SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 April 4, 1997
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 (IRS 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 April 4, 1997
Common Stock, $.01 par value 5,834,147
<PAGE>
Table of Contents
Part I. - Financial Information Page No.
- ------------------------------- --------
Unaudited Condensed Consolidated Balance Sheets -
April 4, 1997 and January 3, 1997 ....................................3
Unaudited Condensed Consolidated Statements of Operations -
For the Three Months Ended April 4, 1997 and March 29, 1996 ..........4
Unaudited Condensed Consolidated Statements of Cash Flows -
For the Three Months Ended April 4, 1997 and March 29, 1996 ..........5
Notes to Unaudited 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
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Audited
April 4, January 3,
(in thousands, except per share and share amounts) 1997 1997
- ------------------------------------------------------------------------------- -------------- ----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents ....................................................... $507 $306
Accounts receivable, less allowances for doubtful accounts, discounts, and
claims of $467 at April 4, 1997 and $437 at January 3, 1997 ..................... 17,998 15,518
------- -------
Inventories (Note 4) : .......................................................... 23,757 23,985
------- -------
Other current assets ............................................................ 1,150 1,053
------- -------
Total current assets ....................................................... 43,412 40,862
------- -------
Property, plant, and equipment: ................................................. 42,210 41,652
Less accumulated depreciation ................................................... 21,909 21,154
------- -------
Net property, plant and equipment ........................................... 20,301 20,498
------- -------
Other Assets:
Deferred income taxes ........................................................... 5,273 5,249
Goodwill, net of accumulated amortization of $999 at
April 4, 1997 and $958 at January 3, 1997 ................................. 4,653 4,603
Other ........................................................................... 2,122 2,183
------- -------
Total other assets ......................................................... 12,048 12,035
------- -------
$75,761 $73,395
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities:
Current maturities of long-term debt ............................................ $452 $520
Accounts payable ................................................................ 4,514 5,210
Checks outstanding .............................................................. 1,278 1,532
Accrued expenses ................................................................ 9,419 8,384
Deferred income taxes ........................................................... 537 539
------- -------
Total current liabilities .................................................. 16,200 16,185
------- -------
Long-term debt, less current maturities ......................................... 22,083 21,707
------- -------
Postretirement benefit obligation, less current portion ......................... 18,450 18,628
------- -------
Shareholders' Equity:
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, 5,834,147 and
5,827,397 shares issued and outstanding at April 4, 1997 and January 3, 1997,
respectively .................................................................... 58 58
Additional paid-in capital ...................................................... 28,201 28,158
Accumulated deficit ............................................................. (9,169) (11,306)
Foreign currency translation adjustment ......................................... (62) (35)
Total shareholders' equity ................................................. 19,028 16,875
------- -------
................................................................................ $75,761 $73,395
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
3
<PAGE>
TB Wood's Corporation And Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
April 4, March 29,
(in thousands, except per share amounts) 1997 1996
- -------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Net sales ........................................................... $30,489 $23,813
Cost of sales ....................................................... 19,538 14,921
------- -------
Gross profit ................................................... 10,951 8,892
Selling, general, and administrative expenses ....................... 6,714 6,073
------- -------
Operating income ............................................... 4,237 2,819
------- -------
Other (expense) income:
Interest expense and other finance charges ..................... (487) (800)
Other, net ..................................................... (188) (506)
------- -------
Other expense, net ........................................ (675) (1,306)
------- -------
Income before provision for income taxes and extraordinary item
.................................................................... 3,562 1,513
Provision for income taxes .......................................... 1,425 580
------- -------
Income before extraordinary item .................................... 2,137 933
Extraordinary item, early extinguishment of debt
(less related income tax benefit of $870) ...................... - - (1,305)
------- -------
Net income .......................................................... $2,137 ($372)
======= =======
Per share of common stock:
Income before extraordinary item ............................... $0.36 $.19
Extraordinary item ............................................. - - (0.27)
------- -------
Net income per common share ......................................... $0.36 ($0.08)
======= =======
Weighted average shares of common stock
and equivalents outstanding .................................... 5,908 4,832
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
4
<PAGE>
TB Wood's Corporation And Subsidiaries
Consolidated Statements Of Cash Flows
<TABLE>
<CAPTION>
April 4, March 29,
(in thousands) 1997 1996
- ------------------------------------------------------------------- -------------- --------------
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $2,137 $(372)
------- -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,017 911
Deferral of interest and management fees payable to
affiliates 0 288
Change in deferred income taxes, net (26) (440)
Stock option compensation expense 26 35
Write off of non-compete agreement -- 563
Extraordinary loss on early extinguishment of debt, net -- 1,305
Other, net -- (100)
Changes in working capital, net of effects of acquisitions:
Accounts receivable, net (2,080) 487
Inventories, net 228 (1,230)
Prepaid expenses and other current assets (249) (290)
Accounts payable (230) 244
Accrued and other liabilities 857 (1,112)
------- -------
Total adjustments (457) 661
------- -------
Net cash provided by operating activities 1,680 289
------- -------
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired -- (458)
Capital expenditures (554) (447)
Purchase of minority interest in subsidiary -- (1,626)
Other, net (500) (19)
------- -------
Net cash used in investing activities (1,054) (2,550)
------- -------
Cash Flows from Financing Activities:
Change in checks outstanding (254) (672)
Repayments of long-term debt, net (95) (14,319)
Proceeds from original revolving credit facility -- 31,021
Repayments of original revolving credit facility -- (33,882)
Proceeds from new revolving credit facility 10,100 --
Repayments of new revolving credit facility (9,700) --
Proceeds from public sale of common stock -- 20,099
Payment of dividends (466) --
Proceeds from issuance of stock upon option exercise 17 --
------- -------
Net cash used in financing activities (398) 2,247
------- -------
Effect of changes in foreign exchange rates (27) 7
------- -------
Net (decrease) increase in cash and cash equivalents 201 (7)
Cash and cash equivalents at beginning of year 306 417
======= =======
Cash and cash equivalents at end of period $507 $410
======= =======
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
5
<PAGE>
TB Wood's Corporation And Subsidiaries
Notes To Consolidated Financial Statements
(in thousands, except per share amounts)
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
the financial position of TB Wood's Corporation and Subsidiaries (the
"Company") as of April 4, 1997 and January 3, 1997, and the results of
operations and cash flows for the three month periods ended April 4, 1997
and March 29, 1996. Operating results for the interim periods presented are
not necessarily indicative of the results that may be expected for the
fiscal year ending January 2, 1998.
