<PAGE> 1
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 30, 1996
Commission File Number 0-6955
WALBRO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
38-1358966
(I.R.S. Employer ID No.)
6242 Garfield Street, Cass City, MI 48726
(Address of principal executive offices) (Zip Code)
(517) 872-2131
Registrant's telephone number, including area code
Indicate by check mark whether the registrant 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 (of for such shorter period that the
registrant was required to file such reports) and has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of August 9, 1996
Common Stock (one class): 8,601,796
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION TO THE CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements of Walbro Corporation and
subsidiaries (the "Company") have been prepared by the Company without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The condensed consolidated financial statements of the Company
should be read in conjunction with the financial statements and the notes
thereto included in the Company's Form 10-K as filed with the Securities and
Exchange Commission for the year ended December 31, 1995.
The financial information presented reflects all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of the results for interim periods presented.
The results for the interim periods are not necessarily indicative of the
results to be expected for the year.
<PAGE> 3
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
6/30/96 12/31/95
------- --------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
CASH $ 26,167 $ 19,792
ACCOUNTS RECEIVABLE (NET) 133,097 113,346
INVENTORIES 48,074 50,723
OTHER CURRENT ASSETS 11,425 15,843
------------- -------------
TOTAL CURRENT ASSETS 218,763 199,704
PROPERTY, PLANT & EQUIPMENT:
LAND, BUILDINGS & IMPROVEMENTS 65,704 57,986
MACHINERY & EQUIPMENT 254,382 211,707
------------- -------------
SUBTOTAL 320,086 269,693
LESS: ACCUMULATED DEPRECIATION (72,266) (63,928)
------------- -------------
NET PROPERTY, PLANT & EQUIPMENT 247,820 205,765
OTHER ASSETS:
GOODWILL (NET) 32,848 33,299
JOINT VENTURES, INVESTMENTS &
OTHER 52,648 54,705
------------- -------------
TOTAL OTHER ASSETS 85,496 88,004
------------- ------------
TOTAL ASSETS $ 552,079 $ 493,473
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE> 4
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
6/30/96 12/31/95
------- --------
LIABILITIES (Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
CURRENT PORTION LONG-TERM DEBT $ 5,148 $ 1,086
NOTES PAYABLE-BANKS 9,699 14,921
ACCOUNTS PAYABLE 67,054 52,774
ACCRUED LIABILITIES 33,525 35,210
------------- -------------
TOTAL CURRENT LIABILITIES 115,426 103,991
LONG-TERM LIABILITIES:
LONG-TERM DEBT, NET OF CURRENT 276,960 233,389
OTHER LONG-TERM LIABILITIES 20,400 20,666
------------- -------------
TOTAL LONG-TERM LIABILITIES 297,360 254,055
STOCKHOLDERS' EQUITY
COMMON STOCK, $.50 PAR VALUE; 4,301 4,290
AUTHORIZED 25,000,000;
OUTSTANDING 8,601,796 IN 1996 AND
8,579,976 IN 1995
PAID-IN CAPITAL 64,762 64,381
RETAINED EARNINGS 73,895 66,256
OTHER STOCKHOLDERS' EQUITY (3,665) 500
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 139,293 135,427
------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 552,079 $ 493,473
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE> 5
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
06/30/96 06/30/95 06/30/96 06/30/95
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 155,086 $ 90,034 $ 308,052 $ 188,291
COST OF SALES & EXPENSES:
COST OF SALES 126,752 73,036 250,931 150,585
SELLING AND ADMINISTRATIVE EXPENSES 14,378 8,027 28,336 17,168
RESEARCH & DEVELOPMENT EXPENSES 3,489 3,302 8,447 6,662
--------------- ------------ ----------- -----------
OPERATING INCOME 10,467 5,669 20,338 13,876
OTHER EXPENSE (INCOME):
INTEREST EXPENSE 5,538 1,486 10,593 2,665
INTEREST INCOME (456) (37) (624) (127)
OTHER (INCOME) EXPENSE (180) 95 17 416
--------------- ------------ ----------- -----------
INCOME BEFORE INCOME TAXES, MINORITY
INTEREST, AND JOINT VENTURES 5,565 4,125 10,352 10,922
PROVISION FOR INCOME TAXES 1,723 1,197 3,009 3,751
MINORITY INTEREST 112 161 210 322
EQUITY IN (INCOME) OF JOINT VENTURES (1,094) (1,068) (2,225) (2,074)
--------------- ------------ ----------- -----------
NET INCOME $ 4,824 $ 3,835 $ 9,358 $ 8,923
=============== ============ =========== ===========
NET INCOME PER SHARE $0.56 $0.45 $1.08 $1.04
AVERAGE SHARES OUTSTANDING 8,658,608 8,601,645 8,645,755 8,599,490
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 6
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited; In thousands) SIX MONTHS ENDED
6/30/96 6/30/95
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 9,358 $ 8,923
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION 13,878 7,838
(GAIN) LOSS ON DISPOSITION OF ASSETS (194) 144
MINORITY INTEREST (334) 344
(INCOME) OF JOINT VENTURES (2,225) (2,074)
CHANGES IN ASSETS AND LIABILITIES:
DEFERRED INCOME TAXES 494 (1,800)
DEFERRED PENSION OBLIGATIONS & OTHER 327 2,098
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 8,783 6,108
