<PAGE>
===============================================================================
UNITED STATES
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 January 31, 2000 COMMISSION FILE NO. 1-13683
DELCO REMY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 35-1909253
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2902 Enterprise Drive
Anderson, Indiana 46013
(Address of principal executive offices) (Zip Code)
(765) 778-6499
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
Yes X No___
-
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
Number of common shares outstanding
Class as of February 18, 2000
------------------- ---------------------------------------
Common Stock - Class A 18,118,058
Common Stock - Class B 6,278,055
===============================================================================
<PAGE>
Delco Remy International, Inc. and Subsidiaries
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations................ 3
Condensed Consolidated Balance Sheets.......................... 4
Condensed Consolidated Statements of Cash Flows................ 5
Notes to Condensed Consolidated Financial Statements........... 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 18
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders............ 22
Item 5 Other Information.............................................. 22
Item 6 Exhibits and Reports on Form 8-K............................... 23
SIGNATURES ............................................................... 24
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
Delco Remy International, Inc. and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
Three-Month Period Six-Month Period
Ended January 31 Ended January 31
------------------------- -----------------------
2000 1999 2000 1999
------------ ----------- ---------- -----------
(in thousands of dollars, except for share amounts)
<S> <C> <C> <C> <C>
Net sales $260,037 $222,324 $537,226 $455,109
Cost of goods sold 202,290 175,614 419,054 366,627
-------- -------- -------- --------
Gross profit 57,747 46,710 118,172 88,482
Selling, engineering and administrative
expenses 30,886 24,611 61,756 46,775
Amortization of goodwill and intangibles 1,268 1,276 2,908 2,336
-------- -------- -------- --------
Operating income 25,593 20,823 53,508 39,371
Interest expense and other non-operating
expenses (11,798) (11,266) (23,922) (21,669)
-------- -------- -------- --------
Income before income taxes, minority
interest in income of subsidiaries and
income (loss) from unconsolidated joint
ventures 13,795 9,557 29,586 17,702
Income taxes 5,242 3,727 11,242 6,904
Minority interest in income of subsidiaries (1,616) (821) (3,427) (1,582)
Income (loss) from unconsolidated joint
ventures (30) 847 (36) 2,028
-------- -------- -------- --------
Net income $ 6,907 $ 5,856 $ 14,881 $ 11,244
======== ======== ======== ========
Basic earnings per common share $ 0.29 $ 0.25 $ 0.61 $ 0.47
======== ======== ======== ========
Diluted earnings per common share $ 0.27 $ 0.23 $ 0.57 $ 0.43
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
Condensed Consolidated Balance Sheets
Delco Remy International, Inc. and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
January 31, July 31,
2000 1999
-------------------- -------------------
(in thousands of dollars)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 17,557 $ 15,309
Trade accounts receivable, net 159,987 147,988
Other receivables 15,132 15,496
Inventories 240,375 232,165
Deferred income taxes 14,997 14,997
Other current assets 3,427 2,903
-------------------- -------------------
Total current assets 451,475 428,858
Property and equipment 278,123 258,727
Less accumulated depreciation 73,903 63,532
-------------------- -------------------
Property and equipment, net 204,220 195,195
Deferred financing costs 10,312 11,192
Goodwill (net of accumulated amortization) 135,375 137,429
Investments in joint ventures 4,742 4,756
Other assets 5,352 5,233
-------------------- -------------------
Total assets $811,476 $782,663
==================== ===================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $125,127 $119,339
Accrued interest payable 10,846 11,603
Accrued restructuring charges 4,777 5,866
Other liabilities and accrued expenses 44,816 37,105
Current debt 5,007 12,596
-------------------- -------------------
Total current liabilities 190,573 186,509
Deferred income taxes 4,569 4,568
Long-term debt, less current portion 437,686 434,931
Post-retirement benefits other than pensions 23,097 21,050
Accrued pension benefits 2,744 2,719
Other noncurrent liabilities 3,910 3,545
Commitments and contingencies
Minority interest in subsidiaries 23,697 19,821
Stockholders' equity:
Common stock:
Class A shares 182 182
Class B shares 63 63
Paid-in capital 104,176 104,176
Retained earnings 27,033 12,152
Accumulated other comprehensive loss (5,822) (6,516)
Stock purchase plan (432) (537)
-------------------- -------------------
Total stockholders' equity 125,200 109,520
-------------------- -------------------
Total liabilities and stockholders' equity $811,476 $782,663
==================== ===================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
Condensed Consolidated Statements of Cash Flows
Delco Remy International, Inc. and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
Six-Month Period
Ended January 31,
---------------------------------------
2000 1999
---------------- ----------------
(in thousands of dollars)
<S> <C> <C>
Operating activities:
Net income $ 14,881 $ 11,244
Adjustments to reconcile net income to net cash flows provided
by (used in) operating activities:
Depreciation 13,624 8,512
Amortization 2,908 2,336
Minority interest in income of subsidiaries 3,427 1,582
Income (loss) from unconsolidated joint ventures 36 (2,028)
Deferred income taxes -- 3,047
Post-retirement benefits other than pensions 2,047 1,912
Accrued pension benefits 25 403
Non-cash interest expense 880 767
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable (11,999) (3,616)
Inventories (4,624) (10,917)
Accounts payable 5,788 1,604
Other current assets and liabilities 6,392 (14,884)
Accrued restructuring charges (1,089) (10,619)
Other non-current assets and liabilities, net 2,165 186
---------------- ----------------
Net cash provided by (used in) operating activities 34,461 (10,471)
Investing activities:
Acquisitions, net of cash acquired (5,733) (40,148)
Purchases of property and equipment (21,642) (11,161)
---------------- ----------------
Net cash used in investing activities (27,375) (51,309)
Financing activities:
Net (repayments) borrowings under revolving line of credit and
other (4,834) 63,855
---------------- ----------------
Net cash (used in) provided by financing activities (4,834) 63,855
Effect of exchange rate changes on cash (4) (47)
---------------- ----------------
Net increase in cash and cash equivalents 2,248 2,028
Cash and cash equivalents at beginning of period 15,309 8,113
---------------- ----------------
Cash and cash equivalents at end of period $ 17,557 $ 10,141
================ ================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands of dollars)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three-month and six-month periods
ended January 31, 2000 are not necessarily indicative of the results that may be
expected for the full fiscal year. The balance sheet at July 31, 1999 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto for the year ended
July 31, 1999 in Form 10-K.
