<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, 1997
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 9, 1997
Common Stock (one class): 8,652,737
<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, 1996.
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.
1
<PAGE> 3
WALBRO CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
3/31/97 12/31/96
------- --------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
CASH $ 20,471 $ 18,213
ACCOUNTS RECEIVABLE (NET) 145,932 126,509
INVENTORIES 47,554 50,588
OTHER CURRENT ASSETS 15,446 16,206
------------ ------------
TOTAL CURRENT ASSETS 229,403 211,516
PROPERTY, PLANT & EQUIPMENT:
LAND, BUILDINGS & IMPROVEMENTS 78,864 74,931
MACHINERY & EQUIPMENT 285,618 285,376
------------ ------------
SUBTOTAL 364,482 360,307
LESS: ACCUMULATED DEPRECIATION (85,685) (80,420)
------------ ------------
NET PROPERTY, PLANT & EQUIPMENT 278,797 279,887
OTHER ASSETS:
GOODWILL (NET) 35,387 35,998
JOINT VENTURES, INVESTMENTS & OTHER 68,514 62,248
------------ ------------
TOTAL OTHER ASSETS 103,901 98,246
------------ ------------
TOTAL ASSETS $ 612,101 $ 589,649
============ ============
</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>
3/31/97 12/31/96
------- --------
LIABILITIES (Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
CURRENT PORTION LONG-TERM DEBT $ 1,068 $ 1,089
NOTES PAYABLE-BANKS 21,785 22,072
ACCOUNTS PAYABLE 70,215 77,939
ACCRUED LIABILITIES 39,332 42,141
----------- ----------
TOTAL CURRENT LIABILITIES 132,400 143,241
LONG-TERM LIABILITIES:
LONG-TERM DEBT, NET OF CURRENT 261,359 291,723
OTHER LONG-TERM LIABILITIES 18,360 16,952
----------- ----------
TOTAL LONG-TERM LIABILITIES 279,719 308,675
COMPANY-OBLIGATED MANDATORILY REDEEMABLE CON-
VERTIBLE PREFERRED SECURITIES OF WALBRO CAPITAL
TRUST HOLDING SOLELY CONVERTIBLE DEBENTURES 69,000 --
STOCKHOLDERS' EQUITY
COMMON STOCK, $.50 PAR VALUE; 4,326 4,326
AUTHORIZED 25,000,000;
OUTSTANDING 8,652,737 IN 1997 AND
8,652,737 IN 1996
PAID-IN CAPITAL 65,674 65,674
RETAINED EARNINGS 75,536 74,039
OTHER STOCKHOLDERS' EQUITY (14,554) (6,306)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 130,982 137,733
----------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 612,101 $ 589,649
=========== ==========
</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
03/31/97 03/31/96
-------- --------
(Unaudited)
<S> <C> <C>
NET SALES $ 154,019 $ 152,966
COST OF SALES & EXPENSES:
COST OF SALES 129,821 124,178
SELLING AND ADMINISTRATIVE EXPENSES 12,368 14,163
RESEARCH & DEVELOPMENT EXPENSES 3,350 4,957
------------- -------------
OPERATING INCOME 8,480 9,668
OTHER EXPENSE (INCOME):
INTEREST EXPENSE 5,775 5,055
INTEREST INCOME (131) (168)
OTHER (INCOME) EXPENSE (1,089) (6)
------------- -------------
INCOME BEFORE INCOME TAXES, MINORITY
INTEREST, AND JOINT VENTURES 3,925 4,787
PROVISION FOR INCOME TAXES 1,380 1,286
MINORITY INTEREST 984 98
EQUITY IN (INCOME) OF JOINT VENTURES (801) (1,131)
------------- -------------
NET INCOME $ 2,362 $ 4,534
============= =============
NET INCOME PER SHARE $0.27 $0.53
AVERAGE SHARES OUTSTANDING 8,674,447 8,620,942
</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>
(In thousands) THREE MONTHS ENDED
03/31/97 03/31/96
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
<S> <C> <C>
NET INCOME $ 2,362 $ 4,534
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION 8,180 7,251
(GAIN) LOSS ON DISPOSITION OF ASSETS 123 125
MINORITY INTEREST 110 98
(INCOME) OF JOINT VENTURES (801) (1,131)
CHANGES IN ASSETS AND LIABILITIES:
DEFERRED INCOME TAXES 108 244
PENSION OBLIGATIONS & OTHER (592) (165)
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (4,182) 7,620
ACCOUNTS RECEIVABLE, NET (20,412) (22,457)
INVENTORIES 1,646 (1,224)
PREPAID EXPENSES AND OTHER (578) (4,160)
------------ ------------
TOTAL ADJUSTMENTS (16,398) (13,799)
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (14,036) (9,265)
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF FIXED ASSETS (14,232) (12,491)
PURCHASE OF OTHER ASSETS (206) (376)
INVESTMENT IN JOINT VENTURES & OTHER (2,654) (245)
PROCEEDS FROM DISPOSAL OF ASSETS 24 0
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (17,068) (13,112)
CASH FLOWS FROM FINANCING ACTIVITIES:
BORROWINGS UNDER LINES-OF-CREDIT 32,187 42,555
REPAYMENTS UNDER LINES-OF-CREDIT (61,562) (21,900)
DEBT REPAYMENTS (143) (552)
PROCEEDS FROM ISSUANCE OF STOCK
& OPTIONS 69,000 392
FINANCING FEES PAID (3,241) (328)
CASH DIVIDENDS PAID (865) (858)
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 35,376 19,309
EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,014) (204)
------------ ------------