2. Certain reclassifications may have been made to the consolidated financial
statements of prior periods to conform to the current period presentation.
3. In 1997, the Company changed the remaining amortization period for the Post
Retirement Benefits, unrecognized prior service cost from 14.4 years to 5.4
years. The change in the amortization rate will provide an additional
benefit of approximately $700 before taxes annually through 2001 and $300
in 2002.
4. The major classes of inventories at April 4, 1997 and January 3, 1997
consisted of the following:
audited
April 4, January 3,
1997 1997
Raw material and supplies $ 3,058 $ 3,755
Work in process 7,822 7,994
Finished goods 17,034 16,293
------ ------
Total at FIFO cost 27,914 28,042
Excess of FIFO cost over LIFO cost (4,157) (4,057)
------- ------
Total at LIFO cost $23,757 $23,985
======= =======
5. In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share,"
which the Company is required to adopt for periods ending after December
15, 1997. While SFAS 128 prohibits early adoption, pro forma presentation
is permitted. The pro forma Earnings per Share ("EPS") is as follows:
April 4, 1997 March 29, 1996
------------- --------------
APB 15 SFAS 128 APB 15 SFAS 128
Net Income $2,137 $2,137 ($372) ($372)
Primary EPS $0.36 $0.08)
Primary Shares 5,908
4,832
Basic EPS $0.37 ($0.08)
Basic Shares 5,828 4,727
Diluted EPS $0.36 ($0.08)
Diluted Shares 5,908 4,832
6. On April 10, 1997 the Board of Directors declared a quarterly cash dividend
of $0.08 per share payable on April 30, 1997 to shareholders of record on
April 18, 1997.
6
<PAGE>
7. On April 9, 1997, the Company issued Variable Rate Demand Revenue Bonds,
Series 1997, totaling approximately $2,550 under the authority of The
Industrial Revenue Board of the City of Chattanooga. Interest is due
monthly and the bonds mature on April 1, 2022. The bonds are tax exempt
and bear interest at the prevailing 7 day floating rate. The initial
weekly interest rate (including letter of credit and remarketing fees)
was approximately 4.4%.
8. On May 8, 1997, the Company purchased the stock of Graseby Controls,
Inc.("GCI"), for cash of approximately $5,000. GCI manufactures and
sells industrial AC Drives, including the Volkmann brand of high
frequency, AC drives, electronic brakes, and SoftStarts.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS (in thousands, except per share amounts)
TB Wood's Corporation and Subsidiaries (the "Company") posted net sales
for the first quarter 1997 of $30,489, compared to $23,813 for the first quarter
1996, an increase of 28.0%. The increase was primarily due to increased sales of
AC Drives, electronic systems, sales from recent acquisitions, and strong demand
for mechanical products.
Cost of sales ("COS") in the first quarter 1997 was $19,538 compared to
$14,921 for the same period last year, an increase of 30.9%. COS as a percent of
sales in the first quarter 1997 was 64.1% compared to 62.7% for the first
quarter 1996. The increase was primarily due to shifts in product mix, and
higher COS as the recent coupling acquisition is integrated into the business.
Selling, general and administrative ("SG&A") expenses for the first
quarter 1997 were $6,714, compared to $6,073 for the first quarter 1996, an
increase of $641 or 10.6%. SG&A as a percent of sales decreased to 22.0% in the
first quarter 1997 from 25.5% in the first quarter 1996.
Operating profit was $4,237 for the first quarter 1997 compared to
$2,819 for the first quarter 1996, an increase of $1,418 or 50.3%. Operating
profits as a percent of sales increased to 13.9% in the first quarter 1997 from
11.8% in the first quarter 1996.
