SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1995
------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- --------------
Commission file no. 1-4651
-------
ECHLIN INC.
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-0330448
- ------------------------------------------- ----------------------
(State of incorporation) (I.R.S. employer
identification no.)
100 Double Beach Road
Branford, Connecticut 06405
- ------------------------------------------- ---------------------
(Address of principal executive offices) (Zip code)
(203) 481-5751
---------------------------------------
(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
---- ----
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Title of class Outstanding at December 31, 1995
- -------------------------- --------------------------------
Common stock, $1 par value 61,170,488
ECHLIN INC.
INDEX
PART I. FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements
Consolidated balance sheets--November 30, 1995
and August 31, 1995. 3
Consolidated statements of income--Three months ended
November 30, 1995 and 1994. 4
Consolidated statements of cash flows--Three months
ended November 30, 1995 and 1994. 5
Notes to consolidated financial statements--
November 30, 1995. 6
Item 2. Management's Financial Analysis 7
PART II. OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
- ----------
2
PART I: FINANCIAL INFORMATION
ECHLIN INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
November 30, August 31,
1995 1995
----------- ----------
(unaudited) (A)
ASSETS
Current assets:
Cash and cash equivalents $ 4,666 $ 27,700
Accounts receivable, less-allowance for
doubtful accounts of $6,477 and $8,088 375,730 340,406
Inventories, at lower of cost (first-in,
first-out) or market:
Raw materials and component parts 167,385 169,024
Work in process 95,524 83,494
Finished goods 450,714 426,267
---------- ----------
Total inventories 713,623 678,785
Other current assets 33,804 29,593
---------- ----------
Total current assets 1,127,823 1,076,484
---------- ----------
Property, plant and equipment, at cost 1,040,925 976,699
Accumulated depreciation (480,412) (451,171)
---------- ----------
Property, plant and equipment, net 560,513 525,528
---------- ----------
Marketable securities 84,885 102,462
---------- ----------
Intangible Assets 188,818 187,592
---------- ----------
Other assets 86,850 68,942
---------- ----------
Total assets $2,048,889 $1,961,008
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 18,604 $ 20,810
Current portion of long-term debt 4,966 4,146
Accounts payable, trade 208,402 201,692
Accrued taxes on income 53,581 43,208
Accrued liabilities 192,745 215,902
---------- ----------
Total current liabilities 478,298 485,758
---------- ----------
Long-term debt 543,258 482,169
---------- ----------
Deferred income taxes 85,419 83,814
---------- ----------
Shareholders' equity:
Preferred stock, without par value:
Authorized 1,000,000 shares, issued none - -
Common stock, $1 par value:
Authorized 150,000,000 shares,
issued 61,430,107 and 59,893,824 61,430 59,894
Capital in excess of par value 348,454 334,191
Retained earnings 587,782 563,024
Foreign currency translation adjustment (52,757) (44,847)
Treasury stock, at cost, 270,264 shares (2,995) (2,995)
---------- ----------
Total shareholders' equity 941,914 909,267
---------- ----------
Total liabilities and shareholders' equity $2,048,889 $1,961,008
========== ==========
See notes to consolidated financial statements.
(A) The balance sheet at August 31, 1995 has been derived from the audited
financial statements at that date.
</table.
3
ECHLIN INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three Months Ended
November 30,
--------------------
1995 1994
--------- ---------
Net sales $704,423 $600,615
Cost of goods sold 513,946 424,556
--------- ---------
Gross profit on sales 190,477 176,059
Selling and administrative expenses 132,399 126,298
--------- ---------
Income from operations 58,078 49,761
--------- ---------
Interest expense (10,496) (6,545)
Interest income 2,830 3,543
--------- ---------
Interest expense, net (7,666) (3,002)
--------- ---------
Income before taxes 50,412 46,759
Provision for taxes 17,212 14,963
--------- ---------
Net income $33,200 $ 31,796
========= =========
Average shares outstanding
61,113 59,321
========= =========
Per share data:
Net income $0.54 $0.54
========= =========
Cash dividends per share $.205 $0.19
========= =========
See notes to consolidated financial statements.
4
ECHLIN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Three Months Ended
November 30,
---------------------
1995 1994
--------- ---------
Cash flows from operating activities:
Net income $33,200 $31,796
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,819 18,732
Changes in assets and liabilities, excluding
acquisitions' balance sheets:
Accounts receivable (32,871) (11,803)
Inventories (31,966) (40,780)
Other current assets (3,765) (5,499)
Accounts payable 5,971 (7,353)
Taxes on income 11,164 6,737
Accrued liabilities (18,414) (7,317)
Other (410) 338
-------- --------
Cash used for operating activities (15,272) (15,149)
-------- --------
Cash flows from financing activities:
Long-term and short-term borrowings 161,687 80,949
Long-term and short-term repayments (115,306) (41,698)
Proceeds from common stock issuances 1,144 635
Dividends paid (12,229) (11,266)
-------- --------
Cash provided by financing activities 35,296 28,620
-------- --------
Cash flows from investing activities:
Capital expenditures, net of disposals (22,095) (17,892)
Sale of marketable securities 17,577 2,943
Net assets of businesses acquired (36,948) (393)
-------- --------
Cash used for investing activities (41,466) (15,342)
-------- --------
Translation impact on cash (1,592) 2,564
-------- --------
(Decrease) increase in cash and cash
equivalents (23,034) 693
Cash and cash equivalents at beginning of period 27,700 53,816
-------- --------
Cash and cash equivalents at end of period $ 4,666 $54,509
======== ========
See notes to consolidated financial statements.
