FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-20416
EAGLE INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3384361
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 906-8700
(Registrant's telephone number, including area code)
Not Applicable
(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, 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 Registrant's classes
of common stock, as of the latest practicable date.
1,860,000 shares of Common Stock as of August 1, 1995
EAGLE INDUSTRIES, INC.
FORM 10-Q
JUNE 30, 1995
INDEX
PART I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 31.0 $ 31.1
Accounts receivable, net 28.8 29.4
Inventories, net 154.7 126.5
Other current assets 65.1 76.6
Net assets of discontinued
operations 9.9 9.8
Total current assets 289.5 273.4
Property, plant and equipment,
net 187.9 184.9
Goodwill 289.9 290.0
Other long-term assets 85.6 119.7
Total assets $ 852.9 $ 868.0
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion long-term debt $ 23.2 $ 24.7
Accounts payable 75.2 64.8
Accrued liabilities 71.9 84.2
Total current liabilities 170.3 173.7
Senior subordinated notes 141.9 180.4
Other long-term debt 191.2 186.6
Accrued employee benefit
obligations 73.9 73.6
Other long-term liabilities 95.5 90.2
Total liabilities 672.8 704.5
Stockholder's equity:
Common stock -- --
Additional paid-in capital 188.7 188.7
Accumulated deficit (6.4) (21.7)
Cumulative translation
adjustments 2.9 1.6
Pension liability adjustment (5.1) (5.1)
Total stockholder's equity 180.1 163.5
Total liabilities and
stockholder's equity $ 852.9 $ 868.0
The accompanying notes are an integral part of
these condensed consolidated financial statements.
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS)
(UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
(RESTATED) (RESTATED)
Net sales $ 267.4 $ 253.5 $ 518.6 $ 479.7
Cost of sales 211.8 200.5 410.3 381.0
Gross earnings 55.6 53.0 108.3 98.7
Selling and administrative
expenses 32.6 39.1 64.1 71.5
Goodwill amortization 2.2 2.2 4.4 4.4
Operating income 20.8 11.7 39.8 22.8
Net interest expense 7.2 9.6 14.9 21.6
Income from continuing operations
before income taxes 13.6 2.1 24.9 1.2
Provision for income taxes from
continuing operations 5.7 1.1 9.6 1.3
Income (loss) from continuing
operations 7.9 1.0 15.3 (0.1)
Discontinued Operations:
Loss from discontinued operations,
less income tax benefit
of $1.1 and $1.0, respectively
in the quarter and six months
ended June, 1994 -- (4.2) -- (4.1)
Reversal of net loss from
discontinued operations
subsequently retained -- 2.4 -- 4.5
Loss on disposal of businesses,
net of applicable income tax
benefit of $7.9 in 1994 -- (27.2) -- (27.2)
Income (loss) before extraordinary
item 7.9 (28.0) 15.3 (26.9)
Extraordinary loss from early
retirement of debt, net of
income tax benefit of $9.4
in 1994 -- -- -- (16.6)
Net income (loss) $ 7.9 $ (28.0) $ 15.3 $(43.5)
The accompanying notes are an integral part of
these condensed consolidated financial statements.
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
1995 1994
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ 15.3 $ (0.1)
Adjustments to reconcile income (loss)
from continuing operations
to net cash flow used in operations:
Depreciation and amortization 19.8 19.4
Accretion of discount on subordinated
debt 8.5 10.5
Proceeds from sales of accounts
receivable -- 110.3
Cash effects of changes in other working
capital balances, accrued employee
benefit obligations, and other long-term
liabilities (excluding the effects of
acquisitions and dispositions of
businesses) (10.2) 6.5
Net cash flow from continuing
operating activities 33.4 146.6
Net cash flow used in discontinued
operations (1.8) (30.3)
Net cash flow from operations 31.6 116.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses (10.4) --
Proceeds from sale of businesses -- 59.9
Proceeds from sale of notes receivable 39.8 --
Capital expenditures (13.7) (10.3)
Other (5.4) 0.6
Net cash flow from investing
activities 10.3 50.2
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of senior subordinated notes (45.0) --
Repayment of senior subordinated debt -- (234.1)
Repayment of senior credit facilities -- (221.1)
Capital contribution -- 50.0
Proceeds from new credit facility -- 317.9
Payments on long-term debt (29.0) (25.0)
Net borrowing (payment) on revolving
credit facilities 32.0 (41.4)
Net cash flow used in financing
activities (42.0) (153.7)
CHANGE IN CASH AND CASH EQUIVALENTS (0.1) 12.8
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 31.1 4.8
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31.0 $ 17.6
The accompanying notes are an integral part of
these condensed consolidated financial statements.