NET INCREASE (DECREASE) IN CASH 2,258 (3,272)
CASH BEGINNING BALANCE 18,213 19,792
------------ ------------
CASH ENDING BALANCE $ 20,471 $ 16,520
============ ============
</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) PREFERRED SECURITIES OFFERING
In February 1997, the Company completed an offering of 2,760,000 shares or
$69 million of Convertible Preferred Securities of Walbro Capital Trust, a
wholly-owned subsidiary of the Company, at a face value of $25 per share and an
interest rate of 8% per annum. The preferred securities are convertible into
common stock of the Company at the option of the security holder anytime after
April 4, 1997. Each share of preferred stock will yield 1.1737 shares of
common stock of the Company upon conversion. Net proceeds of the offering were
approximately $66 million and were used to repay a portion of the Company's
credit facility.
(2) EARNINGS PER SHARE
During 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which changes the calculation of earnings per share to be more
consistent with countries outside of the United States. In general, the
statement requires two calculations of earnings per share to be disclosed,
basic EPS and diluted EPS. Basic EPS is to be computed using only weighted
average shares outstanding. Diluted EPS is to be computed using the average
share price for the period when calculating the dilution of options and
warrants. This statement must be adopted by the Company in its December 31,
1997 consolidated financial statements and early adoption is not permitted. If
this statement had been adopted for the periods presented, the net income and
per share amounts would have been as follows (unaudited: in thousands, except
per share data):
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1997 1996
---- ----
<S> <C> <C>
Net income $2,362 $4,534
Basic net income per share $0.27 $0.53
Diluted net income per share $0.27 $0.53
</TABLE>
(3) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories include raw material and component parts, work-in-process
and
<PAGE> 8
finished products. Work-in-process and finished products inventories include
material, labor and manufacturing overhead costs.
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Raw materials and components $23,343 $23,964
Work-in-process 9,572 10,620
Finished products 14,639 16,004
------- -------
$47,554 $50,588
------- -------
</TABLE>
<PAGE> 9
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
as of Mar. 31, 1997
---------------------------------------------------------------------------------
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 $ 2,540 $ 17,525 $ 406 $ - $ 20,471
Accounts receivable, net 79,090 66,077 765 - 145,932
Accounts receivable, intercompany (101,525) (15,207) 128,410 (11,678) -
Inventories 24,235 20,692 2,627 - 47,554
Prepaid expenses and other 3,556 5,478 600 - 9,634
Deferred and refundable income taxes 1,076 1,290 3,446 - 5,812
--------------------------------------------------------------------------
Total current assets 8,972 95,855 136,254 (11,678) 229,403
--------------------------------------------------------------------------
PLANT AND EQUIPMENT, NET 126,480 144,316 7,893 108 278,797
--------------------------------------------------------------------------
OTHER ASSETS:
Funds held for construction 1,140 - - - 1,140
Joint ventures 12,794 17,656 - - 30,450
Investments 110,646 24,709 100,061 (229,600) 5,816
Goodwill, net 23,125 12,408 (146) - 35,387
Notes receivable 1,116 72,471 205,181 (275,451) 3,317
Deferred income taxes - 1,844 4,871 - 6,715
Other 9,038 2,326 9,712 - 21,076
--------------------------------------------------------------------------
Total other assets 157,859 131,414 319,679 (505,051) 103,901
--------------------------------------------------------------------------
Total assets $293,311 $371,585 $463,826 $(516,621) $612,101
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 598 $ 61 $ 409 $ - $ 1,068
Bank and other borrowings - 21,785 - - 21,785
Accounts payable 30,708 50,694 2,453 (13,640) 70,215
Accrued liabilities 18,397 18,911 7,141 (5,982) 38,467
Dividends payable - 874 865 (874) 865
--------------------------------------------------------------------------
Total current liabilities 49,703 92,325 10,868 (20,496) 132,400
--------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 171,529 82,176 310,587 (302,933) 261,359
Pension obligations - 2,131 7,970 - 10,101
Deferred income taxes - 3,402 3,419 - 6,821
Minority interest - 1,438 - - 1,438
--------------------------------------------------------------------------
Total long-term liabilities 171,529 89,147 321,976 (302,933) 279,719
