SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 27, 1996
Commission File Number 1-14182
TB WOOD'S CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 25-1771145
(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation of Organization)
440 North Fifth Avenue, Chambersburg, PA 17201
(Address of principal executive offices) (Zip Code)
(717) 264-7161
(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 ____
Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at September 27, 1996
Common Stock, $.01 par value 5,818,272
<PAGE>
Table of Contents
Part I. - Financial Information Page No.
Condensed Consolidated Balance Sheets -
September 27, 1996 and December 29, 1995 3
Condensed Consolidated Statements of Operations -
For the Three Months and Nine Months Ended September 27, 1996
and September 29, 1995 4
Condensed Consolidated Statements of Cash Flows -
For the Nine Months Ended September 27, 1996 and
September 29, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. - Other information 9
<PAGE>
Part I. - FINANCIAL INFORMATION
Item 1. Financial Statements
TB WOOD'S CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 1996 AND DECEMBER 29, 1995
(In Thousands)
unaudited
September 27 December 29,
ASSETS 1996 1995
Current Assets:
Cash and cash equivalents ....................... 761 417
------ ------
Accounts receivable
Trade, net of allowances for doubtful accounts,
discounts, and claims of $430 at September
27, 1996 and $510 at December 29, 1995 ........ 14038 14053
Affiliates .................................... 318 79
------ ------
Total accounts receivable .................. 14356 14132
Inventories (note 5) .......................... 22090 21807
Prepaid expenses and other current assets ..... 201 504
------ ------
Total current assets ....................... 37408 36860
------ ------
Property, plant and equipment ..................... 39094 36237
Less accumulated depreciation ..................... (20497) (18424)
------ ------
Net Property, Plant and Equipment ................. 18597 17813
------ ------
Other Assets:
Deferred taxes .................................. 5679 5049
Goodwill, net of accumulated amortization
of $929 at September 27, 1996 and $846 at
December 29, 1995 ............................ 3556 3639
Loan issue cost, net of accumulated amortization
of $902 at December 29, 1996 ................. 0 1184
Other ........................................... 1341 2086
------ ------
Total other assets .......................... 10576 11958
------ ------
TOTAL ASSETS ...................................... 66581 66631
===== =====
<PAGE>
unaudited
LIABILITIES AND September 27 December 29,
STOCKHOLDERS' EQUITY (DEFICIT) 1996 1995
Current Liabilities:
Current maturities of long term-debt and
capital lease obligations .................... 362 1759
Accounts payable ................................ 5642 5991
Other accrued liabilities ....................... 3772 3590
Accrued payroll and other compensation .......... 2610 2115
Accrued income taxes ............................ 2287 635
Current deferred income taxes ................... 1646 1897
------ ------
Total current liabilities .................... 16319 15987
------ ------
Long-Term Debt and Capital Lease Obligations
Notes payable, subordinated debt ................ 318 15293
Other ........................................... 15484 24411
------ ------
Total long-term debt ........................ 15802 39704
Post Retirement Benefit Obligations ............... 18577 18428
------ ------
Stockholders' Equity (Deficit)
Preferred stock, $.01 par value; 5,000,000
shares authorized, no shares issued or outstanding 0 0
Common stock, $.01 par value; 40,000,000
shares authorized, 5,818,272 shares
issued and outstanding at September 27, 1996
and 3,375,000 issued and outstanding at
December 29, 1995 ............................ 58 33
Warrants ........................................ 0 500
Additional paid-in capital ...................... 29668 6104
Accumulated deficit ............................. (13787) (14094)
Foreign currency translation adjustment ......... (56) (31)
------ ------
Total stockholders' equity (deficit) ........ 15883 (7488)
------ ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY(DEFICIT) ..................... 66581 66631
===== =====
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
<PAGE>
TB WOOD'S CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 27, September 29, September 27, September 29,
1996 1995 1996 1995
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Net Sales .................................................. 25849 25263 74769 77792
Cost of Goods Sold ......................................... 16525 16479 47363 50215
----- ----- ----- -----
Gross Profit ............................................... 9324 8784 27406 27577
Operating Expenses:
Selling, general and administrative expenses .......... 6102 5498 17995 16898
Other operating expenses .............................. 60 185 273 1097
Operating Profit ........................................... 3162 3101 9138 9582
Other:
Interest expense ...................................... (333) (1148) (1641) (3409)
Other expenses ........................................ (21) 41 (596) (500)
Income before provision for income taxes and
extraordinary item .................................... 2808 1994 6901 5673
Provision for income taxes ................................. 1124 798 2769 2269
Income before extraordinary item ........................... 1684 1196 4132 3404
Extraordinary item, early extinguishment of debt, net of tax 0 0 (1305) 0
----- ----- ----- -----
Net Income (Loss) .......................................... 1684 1196 2827 3404
Per Share Information:
Income before extraordinary item ........................... 0.29 0.31 0.75 0.88
Extraordinary item, early extinguishment of debt, net of tax 0 0 (0.24) 0
Net income ................................................. 0.29 0.31 0.51 0.88
Weighted average common shares outstanding ................. 5851 3832 5501 3868
The accompanying notes are an integral part of these condensed consolidated statements of operations
</TABLE>
<PAGE>
TB WOOD'S CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995
(UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
September 27, 1996 September 29, 1995
<S> <C> <C>
Net cash provided by operating activities ......................... 6660 6954
Cash Flows From Investing Activities
Capital expenditures ............................................. (2290) (2985)
Other, net ....................................................... (11) (348)
Acquisition of certain businesses, net of cash acquired .......... (458) 0
Purchase of minority interest in TB Wood's Canada ................ (1600) 0
Cash used for investing activities ................................. (4359) (3333)
Cash Flows From Financing Activities
Repayment of subordinated debt ................................... (10677) 0
Payments of other debt ........................................... (14459) (1584)
Proceeds from public sale of common stock ........................ 19803 0
Proceeds of new revolving credit facility ....................... 83656 74408
Repayments of new revolving credit facility ...................... (79524) (76452)
Payment of dividend .............................................. (920) 0
Proceeds from issuance of stock upon option exercise ............. 188 0
Cash used for financing activities ................................. (1933) (3628)
Effect of Changes in Foreign Exchange Rate ......................... (24) 179
Net Increase in Cash and Equivalents ............................... 344 172
Cash and Equivalents at Beginning of Period ........................ 417 329
Cash and Equivalents at End of Period .............................. 761 501
The accompanying notes are an integral part of these condensed consolidated statements of cash flows
</TABLE>
<PAGE>
TB WOOD'S CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the TB Wood's Corporation and
Subsidiaries (the "Company") as of September 27, 1996 and December 29,
1995, and the results of operations for the three and nine month periods
ended September 27, 1996 and September 29, 1995, and cash flows for the
nine month periods ended September 27, 1996 and September 29, 1995.
Operating results for the interim periods presented are not necessarily
indicative of the results that may be expected for the fiscal year
ending January 3, 1997.
2. Certain reclassifications have been made to the condensed consolidated
financial statements of prior periods to conform to the current period
presentation.
3. On October 4, 1996 the Board of Directors declared a quarterly cash
dividend of $0.08 per share payable on October 31, 1996 to shareholders of
record on October 18, 1996.
4. On July 18, 1996 the Company repaid $16.7 million of subordinated debt
due to The Bibb Company, a company formerly related by common ownership,
for $10.7 million. The gain on extinguishment is reflected as a
component of stockholders' equity (net of tax).
5. The major classes of inventories at September 27, 1996 and
December 29, 1995 consist of the following (in thousands):
September 27, December 29,
1996 1995
(unaudited)
Raw material and supplies $ 3109 $ 3211
Work in process 6884 6420
Finished goods 15998 16057
------ ------
Total at FIFO cost 25991 25688
Excess of FIFO cost over LIFO cost (3,901) (3881)
------ ------
Total at LIFO cost $22090 $21807
====== ======
6. On October 9, 1996, the Company purchased the assets of Ambi-Tech Industries,
Inc., a leading manufacturer of electronic brakes for electric motors, for
approximately $1.0 million of cash and a $0.8 million note payable.
