<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 March 31, 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 May 11, 1996
Common Stock (one class): 8,601,796
<PAGE> 2
PART 1
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 Company believes that the disclosures are adequate to make the
information presented not misleading when 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>
3/31/96 12/31/95
--------- ---------
ASSETS (Unaudited)
- ------
<S> <C> <C>
CURRENT ASSETS:
CASH $ 16,520 $ 19,792
ACCOUNTS RECEIVABLE (NET) 135,001 113,346
INVENTORIES 51,528 50,723
OTHER CURRENT ASSETS 20,346 15,843
---------- ----------
TOTAL CURRENT ASSETS 223,395 199,704
PROPERTY, PLANT & EQUIPMENT:
LAND, BUILDINGS & IMPROVEMENTS 59,341 57,986
MACHINERY & EQUIPMENT 221,638 211,707
---------- ----------
SUBTOTAL 280,979 269,693
LESS: ACCUMULATED DEPRECIATION (69,486) (63,928)
---------- ----------
NET PROPERTY, PLANT & EQUIPMENT 211,493 205,765
OTHER ASSETS:
GOODWILL (NET) 33,027 33,299
JOINT VENTURES, INVESTMENTS &
OTHER 53,015 54,705
---------- ----------
TOTAL OTHER ASSETS 86,042 88,004
---------- ----------
TOTAL ASSETS $ 520,930 $ 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>
3/31/96 12/31/95
---------- -----------
LIABILITIES (Unaudited)
- -----------
<S> <C> <C>
CURRENT LIABILITIES:
CURRENT PORTION LONG-TERM DEBT $ 1,024 $ 1,086
NOTES PAYABLE-BANKS 11,430 14,921
ACCOUNTS PAYABLE 71,562 52,774
ACCRUED LIABILITIES 28,358 35,210
-------- ----------
TOTAL CURRENT LIABILITIES 112,374 103,991
LONG TERM LIABILITIES:
LONG-TERM DEBT, NET OF CURRENT 252,098 233,389
OTHER LONG-TERM LIABILITIES 20,021 20,666
-------- ----------
TOTAL LONG-TERM LIABILITIES 272,119 254,055
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 69,931 66,256
OTHER STOCKHOLDERS' EQUITY (2,557) 500
-------- ----------
TOTAL STOCKHOLDERS' EQUITY 136,437 135,427
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $520,930 $ 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
3/31/96 3/31/95
------- -------
(Unaudited)
<S> <C> <C>
NET SALES $ 152,966 $ 98,257
COST OF SALES & EXPENSES:
COST OF SALES 124,178 77,550
SELLING AND ADMINISTRATIVE EXPENSES 13,960 9,140
RESEARCH & DEVELOPMENT EXPENSES 4,957 3,360
---------- ----------
OPERATING INCOME 9,871 8,207
OTHER EXPENSE (INCOME):
INTEREST EXPENSE 5,055 1,179
INTEREST INCOME (168) (90)
OTHER EXPENSE 197 321
---------- ----------
INCOME BEFORE INCOME TAXES, MINORITY
INTEREST, AND JOINT VENTURES 4,787 6,797
PROVISION FOR INCOME TAXES 1,286 2,554
MINORITY INTEREST 98 161
EQUITY IN (INCOME) OF JOINT VENTURES (1,131) (1,006)
---------- ----------
NET INCOME $ 4,534 $ 5,088
========== ==========
NET INCOME PER SHARE $ 0.53 $ 0.59
AVERAGE SHARES OUTSTANDING 8,620,942 8,597,265
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 6
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
3/31/96 3/31/95
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 4,534 $ 5,088
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION 7,251 3,965
LOSS ON DISPOSITION OF ASSETS 125 89
MINORITY INTEREST 98 161
(INCOME) OF JOINT VENTURES (1,131) (1,006)
CHANGES IN ASSETS AND LIABILITIES:
DEFERRED INCOME TAXES 244 1,309
DEFERRED PENSION OBLIGATIONS & OTHER (165) 1,210
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 7,620 4,484
ACCOUNTS RECEIVABLE, NET (22,457) (2,642)
INVENTORIES (1,224) (1,925)
PREPAID EXPENSES AND OTHER (4,160) (615)
--------- ----------
TOTAL ADJUSTMENTS (13,799) 5,030
--------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (9,265) 10,118
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF FIXED ASSETS (12,491) (12,524)
ACQUISITIONS, NET OF CASH ACQUIRED 0 105
PURCHASE OF OTHER ASSETS (704) (3,767)
INVESTMENT IN JOINT VENTURES & OTHER (245) 184
PROCEEDS FROM DISPOSAL OF ASSETS 0 98
NET CASH USED IN INVESTING ACTIVITIES (13,440) (15,904)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS UNDER LINE-OF-CREDIT
AGREEMENTS 20,655 6,560
DEBT REPAYMENTS (552) (148)
PROCEEDS FROM ISSUANCE OF
COMMON STOCK & OPTIONS 392 0
CASH DIVIDENDS PAID (858) (856)
--------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 19,637 5,556
EFFECT OF EXCHANGE RATE CHANGES ON CASH (204) (1,122)
--------- ----------
NET DECREASE IN CASH (3,272) (1,352)
CASH BEGINNING BALANCE 19,792 4,540
--------- ---------
CASH ENDING BALANCE $ 16,520 $ 3,188
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 7
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 ended March 31, 1996 include the results of Dyno while the
results of operations for the three months ended March 31, 1995 exclude the
results of Dyno.