--------------------------------------------------------------------------
REDEEMABLE PREFERRED STOCK - 69,000 - - 69,000
STOCKHOLDERS' EQUITY
Common stock, $.50 par value;
authorized 25,000,000; outstanding
8,652,737 in 1997; 8,652,737 in 1996 - 19,853 4,326 (19,853) 4,326
Paid-in capital - 74,684 65,674 (74,684) 65,674
Retained earnings 72,059 35,334 75,536 (107,393) 75,536
Deferred compensation - - (668) - (668)
Minimum pension liability adjustment - - - - -
Unrealized gain on securities available for sale - - 593 - 593
Cumulative translation adjustments 20 (8,758) (14,479) 8,738 (14,479)
--------------------------------------------------------------------------
Total stockholders' equity 72,079 121,113 130,982 (193,192) 130,982
--------------------------------------------------------------------------
Total liabilities and stockholders' equity $293,311 $371,585 $463,826 $(516,621) $612,101
==========================================================================
</TABLE>
<PAGE> 10
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
as of December 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>
ASSETS
CURRENT ASSETS
Cash $ 299 $ 17,779 $ 135 $ - $ 18,213
Accounts receivable, net 67,944 57,823 742 - 126,509
Accounts receivable, intercompany (81,610) 115 101,752 (20,257) -
Inventories 25,219 22,884 2,485 - 50,588
Prepaid expenses and other 4,464 5,851 920 - 11,235
Deferred and refundable income taxes 509 1,016 3,446 - 4,971
------------------------------------------------------------------------------
Total current assets 16,825 105,468 109,480 (20,257) 211,516
------------------------------------------------------------------------------
PLANT AND EQUIPMENT, NET 121,084 150,699 7,995 109 279,887
------------------------------------------------------------------------------
OTHER ASSETS:
Funds held for construction 1,140 - - - 1,140
Joint ventures 10,629 18,326 - - 28,955
Investments 118,673 24,723 104,084 (241,753) 5,727
Goodwill, net 23,238 12,877 (117) - 35,998
Notes receivable 1,074 - 204,884 (204,690) 1,268
Deferred income taxes - 543 4,871 - 5,414
Other 8,890 2,926 7,928 - 19,744
------------------------------------------------------------------------------
Total other assets 163,644 59,395 321,650 (446,443) 98,246
------------------------------------------------------------------------------
Total assets $301,553 $315,562 $439,125 $(466,591) $ 589,649
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 598 $ 82 $ 409 $ - $ 1,089
Bank and other borrowings - 22,072 - - 22,072
Accounts payable 34,690 61,068 8,981 (26,800) 77,939
Accrued liabilities 17,046 16,498 10,633 (2,901) 41,276
Dividends payable - - 865 - 865
------------------------------------------------------------------------------
Total current liabilities 52,334 99,720 20,888 (29,701) 143,241
------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt, less current portion 171,675 83,820 269,141 (232,913) 291,723
Pension obligations - 2,826 7,892 - 10,718
Deferred income taxes - 1,443 3,471 - 4,914
Minority interest - 1,320 - - 1,320
------------------------------------------------------------------------------
Total long-term liabilities 171,675 89,409 280,504 (232,913) 308,675
------------------------------------------------------------------------------
REDEEMABLE PREFERRED STOCK - - - - -
STOCKHOLDERS' EQUITY
Common stock, $.50 par value;
authorized 25,000,000; outstanding
8,652,737 in 1997; 8,652,737 in 1996 - 19,853 4,326 (19,853) 4,326
Paid-in capital - 74,637 65,674 (74,637) 65,674
Retained earnings 77,524 33,569 74,039 (111,093) 74,039
Deferred compensation - - (967) - (967)
Minimum pension liability adjustment - - - - -
Unrealized gain on securities available for sale - - 688 - 688
Cumulative translation adjustments 20 (1,626) (6,027) 1,606 (6,027)
------------------------------------------------------------------------------
Total stockholders' equity 77,544 126,433 137,733 (203,977) 137,733
------------------------------------------------------------------------------
Total liabilities and stockholders' equity $301,553 $315,562 $439,125 $(466,591) $ 589,649
==============================================================================
</TABLE>
<PAGE> 11
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended Mar. 31, 1997
---------------------------------------------------------------------------------
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 $ 83,462 $ 76,336 $ 340 $ (6,119) $154,019
COSTS AND EXPENSES:
Cost of sales 69,021 66,641 278 (6,119) 129,821
Selling, administration & other expenses 8,162 5,293 2,263 - 15,718
---------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 6,279 4,402 (2,201) - 8,480
