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 June 28, 1996
Commission File Number 1-14182
TB WOOD'S CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
DELAWARE 25-1771145
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(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation of Organization)
440 North Fifth Avenue, Chambersburg, PA 17201
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(Address of principal executive offices) (Zip Code)
(717) 264-7161
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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 ____
Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at June 28, 1996
----- ----------------------------
Common Stock, $.01 par value 5,753,000
<PAGE>
INDEX
Part I. - Financial Information Page No.
- ------------------------------- --------
Condensed Consolidated Balance Sheets -
As of June 28, 1996 and December 29, 1995 3
Condensed Consolidated Statements of Operation -
Three Months and Six Months Ended June 28, 1996
and June 30 1995 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 28, 1996 and June 30, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operation 7
Part II. - Other information 10
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
TB WOOD'S CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 28, 1996 AND DECEMBER 29, 1995
(UNAUDITED)
(In Thousands)
ASSETS June 28, December 29,
1996 1995
- --------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents ........................ $ 329 $ 417
------ ------
Accounts receivable
Trade, net of allowances for doubtful accounts,
discounts, and claims of $491 at June 28, 1996
and $510 at December 29, 1995 and .......... 13,292 14,053
Affiliates ................................... 329 79
Total accounts receivable ................ 13,621 14,132
------ ------
Inventories (note 5) ............................. 22,495 21,807
Prepaid Expenses and Other Current Assets ........ 524 504
------ ------
Total current assets ........................... 36,969 36,860
Property, Plant and Equipment ......................... 38,094 36,237
Less accumulated depreciation ......................... 19,838 18,424
------ ------
Net property, plant and equipment ..................... 18,256 17,813
------ ------
Other Assets:
Deferred Taxes ................................... 5,233 5,049
Goodwill, net of accumulated amortization
of $919 at June 28, 1996 and $846 at
December 29, 1995 ......................... 3,588 3,639
Loan issue cost, net of accumulated amortization
of $927 at June 28, 1996 and $902 at
December 29, 1995 ................. ...... -- 1,184
Other ............................................ 1,293 2,086
------ ------
Total other assets .......................... 10,114 11,958
------ ------
TOTAL ASSETS .......................................... $65,339 $66,631
====== ======
<PAGE>
LIABILITIES AND STOCKHOLDERS' June 28, December 29,
EQUITY (DEFICIT) 1996 1995
- --------------------------------------------------------------------------------
Current Liabilities:
Current maturities of long-term debt and
capital lease obligations $ 362 $ 1,759
Accounts Payable 5,398 5,991
Other accrued liabilities 6,500 6,340
Current deferred income taxes 1,644 1,897
------ ------
Total current liabilities 13,904 15,987
------ ------
Long-term debt and capital lease obligations
Notes payable to affiliates 15,643 15,293
Other 5,620 24,411
------ ------
Total long-term debt 21,263 39,704
Postretirement Benefit Obligations 18,530 18,428
------ ------
Stockholders Equity (Deficit)
Preferred stock, $.01 par value; 5,000,000
shares authorized, no shares issued or outstanding -- --
Common stock, $.01 par value; 40,000,000
shares authorized, 5,750,000 shares
issued and outstanding June 28, 1996
and 3,375,000 issued and outstanding at
December 29, 1995 57 33
Warrants -- 500
Additional paid-in capital 26,661 6,104
Accumulated deficit (15,037) (14,094)
Foreign currency translation adjustment (39) (31)
------ ------
Total stockholders' equity (deficit) 11,642 (7,488)
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $65,339 $66,631
====== ======
See accompanying notes to condensed consolidated financial statements
<PAGE>
TB WOOD'S CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
(UNAUDITED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
------------------- -------------------
<S> <C> <C> <C> <C>
Net Sales ........................................................... 25,107 27,055 48,920 52,529
Cost of Goods Sold .................................................. 15,917 17,294 30,838 33,736
------ ------ ------ ------
Gross Profit ........................................................ 9,190 9,761 18,082 18,793
Operating Expenses:
Selling, general and administrative expenses ................... 6,042 5,852 11,893 11,400
Other operating expenses ....................................... (9) 428 213 912
Operating Profit .................................................... 3,157 3,481 5,976 6,481
Other:
Interest Expense ............................................... (508) (1,165) (1,308) (2,261)
Other Expenses ................................................. (69) (306) (575) (541)
Income before provision for income taxes and ........................ 2,580 2,010 4,093 3,679
extraordinary item
Prov for Income Taxes ............................................... 1,065 803 1,645 1,471
Net Income before Extraordinary item ................................ 1,515 1,207 2,448 2,208