Assuming the acquisition had taken place as of the beginning of the
quarter ended March 31, 1995, the consolidated pro forma results of operations
of the Company for the first quarter of 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):
Net Sales $151,596
Net Income 5,315
Net Income Per Share $ 0.62
6
<PAGE> 8
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
March 31, 1996
-----------------------------------------------------------------------------------
Walbro
Corporation Consolidation
Guarantor Nonguaranto (Parent and Elimination Consolidated
Subsidiaries Subsidiaries Corporation) Entries Total
------------ ------------ ------------- --------------- -----------
(in thousands, except share data)
-------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 227 $ 16,076 $ 217 $ - $ 16,520
Accounts receivable, net 16,767 56,683 70,584 (9,033) 135,001
Inventories 24,776 25,534 683 535 51,528
Prepaid expenses and other 12,214 3,014 530 (620) 15,138
Deferred and refundable income taxes 325 819 4 ,064 - 5,208
----------------------------------------------------------------------------------
Total current assets 54,309 102,126 76,078 (9,118) 223,395
----------------------------------------------------------------------------------
PLANT AND EQUIPMENT, NET 90,259 111,965 9,161 108 211,493
----------------------------------------------------------------------------------
OTHER ASSETS:
Funds held for construction 1,102 - - - 1,102
Joint ventures 10,766 14,262 - - 25,028
Investments 115,294 29,077 104,596 (240,529) 8,438
Goodwill, net 15,140 7,137 (29) 10,779 33,027
Notes receivable - - 189,252 (188,773) 479
Deferred income taxes - - - - -
Other 6,547 4,960 7,275 (814) 17,968
----------------------------------------------------------------------------------
Total other assets 148,849 55,436 301,094 (419,337) 86,042
----------------------------------------------------------------------------------
Total assets $293,417 $269,527 $386,333 $(428,347) $520,930
==================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 555 $ 61 $ 408 $ - $ 1,024
Bank and other borrowings - 11,430 - - 11,430
Accounts payable 28,725 46,471 9,541 (13,175) 71,562
Accrued liabilities 14,924 11,061 2,276 (763) 27,498
Dividends payable
----------------------------------------------------------------------------------
Total current liabilities 44,204 69,023 13,085 (13,938) 112,374
----------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 175,511 74,753 224,557 (222,723) 252,098
Pension obligations 410 3,791 10,600 - 14,801
Deferred income taxes - 1,917 1,654 - 3,571
Minority interest - 1,649 - - 1,649
----------------------------------------------------------------------------------
Total long-term liabilities 175,921 82,110 236,811 (222,723) 272,119
----------------------------------------------------------------------------------
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 - 71,083 64,762 (71,083) 64,762
Retained earnings 72,719 27,361 69,931 (100,080) 69,931
Deferred compensation - - (630) - (630)
Minimum pension liability adjustment - - (63) - (63)
Unrealized gain on securities available
for sale - - 323 - 323
Cumulative translation adjustments 573 558 (2,187) (1,131) (2,187)
----------------------------------------------------------------------------------
Total stockholders' equity 73,292 118,394 136,437 (191,686) 136,437
----------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 293,417 $ 269,527 $386,333 $(428,347) $520,930
==================================================================================
</TABLE>
7
<PAGE> 9
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
December 31, 1995
-----------------------------------------------------------------------------------
Walbro
Corporation Consolidation
Guarantor Nonguaranto (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 - - 2,850
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 0 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 shareholders'
equity $318,871 $246,351 $362,180 $(433,929) $ 493,473
====================================================================================
</TABLE>
8
<PAGE> 10
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
March 31, 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 $ 87,611 $ 71,572 $ 672 $ (6,889) $152,966
COSTS AND EXPENSES:
Cost of sales 70,900 59,607 560 (6,889) 124,178
Selling, administration & other expenses 9,118 6,963 2,836 - 18,917