ACCOUNTS RECEIVABLE, NET (14,644) (197)
INVENTORIES 1,785 (1,634)
PREPAID EXPENSES AND OTHER (209) (1,729)
------------- -------------
TOTAL ADJUSTMENTS 7,661 9,098
------------- -------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 17,019 18,021
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF FIXED ASSETS (52,227) (20,730)
ACQUISITIONS, NET OF CASH ACQUIRED 0 105
PURCHASE OF OTHER ASSETS (1,380) (3,767)
INVESTMENT IN JOINT VENTURES & OTHER (259) (2,232)
PROCEEDS FROM DISPOSAL OF ASSETS 3,148 309
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (50,718) (26,315)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS UNDER LINE-OF-CREDIT
AGREEMENTS 44,450 10,787
DEBT REPAYMENTS (1,347) (634)
PROCEEDS FROM ISSUANCE OF
COMMON STOCK & OPTIONS 392 0
CASH DIVIDENDS PAID (1,718) (1,713)
------------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 41,777 8,440
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,703) (1,267)
------------- -------------
NET INCREASE (DECREASE) IN CASH 6,375 (1,121)
CASH BEGINNING BALANCE 19,792 4,540
------------- -------------
CASH ENDING BALANCE $ 26,167 $ 3,419
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 7
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
As of June 30, 1996
--------------------------------------------------------------------------
Walbro
Corporation Consolidation
Guarantor Nonguarantor (Parent and Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
------------ ------------ ------------ --------------- -----------
(in thousands, except share data)
---------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 206 $ 25,339 $ 622 $ - $ 26,167
Accounts receivable, net 73,895 58,251 958 (7) 133,097
Inventories 23,142 23,553 716 663 48,074
Prepaid expenses and other (71,525) (603) 86,327 (8,011) 6,188
Deferred and refundable income taxes 353 820 4,064 - 5,237
--------------------------------------------------------------------------
Total current assets 26,071 107,360 92,687 (7,355) 218,763
--------------------------------------------------------------------------
PLANT AND EQUIPMENT, NET 114,946 123,254 9,511 109 247,820
--------------------------------------------------------------------------
OTHER ASSETS:
Funds held for construction 1,102 - - - 1,102
Joint ventures 11,291 15,545 - - 26,836
Investments 119,601 29,067 108,342 (250,470) 6,540
Goodwill, net 15,026 7,101 (58) 10,779 32,848
Notes receivable - - 197,947 (197,505) 442
Deferred income taxes - 1,813 - - 1,813
Other 6,738 2,925 7,067 (815) 15,915
--------------------------------------------------------------------------
Total other assets 153,758 56,451 313,298 (438,011) 85,496
--------------------------------------------------------------------------
Total assets $294,775 $287,065 $415,496 $(445,257) $552,079
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 555 $ 4,185 $ 408 $ - $ 5,148
Bank and other borrowings - 9,699 - - 9,699
Accounts payable 25,699 46,390 7,580 (12,615) 67,054
Accrued liabilities 15,945 13,963 4,216 (1,459) 32,665
Dividends payable - - 860 - 860
--------------------------------------------------------------------------
Total current liabilities 42,199 74,237 13,064 (14,074) 115,426
--------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 169,416 86,273 250,068 (228,797) 276,960
Pension obligations 410 3,692 11,047 - 15,149
Deferred income taxes - 2,004 2,024 - 4,028
Minority interest - 1,223 - - 1,223
--------------------------------------------------------------------------
Total long-term liabilities 169,826 93,192 263,139 (228,797) 297,360
--------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $.50 par value;
authorized 25,000,000; outstanding
8,601,796 in 1996; 8,579,976 in 1995 - 19,392 4,301 (19,392) 4,301
Paid-in capital - 71,485 64,762 (71,485) 64,762
Retained earnings 81,756 29,807 73,895 (111,563) 73,895
Deferred compensation - - (504) - (504)
Minimum pension liability adjustment - - (63) - (63)
Unrealized gain on securities available for sale - - 1,036 - 1,036
Cumulative translation adjustments 994 (1,048) (4,134) 54 (4,134)
--------------------------------------------------------------------------
Total stockholders' equity 82,750 119,636 139,293 (202,386) 139,293
--------------------------------------------------------------------------
Total liabilities and stockholders' equity $294,775 $287,065 $415,496 $(445,257) $552,079
==========================================================================
</TABLE>
6
<PAGE> 8
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Six months ended June 30, 1996
--------------------------------------------------------------------------
Walbro
Corporation Consolidation
Guarantor Nonguarantor (Parent and Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
------------ ------------ ------------ --------------- -----------
(in thousands, except share data)
---------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $176,266 $145,079 $ 1,240 $ (14,533) $308,052
COSTS AND EXPENSES:
Cost of sales 142,483 122,047 934 (14,533) 250,931
Selling, administration & other expenses 18,743 12,444 5,596 - 36,783
--------------------------------------------------------------------------