OTHER EXPENSE (INCOME):
Interest expense 4,009 1,737 6,335 (6,306) 5,775
Interest income (1,134) (899) (4,404) 6,306 (131)
Foreign currency exchange loss(gain) 28 (71) 15 - (28)
Other (1,038) (23) - - (1,061)
---------------------------------------------------------------------------------
Income before provision for income taxes,
minority interest, equity in (income) loss
of joint ventures and subsidiaries 4,414 3,658 (4,147) - 3,925
Provision (credit) for income taxes 1,527 1,405 (1,552) - 1,380
Minority Interest - 984 - - 984
Equity in (income) loss of joint ventures (300) (501) - - (801)
Equity in (income) of subsidiaries (1,793) (52) (4,957) 6,802 -
---------------------------------------------------------------------------------
Net Income $ 4,980 $ 1,822 $ 2,362 $ (6,802) $ 2,362
=================================================================================
</TABLE>
<PAGE> 12
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended Mar. 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 9,467 6,816 2,836 - 19,119
---------------------------------------------------------------------------
OPERATING INCOME (LOSS) 7,244 5,149 (2,724) - 9,669
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 (349) 159 - - (190)
---------------------------------------------------------------------------
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>
<PAGE> 13
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended Mar. 31, 1997
---------------------------------------------------------------------------
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 $ 15,267 $ 8,273 $ (37,576) $ - $ (14,036)
------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (8,192) (5,945) (95) - (14,232)
Acquisitions, net of cash acquired - - - - -
Purchase of other assets (359) 22 131 - (206)
Investment in joint ventures and other (4,329) (164) 1,839 - (2,654)
Proceeds/(payments) of intercompany note rec. - - - - -
Proceeds from disposal of assets (1) 25 - - 24
------------------------------------------------------------------------
Net cash provided by(used in) investing activities (12,881) (6,062) 1,875 - (17,068)
------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving
line-of-credit agreements - (1,813) (27,562) - (29,375)
Debt repayments (145) 2 - - (143)
Proceeds from issuance of long-term debt - (69,000) 69,000 - -
Proceeds from issuance of stock
and options - 69,000 - - 69,000
Financing fees paid - - (3,241) - (3,241)
Cash dividends paid - - (865) - (865)
------------------------------------------------------------------------
Net cash provided by(used in) financing activities (145) (1,811) 37,332 - 35,376
------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH - (654) (1,360) - (2,014)
------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 2,241 (254) 271 - 2,258
CASH AT BEGINNING OF YEAR 299 17,779 135 - 18,213
------------------------------------------------------------------------
CASH AT END OF PERIOD $ 2,540 $ 17,525 $ 406 $ - $ 20,471
========================================================================
</TABLE>
<PAGE> 14
WALBRO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended Mar. 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) 2 - (376)
Investment in joint ventures and other (6,287) 2,544 3,498 - (245)
Proceeds/(payments) of intercompany note rec. - - - - -
Proceeds from disposal of assets - - - - -
-----------------------------------------------------------------------
Net cash provided by(used in) investing activities (11,689) (4,497) 3,074 - (13,112)
-----------------------------------------------------------------------
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 stock
and options - - 392 - 392
Financing fees paid - - (328) - (328)
Cash dividends paid - - (858) - (858)
-----------------------------------------------------------------------
Net cash provided by(used in) financing activities (136) 1,139 18,306 - 19,309
-----------------------------------------------------------------------
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>
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
THREE MONTHS ENDED MARCH 31, 1997 VS. THREE MONTHS ENDED MARCH 31, 1996
Net sales in the first quarter of 1997 increased 0.7% to $154.0 million
compared to $153.0 million for the same period of 1996. Sales of automotive
products declined slightly to $113.7 million for the first quarter of 1997
compared to $114.4 million for the same period of 1996. Sales of small engine
products increased 1.3% to $31.5 million for the first quarter of 1997 compared
to $31.1 million for the same period of 1996.