7. On October 10, 1996, the Company entered into a new $40 million unsecured
revolving credit facility arranged by PNC Bank, N.A. The Company realized an
initial rate reduction of 50 basis points with future rates based on the ratio
of total indebtedness to EBITDA.
6
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
TB Wood's Corporation and Subsidiaries (the "Company") posted operating
revenues of $25.8 million for the third quarter of 1996 compared to $25.3
million for the third quarter of 1995, an increase of 2.3%. Third quarter 1996
revenues were 3.0% higher than second quarter 1996 revenues of $25.1 million.
Year-to-date revenues were $74.8 million for 1996 compared to $77.8 million for
the same period in 1995, a decrease of 3.9%. The decline in comparative
year-to-date revenues is due to lower first and second quarter 1996 revenues.
These lower revenues resulted from extreme weather conditions in the first
quarter of 1996, and reduced demand for electronic products, as our customers
reduced inventories in anticipation of new product introductions.
Gross profit was $9.3 million for the third quarter of 1996 compared to
$8.8 million for the third quarter of 1995, an increase of 6.1%. Year-to-date
gross profit was $27.4 million for 1996 compared to $27.6 million for the first
nine months of 1995, a decrease of 0.6%. The gross profits as a percent of sales
for the third quarter and year-to-date periods ended September 27, 1996, of
36.1% and 36.7%, respectively, exceeded the gross profits as a percent of sales
for the same periods in 1995 of 34.8% and 35.4%, respectively. The improvements
in gross profits as a percent of sales were due primarily to a price increase on
mechanical products, productivity improvements, cost reductions resulting from
capital expenditures, and the Company's Total Quality Management (TQM) program.
Selling, General and Administrative (SG&A) expenses were $6.1 million
for the third quarter of 1996 compared to $5.5 million for the third quarter of
1995, an increase of 11.0%. Year-to-date SG&A expenses were $18.0 million
compared to $16.9 million for the first nine months of 1995, an increase of
6.5%. The higher SG&A expenses were primarily due to increased research and
development investments, to accelerate new electronic product introductions and
added technical sales personnel, to strengthen the Company's presence in the
electronic market.
Operating profit was $3.2 million for the third quarter of 1996
compared to $3.1 million for the third quarter of 1995, an increase of 2.0%.
Year-to-date operating profit was $9.1 million compared to $9.6 million for the
first nine months of 1995, a decrease of 4.6%. Operating profits as a percent of
sales for the third quarter and nine month periods ended September 27, 1996 were
12.2%, compared to 12.3% for the same periods ended September 29, 1995.
Net income was $1.7 million for the third quarter of 1996, up
40.8% from $1.2 million for the third quarter of 1995. Year-to-date net
income, before one time after tax
7
<PAGE>
charges of $1.3 million related to early extinguishment of debt and $0.3 million
to write-off a non-compete agreement, was $4.4 million compared to $3.4 million
for the first nine months of 1995, an increase of $1.0 million. This increase
was primarily due to decreased interest expense resulting from the reduction of
debt with the proceeds of the Company's initial public offering on February 8,
1996 and the repayment of the subordinated note on July 18, 1996. On a per share
basis, third quarter and year-to-date 1996 earnings were $0.29 and $0.51
compared to 1995 earnings of $0.31 and $0.88, respectively. The 1995 earnings
per share information is based on pre-IPO shares outstanding of 3,832,000 shares
for the three months ended September 29, 1995 and 3,868,000 shares for the nine
months ended September 29, 1995 compared to 5,851,000 shares for the three
months ended September 27, 1996 and 5,501,000 shares for the nine months ended
September 27, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations provide the principal source of current
liquidity. Net cash flows provided from operating activities were $6.7 million
and $7.0 million for the nine month periods ended September 27, 1996, and
September 29, 1995, respectively. Total working capital increased $0.2 million
from $20.9 million at December 29, 1995, to $21.1 million at September 27, 1996.
The Company used $4.4 million for investment purposes during the first
nine months of 1996, an increase of $1.1 million over the same period in 1995.
On February 14, the Company completed a strategic acquisition of Grupo Blaju,
S.A., de C.V., located in Mexico City, a leading manufacturer and marketer of
power transmission products, for approximately $0.5 million. In addition, on
February 28, the Company purchased the minority interest of T. B. Wood's Canada,
LTD for approximately $1.6 million. The remaining $2.3 million consisted of
capital expenditures.