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements
of Eagle Industries, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for a complete set of financial statements. In the opinion
of management, all adjustments considered necessary, consisting only of
normal recurring adjustments are included for fair presentation.
Operating results for the quarter and six months ended June 30, 1995 are
not necessarily indicative of results that may be expected for the full
year. The unaudited Condensed Consolidated Financial Statements for the
quarters and six months ended June 30, 1995 and 1994 should be read in
conjunction with the audited Consolidated Financial Statements of the
Company for the year ended December 31, 1994. The historical statements
of the Company have been restated for companies being reported as
discontinued operations.
(2) INVENTORIES
Inventory consists of the following (in millions):
JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
Raw materials and supplies $ 51.0 $ 46.4
Work in process 29.0 25.2
Finished goods 74.7 54.9
$ 154.7 $ 126.5
(3) LONG-TERM DEBT
Components of other long-term debt are as follows (in millions):
JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
Eagle Industrial Credit Facility $ 75.8 $ 89.5
Falcon Credit Facility 132.0 112.5
Other 6.6 9.3
214.4 211.3
Less current portion (23.2) (24.7)
Total other long-term debt $ 191.2 $186.6
On June 30, 1995 Eagle's subsidiary, Falcon Building Products, Inc.
("Falcon"), amended and restated its existing senior credit facility,
increasing it to a $250 million credit facility (the "Falcon Credit
Facility") with its existing group of banks. The Falcon Credit Facility
consists of a six-year $100 million term loan, maturing in June 2001,
due in quarterly installments increasing in amount from $2.5 million
beginning September 30, 1995 to $6.25 million per quarter beginning in
September 2000, and a $150 million revolving credit facility (the
"Revolver") that expires in 2001. Borrowings under the Falcon Credit
Facility bear interest, at management's option, at rates equal to London
Interbank Offered Rates ("LIBOR") plus a margin or the prime rate. The
Falcon Credit Facility is secured by substantially all of the inventory,
intangibles, property, plant, equipment and stock of Falcon's
subsidiaries. The Falcon Credit Facility also allows for $25 million to
be used in the form of letters of credit, which when issued, reduce the
availability under the Revolver.
The Falcon Credit Facility does not include a borrowing base qualifier
to determine the availability under the Revolver, but does contain
various covenants pertaining to the maintenance of certain cash flow and
expense coverage ratios, the incurrence of additional indebtedness and
restrictions on the payment of dividends.
In May 1995, Falcon entered into a five-year interest rate swap
agreement. This agreement, covering $100 million of the Falcon's
floating rate debt, fixed the interest rate at 6.52 percent per annum,
plus the then applicable margin.
The Company and its subsidiaries complied with all covenants of their
respective debt agreements at June 30, 1995. For a more detailed
description of all of the Company's other credit facilities, refer to
the Company's December 31, 1994 report on Form 10-K.
During the six months ended June 30, 1995, the Company retired $65.5
million face value ($47.0 million accreted value) of its senior
subordinated notes, no gain or loss was recorded on the repurchases.
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following is a discussion of the results of operations of Eagle
Industries, Inc. (the "Company") and subsidiaries for the quarter and
six months ended June 30, 1995 as compared to the quarter and six months
ended June 30, 1994 and should be read in conjunction with the Condensed
Consolidated Financial Statements included herein and the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 and the
audited Consolidated Financial Statements of the Company for the year
ended December 31, 1994 included therein.
QUARTER ENDED JUNE 30, 1995 COMPARED TO THE QUARTER ENDED JUNE 30, 1994
The following table shows net sales and operating income by business
group (in millions):
NET SALES OPERATING INCOME
QUARTER ENDED QUARTER ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
Building Products Group $ 116.7 $ 112.1 $ 14.3 $ 12.1
Electrical Products Group 76.3 71.6 10.0 2.5
Automotive Products Group 49.4 46.7 2.6 2.0
Corporate and Other 25.0 23.1 (6.1) (4.9)
Total $ 267.4 $ 253.5 $ 20.8 $ 11.7
NET SALES
Net sales of $267.4 million for the second quarter of 1995 were $13.9
million or 5.5% higher than net sales for the second quarter of 1994.
This increase was primarily due to increased volume in most of the
Company's business groups.
Net sales of $116.7 million for the Building Products Group were $4.6
million or 4.0% higher than net sales for the 1994 period. During the
quarter ended June 30, 1995, Falcon Building Products, Inc. acquired
three businesses. Excluding the effects of these acquisitions, net
sales were $0.8 million higher than in the 1994 period. This increase
was primarily due to new products and an improvement in pricing,
partially offset by volume declines in bathroom fixtures.