Extraordinary item, early extinguishment of debt .................... -- -- (1,305) --
------ ------ ------ ------
1,515 1,207 1,143 2,208
Per share information:
Net Income (Loss) before Extraordinary item ......................... .26 .32 .46 .59
Extraordinary item .................................................. -- -- (.24) --
Net income (Loss) ................................................... .26 .32 .21 .59
Weighted average common shares outstanding
5,850 3,771 5,327 3,771
See accompanying notes to Condensed Consolidated financial statements
</TABLE>
<PAGE>
TB WOOD'S CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(UNAUDITED)
(In Thousands)
<TABLE>
<CAPTION>
June 28, 1996 June 30, 1995
------------------------------
<S> <C> <C>
Net Cash Provided by (used for) Operating Activities ....... 3,953 2,882
------- ------
Cash Flows From Investing Activities
Capital Expenditures .................................. (1,290) (1,702)
Disposal of Fixed Assets .............................. (4) 0
Other, net ............................................ 9 (165)
Acquisition of certain businesses, net of cash acquired (458) (99)
Selling (Purchase) of minority interest in TBWC ....... (1,600) 0
------- ------
Cash Provided by (used for) Investing Activities ........... (3,343) (1,966)
------- ------
Cash Flows From Financing Activities
Reclass and Payments of Long Term Portion of Other Debt (14,369) (1,039)
Proceeds from Public Sale of Common Stock ............. 19,986 56
Proceeds of New Revolving Credit Facility ............ 49,067 0
Repayments of new revolving credit facility ........... (54,889) 0
Payment of Dividend ................................... (460) 0
Cash Provided by (used for) Financing Activities ........... (665) (983)
------- ------
Effect of Changes in Foreign Exchange Rate ................. (33) 84
------- ------
Net Increase (decrease) in Cash and Equivalents ............ (88) 17
Cash and Equivalents at Beginning of Period ................ 417 329
------- ------
Cash and Equivalents at End of Period ...................... 329 346
======= ======
</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 Company as of June 28, 1996
and December 29, 1995 and the results of operations for the three and six
month periods ended June 28, 1996 and June 30, 1995, and cash flows for the
six month periods ended June 28, 1996 and June 30, 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 July 9, 1996 the Board of Directors declared a quarterly cash dividend
of $0.08 per share payable on July 31, 1996 to shareholders of record on
July 20, 1996.
4. On July 18, 1996 the Company repaid $16.7 million of subordinated debt due
to The Bibb Company for $10.7 million.
5. The major classes of inventories at December 31, 1995 and June 28, 1996
consist of the following (in thousands):
June 28, December 29,
1996 1995
(unaudited)
Raw material and supplies $ 4,510 $ 3,930
Work in process 5,514 5,701
Finished goods 16,353 16,057
------ ------
Total at FIFO cost 26,377 25,688
Excess of FIFO cost over LIFO cost (3,882) (3,881)
Total at LIFO cost $22,495 $21,807
<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 the "Company" posted operating revenues of $25.1 million
for the second quarter of 1996 compared to $23.8 million for the first quarter
of 1996, an increase of 5.4%. Second quarter revenues were down 7.2% from $27.1
million for the second quarter of 1995 which was a record for any quarter.
Year-to-date, revenues were $48.9 million for 1996 compared to $52.5 million for
the same six month period of 1995, a decrease of 6.9%. This decline was
primarily the result of softer demand in the power transmission industry, lower
electronic system sales and reduced demand for AC drives as customers anticipate
new product introductions.
Gross profit was $9.2 million for the second quarter of 1996 compared to $9.8
million for the second quarter of 1995, a decrease of 5.8%. Year-to-date, gross
profit was $18.1 million for 1996 compared to $18.8 million for the first six
months of 1995, a decrease of 3.8%. Second quarter and year-to-date gross profit
margins as a percent of sales for 1996 of 36.6% and 37.0%, respectively,
exceeded 1995 gross profit margins of 36.1% and 35.8%, respectively. Gross
profit margin increase, as a percent of sales, was due primarily to a price
increase on mechanical products and productivity improvements and cost
reductions resulting from capital expenditures and the Company's Total Quality
Management (TQM) program.
Selling, General and Administration (SG&A) expense was $6.0 million for
the second quarter of 1996 compared to $5.9 million for the second quarter of
1995, an increase of 3.2%. Year-to-date, SG&A expense was $11.9 million compared
to $11.4 million for the first six months of 1995, an increase of 4.3%. This
increase is primarily due to increased research and development expenditures and
added technical sales personnel to strengthen the Company's presence in the
electronic market.
Operating income was $3.2 million for the second quarter of 1996 compared
to $3.5 million for the second quarter of 1995, a decrease of 9.3%.
Year-to-date, operating profit was $6.0 million compared to $6.5 million for the
first six months of 1995, a decrease of 7.8%. As a percent of sales, second
quarter and year-to-date operating income for 1996 was 12.6% and 12.2%,
respectively, compared to 1995 operating income of 12.9% and 12.3%,
respectively.