5
ECHLIN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. General:
- ----------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair statement have been included. Operating
results for the three-month period ended November 30, 1995 are not
necessarily indicative of the results that may be expected for the year
ending August 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the company's Annual
Report on Form 10-K for the year ended August 31, 1995.
NOTE 2. Business Combinations:
- ------------------------------
During December, 1995 the company acquired the outstanding common stock of
the American Electronic Components, Inc. (AEC), an Indiana-based designer,
manufacturer and marketer of motor vehicle electronic components by issuing
1,459,211 shares of Echlin Inc. common stock. The transaction was
accounted for as a pooling of interests and as a result the financial
statements for the three months ended November 30, 1995 include AEC's
results of operations. Since the acquisition did not have a material
impact on the company, prior years' results were not restated.
NOTE 3. Subsequent Event:
- -------------------------
During December, 1995 the company purchased Handy & Harman's Automotive
Segment, based in Michigan, for approximately $65 million. The purchased
business manufactures fuel-delivery system components for motor vehicles.
The acquisition will be accounted for using the purchase method.
6
ECHLIN INC.
MANAGEMENT'S FINANCIAL ANALYSIS
Results of Operations:
- ----------------------
Net sales for the first three months of fiscal 1996 increased
$103,808,000 or 17.3 percent as compared to the same period a year
ago. This growth was largely attributable to price increases, the
introduction of new products and the impact of recent acquisitions,
primarily Preferred Technical Group International, Inc. and American
Electronics Components, Inc.
Net sales of comparable operations, those part of Echlin for at
least twelve months, rose 3.1 percent. Foreign comparable
operations increased 6.7 percent while domestic comparable
operations were 1.2 percent above a year ago. Non-U.S. operations
benefited from strong unit volume gains, price increases and the
introduction of new products. Domestically, the impact of price
changes and new products was partially offset by sluggish sales in
September. October and November sales recovered, but only to last
year's levels. The automotive brake group was the only domestic
operation showing unit volume improvements this quarter.
Gross profit to sales for the quarter decreased to 27.0 percent from
29.3 percent last year. This change reflects the impact of recent
acquisitions and unabsorbed overhead costs as we lowered production
levels to better manage inventories.
Selling and administrative expenses increased $6,101,000 or 4.8
percent over the prior year. Expenses to sales, however, declined
to 18.8 percent from 21.0 percent a year ago. The dollar increase
was primarily attributable to expenses generated by acquisitions.
Net interest expense increased $4,664,000 over the previous year
primarily due to higher average interest rates and debt levels.
The effective tax rate was 34.1 percent at November 30, 1995, vs. 32
percent at November 30, 1994. The increase was principally due to
acquisitions and statutory changes in the tax laws governing our
foreign operations.
Liquidity and Sources of Capital:
- ---------------------------------
During the first three months of fiscal 1996, operations used
$15,272,000 of cash vs. the $15,149,000 used during the prior year.
This year outflows for inventory were $8,814,000 lower than in
fiscal 1995 reflecting the company's efforts to manage inventory;
however, this was offset by a $21,068,000 increase in accounts
receivable because of higher sales.
7
ECHLIN INC.
Liquidity and Sources of Capital (continued):
- ---------------------------------------------
During the quarter the company had net borrowings of $46,381,000
which were used for working capital needs, capital expenditures and
acquisitions.
Total debt as a percentage of total capital was 38 percent at
November 30, 1995 as compared to 36 percent at August 31, 1995.
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
The Annual Meeting of Shareowners was held on December 20, 1995, for
the purpose of electing eleven Directors of the company, approving
the First Amendment to the Echlin Inc. Performance Unit Plan, and
approving the designation of Price Waterhouse LLP as independent
accountants for fiscal 1996. All of the company's nominees for
directors as listed in the proxy statement were elected. The vote
for each nominee was as follows:
Shares Shares
voting "For" "Withheld"
----------- --------
D. Allan Bromley 52,296,746 352,225
John F. Creamer, Jr. 51,422,251 1,226,720
Milton P. DeVane 50,852,759 1,796,212
John E. Echlin, Jr. 52,319,310 329,661
C. Scott Greer 51,416,929 1,232,042
John F. Gustafson 52,292,912 356,059
Donald C. Jensen 52,320,105 328,866
Trevor O. Jones 52,318,710 330,261
Frederick J. Mancheski 51,407,470 1,241,501
Phillip S. Myers 50,952,104 1,696,867
Jerome G. Rivard 50,987,560 1,661,411
The proposal for the approval of the First Amendment to the Echlin
Inc. Performance Unit Plan was adopted. The proposal received
43,361,479 "For" votes, 7,510,207 "Against" votes and 1,777,283
abstentions.
The proposal for the approval of Price Waterhouse LLP as independent
accountants for fiscal 1996 was adopted. The proposal received
52,436,191 "For" votes, 55,839 "Against" votes and 156,940
abstentions.
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
During the quarter ended November 30, 1995 the company did not file
any reports on Form 8-K.
8
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 thereunto duly authorized.
Echlin Inc.
Date: January 10, 1996 /s/ Richard A. Wisot
---------------- --------------------------
Richard A. Wisot
Vice President and
Controller
Date: January 10, 1996 /s/ Jon P. Leckerling
---------------- --------------------------
Jon P. Leckerling
Vice President, General
Counsel and Corporate
Secretary
9