-----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, IpAjy4R9rugVCnALhSeEucU5UGVNUKrq0fWcCIh3lGqURVx3f6nI4Fv4C13XITqF sbqWcU/zZbIYyFb3SkdNdQ== 0000082811-97-000020.txt : 19971106 0000082811-97-000020.hdr.sgml : 19971106 ACCESSION NUMBER: 0000082811-97-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971105 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: 97708000 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 September 30, 1997 -------------------------------------------------------------- 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. 20,821,976 Shares, Common Stock, $.01 Par Value - ------------------------------------------------------------------------------- 1 REGAL-BELOIT CORPORATION FORM 10-Q For Quarter Ended September 30, 1997 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 6 - Reports on Form 8-K. . . . . . . . . . . . . . . . . 10 Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2 PART I FINANCIAL INFORMATION 1. Financial Statements REGAL-BELOIT CORPORATION
CONDENSED BALANCE SHEET ASSETS (In Thousands of Dollars) (From Audited (Unaudited) Statements) -------------- ------------- Sept. 30, 1997 Dec. 31, 1996 -------------- ------------- Current Assets: Cash and cash equivalents . . . . . . . . . . . . . . . $ 3,301 $ 38,402 Receivables, less reserves of $2,570 in 1997 and $1,190 in 1996. . . . . . . . . . . . . . . . . 75,735 32,796 Inventories . . . . . . . . . . . . . . . . . . . . . . 81,333 45,908 Other current assets. . . . . . . . . . . . . . . . . . 10,335 4,925 --------- --------- Total Current Assets . . . . . . . . . . . . . . . . 170,704 122,031 --------- --------- Property, Plant and Equipment at Cost . . . . . . . . . . 228,862 142,740 Less - accumulated depreciation . . . . . . . . . . . . (78,499) (68,124) --------- --------- Net Property, Plant and Equipment . . . . . . . . . 150,363 74,616 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . 152,104 ------ Other Noncurrent Assets. . . . . . . . . . . . . . . . . . 10,534 349 --------- --------- Total Assets. . . . . . . . . . . . . . . . . . . . . $483,705 $196,996 ========= ========= LIABILITIES AND SHAREHOLDERS INVESTMENT Current Liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . $ 22,077 $ 9,481 Federal and state income taxes . . . . . . . . . . . . . 4,374 886 Other current liabilities. . . . . . . . . . . . . . . . 43,079 19,051 --------- --------- Total Current Liabilities. . . . . . . . . . . . . $ 69,530 $ 29,418 --------- --------- Long-term Debt . . . . . . . . . . . . . . . . . . . . . . 207,271 2,168 Deferred Income Taxes. . . . . . . . . . . . . . . . . . . 25,443 5,387 Other Noncurrent Liabilities . . . . . . . . . . . . . . . 272 -------- Shareholders Investment: Common stock, $.01 par value, 50,000,000 shares authorized, 20,821,976 issued in 1997 and 20,644,843 issued in 1996. . . . . . . . . . . . . 208 206 Additional paid-in capital . . . . . . . . . . . . . . . 38,846 37,695 Retained earnings. . . . . . . . . . . . . . . . . . . . 142,387 121,453 Cumulative Translation Adjustments . . . . . . . . . . . (252) 669 --------- --------- Total Shareholders Investment. . . . . . . . . . . . 181,189 160,023 --------- --------- Total Liabilities and Shareholders Investment . . . . $483,705 $196,996 ========= ========= See accompanying notes.