OPERATING INCOME (LOSS) 15,040 10,588 (5,290) - 20,338
OTHER EXPENSE (INCOME):
Interest expense 7,751 3,608 10,117 (10,883) 10,593
Interest income (2,147) (1,346) (8,014) 10,883 (624)
Foreign currency exchange loss(gain) (137) 52 362 - 277
Other 3 11 (274) - (260)
--------------------------------------------------------------------------
Income before provision for income taxes,
minority interest, equity in (income) loss
of joint ventures and subsidiaries 9,570 8,263 (7,481) - 10,352
Provision (credit) for income taxes 2,833 2,709 (2,533) - 3,009
Minority Interest - 210 - - 210
Equity in (income) loss of joint ventures (427) (1,798) - - (2,225)
Equity in (income) of subsidiaries (7,383) - (14,306) 21,689 -
--------------------------------------------------------------------------
Net Income $ 14,547 $ 7,142 $ 9,358 $ (21,689) $ 9,358
==========================================================================
</TABLE>
7
<PAGE> 9
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Six months ended June 30, 1996
--------------------------------------------------------------------------
Walbro
Corporation Consolidation
Guarantor Nonguarantor (Parent and Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
------------ ------------ ------------ --------------- -----------
(in thousands, except share data)
---------------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ 38,470 $ 30,674 $(52,125) $ - $ 17,019
--------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (26,751) (24,506) (970) - (52,227)
Acquisitions, net of cash acquired - - - - -
Purchase of other assets (592) (333) (455) - (1,380)
Investment in joint ventures and other (11,147) 3,485 7,403 - (259)
Proceeds/(payments) of intercompany note rec. - - - - -
Proceeds from disposal of assets - 180 2,968 - 3,148
--------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (38,490) (21,174) 8,946 - (50,718)
--------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving
line-of-credit agreements - (150) 44,600 - 44,450
Debt repayments (272) (1,075) - - (1,347)
Proceeds from issuance of long-term debt - - - - -
Proceeds from issuance of common stock
and options - - 392 - 392
Financing fees paid - - - - -
Cash dividends paid - - (1,718) - (1,718)
--------------------------------------------------------------------------
Net cash provided by(used in) financing activities (272) (1,225) 43,274 - 41,777
--------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH 423 (2,155) 29 - (1,703)
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 131 6,120 124 - 6,375
CASH AT BEGINNING OF YEAR 75 19,219 498 - 19,792
--------------------------------------------------------------------------
CASH AT END OF PERIOD $ 206 $ 25,339 $ 622 $ - $ 26,167
==========================================================================
</TABLE>
8
<PAGE> 10
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
As of December 31, 1995
--------------------------------------------------------------------------
Walbro
Corporation Consolidation
Guarantor Nonguarantor (Parent and Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
------------ ------------ ------------ --------------- -----------
(in thousands, except share data)
---------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 75 $ 19,219 $ 498 $ - $ 19,792
Accounts receivable, net 20,598 51,455 49,116 (7,823) 113,346
Inventories 24,416 25,342 965 - 50,723
Prepaid expenses and other 8,519 2,264 678 (495) 10,966
Deferred and refundable income taxes 349 464 4,064 - 4,877
--------------------------------------------------------------------------
Total current assets 53,957 98,744 55,321 (8,318) 199,704
--------------------------------------------------------------------------
PLANT AND EQUIPMENT, NET 85,437 111,190 9,030 108 205,765
--------------------------------------------------------------------------
OTHER ASSETS:
Funds held for construction 1,102 - - - 1,102
Joint ventures 10,181 13,285 - - 23,466
Investments 144,588 295 101,386 (237,045) 9,224
Goodwill, net 15,254 18,045 - - 33,299
Notes receivable - - 189,134 (188,674) 460
Deferred income taxes - 2,805 - - 2,805
Other 8,352 1,987 7,309 - 17,648
--------------------------------------------------------------------------
Total other assets 179,477 36,417 297,829 (425,719) 88,004
--------------------------------------------------------------------------
Total assets $318,871 $246,351 $362,180 $(433,929) $493,473
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 555 $ 123 $ 408 $ - $ 1,086
Bank and other borrowings - 14,921 - - 14,921
Accounts payable 27,113 36,988 2,057 (13,384) 52,774
Accrued liabilities 13,278 15,360 6,029 (315) 34,352
Dividends payable - - 858 - 858
--------------------------------------------------------------------------
Total current liabilities 40,946 67,392 9,352 (13,699) 103,991
--------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 204,435 45,387 205,448 (221,881) 233,389
Pension obligations 618 4,455 10,029 - 15,102
Deferred income taxes - 2,003 1,924 - 3,927
Minority interest - 1,637 - - 1,637
--------------------------------------------------------------------------