Net sales of $76.3 million for the Electrical Products Group were $4.7
million or 6.6% higher than net sales for the 1994 period. This
increase was primarily due to increased volume and, to a lesser extent,
improved pricing at most businesses within the group due to continued
improvement in the economy, as well as new products at Elastimold.
These increases were partially offset by decreased volume at Lapp
primarily due to the sale of its polymer product line in 1994.
Net sales of $49.4 million for the Automotive Products Group were $2.7
million or 6.0% higher than net sales for the 1994 period. This
increase was primarily due to increased volume at Denman and the
automotive parts distribution businesses as a result of increased market
penetration and geographic expansion.
Other net sales of $25.0 million were $1.9 million or 8.2% higher than
net sales for the 1994 period. This increase was primarily due to
shipments under a major order from British Airways at Burns Aerospace.
GROSS EARNINGS
Gross earnings of $55.6 million were $2.6 million or 4.8% higher than
gross earnings for the 1994 period. This increase was primarily due to
the higher volume and, to a lesser extent, improved pricing in the
Electrical Products Group in the 1995 period. Gross margin was 20.8% in
1995 and 20.9% in 1994.
OPERATING INCOME
Operating income of $20.8 million for the second quarter of 1995 was
$9.1 million or 78.1% higher than operating income for the comparable
period in 1994. Excluding charges to establish self-insurance reserves
recorded in the second quarter of 1994 of $8.3 million, operating income
increased $0.8 million or 4.0%. This increase is primarily due to
increased sales volume in each of the business groups, improved pricing
and equity earnings from joint ventures, partially offset by increased
operating expenses related to new locations and new product lines.
Operating income of $14.3 million for the Building Products Group was
$2.2 million or 18.2% higher than in the 1994 period. Excluding the
effects of acquisitions, operating income increased $1.8 million. This
increase was primarily due to the absence of $3.6 million in charges
recorded in 1994 to establish self-insurance reserves. This increase
was partially offset by raw material cost inflation.
Operating income of $10.0 million for the Electrical Products Group was
$7.5 million higher than in the 1994 period. Excluding charges to
establish self-insurance reserves of $2.6 million recorded in 1994,
operating income increased $4.9 million or 93.5%. This increase was
primarily due to the increased sales volume, improved pricing and equity
earnings from Elastimold's joint ventures. In addition, the sale of
Lapp's polymer product line also contributed to the increase.
Operating income of $2.6 million for the Automotive Products Group was
$0.6 million or 27.9% higher than in the 1994 period. Excluding charges
to establish self-insurance reserves of $0.5 million recorded in 1994,
operating income increased $0.1 million.
Corporate and other expenses of $6.1 million were $1.2 million higher
than in the 1994 period. Excluding charges to establish self-insurance
reserves of $1.6 million recorded in 1994, corporate and other expenses
were $2.8 million higher than in the 1994 period. This increase was
primarily due to increased compensation expenses as well as increased
costs at Burns Aerospace.
INTEREST EXPENSE
Net interest expense was $7.2 million for the quarter ended June 30,
1995 compared to $9.6 million for the comparable 1994 period, a decrease
of $2.4 million or 25.0%. This decrease was primarily due to the
overall decrease in the level of debt.
PROVISION FOR INCOME TAXES
The effective tax rates for the second quarters of 1995 and 1994 reflect
non-deductible expenses, primarily goodwill amortization and state
income taxes.
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1994
The following table shows net sales and operating income by business
group (in millions):
NET SALES OPERATING INCOME
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
Building Products Group $ 229.5 $ 212.6 $ 28.1 $ 24.6
Electrical Products Group 146.1 138.2 16.9 3.4
Automotive Products Group 94.7 87.5 4.6 3.6
Corporate and Other 48.3 41.4 (9.8) (8.8)
Total $ 518.6 $ 479.7 $ 39.8 $ 22.8
NET SALES
Net sales of $518.6 million for the six months ended June 30, 1995 were
$38.9 million or 8.1% higher than net sales for the comparable period in
1994. This increase was primarily due to increased volume at most of
the Company's business groups.
Net sales of $229.5 million for the Building Products Group were $16.9
million or 8.0% higher for the first six months of 1995 compared to the
first six months of 1994. Excluding the effects of acquisitions, net
sales were $13.2 million or 6.2% higher than in 1994. This increase was
primarily due to increased volume and improved pricing at Falcon.
Net sales of $146.1 million for the Electrical Products Group were $7.9
million or 5.7% higher in the first six months of 1995 compared to the
first six months of 1994. This increase was primarily due to increased
volume and improved pricing at most companies within the group due to
continued improvement in the economy, as well as new products at
Elastimold. These increases were partially offset by decreased volume
at Lapp due to the sale of its polymer product line in 1994.