3 REGAL-BELOIT CORPORATION
STATEMENT OF INCOME (In Thousands of Dollars) (Unaudited) ------------------------------------------------------ Three Months Ended Nine Months Ended ------------------------------------------------------ September 30, September 30, ----------------------- -------------------------- 1997 1996 1997 1996 ---------- --------- ---------- ----------- Net Sales . . . . . . . . . . . . . $ 138,403 $ 68,149 $ 352,583 $ 215,085 Cost of Sales . . . . . . . . . . . 99,335 48,391 251,736 151,135 ---------- ---------- ----------- ----------- Gross Profit . . . . . . . . . . 39,068 19,758 100,847 63,950 Operating Expenses . . . . . . . . . 19,134 8,010 46,988 24,295 ---------- ---------- ----------- ----------- Income from Operations. . . . . . 19,934 11,748 53,859 39,655 Interest Expense . . . . . . . . . . 3,501 109 7,631 300 Interest Income . . . . . . . . . . 117 316 736 628 ---------- ---------- ----------- ---------- Income Before Taxes . . . . . . . 16,550 11,955 46,964 39,983 Provision for Income Taxes . . . . . 6,636 4,543 18,537 15,097 ---------- ---------- ----------- ---------- Net Income . . . . . . . . . . . $ 9,914 $ 7,412 $ 28,427 $ 24,886 ========== ========== =========== ========== Per Share of Common Stock: Net Income . . . . . . . . . . . $.48 $.36 $1.37 $1.21 ========== ========== =========== ========== Cash Dividends Declared . . . . . $.12 $.12 $.36 $.36 ========== ========== =========== ========== Weighted Average Number of Shares Outstanding . . . . . . . 20,816,285 20,631,363 20,799,122 20,610,961 ========== ========== ============ =========== See accompanying notes.
4 REGAL-BELOIT CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (In Thousands of Dollars) (Unaudited) ----------------------------- Nine Months Ended Sept. 30, ----------------------------- 1997 1996 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,427 $ 24,886 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation, amortization and deferred income taxes. . . . . . 13,626 8,188 Change in assets and liabilities: Current assets, other than cash . . . . . . . . . . . . . . . 12,826 6,188 Current liabilities, other than notes payable . . . . . . . . 1,394 (1,802) ----------- ------------ Net cash provided from operating activities . . . . . . . 56,273 37,460 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment, net of retirements . . (10,481) (8,044) Business acquisition . . . . . . . . . . . . . . . . . . . . . . . (279,260) ------ Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310 (434) ----------- ------------ Net cash used in investing activities . . . . . . . . . . . . . (289,431) (8,478) CASH FLOWS FROM FINANCING ACTIVITIES: Additions to long-term debt. . . . . . . . . . . . . . . . . . . . 242,000 ------ Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . (37,520) (1,720) Dividends to shareholders. . . . . . . . . . . . . . . . . . . . . (7,471) (7,004) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,152 458 ----------- ------------ Net cash provided from (used in) financing activities . . . . . 198,161 (8,266) EFFECT OF EXCHANGE RATE ON CASH. . . . . . . . . . . . . . . . . . . (104) 6 ---------- ------------ Net (decrease) increase in cash and cash equivalents . . . . . . . (35,101) 20,722 Cash and cash equivalents at beginning of period . . . . . . . . . 38,402 7,458 ---------- ------------ Cash and cash equivalents at end of period . . . . . . . . . . . . $ 3,301 $ 28,180 ========== ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during year for: Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,878 $ 236 ========== ============ Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,700 $ 15,428 ========== ============ See accompanying notes.