Total long-term liabilities 205,053 53,482 217,401 (221,881) 254,055
--------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $.50 par value;
authorized 25,000,000;outstanding
8,601,796 in 1996;8,579,976 in 1995 - 19,392 4,290 (19,392) 4,290
Paid-in capital - 78,633 64,381 (78,633) 64,381
Retained earnings 72,301 23,993 66,256 (96,294) 66,256
Deferred compensation - - (817) - (817)
Minimum pension liability adjustment - - (63) - (63)
Unrealized gain on securities available for sale - - 827 - 827
Cumulative translation adjustments 571 3,459 553 (4,030) 553
--------------------------------------------------------------------------
Total stockholders' equity 72,872 125,477 135,427 (198,349) 135,427
--------------------------------------------------------------------------
Total liabilities and stockholders' equity $318,871 $246,351 $362,180 $(433,929) $493,473
==========================================================================
</TABLE>
9
<PAGE> 11
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Six months ended June 30, 1995
--------------------------------------------------------------------------
Walbro
Corporation Consolidation
Guarantor Nonguarantor (Parent and Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
------------ ------------ ------------ --------------- -----------
(in thousands, except share data)
---------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $168,563 $ 37,888 $ 1,814 $ (19,974) $188,291
COSTS AND EXPENSES:
Cost of sales 137,805 31,562 1,192 (19,974) 150,585
Selling, administration & other expenses 14,910 2,144 6,780 - 23,834
--------------------------------------------------------------------------
OPERATING INCOME (LOSS) 15,848 4,182 (6,158) - 13,872
OTHER EXPENSE (INCOME):
Interest expense 2,697 242 1,884 (2,165) 2,658
Interest income (556) 524 (2,253) 2,165 (120)
Foreign currency exchange loss(gain) (84) 5 491 - 412
Other - - - - -
--------------------------------------------------------------------------
Income before provision for income taxes,
minority interest, equity in (income) loss
of joint ventures and subsidiaries 13,791 3,411 (6,280) - 10,922
Provision (credit) for income taxes 4,754 1,143 (2,146) - 3,751
Minority Interest - 322 - - 322
Equity in (income) loss of joint ventures (497) (1,577) - - (2,074)
Equity in (income) of subsidiaries (3,523) - (13,057) 16,580 -
--------------------------------------------------------------------------
Net Income $ 13,057 $ 3,523 $ 8,923 $ (16,580) $ 8,923
==========================================================================
</TABLE>
10
<PAGE> 12
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Six months ended June 30, 1995
-----------------------------------------------------------
Walbro Combined
Corporation Consolidation Issuer and
Guarantor (Parent and Elimination Guarantor
Subsidiaries Corporation) Entries Total
------------ ------------ --------------- -----------
(in thousands, except share data)
---------------------------------
<S> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ 28,755 $ (10,656) $ - $ 18,099
--------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (18,315) (960) - (19,275)
Acquisitions, net of cash acquired - 105 - 105
Purchase of other assets (3,362) (368) - (3,730)
Investment in joint ventures and other (6,862) 1,108 - (5,754)
Proceeds/(payments) of intercompany note rec. - - - -
Proceeds from disposal of assets 89 198 - 287
--------------------------------------------------------
Net cash provided by (used in)
investing activities (28,450) 83 - (28,367)
--------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving
line-of-credit agreements - 11,000 - 11,000
Debt repayments (253) (36) - (289)
Proceeds from issuance of long-term debt - - - -
Proceeds from issuance of common stock
and options - - - -
Financing fees paid - - - -
Cash dividends paid - (1,713) - (1,713)
--------------------------------------------------------
Net cash provided by(used in) financing activities (253) 9,251 - 8,998
--------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH 7 - - 7
--------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 59 (1,322) - (1,263)
CASH AT BEGINNING OF YEAR 75 1,940 - 2,015
--------------------------------------------------------
CASH AT END OF PERIOD $ 134 $ 618 $ - $ 752
========================================================
</TABLE>
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
On July 27, 1995, the Company, through certain of its wholly-owned
subsidiaries, acquired the Fuel Systems Business of Dyno Industrier A.S, Oslo,
Norway ("Dyno" operating as Walbro Automotive Europe). Dyno supplies plastic
fuel tanks to most European vehicle manufacturers through production facilities
in Belgium, France, Germany, Norway, Spain and the United Kingdom. Dyno's
sales, on a pro forma basis, were $210.2 million in 1995. Except as noted
below, the results of operations for the three months and six months ended June
30, 1996 include the results of Dyno while the results of operations for the
three months and six months ended June 30, 1995 exclude the results of Dyno.