Net income was $1.5 million for the second quarter of 1996, up 25.5% from
$1.2 million for the second quarter of 1995. Year-to-date, net income, before
one time after tax charges of $1.3 million related to early extinguishment of
debt and $0.3 million to write-off a non-compete agreement, was $2.8 million
compared to $2.2 million for the first six months of 1995, an increase of $0.6
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 a per share basis, second quarter and year-to-date 1996 net income
was $0.26 and $0.21 compared to 1995 earnings of $0.32 and $0.59, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations provide the principal source of current
liquidity. Net cash flows provided from operating activities were $3.9 million
and $2.9 million for the six month periods ended June 1996 and 1995,
respectively. Total working capital increased $2.2 million from $20.9 million at
December 31, 1995 to $23.1 million at June 28, 1996. The working capital
increase was due primarily to an increase in inventories and a decrease in
current maturities of long term debt and accounts payable.
The Company used $3.3 million for investment purposes during the first six
months of 1996, an increase of $1.4 million over the same period in 1995. On
February 14, the Company completed a strategic acquisition of Grupo Blaju, S.A.,
de C.V. 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 $1.3 million consisted of capital expenditures.
For the six months ended June 28, 1996, the Company obtained approximately
$20.0 million in net proceeds from the initial public offering and used the
funds primarily to repay debt. The Company announced on July 1, 1996 that an
agreement was reached with the Bibb Company to repay $16.7 million of
subordinated debt for $10.7 million. This improves the balance sheet equity
position by $3.0 million (net of taxes) and reduces interest expense by
$0.3 million annually.
On July 9, 1996, the Board of Directors declared a quarterly cash dividend
of $0.08 per share payable on July 31, 1996 to shareholders of record on July
20, 1996.
<PAGE>
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1996 annual meeting of stockholders was held on May 14, 1996. Voting on
the election of one director to the first class of directors was conducted.
The stockholders voted 5,113,520 shares in the affirmative and 29,492
shares in the negative to elect Mr. Foley to the first class of directors
of the Board of Directors. Thomas C. Foley was duly elected as a director
of the first class at the meeting. In addition to Mr. Foley, Michael L.
Hurt, Jean-Pierre L. Conte and Craig R. Stapleton will continue as
directors after the meeting.
Item 5. Other Information
On May 9, 1996 the Board of Directors passed a resolution to appoint
Craig R. Stapleton as a director of the third class for a term of 3 years.
Item 6. Exhibits and Reports on Form 8-K
a)
EXHIBIT INDEX
Exhibit
11 Computation of Per Share Earning
27 Financial Data Schedule
b) Reports on Form 8-K - There were no reports on Form 8-K filed for the
three months ended June 28, 1996.
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Chambersburg and Commonwealth of Pennsylvania, on August 12, 1996.
TB WOOD'S CORPORATION
By: /s/ DAVID H. HALLEEN
David H. Halleen
Vice President of Finance, Treasurer
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
Exhibit 11
TB WOOD'S CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
($ and shares in thousands, except per share data)
<TABLE>
<CAPTION>
PRIMARY EARNINGS (LOSS) PER COMMON SHARE: Three Months Ended Six Months Ended
June 28, 1996 June 30, 1995 June 28, 1996 June 30, 1995
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net income ........................................................ 1,515 1,207 1,143 2,208
===== ===== ===== =====
Weighted average common shares outstanding ....................... 5,750 3,375 5,226 3,375
Add: Weighted average number of shares which could have
been issued upon exercise of outstanding options/warrants 100 396 101 396
----- ----- ----- -----
Weighted average number of shares used to compute
primary earning (loss) per share ....................... 5,850 3,771 5,327 3,771
===== ===== ===== =====
Primary Earning (loss) per share .................................. .26 .32 .21 .59
===== ===== ===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 28, 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
Operation are reported herein.
</LEGEND>
<CIK> 0001000227
<NAME> TB WOOD'S CORPORATION AND SUBSIDIARIES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jan-03-1997
<PERIOD-START> Mar-29-1996
<PERIOD-END> Jun-28-1996
<EXCHANGE-RATE> 1.000
<CASH> 329
<SECURITIES> 0
<RECEIVABLES> 14,112
<ALLOWANCES> 491
<INVENTORY> 22,495
<CURRENT-ASSETS> 36,969
<PP&E> 38,094
<DEPRECIATION> 19,838
<TOTAL-ASSETS> 65,339
<CURRENT-LIABILITIES> 13,904
<BONDS> 21,263
0
0
<COMMON> 57
<OTHER-SE> 11,585
<TOTAL-LIABILITY-AND-EQUITY> 65,339
<SALES> 48,920
<TOTAL-REVENUES> 50,207<FN>
<CGS> 30,838
<TOTAL-COSTS> 12,106
<OTHER-EXPENSES> 600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,283
<INCOME-PRETAX> 4,093
<INCOME-TAX> 1,645
<INCOME-CONTINUING> 2,448
<DISCONTINUED> 0
<EXTRAORDINARY> (1,305)
<CHANGES> 0
<NET-INCOME> 1,143
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
<FN>
Revenues are reported net of credits in the Statement of Operation.
</FN>
</TABLE>
