UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the quarterly period ended June 30, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number 1-6176
AUGAT INC.
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2022285
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
89 Forbes Boulevard, P.O. Box 448, Mansfield, Massachusetts 02048
------------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(508) 543-4300
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(Registrant's telephone number, including area code)
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 / /
The number of shares of the Registrant's common stock
outstanding on June 30, 1994 was 19,196,559.
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AUGAT INC.
INDEX
Financial Statements: Page No.
Statements of Consolidated Income - For the
Three Months and Six Months Ended June 30,
1994 and 1993 --------------------------------- 3
Consolidated Balance Sheets - June 30, 1994 4-5
and December 31, 1993 -------------------------
Statements of Consolidated Cash Flows For the Six
Months Ended June 30, 1994 and 1993 ----------- 6
Notes to Unaudited Consolidated Financial Statements ---- 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations ---------------- 8-9
Part II - Other Information ----------------------------- 10
Signatures ---------------------------------------------- 10
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PART I - FINANCIAL INFORMATION
Statements of Consolidated Income
For the Three Months and Six Months Ended June 30, 1994 and 1993
(In thousands, except per share data)
Three Months Ended* Six Months Ended*
1994 1993 1994 1993
---- ---- ---- ----
Net sales ---------------- $134,399 $106,295 $261,802 $207,450
Cost of products sold ---- 104,844 82,982 205,825 162,592
-------- -------- -------- --------
Gross margin ------------- 29,555 23,313 55,977 44,858
Selling, general and admini-
strative expenses ------ 18,034 16,633 34,382 32,627
-------- -------- -------- --------
Income from operations --- 11,521 6,680 21,595 12,231
Other income (expense):
Interest income, etc. -- 87 141 12 351
Interest expense ------- (1,078) (1,196) (2,172) (2,427)
-------- -------- -------- --------
Net ---------------------- (991) (1,055) (2,160) (2,076)
-------- -------- -------- --------
Income before taxes on
income ----------------- 10,530 5,625 19,435 10,155
Provision for taxes on
income ----------------- 3,580 2,025 6,785 3,655
-------- -------- -------- --------
Net income --------------- $ 6,950 $ 3,600 $ 12,650 $ 6,500
======== ======== ======== ========
Earnings per share ------- $.36 $.19 $.66 $.35
Average common shares
outstanding ------------ 19,190 18,722 19,154 18,582
Dividends paid per share - $.00 $.00 $.00 $.00
* Unaudited
See notes to unaudited consolidated financial statements.
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Consolidated Balance Sheets, June 30, 1994 and December 31, 1993
(In thousands)
Assets 1994* 1993
Current Assets:
Cash and cash equivalents ------------ $ 23,637 $ 8,540
Accounts receivable-net -------------- 73,396 73,633
Refundable income taxes -------------- 256 138
Inventories:
Finished goods --------------------- 36,772 33,493
Work in process -------------------- 22,308 26,415
Raw materials ---------------------- 30,097 26,654
-------- --------
Total inventories ---------------- 89,177 86,562
Deferred income taxes ---------------- 4,556 4,556
Prepaid expenses --------------------- 3,519 3,079
-------- --------
Total current assets ------- 194,541 176,508
Property, Plant, and Equipment:
Land --------------------------------- 3,685 3,528
Buildings and building
improvements ----------------------- 58,999 54,674
Machinery and equipment -------------- 123,603 115,155
Furniture and fixtures --------------- 21,259 20,603
Construction in progress - buildings
and machinery ---------------------- 15,420 10,010
-------- --------
Total -------------------------- 222,966 203,970
Less accumulated depreciation -------- (113,105) (103,971)
-------- --------
Property, plant, and equipment-net ----- 109,861 99,999
Other Assets:
Goodwill-net ------------------------- 26,107 26,759
Property held for sale-net ----------- 8,204 9,179
Other -------------------------------- 5,466 5,415
-------- --------
Total other assets ----------------- 39,777 41,353
-------- --------
Total -------------------------- $344,179 $317,860
======== ========
* Unaudited
See notes to unaudited consolidated financial statements.
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Consolidated Balance Sheets, June 30, 1994 and December 31, 1993
(In thousands)
Liabilities and Shareholders' Equity
1994* 1993
---- ----
Current Liabilities:
Notes payable ------------------------ $ 2,000 $ 1,000
Current maturities of long-term debt - 6,604 2,130
Accounts payable --------------------- 34,219 28,353
Federal, state and foreign taxes
payable ---------------------------- 4,242 3,352
Accrued restructuring costs ---------- 374 1,751
Accrued compensation and benefits ---- 11,867 10,193
Other accrued expenses --------------- 12,281 10,801
-------- --------
Total current liabilities ---------- 71,587 57,580
Long-Term Debt ------------------------- 41,031 45,797
Deferred Income Taxes ------------------ 12,551 12,872
Shareholders' Equity:
Common stock ------------------------- 1,921 1,903
Paid-in capital ---------------------- 71,476 69,262
Retained earnings -------------------- 131,528 118,878
Cumulative translation adjustment ---- 14,695 11,923
Treasury stock, at cost -------------- (110) (110)
Unearned compensation-restricted
stock awards ----------------------- (500) (245)
-------- --------
Shareholders' equity --------------- 219,010 201,611
-------- --------
Total ---------------------------- $344,179 $317,860
======== ========
* Unaudited
See notes to unaudited consolidated financial statements.