THREE MONTHS ENDED JUNE 30, 1996 VS. THREE MONTHS ENDED JUNE 30, 1995
Net sales in the second quarter of 1996 increased 72.3% to $155.1 million
(including $54.7 million of sales from Dyno) compared to $90.0 million for the
same period of 1995. Net sales in the second quarter of 1996 without Dyno
sales increased 11.6%. Sales of automotive products increased 121.2% to $116.8
million for the second quarter of 1996 compared to $52.8 million for the same
period of 1995 (17.6% increase without Dyno sales).
Sales of automotive products increased for the second quarter of 1996
because of higher light vehicle production and sales during the quarter in both
the U.S. and Europe. Sales of light vehicles in the U.S. increased 4.4% for
the second quarter of 1996, while sales of vehicles in Europe increased 2.9%
for the quarter. Sales of fuel modules to the Company's largest customer
increased significantly because of higher production by the customer,
additional applications and increased dollar content per unit, while sales of
fuel modules and fuel pumps to the Company's second largest customer declined
because of the customer's increased in-house production. Sales of plastic fuel
tanks by Dyno in Europe for the second quarter of 1996 increased by 0.5%.
Reported sales were depressed by lower European foreign currency exchange rates
versus the dollar; without giving effect to this exchange rate change, Dyno's
sales would have increased by 8.5%.
Sales of small engine products increased 3.7% to $30.9 million for the
second quarter of 1996 compared to $29.8 million for the same period in 1995.
The increase was the result of increased sales of ignition systems (up 90.3%)
due to new contracts with existing carburetor customers and increased
12
<PAGE> 14
carburetor sales in China (up 22.2%) because of the continued rapid growth of
motorcycle sales in China. These increases were partially offset by lower
sales of both diaphragm and float feed carburetors which were below normal
seasonal levels due to poor weather conditions. The drought in the Southeast
and Southwest U.S. and cold, wet spring conditions in other areas resulted in
reduced demand for outdoor power equipment and marine products. Sales of
diaphragm carburetors also declined in Japan because of the lower yen-dollar
exchange rate. The sales in yen increased by 15.1% but the yen weakened by
27.4% against the dollar.
Sales to the aftermarket decreased 9.1% to $6.0 million for the second
quarter of 1996 compared to $6.6 million for the same period of 1995. Sales of
small engine carburetor replacement parts decreased by 12.3% due to poor
weather conditions and sales of automotive products declined by 7.5% because of
increased in-house production by one of the Company's aftermarket customers.
Cost of sales for the second quarter of 1996 increased 73.7% to $126.8
million compared to $73.0 million for the same period of 1995 (9.1% increase
without Dyno), while cost of sales as a percent of net sales was 81.7% (79.3%
without Dyno) compared to 81.1% for the same 1995 period. Cost of sales as a
percent of sales at Dyno was 86.2% for the second quarter of 1996. For
automotive products (without Dyno), gross margin increased because of higher
sales volumes of fuel modules and fuel rails partially offset by lower fuel
pump volumes. This increase was more than offset by the effect of lower gross
margins at Dyno compared to U.S. automotive gross margins. In small engine
products, gross margin increased primarily because of significantly higher
volumes of ignition systems products.