2. Additional Balance Sheet Information
January 31, July 31,
Inventory: 2000 1999
-------------- --------------
Raw material $133,373 $121,725
Work-in-process 45,109 50,725
Finished goods 61,893 59,715
-------------- --------------
Total $240,375 $232,165
============== ==============
3. Comprehensive Income
The Company's other comprehensive income consists of unrealized gains and losses
on the translation of the assets and liabilities of its foreign operations.
Comprehensive income was $8,090 and $6,488 for the three month periods ending
January 31, 2000 and 1999, respectively, and $15,576 and $11,146 for the six-
month periods ending January 31, 2000 and 1999, respectively.
6
<PAGE>
4. Earnings per Share
Basic earnings per share is computed by dividing net income available to common
stockholders by the weighted average number of common stock shares outstanding
during the period. Diluted earnings per share is computed by dividing net income
available to common stockholders by the weighted average number of common stock
shares outstanding during the period plus potential dilutive instruments,
including stock options, warrants and the stock purchase plan.
The following table sets forth the numerator and denominator for the computation
of basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three-Month Period Six-Month Period
Ended January 31, Ended January 31,
----------------------------- ---------------------------
2000 1999 2000 1999
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 6,907 $ 5,856 $ 14,881 $ 11,244
============ =========== =========== ============
Denominator:
Denominator for basic earnings per share
(weighted average shares) 24,223,913 23,841,713 24,215,513 23,808,387
Effect of dilutive securities:
Warrants 1,679,765 1,679,806 1,679,776 1,679,814
Stock purchase plan 85,474 351,144 87,088 398,362
------------ ----------- ----------- ------------
Denominator for diluted earnings per share
(weighted average shares and assumed
conversions) 25,989,152 25,872,663 25,982,377 25,886,563
============ =========== =========== ===========
</TABLE>
5. Restructuring Charges
In May 1998, the Company offered an incentive separation payment to DRA hourly
employees through a voluntary employee termination program (VTEP). By the
program's completion date on July 10, 1998, 337 employees had accepted the
Company's offer. A charge of $26,515 was recorded for these separation costs,
$9,974 of which were paid in fiscal year 1998, $11,565 of which were paid in
fiscal year 1999 and $1,060 of which were paid in the first half of fiscal year
2000. Approximately $2,590 are to be paid in the second half of fiscal year 2000
and $1,325 are to be paid in fiscal year 2001.
In May 1997, the Company decided to restructure the manufacturing operations of
DRA to utilize focus factory manufacturing concepts and to close the Company's
operations in the old vertically-integrated factories that were leased from GM.
These decisions resulted in the impairment of certain production assets with a
carrying amount of $30,321 ($25,279 of which was property and equipment and
$5,042 of which was related tooling and other supplies) which the Company sold
or otherwise disposed of. In fiscal year 1998, the reserve established for this
charge was reduced $5,366 to reflect the utilization of certain assets
previously targeted for disposal. The Company estimated the loss on disposal
including related costs at $26,260. In addition, the Company estimated a cost of
$8,240 for reducing its workforce through several transition programs. In fiscal
year 1998, this charge was increased $5,232 to reflect greater than anticipated
7
<PAGE>
participation in the various workforce transition programs. Some of the
operations for the closed facilities were transferred to the new focus
factories; others were outsourced.