Other expense for the first quarter 1997 was $188, compared to $506 for
the same period last year. The 1997 expense included one time charges related to
1996 acquisitions, while the 1996 expense related to a write off of a
non-compete agreement.
Net income for the first quarter 1997 was $2,137, compared to ($372)
for the same period in the prior year. First quarter 1996 net income was $1,282
before one time charges of $1,654 associated with the early extinguishment of
debt and a write-off of a non-compete agreement.
Earnings per share ("EPS") for the first quarter 1997 were $0.36 on
5,908 weighted average shares outstanding compared to first quarter 1996 EPS of
$0.27 before one time charges, on 4,832 weighted average shares outstanding. EPS
on net income for the first quarter 1996 was ($0.08).
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (in thousands, except per share amounts)
Cash flows from operations provide the principal source of current
liquidity. Net cash flows provided by operating activities were $1,680 and $289
for the first quarters ended April 4, 1997 and March 29, 1996, respectively.
Working capital increased $2,535 to $27,212 at April 4, 1997 from $24,677 at
January 3, 1997. The increase was caused by additional accounts receivable due
to record sales in the first quarter 1997.
The Company used $1,054 for investment purposes during the first three
months of 1997, a decrease of $1,496 over the same period in 1996. Capital
expenditures were constant at approximately $500 for both years. In the first
quarter 1996, the Company purchased the minority interests of TB Woods Canada
LTD for approximately $1,600.
The Company used $398 from financing activities in the first quarter
1997 compared to cash provided by financing activities of $2,247 in the first
quarter 1996. The Company received net proceeds of approximately $20,099 from
the initial public offering on February 8, 1996, and used the funds primarily to
repay debt.
On April 10, 1997, the Board of Directors declared a quarterly cash
dividend of $0.08 per share payable on April 30, 1997, to shareholders of record
on April 18, 1997.
SAFE HARBOR STATEMENT
This quarterly report contains various forward-looking statements and
includes assumptions concerning the Company's operations, future results and
prospects. These forward-looking statements are based on current expectations
and are subject to risk and uncertainties. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the Company
provides the following cautionary statement identifying important economic,
political and technology factors which, among others, could cause the actual
results or events to differ materially from those set forth in or implied by the
forward-looking statements and related assumptions.
Such factors include the following: (i) changes in the current and
future business environment, including interest rates and capital and consumer
spending; (ii) competitive factors and competitor responses to the Company's
initiatives; (iii) successful development and market introductions of
anticipated new products; (iv) changes in government laws and regulations,
including taxes; and (v) favorable environment to make acquisitions, domestic
and foreign, including regulatory requirements and market value of candidates.
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 (in thousands)
On April 9, 1997, the Company issued Variable Rate Demand Revenue
Bonds, Series 1997, totaling approximately $2,550 under the authority of The
Industrial Revenue Board of the City of Chattanooga. Interest is due monthly and
the bonds mature on April 1, 2022. The bonds are tax exempt and bear interest at
the prevailing 7 day floating rate. The initial weekly interest rate (including
letter of credit and remarketing fees) was approximately 4.4%. The proceeds will
be used to purchase and renovate a new production facility for the electronic
systems business.
On May 8, 1997, the Company purchased the stock of Graseby Controls, Inc.
("GCI"), for cash of approximately $5,000. GCI manufactures and sells industrial
AC Drives, including the Volkmann brand of high frequency, AC drives, electronic
brakes, and SoftStarts
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 April 4, 1997.
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 May 15, 1997.
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
<TABLE>
<CAPTION>
April 4, March 29,
(in thousands, except per share amounts) 1997 1996
- ------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Weighted average number of common shares outstanding 5,828 4,727
Shares issued upon assumed exercise of outstanding stock options 80 105
----- -----
Weighted average number of common and common equivalent shares
outstanding 5,908 4,832
----- -----
Income before extraordinary item $2,137 $933
Extraordinary item -- (1,305)
Net income 2,137 (372)
===== ====
Net (loss) Income per common share:
Before extraordinary item $0.36 $0.19
Extraordinary item -- (0.27)
Net Income 0.36 (0.08)
===== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFOMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED APRIL 4, 1997 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 CORPORATIONS & SUBSIDIARIES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jan-02-1998
<PERIOD-START> Jan-04-1997
<PERIOD-END> Apr-04-1997
<EXCHANGE-RATE> 1.000
<CASH> 507
<SECURITIES> 0
<RECEIVABLES> 18,479
<ALLOWANCES> 481
<INVENTORY> 23,757
<CURRENT-ASSETS> 43,412
<PP&E> 42,210
<DEPRECIATION> (21,909)
<TOTAL-ASSETS> 75,761
<CURRENT-LIABILITIES> 16,200
<BONDS> 22,083
0
0
<COMMON> 58
<OTHER-SE> 19,028
<TOTAL-LIABILITY-AND-EQUITY> 75,761
<SALES> 30,489
<TOTAL-REVENUES> 31,145
<CGS> 19,538
<TOTAL-COSTS> 6,714
<OTHER-EXPENSES> 188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 487
<INCOME-PRETAX> 3,562
<INCOME-TAX> 1,425
<INCOME-CONTINUING> 2,137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,137
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