Sales of automotive products were lower than expected for the first
quarter of 1997 because of continued in-sourcing of fuel pumps and fuel modules
by a major U.S. customer and because of the strong U.S. dollar currency impact
on foreign sales. The in-sourcing represented an $11.0 million decline in
sales for the first quarter of 1997 compared to the same period of 1996 and the
in-sourcing decline is expected to be completed by the end of the second
quarter of 1997. Sales of plastic fuel tanks in Europe for the first quarter
of 1997 increased by only 0.8% because of foreign currency exchange rates.
Without the currency effect European sales would have increased by
approximately 10%. Sales of plastic fuel tanks in Brazil, which began initial
production in November 1996, added $3.0 million to sales for the first quarter
of 1997.
Sales of small engine products increased as a result of higher sales of
ignition system products partially offset by lower sales of small engine
carburetors in the U.S. Shipments to U.S. original equipment customers were
lower because of customer's high inventories of lawn-and-garden equipment due
to last year's poor spring and summer sales. Sales of small engine products
increased by 8.5% in Japan in spite of the lower yen exchange rate. Without
the currency effect Japan sales would have increased by approximately 24%.
Sales to the aftermarket increased 15.3% to $6.8 million for the first
quarter of 1997 compared to $5.9 million for the same period of 1996.
Increased sales of automotive products to aftermarket customers more than
offset a small decline in small engine carburetor aftermarket sales.
Cost of sales for the first quarter of 1997 increased 4.5% to $129.8
million compared to $124.2 million for the same period of 1996, while cost of
sales as a
<PAGE> 16
percent of net sales was 84.3% compared to 81.2% for the same 1996 period
resulting in a gross margin decline of 3.1 percentage points. The automotive
products gross margin decline resulted from lower volume of fuel pumps and fuel
modules in the U.S., lower volume of plastic fuel tanks in the two largest
plants in Europe and new plant start-up costs in Brazil. In addition,
automotive products gross margin was $2 million lower because it included some
engineering costs in 1997 that were included in research and development costs
in 1996. The small engine products gross margin decline resulted from lower
volume of carburetors and new plant start-up costs in China.
Selling and administrative ("S & A") expenses decreased 11.4% for the
first quarter of 1997 compared to the first quarter of 1996. S & A expenses
declined as a result of cost control programs in most areas of the Company. S
& A expenses as a percent of net sales were 8.0% for the first quarter of 1997
compared to 9.1% for the same period of 1996.
Research and development ("R & D") expenses decreased 32.4%. As reported
above, $2.0 million of engineering expenses were included in cost of sales that
were reported as R & D expenses in first quarter of 1996. If the $2.0 million
of engineering expenses were included as R & D expense in 1997, R & D would
have increased by 7.9% as efforts were expanded to develop new products to meet
EPA regulations for small engine exhaust emissions.
Interest expense increased 14.2% for the first quarter of 1997 compared to
the same period in 1996 because of higher borrowings for additional working
capital and for capital expenditures.
Other income was $1.1 million for the first quarter of 1997 compared to
zero for the first quarter of 1996. The increase was due to higher royalty
income from the Company's joint ventures.
Provision for income taxes was 7.3% higher for the first quarter of 1997
compared to the same period of 1996 of a larger amount of R & D tax credits
available in 1996 resulting in a lower effective tax rate.
Minority Interest increased by $0.9 million in the first quarter of 1997
compared to the same period of 1996 because of the preferred dividends due on
the Convertible Preferred Securities of Walbro Capital Trust issued in February
1997.