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Statements of Consolidated Cash Flows
For the Six Months Ended June 30, 1994 and 1993
(In thousands)
1994* 1993*
---- ----
Cash Flows From Operating Activities:
Net income ----------------------------------- $12,650 $ 6,500
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization -------------- 9,415 7,952
(Gain) loss on the sale of property, plant
and equipment ------------------------------ (128) 48
Deferred federal income taxes -------------- (321) 31
Amortization of restricted stock awards ---- 117 85
Increase (decrease) in cash from changes in
assets and liabilities:
Accounts receivable ------------------------ 237 (10,326)
Refundable income taxes -------------------- (118) 113
Inventories -------------------------------- (2,615) (5,952)
Prepaid expenses --------------------------- (440) (804)
Other assets ------------------------------- (156) (71)
Accounts payable --------------------------- 5,866 4,406
Income taxes payable ----------------------- 890 2,002
Accrued restructuring, compensation and
other expenses ----------------------------- 1,777 3,409
Effect of exchange rate changes on
current assets and liabilities (other than
cash) -------------------------------------- (130) 823
------- -------
Net cash provided by operating activities ---- 27,044 8,216
------- -------
Cash Flows From Investing Activities:
Purchase of property, plant, and equipment - (15,711) (8,776)
Proceeds from the sale of property, plant
and equipment ------------------------------ 237 104
------- -------
Net cash used for investing activities ------- (15,474) (8,672)
------- -------
Cash Flows From Financing Activities:
Net increase (decrease) in short term
borrowings --------------------------------- 1,000 (3,600)
Payments for long-term debt ---------------- (292) (697)
Common stock issued under employee benefit
plans -------------------------------------- 1,860 3,763
------- -------
Net cash provided by (used for) financing
activities ---------------------------------- 2,568 (534)
Effect of exchange rate changes on cash -------- 959 79
------- -------
Net changes in cash and cash equivalents ------- 15,097 (911)
Cash and cash equivalents at beginning of the
period ------------------------------------- 8,540 28,323
------- -------
Cash and cash equivalents at end of the period - $23,637 $27,412
======= =======
* Unaudited
See notes to unaudited consolidated financial statements.
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Notes to Unaudited Consolidated Financial Statements
----------------------------------------------------
1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to
present fairly the financial position as of June 30, 1994, the
results of operations for the three months and six months ended
June 30, 1994 and 1993 and the cash flows for the six month
periods then ended.
2. The results of operations for the three month period ended June
30, 1994 and 1993 are not necessarily indicative of the results
to be expected for the full year.
3. Earnings Per Share - Earnings per share are based on the weighted
average number of shares outstanding during each period. The
exercise of all presently issued outstanding stock options and
the issuance of shares under the "Employee Stock Purchase Plan"
would have no material dilutive effect on earnings per share.
4. The acquisition of National Industries Inc. included a liability
of approximately $5.4 million to cover the estimated costs of
site remediation for certain National facilities. The Company
informed the State of Alabama about the possible contamination
and its desire to voluntarily proceed with further study and, if
necessary, remediation of the possible contamination. The
Company has completed its investigation and provided this
information to the State. The State has informed the Company
that it believes further investigation is necessary. The
Company, however, has considered and disagreed with the State's
comments and is voluntarily proceeding to design and implement an
appropriate remedy. The Company has included in its financial
statements an allowance of $4.7 million for estimated
environmental cleanup costs as of June 30, 1994.
5. Subsequent Events:
The Company announced on July 19, 1994 that its Board of
Directors voted on that day to reinstate a quarterly cash
dividend of $.04 per share on The Company's Common Stock. This
dividend is payable on August 31, 1994 to shareholders of record
on August 10, 1994.