5 REGAL-BELOIT CORPORATION NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1997 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 80% of the Company's inventory is determined using the last-in, first-out (LIFO) inventory valuation method at September 30, 1997 and 67% at December 31, 1996. The approximate percentage distribution between major classes of inventories is as follows:
9-30 12-31 1997 1996 ---- ----- Raw Material 13% 17% Work-in Process 23% 19% Finished Goods 64% 64%
3. ACQUISITION The financial statements incorporate, after March 26, 1997, the results of operations and the assets and liabilities of Marathon Electric Manufacturing Corporation, which was acquired by the Company on March 26, 1997. 4. IMPACT OF NEW ACCOUNTING PRONOUNCEMENT In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share, which established new standards for computing and presenting net income per common share and replaced the standards previously found in Accounting Principles Board Opinion No. 15, Earnings Per Share. Regal-Beloit Corporation will begin reporting within the Statement of Income net income per common share and net income per common share assuming dilution according to this new standard in the fourth quarter of 1997. For the third quarter and first nine months of 1997 and 1996, net income per common share amounts computed under the new standard are:
Third Quarter Nine Months -------------- ------------- 1997 1996 1997 1996 ------ ------ ------ ------ Basic earnings per share $.48 $.36 $1.37 $1.21 Diluted earnings per share $.47 $.35 $1.35 $1.19
6 5. DISCLOSURES In the opinion of Management, all adjustments which were necessary for a fair statement of the results of the interim periods have been included in the preceding financial statements. These adjustments were considered to be recurring in nature and there were no adjustments other than normal recurring adjustments made to these statements for the periods reported. However, the results of operations for the quarter are not necessarily indicative of results to be expected for the year. Certain items, such as income taxes, LIFO charges, profit sharing expenses and various other accruals, are included in these statements based on estimates for the entire year. Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations ----------------------------------- RESULTS OF OPERATIONS - --------------------- Net sales for the third quarter of 1997 were $138,403,000, or 103% greater than net sales of $68,149,000 in 1996's third quarter. The net sales of the Company's Electrical Group, which was formed when Marathon Electric Manufacturing Corporation was acquired on March 26, 1997 (see "Acquisition" following), were $68,965,000, or 50% of total Company sales, in the third quarter of 1997, accounting for all but $1,289,000 of the Company's sales increase from 1996. On a pro-forma basis the Electrical Group's net sales were 19.3% higher than the third quarter of 1996. The Company's Mechanical Group (formerly the power transmission and cutting tool groups) net sales were $69,438,000 in 1997's third quarter, 2% higher than comparable 1996. Business conditions in the markets served by the Electrical Group were generally good during the third quarter of 1997. Most markets the Group serves did well, and the Group's export sales continued to be strong. Business conditions in the Mechanical Group were more mixed, with the general industrial and the agricultural and construction equipment markets continuing strong, while marine, cutting tool, and custom gearing markets exhibited softness. Net sales for the nine months ended September 30, 1997, were $352,583,000, a 64% increase from comparable 1996 sales of $215,085,000. The increase was entirely due to Electrical Group sales as Mechanical Group net sales of $213,022,000 for the first nine months of 1997 were 1% less than in the first nine months of 1996. Net income in the third quarter of 1997 of $9,914,000, or $.48 per share, was $2,502,000 (34%) higher than the $7,412,000, or $.36 per share, earned in the third quarter of 1996. The contribution of the Company's new Electrical Group accounted for the improvement. Nine months 1997 net income of $28,427,000, or $1.37 per share, was $3,541,000 (14%) improved from the $24,886,000, or $1.21 per share, earned in comparable 1996. On a pro-forma basis, if Marathon Electric had been acquired on January 1, 1996, nine month 1997 net sales for the Company would have been $415,418,000 as compared to $398,370,000 for the same nine months of 1996. Net income and earnings per share of the Company on the same pro-forma basis would have been 7 $29,132,000 and $1.40 per share for the nine months ended September 30, 1997. 1996 nine months net income and earnings per share for the Company would have been $27,286,000 and $1.32 per share. The margins of the Company were, as expected, significantly reduced following the March 26, 1997 acquisition of Marathon Electric, whose margins, though comparable to their peers, are below those of the Company's Mechanical Group. The following table compares the third quarter and nine month margins of 1997 to 1996:
Three Months Ended Nine Months Ended (As a percent of Net Sales) September 30, September 30, ------------------ ----------------- 1997 1996 1997 1996 ------- ------- ------ ------- Gross Profit 28.2 29.0 28.6 29.7 Income From Operations 14.4 17.2 15.3 18.4 Pre-tax Income 12.0 17.5 13.3 18.6 Net Income 7.2 10.9 8.1 11.6 ======= ======= ====== =======
Interest expense of $3,501,000 in the third quarter of 1997 was 2.5% of sales as compared to only $109,000 in comparable 1996. This accounted for the larger margin decline at the pre-tax income level versus the income from operations level. The third quarter 1997 interest expense was $576,000 lower than 1997's second quarter, due primarily to repayment of debt during the third quarter. ACQUISITION - ----------- On March 26, 1997, the Company acquired 100% of the stock of Marathon Electric Manufacturing Corporation, a private company, in a cash merger transaction for approximately $278,000,000. The acquisition of Marathon Electric had no material impact on the Company's first quarter 1997 Statement of Income. Marathon Electric, which now comprises the Company's Electrical Group, is a leading manufacturer of electric motors and generators and related products. In 1996 its sales were $245,000,000 and its net income was $17,800,000. The acquisition was financed with a combination of approximately $37,000,000 of existing cash and $242,000,000 of debt. The debt was provided by Bank of America and M&I Marshall & Ilsley Bank under a $280,000,000, 5-year, unsecured, revolving credit facility. The loan agreement was amended to include seven other banks on May 30, 1997. The interest rate the Company pays is based on LIBOR (London Interbank Offered Rate), plus a variable margin based on the Company's ratio of funded debt to EBITDA. Since March 26, 1997, the Company has paid an annual interest rate of between 6.1% and 6.2% under the facility. In the month of June 1997, the assets and liabilities of Marathon Electric were revalued in accordance with the purchase accounting requirements of generally accepted accounting principles. The net asset value of Marathon Electric increased approximately $27,000,000, the final value of goodwill being $153,963,000. 8 LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital as of September 30, 1997 increased to $101,174,000 from $92,613,000 at December 31, 1996, due primarily to the acquisition of Marathon Electric partly offset by the use of Company cash in the acquisition. (See "Acquisition" preceding.) The current ratio of the Company decreased to 2.5:1 from 4.1:1 for the same reason. At September 30, 1997, the Company had $207,271,000 of long-term debt, a $36,754,000 (15%) reduction from $244,025,000 outstanding at March 31, 1997 and $20,594,000 reduced from June 30, 1997. Of the total debt at September 30, 1997, virtually all was borrowed under the Company's $280,000,000 unsecured revolving credit facility (the "Facility"). Effective October 1, 1997, the Company, in order to lower the commitment fees paid to its lenders, reduced the commitment level under the Facility to $225,000,000. Effectively, the Company had $18,000,000 of available borrowing capacity at September 30, 1997 under the Facility and an additional $10,000,000 under a supplemental line of credit with its lead bank. The Company's funded debt to EBITDA ratio at September 30, 1997 was 2.00:1, down from 2.45:1 at March 31, 1997, and its capitalization ratio was 53.4% as compared to 59.7% at March 31, 1997. The Company paid an annual interest rate of approximately 6.2% on its outstanding debt at September 30, 1997. The Company generated $24,465,000 of cash flow from operations in the third quarter of 1997 and $56,273,000 for the first nine months of the year. Free cash flow (cash flow from operations less net additions to property, plant and equipment less dividends) was $17,839,000 and $38,321,000 for 1997's third quarter and first nine months, respectively. Net capital expenditures during the third quarter were $4,129,000 and are $10,481,000 year-to-date. Outstanding commitments for capital items at September 30, 1997 totaled approximately $2,800,000. The Company believes that the combination of cash generated by operations and available borrowing capacity is adequate to finance the Company for the foreseeable future. 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. 9 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K There were no exhibits or reports on Form 8-K filed during the quarter ended September 30, 1997. 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: November 5, 1997 10 EX-27 2
5 9-MOS DEC-31-1997 SEP-30-1997 3,301,000 0 75,735,000 2,570,000 81,333,000 170,704,000 228,862,000 78,499,000 483,705,000 69,530,000 207,271,000 0 0 208,000 180,189,000 483,705,000 352,583,000 352,583,000 251,736,000 251,736,000 46,988,000 0 7,631,000 46,964,000 18,537,000 28,427,000 0 0 0 28,427,000 1.37 0
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