The equity in income from joint ventures in the first quarter of 1997 was
$0.8 million versus the comparable period income of $1.1 million in 1996,
because of lower profitability at Marwal Systems (France) and Marwal Brasil as
these joint ventures began paying royalties to the Company.
<PAGE> 17
Net income for the first quarter of 1996 was $2.4 million, a decrease of
46.7% compared to $4.5 million for the same period last year, as a result of
the reasons described above. Net income per share for the first quarter of
1997 was $.27 compared with $.53 for the same 1996 period.
Foreign Currency Transactions
Approximately 52% of the Company's sales during the first three months of
1997 were derived from international manufacturing operations in Europe, Asia,
South America and Mexico. The financial position and the results of operations
of the Company's subsidiaries in Europe (35% of sales), Japan (5% of
sales), South America (2% 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, South
America, 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 (2% 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 52% of the Company's assets at March 31, 1997, 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, Mexico,
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 firm transaction commitments in
foreign currencies.
<PAGE> 18
Liquidity and Capital Resources
As of March 31, 1997, the Company had outstanding $22.9 million in
short-term debt, including current portion of long-term debt, and $261.4
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, 1996 are $1.1 million in 1997, $7.7 million in 1998, $7.4 million
in 1999, $121.6 million in 2000, $7.6 million in 2001 and $147.5 million
thereafter.
At March 31, 1997, the Company had available to it approximately $41
million under its credit facility with a group of commercial banks. In
February 1997, the Company completed an offering of 2,760,000 shares or $69
million of Convertible Preferred Securities of Walbro Capital Trust. The net
proceeds were used to pay down borrowings on the credit facility.
The Company's plans for 1997 capital expenditures for facilities,
equipment and tooling total approximately $60 million. The Company intends to
finance the capital expenditures with the 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, 1997, accounts receivable amounted to $145.9 million, an
increase of $10.9 million, compared to March 31, 1996. The increase was due
to longer collection periods. The average collection period at March 31, 1997
was 85.3 days compared to 79.4 days at March 31, 1996. The higher average
collection period was due to more foreign sales with longer payment terms.
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 1997 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, impact of environmental regulations, continued availability of
<PAGE> 19
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.
<PAGE> 20
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
The only report of Form 8-K filed by the Company during the quarter
ended March 31, 1997 was filed on January 7, 1997 reporting Item 7.
Financial statements filed with the report on Form 8-K were:
Financial Statements of Marwal Systems S.N.C.
The following Financial Statements of Marwal Systems S.N.C. as of
December 31, 1995, 1994, and 1993 and for the years ended December 31,
1995, 1994, and 1993 were included:
Letter of Confirmation
Report of Independent Public Accountants for 1995
Balance Sheet as of December 31, 1995
Income Statement for the year ended December 31, 1995
Notes to the Financial Statements for 1995
Report of Independent Public Accountants for 1994
Balance Sheet as of December 31, 1994
Income Statement for the year ended December 31, 1994
Notes to the Financial Statements for 1994
Report of Independent Public Accountants for 1993
Balance Sheet as of December 31, 1993
Income Statement for the year ended December 31, 1993
Notes to the Financial Statements for 1993
<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: May 13, 1997 /s/ L. E. Althaver
------------------------------------
L. E. Althaver, Chairman, President
and Chief Executive Officer
Dated: May 13, 1997 /s/Michael A. Shope
------------------------------------
Michael A. Shope
Chief Financial Officer and Treasurer
<PAGE> 22
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 20,471
<SECURITIES> 0
<RECEIVABLES> 145,932
<ALLOWANCES> 0
<INVENTORY> 47,554
<CURRENT-ASSETS> 229,403
<PP&E> 364,482
<DEPRECIATION> 85,685
<TOTAL-ASSETS> 612,101
<CURRENT-LIABILITIES> 132,400
<BONDS> 261,359
69,000
0
<COMMON> 4,326
<OTHER-SE> 126,656
<TOTAL-LIABILITY-AND-EQUITY> 612,101
<SALES> 154,019
<TOTAL-REVENUES> 154,019
<CGS> 129,821
<TOTAL-COSTS> 129,821
<OTHER-EXPENSES> 14,629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,644
<INCOME-PRETAX> 3,925
<INCOME-TAX> 1,380
<INCOME-CONTINUING> 2,362
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,362
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