For the nine months ended September 27, 1996, the Company obtained
approximately $19.8 million in net proceeds from the initial public offering on
February 8, 1996, and used the funds primarily to repay debt. The Company repaid
the subordinated debt of $16.7 million at a discount of $6.0 million on July 18,
1996. The early repayment of the subordinated debt improved the balance sheet
equity position by $3.0 million and reduces interest expense by $0.3 million
annually.
On October 4, 1996, the Board of Directors declared a quarterly cash
dividend of $0.08 per share payable on October 31, 1996, to shareholders of
record on October 18, 1996.
8
<PAGE>
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders.
Item 5. Other Information
On October 9, 1996, the Company purchased the assets of Ambi-Tech
Industries Inc., for approximately $1.0 million cash and a $0.8 million note
payable.
On October 10, 1996, the Company entered into a new $40 million
unsecured revolving credit facility, arranged by PNC Bank, N.A. The Company
realized an initial rate reduction of 50 basis points with future rates based on
the ratio of total indebtedness to EBITDA.
Item 6. Exhibits and Reports on Form 8-K
a)
EXHIBIT INDEX
Exhibit
11 Computation of Per Share Earning
27 Financial Data Schedule
b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the three months ended September 27, 1996.
9
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Chambersburg and Commonwealth of Pennsylvania, on
TB WOOD'S CORPORATION
By: \s\DAVID H. HALLEEN
David H. Halleen
Vice President of Finance, Treasurer
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
Exhibit 11
TB WOOD'S CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
($ and shares in thousands, except per share data)
<TABLE>
<CAPTION>
PRIMARY EARNINGS (LOSS) PER COMMON SHARE: For the Three Months Ended For the Nine Months Ended
September 27, 1996 September 29, 1995 September 27, 1996 September 29, 1995
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Income before extraordinary item ............................. 1684 1196 4132 3404
Extraordinary item, early extinguishment of debt,
net of tax ................................................. 0 0 (1305) 0
Net income ................................................... 1684 1196 2827 3404
Weighted average common shares outstanding .................. 5777 3375 5408 3375
Add: Weighted average number of shares which could have
been issued upon exercise of outstanding options/warrants .. 74 457 93 493
Weighted average number of shares used to compute
primary earning per share .................................. 5851 3832 5501 3868
Primary earning per share
Income before extraordinary item ........................... 0.29 0.31 0.75 0.88
Extraordinary item, early extinguishment of debt, net of tax 0 0 (0.24) 0
Net income ................................................. 0.29 0.31 0.51 0.88
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
Amounts inapplicable or not disclosed as a separate line on the Statement of
Operations are reported as herein.
</LEGEND>
<CIK> 0001000227
<NAME> TB WOOD'S CORPORATION AND SUBSIDIARIES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Jan-03-1997
<PERIOD-START> Jun-28-1996
<PERIOD-END> Sep-27-1996
<EXCHANGE-RATE> 1.000
<CASH> 761
<SECURITIES> 0
<RECEIVABLES> 14,468
<ALLOWANCES> 430
<INVENTORY> 22,090
<CURRENT-ASSETS> 37,408
<PP&E> 39,094
<DEPRECIATION> (20,497)
<TOTAL-ASSETS> 66,581
<CURRENT-LIABILITIES> 16,319
<BONDS> 15,802
0
0
<COMMON> 58
<OTHER-SE> 15,883
<TOTAL-LIABILITY-AND-EQUITY> 66,581
<SALES> 74,769
<TOTAL-REVENUES> 76,680<FN>
<CGS> 47,363
<TOTAL-COSTS> 18,268
<OTHER-EXPENSES> 596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,641
<INCOME-PRETAX> 6,901
<INCOME-TAX> 2,769
<INCOME-CONTINUING> 4,132
<DISCONTINUED> 0
<EXTRAORDINARY> (1,305)
<CHANGES> 0
<NET-INCOME> 2,827
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
<FN>
Revenues are reported net of credits in the Statement of Operation.
</FN>
</TABLE>