Selling and administrative ("S & A") expenses increased 79.1% (increased
24.9% without Dyno) for the second quarter of 1996 compared to the second
quarter of 1995. S & A increased as a percent of sales, without Dyno, (from
9.1% in the second quarter of 1995 to 10.0% for the second quarter of 1996)
because of start-up costs for the Company's new plastic fuel tank facility near
Sao Paulo, Brazil; its new plastic fuel tank and plastic fuel rail facility in
Meriden, Connecticut; its new carburetor facility in Tianjin, China; and its
new diecast facility in Tucson, Arizona.
Research and development ("R & D") expenses increased 5.7% (decreased 9.8%
without Dyno). Approximately $1.5 million of expenses that would have been
previously recorded as R & D were classified as Cost of Sales and S & A
expenses during the second quarter. These expenses represented costs for
product engineering and product testing. The level of effort expended to
develop new products to meet EPA regulations for automotive evaporative
emissions and for small engine exhaust emissions has
13
<PAGE> 15
not changed. R & D expenses in automotive were increased for development of
plastic fuel tank programs and reduced for steel fuel rail programs.
Interest expense increased substantially because of borrowings for the
Dyno acquisition and increased borrowings for additional working capital
required to support sales growth and for capital expenditures. A description
of the borrowings for the Dyno acquisition is provided under Liquidity and
Capital Resources.
Provision for income taxes was 43.9% higher for the second quarter of 1996
compared to the same period of 1995 because of higher taxable income and a
slightly higher effective tax rate.
The equity in income from joint ventures in the second quarter of 1996 was
$1.1 million and was approximately the same as the comparable period income in
1995. Increased income at Marwal Systems (France) and Mitsuba-Walbro Inc.
(Japan) was partially offset by start-up costs at Marwal Mexico and Korea
Automotive Fuel Systems Ltd.
Net income for the second quarter of 1996 was $4.8 million, an increase of
25.8% compared to $3.8 million for the same period last year, as a result of
the reasons described above. Net income per share for the second quarter of
1996 was $.56 compared with $.45 for the same 1995 period.
SIX MONTHS ENDED JUNE 30, 1996 VS. SIX MONTHS ENDED JUNE 30, 1995
Net sales for the first six months of 1996 increased 63.6% to $308.1
million (including $108.8 million of sales from Dyno) compared to $188.3
million for the same period of 1995. Net sales for the first six months of
1996 without Dyno sales increased 5.8%. Sales of automotive products increased
107.0% to $231.2 million for the 1996 six-month period compared to $111.7
million for the same 1995 period (9.7% increase without Dyno sales). The
increased automotive product sales were primarily the result of increased sales
during the second quarter of 1996 for the reasons stated above.
Sales of small engine products increased 0.9% to $61.9 million for the
first six months of 1996 compared to $61.4 million for the same period of 1995.
The increased small engine product sales were the result of increased sales of
ignition systems products and carburetors in China mostly offset by declines in
both diaphragm and float feed carburetors in the U.S. for the reasons stated
above.
Sales to the aftermarket decreased 11.8% to $12.0 million for the first
six months of 1996 compared to $13.6 million for the same period of 1995.
Sales
14
<PAGE> 16
decreased in all product areas during the first six months of 1996 for the
reasons stated above.
Cost of sales for the first six months of 1996 increased 66.6% to $250.9
million compared to $150.6 million for the same period of 1995 (4.9% increase
without Dyno). Cost of sales as a percent of net sales was 81.5% (79.3%
without Dyno) for the first six months of 1996 compared to 80.0% for the same
period of 1995. The improved gross margin, without Dyno, for the first six
months of 1996 was achieved in the second quarter for the reasons stated above,
while the gross margin, without Dyno, declined slightly (0.4%) for the first
quarter of 1996.
S & A expenses increased by 65.1% (increased 15.1% without Dyno) for the
first six months of 1996 compared to the same period of 1995. The increase in
S & A expenses for the six-month period were due to the same reasons stated
above for the second quarter of 1996. R & D expenses increased by 26.8%
(decreased 3.7% without Dyno) for the first six months of 1996 compared to the
same period of 1995. Most of the increase was incurred during the first
quarter of 1996, while the second quarter increase was modest for the reasons
stated above.
The provision for income taxes was 16.1% lower for the first six months of
1996 compared to the same period of 1995 because of slightly lower taxable
income and a lower effective tax rate of 29.7% for the 1996 six-month period
compared to 35.4% for the same 1995 period. The lower effective tax rate
resulted from additional research and development tax credits.
The equity in income from joint ventures was $2.2 million for the first
six months of 1996 compared to the 1995 income of $2.1 million for the same
period because of the increased sales and improved profitability at Marwal
Systems (France) and Mitsuba-Walbro (Japan) during the first six months of 1996
which more than offset the start-up costs at Korea Automotive Fuel Systems.