Net sales of $94.7 million for the Automotive Products Group were $7.2
million or 8.1% higher in the first six months of 1995 compared to the
first six months of 1994. This increase was primarily due to increased
sales volume at Denman and the automotive parts distribution businesses
as a result of increased market penetration and geographic expansion.
Other net sales increased $6.9 million or 16.8% compared to 1994. This
increase was primarily due to shipments under a major order from British
Airways at Burns Aerospace.
GROSS EARNINGS
Gross earnings of $108.3 million were $9.6 million or 9.7% higher than
gross earnings for the first six months of 1994. This increase was
primarily due to the increased volume in the 1995 period. Gross margin
increased to 20.9% in the first six months of 1995 compared to 20.6% in
the comparable 1994 period due to improved pricing, as well as various
cost reduction programs.
OPERATING INCOME
Operating income of $39.8 million for the six months ended June 30, 1995
was $17.0 million or 74.9% higher than operating income for the
comparable period in 1994. Excluding charges to establish self-
insurance reserves recorded in 1994 of $8.7 million, operating income
increased $8.3 million or 26.4%. This increase was due to increased
volume at each of the Company's business groups, improved pricing and
equity earnings from joint ventures.
Operating income of $28.1 million for the Building Products Group was
$3.5 million or 14.1% higher than in the 1994 period. Excluding the
effects of acquisitions in 1995 and charges recorded to establish self-
insurance reserves in 1994 and 1995, operating income decreased $0.2
million. This decrease was primarily due to increased raw material
costs, partially offset by improved pricing and increased volume.
Operating income of $16.9 million for the Electrical Products Group was
$13.5 million or 397.1% higher than in the 1994 period. Excluding
charges to establish self-insurance reserves of $2.7 million, operating
income increased $10.8 million. The increase was primarily due to
increased sales volume, improved pricing, and equity earnings from
Elastimold's joint ventures. The restructuring of Lapp's porcelain
operations and the sale of its polymer product line also contributed to
the increase.
Operating income of $4.6 million for the Automotive Products Group was
$1.0 million or 28.1% higher than in the 1994 period. Excluding charges
to establish self-insurance reserves of $0.5 million, operating income
increased $0.5 million primarily due to increased volume.
Corporate and other expenses of $9.8 million were $1.0 million higher
than in the 1994 period. Excluding charges to establish self-insurance
reserves of $1.6 million, other expenses increased $2.6 million. This
was primarily due to an increase in expense associated with the
Company's asset securitization program and increased compensation
expense.
INTEREST EXPENSE
Net interest expense was $14.9 million for the six months ended June 30,
1995 compared to $21.6 million for the comparable 1994 period. This
decrease was primarily due to the overall decrease in the level of debt.
PROVISION FOR INCOME TAXES
The effective tax rates for the six months ended June 30, 1995 and 1994
reflect non-deductible expenses, primarily goodwill amortization and
state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its debt service, capital expenditure
requirements and operating needs through a combination of operating cash
flow and external financing. Excluding the effects of the initial
proceeds from the asset securitization program in the 1994 period, cash
flow from continuing operations activities was $33.4 million for the six
months ended June 30, 1995 and $36.3 million in the comparable 1994
period. The decrease in 1995 was primarily due to an increase in
working capital requirements caused by the higher level of sales
activity, partially offset by the increased income. During the quarter
ended June 30, 1995, the Company sold the note receivable and 200,000
stock appreciation rights received from Robbins & Myers, Inc. in
conjunction with the sale of certain businesses in 1994. Net cash
proceeds received for the note and the stock appreciation rights were
$39.8 million. No gain or loss was recorded in conjunction with this
sale. During the six months ended June 30, 1995, the Company retired
$65.5 million face value ($47.0 million accreted value) of its senior
subordinated notes using available cash.
On June 30, 1995, Falcon amended and restated its senior credit facility
increasing it to a $250 million credit facility. See Note 3 to the
Company's Condensed Consolidated Financial Statements for a further
description of the agreement.
Management believes that cash flow from continuing operations along with
availability under the credit facilities will be sufficient to pay
interest on outstanding debt, meet current maturities, pay income taxes,
fund capital expenditures and meet other operating needs.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
4.1 Amended and Restated Credit Agreement dated June 30, 1995 among
Falcon Building Products, Inc. and Chemical Bank as Administrative
Agent and Citicorp North America, Inc. as Collateral Agent and the
other financial institutions named therein.
b) Reports on Form 8-K
None.
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.
EAGLE INDUSTRIES, INC.
By: /s/ SAM A. COTTONE
------------------
Sam A. Cottone
Senior Vice President and
Chief Financial Officer
Dated: August 14, 1995