--------------------------------------------------------------------------
OPERATING INCOME (LOSS) 7,593 5,002 (2,724) - 9,871
OTHER EXPENSE (INCOME):
Interest expense 3,964 1,790 4,875 (5,574) 5,055
Interest income (1,095) (574) (4,073) 5,574 (168)
Foreign currency exchange loss(gain) (1) - 186 - 185
Other - 11 - - 12
--------------------------------------------------------------------------
Income before provision for income taxes,
minority interest, equity in (income) loss
of joint ventures and subsidiaries 4,725 3,774 (3,712) - 4,787
Provision (credit) for income taxes 1,707 1,099 (1,520) - 1,286
Minority Interest - 98 - - 98
Equity in (income) loss of joint ventures (338) (793) - - (1,131)
Equity in (income) of subsidiaries (3,478) - (6,725) 10,203 -
--------------------------------------------------------------------------
Net Income $ 6,834 $ 3,370 $ 4,533 $ (10,203) $ 4,534
==========================================================================
</TABLE>
9
<PAGE> 11
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
March 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>
NET SALES $ 88,360 $ 19,098 $ 912 $ (10,113) $ 98,257
COSTS AND EXPENSES:
Cost of sales 71,423 15,517 723 (10,113) 77,550
Selling, administration & other expenses 8,287 794 3,419 - 12,500
----------------------------------------------------------------------------
OPERATING INCOME (LOSS) 8,650 2,787 (3,230) - 8,207
OTHER EXPENSE (INCOME):
Interest expense 1,371 406 727 (1,325) 1,179
Interest income (268) (12) (1,135) 1,325 (90)
Foreign currency exchange loss(gain) (72) 5 388 - 321
Other - - - - -
----------------------------------------------------------------------------
Income before provision for income taxes,
minority interest, equity in (income) loss
of joint ventures and subsidiaries 7,619 2,388 (3,210) - 6,797
Provision (credit) for income taxes 2,804 837 (1,087) - 2,554
Minority Interest - 161 - - 161
Equity in (income) loss of joint ventures (229) (777) - - (1,006)
Equity in (income) of subsidiaries (2,167) - (7,211) 9,378 -
----------------------------------------------------------------------------
Net Income $ 7,211 $ 2,167 $ 5,088 $ (9,378) $ 5,088
============================================================================
</TABLE>
10
<PAGE> 12
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
March 31, 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 $ 11,977 $ 572 $ (21,814) $ - $ (9,265)
----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (5,202) (6,863) (426) - (12,491)
Acquisitions, net of cash acquired - - - - -
Purchase of other assets (200) (178) (326) - (704)
Investment in joint ventures and other (6,287) 2,544 3,498 - (245)
Proceeds/(payments) of intercompany note receivable - - - - -
Proceeds from disposal of assets - - - - -
----------------------------------------------------------------------
Net cash provided by(used in) investing activities (11,689) (4,497) 2,746 - (13,440)
----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving
line-of-credit agreements - 1,555 19,100 - 20,655
Debt Repayments (136) (416) - - (552)
Proceeds from issuance of long-term debt - -
Proceeds from issuance of common stock
and options - - 392 - 392
Financing Fees Paid - - - - -
Cash dividends paid - - (858) - (858)
----------------------------------------------------------------------
Net cash provided by(used in) financing activities (136) 1,139 18,634 - 19,637
----------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH - (357) 153 - (204)
----------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 152 (3,143) (281) - (3,272)
CASH AT BEGINNING OF YEAR 75 19,219 498 - 19,792
----------------------------------------------------------------------
CASH AT END OF PERIOD $ 227 $16,076 $ 217 $ - $ 16,520
======================================================================
</TABLE>
11
<PAGE> 13
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
March 31, 1995
---------------------------------------------------------------------------
Walbro
Corporation Consolidation
Guarantor (Parent and Elimination Consolidated
Subsidiaries Corporation) Entries Total
------------ ----------- -------------- ------------
(in thousands, except share data)
-------------------------------
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities $ 15,626 $ (8,337) $ - $ 7,289
-----------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (11,518) (376) - (11,896)