Net income for the first six months of 1996 was $9.4 million, an increase
of 4.9% compared to net income of $8.9 million for the same period of 1995.
The increase was due to the reasons described above. Net income per share was
$1.08 for the first six months of 1996 compared to $1.04 for the first six
months of 1995.
Foreign Currency Transactions
Approximately 50% of the Company's sales during the first six months of
1996 were derived from international manufacturing operations in Europe, Asia
and Mexico. The financial position and the results of operations of the
Company's subsidiaries in Europe (35% of sales), Japan (4% of sales) and
15
<PAGE> 17
China (1% of sales) are measured in the local currency of the countries in
which they operate and translated into U.S. dollars. The effects of foreign
currency fluctuations in Europe, Japan and China are somewhat mitigated by the
fact that expenses are generally incurred in the same currencies in which sales
are generated and the reported income of these subsidiaries will be higher or
lower depending on a weakening or strengthening of the U.S. dollar.
For the Company's subsidiary in Singapore (3% of sales) the expenses are
generally incurred in the local currency, but sales are generated in U.S.
dollars; therefore, results of operations are more directly influenced by a
weakening or strengthening of the local currency. The Company's subsidiary in
Mexico (7% of sales) operates as a maquiladora, or contract manufacturer, where
certain direct manufacturing expenses are incurred in the local currency and
sales are generated in U.S. dollars. Thus, results of operations of the
Company's subsidiary in Mexico are also more directly influenced by a weakening
or strengthening of the local currency.
Approximately 50% of the Company's assets at June 30, 1996, are based in
its foreign operations and are translated into U.S. dollars at foreign currency
exchange rates in effect as of the end of each period. Accordingly, the
Company's consolidated shareholders' equity will fluctuate depending upon the
weakening or strengthening of the U.S. dollar. In addition, the Company has
equity investments in unconsolidated joint ventures in France, Brazil, Japan,
Korea and Mexico. The Company's reported income from these joint ventures will
be higher or lower depending upon a weakening or strengthening of the U.S.
dollar.
The Company's strategy for management of currency risk relies primarily
upon the use of forward currency exchange contracts to manage its exposure to
foreign currency fluctuations related to its operations in foreign countries,
to manage certain of its firm transaction commitments in foreign currencies and
to hedge its equity investment in certain foreign joint ventures.
Liquidity and Capital Resources
As of June 30, 1996, the Company had outstanding $14.8 million in
short-term debt, including current portion of long-term debt, and $277.0
million in long-term debt. The approximate minimum principal payments required
on the Company's long-term debt in each of the five fiscal years subsequent to
December 31, 1995 are $1.1 million in 1996, $1.3 million in 1997, $7.9 million
in 1998, $7.6 million in 1999, $64.6 million in 2000 and $152.0 million
thereafter.
The net purchase price of the acquisition of Dyno's Fuel Systems Business
was approximately $114 million (approximately $130 million less approximately
$16 million in cash acquired by the Company). The Company
16
<PAGE> 18
financed the acquisition through the combination of an issuance of $110 million
in aggregate principal amount of its 9 7/8% Senior Notes due 2005 and a new
$135 million secured Credit Facility with a group of commercial banks. At June
30, 1996, the Company had available to it approximately $25 million under the
new Credit Facility.
In the first six months of 1996, net working capital increased by $7.6
million and cash used for investing activities was $50.7 million. Financing
activities provided $43.5 million with the remaining cash generated from
operations. In the first six months of 1995, net working capital increased by
$6.3 million while cash used for investing activities was $26.3 million.
Financing activities provided $10.2 million with the remaining cash generated
from operations.
The Company's plans for 1996 capital expenditures for facilities,
equipment and tooling total approximately $64 million, of which approximately
$37 million represent expenditures for expansion. The major projects include
new blow molding machines for plastic fuel tanks, expansion of the Ossian,
Indiana plant, new plants in Meriden, Connecticut, Belgium and Brazil, and an R
& D center in France. The Company intends to finance the capital expenditures
with the new Credit Facility and cash from operations.
Management believes that the Company's long-term cash needs will continue
to be provided principally by operating activities supplemented, to the extent
required, by borrowing under the Company's existing and future credit
facilities. Management expects to replace these credit facilities as they
expire with comparable facilities.
