $33,000,000 of available borrowing capacity under the Facility and an additional $10,000,000 under a supplemental $10,000,000 line of credit with its lead bank. The Company's funded debt to EBITDA ratio at June 30, 1998 was 1.84:1, down from 1.86:1 at year-end 1997, and its capitalization ratio was 48.0%, down from 50.4% at year-end 1997 and 56.8% one year ago. The Company paid an annual interest rate of approximately 6.0% on its outstanding debt at June 30, 1998. The Company's cash flow from operations in the second quarter of 1998 was $7,449,000, and was $10,479,000 for the first six months of the year. During the first half of 1998, primarily one-time reductions in current liabilities resulted in a $15,444,000 use of cash. Coupled with increases in accounts receivable and inventories, the positive cash generated by net income and depreciation was partly offset. Free cash flow for the first half of 1998 was a negative $1,377,000 after reducing cash flow from operations for net capital expenditures and dividends to shareholders. Management believes that free cash flow will increase in the second half of 1998 due to expected reductions in accounts receivable and inventories, coupled with cash flow from net income and depreciation. Outstanding commitments for capital items at June 30, 1998 totaled approximately $1,600,000. The Company believes that the combination of cash generated by operations and available borrowing capacity is adequate to finance the Company's operations for the foreseeable future. 8 CAUTIONARY STATEMENT - -------------------- The following is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in Item 2. of this form 10-Q are forward looking statements. Actual results may differ materially from those contemplated by the forward looking statements. These forward looking statements involve risks and uncertainties, including but not limited to, the following risks: 1) cyclical downturns affecting the markets for capital goods, 2) substantial increases in interest rates, 3) availability of or material increases in the costs of select raw materials, and 4) actions taken by competitors with regard to such matters as product offering, pricing, and delivery. Investors are directed to the Company's documents, such as its Annual Report on Form 10-K, Form 10-Q's, and Annual Report, filed with the Securities and Exchange Commission. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The Annual Meeting of stockholders of Regal-Beloit Corporation was held on April 21, 1998. (b) The terms of Directors James L. Packard, Henry W. Knueppel, William W. Keefer, J. Reed Coleman, Frank E. Bauchiero and Stephen N. Graff were continued. (c) Matters voted on at the Annual Meeting and the results of each vote were as follows: (1) Elect three Class B Directors for a term of three years.
For Withheld ---------- -------- John M. Eldred 18,895,942 180,921 John A. McKay 18,895,562 181,301 G. Frederick Kasten, Jr. 18,897,424 179,439
(2) Ratify the appointment of Arthur Andersen LLP as independent public accountants for the Company for the year ending December 31, 1998. For Against Abstain ---------- ------- ------- 19,038,926 25,313 12,624 (3) Approve the Company's 1998 Stock Option Plan. For Against Abstain ---------- --------- ------- 15,515,137 3,470,925 90,801 9 Item 6. Exhibits and Reports on Form 8-K -------------------------------- There were no exhibits or reports on Form 8-K filed during the quarter ended June 30, 1998. SIGNATURE 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. REGAL-BELOIT CORPORATION (Registrant) Kenneth F. Kaplan ----------------------- Kenneth F. Kaplan Vice President, Chief Financial Officer and Secretary (Principal Accounting and Financial Officer) DATE: August 7, 1998 ------------------- 10 EX-27 2
5 6-MOS DEC-31-1998 JUN-30-1998 2,781,000 0 72,164,000 2,697,000 89,971,000 180,112,000 240,505,000 91,247,000 488,802,000 55,495,000 192,240,000 0 0 209,000 208,246,000 488,802,000 276,799,000 276,799,000 195,771,000 195,771,000 39,190,000 0 5,999,000 36,035,000 13,942,000 22,093,000 0 0 0 22,093,000 1.06 1.04
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