On July 22, 1994, the Company increased its borrowing limit from
$40 million up to $100 million under a new unsecured revolving
credit agreement with several banks. The agreement which expires
no sooner than July 1, 1997 requires a commitment fee of one-
quarter percent per annum, payable on any available and unused
portion.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Net Sales: Net sales for the quarter and six months ended June 30,
1994 by product group, compared to the quarter and six months ended
June 30, 1993, are as follows (dollars in thousands):
---------------------------------------------------------------------
Quarter Ended June 30,
1994 1993
---------------- -----------------
Product Group % %
---------------------------------------------------------------------
Interconnection Products
Business $ 33,462 24.9% $ 33,372 31.4%
Wiring Systems and Components
Business 74,796 55.6% 54,592 51.4%
Communications Products Business 26,141 19.5% 18,331 17.2%
-------- ------ -------- ------
Total $134,399 100.0% $106,295 100.0%
======== ====== ======== ======
--------------------------------------------------------------------
Six Months Ended June 30,
1994 1993
---------------- -----------------
Product Group % %
--------------------------------------------------------------------
Interconnection Products
Business $ 65,972 25.2% $ 64,777 31.2%
Wiring Systems and Components
Business 148,824 56.8% 107,298 51.7%
Communications Products Business 47,006 18.0% 35,375 17.1%
-------- ------ -------- ------
Total $261,802 100.0% $207,450 100.0%
======== ====== ======== ======
--------------------------------------------------------------------
Net sales for the quarter and six months ended June 30, 1994 increased
primarily due to the Company's expanded role in the domestic
automotive market, as well as increased volume in the cable television
and telecommunications segments of the communications industry. Net
sales of the Interconnection Products Division were flat primarily due
to the continuing economic recession in the markets which it serves.
Business conditions in the second quarter and six months of 1994
continue to reflect improvement in the domestic markets in which the
Company serves. The domestic Automotive business showed especially
strong growth as a result of the strong demand for Chrysler's new LH
and Neon cars and Ford's new Mustang, coupled with Ford's decision to
continue production of the Aerostar Minivan which had been scheduled
for phaseout with production ending in the second quarter. In the
European and Far East markets, the continuing recession has adversely
affected the Company with the exception of the European automotive
business which showed a significant improvement in the second quarter
over last year. Incoming orders for the second quarter and six
months of 1994 were $143 million and $277 million, respectively
compared to $112 million and $215 million for the same periods of the
prior year. The backlog at June 30, 1994 was $120 million compared
with $98 million at June 30, 1993.
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Cost of Products Sold: Cost of products sold as a percentage of sales
remained constant at 78.0 - 78.6% in the second quarter and six months
ended June 30, 1994 compared to the second quarter and six months of
1993. Price decreases in selected product lines have been offset by
new product introductions. In addition the dollars expended to
manufacture the Company's products have increased due to increases in
material costs, wage increases and overheads. These expenses have
been partially offset by improved manufacturing methods and ongoing
cost-cutting programs.
Selling, General and Administrative Expenses: These expenses were
13.4% of sales in the second quarter of 1994 compared to 15.6% in the
comparable quarter of the prior year. For the six months ended June
30, 1994, these expenses were 13.1% of sales compared to 15.7% of
sales in the comparable period of the prior year. While the dollars
spent in this area have increased, the leveraging of such expenses due
to increased volume have lowered the SG&A percent of sales. These
expenses may vary from period to period based on various factors, none
of which, individually are significant.
Other Income (Expense): Interest income, etc. decreased in 1994 due
to the decrease in cash available to invest over the comparable
period. Interest expense decreased in the 1994 period compared to
the same period in 1993 due to the decrease in total outstanding debt
in 1994 when compared to 1993.
Income Taxes: The effective income tax rate for the Company in the
second quarter of 1994 was 34% and 35% for the six months ended June
30, 1994. The second quarter tax rate is lower than the statutory
rate primarily due to income earned in jurisdictions with lower
effective tax rates. The tax rate for the second quarter and six
months ended June 30, 1993 was 36%. The 1993 tax rate was higher than
the statutory rate due to income earned in jurisdictions with higher
effective tax rates.
Net Income: Net income was $6.9 million and $12.6 million for the
three months and six months ended June 30, 1994 respectively, compared
to net income of $3.6 million and $6.5 million in the same periods of
the prior year. The increase in net income for the second quarter and
six months ended June 30, 1994 resulted principally from increased
sales volume in our domestic automotive business and communications
business and ongoing productivity and cost control programs.
Liquidity and Capital Resources: The Registrant continues to maintain
sufficient liquidity and has adequate resources to fund its operations
under current business conditions. The income generated from
operations along with the cash on hand and established bank credit
facilities are sufficient to cover expected sales growth and planned
capital expenditure programs.
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PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) Annual Meeting of Shareholders held on April 26, 1994
(b) Shareholders approved the following proposal:
The 1994 Stock Plan authorizing the Company to make awards of
restricted stock and to grant incentive and non-statutory options
and stock appreciation rights to employees and directors of the
Company to purchase up to 750,000 shares of common stock by a
vote of 14,448,763 shares in favor, 917,533 shares opposed and
81,952 shares abstaining.
Item 6 - Exhibits and Reports on Form 8-K
The following exhibit on Form 8-K was filed during the Second Quarter
of 1994:
(a) Exhibits - The Registrants News Release dated April 13, 1994.
(b) The following report on Form 8-K was filed during the Second
Quarter of 1994:
1) Form 8-K filed April 19, 1994 for Item 5, Other Events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereto duly authorized.
AUGAT INC.
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(Registrant)
/s/ Ellen B. Richstone
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Ellen B. Richstone
Vice President and
Chief Financial Officer
Date: August 5, 1994
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