Acquisitions, net of cash acquired 0 105 - 105
Purchase of other assets (3,117) (643) - (3,760)
Investment in joint ventures and other (924) 1,108 - 184
Proceeds/(payments) of intercompany note receivable - - - -
Proceeds from disposal of assets - 99 - 99
-----------------------------------------------------------------
Net cash provided by(used in) investing activities (15,559) 291 - (15,268)
-----------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving
line-of-credit agreements - 7,400 - 7,400
Debt Repayments (123) (15) - (138)
Proceeds from issuance of long-term debt - - - -
Proceeds from issuance of common stock
and options - - - -
Financing Fees Paid - - - -
Cash dividends paid - (857) - (857)
-----------------------------------------------------------------
Net cash provided by(used in) financing activities (123) 6,528 - 6,405
-----------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH 7 - - 7
-----------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (49) (1,518) - (1,567)
CASH AT BEGINNING OF YEAR 75 1,940 - 2,015
-----------------------------------------------------------------
CASH AT END OF PERIOD $ 26 $ 422 $ - $ 448
=================================================================
</TABLE>
12
<PAGE> 14
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"). 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 ended March 31, 1996 include the results of Dyno while the
results of operations for the three months ended March 31, 1995 exclude the
results of Dyno.
THREE MONTHS ENDED MARCH 31, 1996 VS. THREE MONTHS ENDED MARCH 31, 1995
Net sales in the first quarter of 1996 increased 55.6% to $153.0 million
(including $54.1 million of sales from Dyno) compared to $98.3 million for the
same period of 1995. Net sales in the first quarter of 1996 without Dyno sales
increased 0.6%. Sales of automotive products increased 94.2% to $114.4 million
for the first quarter of 1996 compared to $58.9 million for the same period of
1995 (2.4% increase without Dyno sales).
Sales of automotive products were lower than expected for the first
quarter of 1996 because of lower light vehicle production during the quarter in
both North America and Europe. Production of light vehicles in North America
was down 13.2% for the first quarter of 1996 (5.2 percentage points of which
related to production lost during the General Motors strike), while production
of light vehicles in Europe was down approximately 6% for the quarter. Sales
of fuel modules to the Company's largest customer increased significantly
primarily because of increased dollar content per unit while sales of fuel
modules, fuel pumps and fuel rails to the Company's second largest customer
declined because of the customer's lower production levels during the quarter
and its increased in-house production. Stronger sales of light trucks during
the quarter caused an overall increase in sales of fuel modules. Sales of the
Company's new plastic fuel tanks manufactured in the U.S. contributed $0.6
million to the higher sales. Sales of plastic fuel tanks by Dyno in Europe for
the first quarter of 1996 increased by 0.7% due to foreign currency exchange
rates; without the currency effect sales would have decreased 1.1% for Dyno
because of lower auto production.
13
<PAGE> 15
Sales of small engine products decreased 1.6% to $31.1 million for the
first quarter of 1996 compared to $31.6 million for the same period in 1995.
The decrease was the result of lower sales of both diaphragm and float feed
carburetors. Sales of diaphragm carburetors declined primarily in Japan
because of the lower yen-dollar exchange rate. The yen weakened by 12% against
the dollar and represented 62% of the diaphragm carburetor sales decline with
the remaining decline mostly caused by price reductions. Float feed carburetor
sales in the U.S. declined for the first quarter of 1996 primarily because of
the weaker market for marine engines. Increased sales of float feed
carburetors from the Company's subsidiary in China and increased sales of
ignition systems partially offset the decreases described above.
Sales to the aftermarket decreased 15.7% to $5.9 million for the first
quarter of 1996 compared to $7.0 million for the same period of 1995. Sales of
small engine carburetors increased by 3.9% while sales of automotive products
declined by 21.4% due to increased in-house production by one of the Company's
aftermarket customers.