As of June 30, 1996, accounts receivable amounted to $133.1 million, an
increase of $63.1 million, compared to $70.0 million at June 30, 1995. The
acquisition of Dyno added $43.6 million of accounts receivable at June 30, 1996
while the remaining increase was due to longer collection periods due to
revised payment terms with certain customers. The average collection period
at June 30, 1996 was 76.9 days compared to the average collection period at
June 30, 1995 of 70.2 days. The average collection period in calendar
year 1995 was 66.4 days, compared to 62.3 days in 1994. Approximately 45% of
the accounts receivable increase in 1995 was due to increased sales in 1995,
while the remaining increase was due to longer collection periods. As of June
30, 1996, inventories amounted to $48.1 million, an increase of $14.2 million,
compared to $33.9 million at June 30, 1995. The Dyno acquisition added $16.2
million of inventories at June 30, 1996.
Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995
17
<PAGE> 19
The statements contained in this discussion that are not historical facts
are forward-looking statements subject to the safe harbor created by the
Securities Litigation Reform Act of 1995. The Company cautions readers of this
discussion that a number of important factors could cause the Company's actual
consolidated results for 1996 and beyond to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. These important factors include, without limitation, changes in
demand for automobiles and light trucks, relationships with significant
customers, price pressures, the timing and structure of future acquisitions or
dispositions, the integration of the Dyno acquisition into the Company's
overall business, impact of environmental regulations, continued availability
of adequate funding sources, currency and other risks inherent in international
sales, and general economic and business conditions. These important factors
and other factors which could affect the Company's results are more fully
disclosed in the Company's filings with the Securities and Exchange Commission.
Readers of this discussion are referred to such filings.
18
<PAGE> 20
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on April 17,
1996.
(b) The Stockholders voted to elect three Class III directors to the Company's
Board of Directors, with the following votes:
<TABLE>
<CAPTION>
Authority Broker
Directors For Against Withheld Abstentions Non-Votes
- --------- --- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
William T. Bacon, Jr 7,054,920 --- 81,907 --- ---
Frank E. Bauchiero 7,057,598 --- 79,229 --- ---
Vernon E. Oechsle 7,061,742 --- 75,085 --- ---
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed with this report:
Exhibit No.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter.
19
<PAGE> 21
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.
WALBRO CORPORATION
(Registrant)
Dated: August 13, 1996 /s/ L. E. Althaver
-------------------------------------
L. E. Althaver, Chairman, President
and Chief Executive Officer
Dated: August 13, 1996 /s/Michael A. Shope
-------------------------------------
Michael A. Shope
Chief Financial Officer and Treasurer
20
<PAGE> 22
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ACQUISITION OF DYNO INDUSTRIER FUEL SYSTEMS BUSINESS
On July 27, 1995, the Company, through certain of its wholly-owned
subsidiaries, acquired the Fuel Systems Business of Dyno Industrier A.S, Oslo,
Norway ("Dyno"). Dyno supplies plastic fuel tanks to most European vehicle
manufacturers through production facilities in Belgium, France, Germany,
Norway, Spain and the United Kingdom.
This acquisition was accounted for as a purchase and, accordingly, the
operating results of Dyno have been included in the accompanying financial
statements since the date of the acquisition. The results of operations for
the three months and six months ended June 30, 1996 include the results of Dyno
while the results of operations for the three months and six months ended June
30, 1995 exclude the results of Dyno.
Assuming the acquisition had taken place as of the beginning of 1995, the
consolidated pro forma results of operations of the Company for the three
months and six months ended June 30, 1995 would have been as follows, after
giving effect to certain adjustments consisting principally of management's
estimates of depreciation and amortization expense resulting from the market
valuation of Dyno net assets acquired, interest expense on acquisition debt and
related tax adjustments (Unaudited; in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Six Months
Ended 6/30/95 Ended 6/30/95
------------- -------------
<S> <C> <C>
Net Sales $144,527 $296,123
Net Income 2,824 8,044
Net Income Per Share 0.33 0.94
</TABLE>
21
<PAGE> 23
Exhibit Index
-------------
Exhibit
Number Description
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 26,167
<SECURITIES> 0
<RECEIVABLES> 133,097
<ALLOWANCES> 0
<INVENTORY> 48,074
<CURRENT-ASSETS> 218,763
<PP&E> 320,086
<DEPRECIATION> 72,266
<TOTAL-ASSETS> 552,079
<CURRENT-LIABILITIES> 115,426
<BONDS> 276,960
0
0
<COMMON> 4,301
<OTHER-SE> 134,992
<TOTAL-LIABILITY-AND-EQUITY> 552,079
<SALES> 308,052
<TOTAL-REVENUES> 308,052
<CGS> 250,931
<TOTAL-COSTS> 250,931
<OTHER-EXPENSES> 37,010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,969
<INCOME-PRETAX> 10,142
<INCOME-TAX> 3,009
<INCOME-CONTINUING> 9,358
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,358
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