Cost of sales for the first quarter of 1996 increased 60.1% to $124.2
million compared to $77.6 million for the same period of 1995 (1.1% increase
without Dyno), while cost of sales as a percent of net sales was 81.2% (79.3%
without Dyno) compared to 78.9% for the same 1995 period. Cost of sales as a
percent of sales at Dyno was 84.7% for the first quarter of 1996. In
automotive products (without Dyno), gross margin increased because of higher
sales volumes of fuel modules partially offset by lower fuel pump and fuel rail
volumes, as well as the effect of lower gross margins at Dyno. In small engine
products, gross margin decreased because of lower prices of diaphragm
carburetors and lower volumes of float feed carburetors in the U.S., partially
offset by higher volumes of ignition systems products and float feed
carburetors in China.
Selling and administrative ("S & A") expenses increased 52.7% (increased
4.5% without Dyno) for the first quarter of 1996 compared to the first quarter
of 1995. S & A increased as a percent of sales, without Dyno, (from 9.3% in
the first quarter of 1995 to 9.6% for the first quarter of 1996) because of
increased spending for the Company's new plastic fuel tank facility near Sao
Paulo, Brazil, and its new diecast facility in Tucson, Arizona. Research and
development ("R & D") expenses increased 47.5% (increased 2.3% without Dyno) as
efforts were expanded to develop new products to meet EPA regulations for
automotive evaporative emissions and for small engine exhaust emissions. 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 and
for
14
<PAGE> 16
capital expenditures. A description of the borrowings for the Dyno acquisition
is provided under Liquidity and Capital Resources.
Provision for income taxes was 49.6% lower for the first quarter of 1996
compared to the same period of 1995 because of lower taxable income and a lower
effective tax rate of 26.9% compared to 37.6%. The lower effective tax rate
for first quarter of 1996 resulted primarily from prior-year research and
development tax credits which will be utilized throughout 1996.
The equity in income from joint ventures in the first quarter of 1996 was
$1.1 million versus the comparable period income of $1.0 million in 1995,
because of increased profitability at Marwal Systems (France), Marwal Brasil
and Mitsuba-Walbro Inc. (Japan) partially offset by start-up costs at Korea
Automotive Fuel Systems Ltd.
Net income for the first quarter of 1996 was $4.5 million, a decrease of
10.9% compared to $5.1 million for the same period last year, as a result of
the reasons described above. Net income per share for the first quarter or
1996 was $.53 compared with $.59 for the same 1995 period.
Foreign Currency Transactions
Approximately 50% of the Company's sales during the first three 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 China
(1% of sales) are measured in 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.
15
<PAGE> 17
Approximately 51% of the Company's assets at March 31, 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
and Korea. 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 March 31, 1996, the Company had outstanding $12.5 million in
short-term debt, including current portion of long-term debt, and $252.1
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 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 March 31, 1996,
the Company had available to it approximately $50 million under the new Credit
Facility.
In the first three months of 1996, net working capital increased by $15.3
million and cash used for investing activities was $13.3 million. Financing
activities provided $20.5 million with the remaining cash generated from
operations. In the first three months of 1995, net working capital declined by
$1.3 million while cash used for investing activities was $15.9 million.
Financing activities provided $6.4 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,
16
<PAGE> 18
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 March 31, 1996, accounts receivable amounted to $135.0 million, an
increase of $63.4 million, compared to $71.6 million at March 31, 1995. The
acquisition of Dyno added $48.1 million of accounts receivable at March 31,
1996 while the remaining increase was due to longer collection periods due to
revised payment terms with customers. The average collection period at March
31, 1996 was 73.2 days compared to the average collection period at March 31,
1995 of 63.2 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 March 31, 1996,
inventories amounted to $51.5 million, an increase of $17.3 million, compared
to $34.2 million at March 31, 1995. The Dyno acquisition added $17.8 million
of inventories at March 31, 1996.
Safe Harbor Statement Under The Private Securities Litigation Reform Act of
1995
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.
17
<PAGE> 19
PART II
OTHER INFORMATION
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.
18
<PAGE> 20
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: May 13, 1996 /s/ L. E. Althaver
-----------------------------------
L. E. Althaver, Chairman, President
and Chief Executive Officer
Dated: May 13, 1996 /s/Michael A. Shope
-----------------------------------
Michael A. Shope
Chief Financial Officer and Treasurer
19
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