The following table summarizes the status of the reserves for restructuring
charges:
<TABLE>
<CAPTION>
Termination Exit/Impairment
Benefits Costs Total
-------------- ------------------ ------------------
<S> <C> <C> <C>
Reserve at July 31, 1999 $4,975 $891 $5,866
Payments and changes in the three month
period ended October 31, 1999 (455) (8) (463)
-------------- ------------------ ------------------
Reserve at October 31, 1999 4,520 883 5,403
Payments and charges in the three month
period ended January 31, 2000 (605) (21) (626)
-------------- ------------------ ------------------
Reserve at January 31, 2000 $3,915 $862 $4,777
============== ================== ==================
</TABLE>
6. Financial Information for Subsidiary Guarantors and Non-Guarantor
Subsidiaries
The Company conducts a significant portion of its business through subsidiaries.
The Senior Notes and the Senior Subordinated Notes are fully and unconditionally
guaranteed, jointly and severally, by certain direct and indirect subsidiaries
(the Subsidiary Guarantors). Certain of the Company's subsidiaries do not
guarantee the Senior Notes or the Senior Subordinated Notes (the Non-Guarantor
Subsidiaries). The claims of creditors of Non-Guarantor Subsidiaries have
priority over the rights of the Company to receive dividends or distributions
from such subsidiaries.
Presented below is condensed consolidating financial information for the
Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at January
31, 2000 and July 31, 1999 and for the three month and six month periods ended
January 31, 2000 and 1999.
The equity method has been used by the Company with respect to investments in
subsidiaries. The equity method has been used by Subsidiary Guarantors with
respect to investments in Non-Guarantor Subsidiaries. Separate financial
statements for Subsidiary Guarantors are not presented based on management's
determination that they do not provide additional information that is material
to investors.
In fiscal year 2000, the Company changed its methodology for identifying certain
assets and liabilities of Subsidiary Guarantors and Non-Guarantor Subsidiaries.
The condensed consolidating balance sheet at July 31, 1999 has been restated to
reflect this change. This restatement had no effect on consolidated balance
sheet amounts or net income.
8
<PAGE>
The following table sets forth the Guarantor and direct Non-Guarantor
Subsidiaries:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Guarantor Subsidiaries Non-Guarantor Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Delco Remy America, Inc. Delco Remy Hungary RT (formerly Autovill RT Ltd.)
Nabco, Inc. Power Investments Canada Ltd.
The A&B Group, Inc. Delco Remy UK Limited
A&B Enterprises, Inc. Delco Remy International (Europe) GmbH
Dalex, Inc. Remy India Holdings, Inc.
A&B Cores, Inc. Remy Korea Holdings, Inc.
R&L Tool Company, Inc. Alberta Ltd.
MCA, Inc. of Mississippi World Wide Automotive Distributors, Inc.
Power Investments, Inc. Kraftube, Inc.
Franklin Power Products, Inc. Tractech (Ireland) Ltd.
International Fuel Systems, Inc. Central Precision Limited
Marine Drive Systems, Inc. Electro Diesel Rebuild BVBA
Marine Corporation of America Electro Rebuild Tunisia S.A.R.L. (Tunisia)
Powrbilt Products, Inc. Delco Remy Mexico, S. de R.L. de C.V.
World Wide Automotive, Inc. Publitech, Inc.
Ballantrae Corporation Delco Remy Brazil, Ltda.
Tractech Inc. Western Reman Ltd. (Canada)
Williams Technologies, Inc. Engine Rebuilders Ltd.
Western Reman, Inc. Reman Transport Ltd.
Engine Master, L.P. Delco Remy Remanufacturing
Delco Remy Germany GmbH
Remy Componentes S. de R. L. de C. V.
Delco Remy Belgium BVBA
Magnum Power Products, LLC
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Delco Remy International, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
For the Three Month Period Ended January 31, 2000
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Delco Remy
International Inc. Non-
(Parent Subsidiary Guarantor
Company Only) Guarantors Subsidiaries Eliminations
------------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ - $ 263,877 $90,674 $ (94,514)(a)
Cost of goods sold - 223,904 72,900 (94,514)(a)
------------------ ------------ -------------- --------------
Gross profit - 39,973 17,774 -
Selling, engineering and administrative expenses 3,275 20,019 7,592 -
Amortization of goodwill and intangibles 14 1,068 186 -
------------------ ------------ -------------- --------------
Operating (loss) income (3,289) 18,886 9,996 -
Interest expense and other non-operating expense (6,982) (4,123) (693) -
------------------ ------------ -------------- --------------
Income (loss) before income taxes, minority interest in
income of subsidiaries, income (loss) from
unconsolidated joint ventures and equity in earnings of
subsidiaries (10,271) 14,763 9,303 -
Income taxes (benefit) (4,343) 6,546 3,039 -
Minority interest in income of subsidiaries - (656) (960) -
Income (loss) from unconsolidated joint ventures - - (30) -
Equity in earnings of subsidiaries 12,835 - - (12,835)(b)
------------------ ------------ -------------- --------------
Net income (loss) $ 6,907 $ 7,561 $ 5,274 $ (12,835)
================== ============ ============== ==============
<CAPTION>
Consolidated
------------
<S> <C>
Net sales $ 260,037
Cost of goods sold 202,290
------------
Gross profit 57,747
Selling, engineering and administrative expenses 30,886
Amortization of goodwill and intangibles 1,268
------------
Operating (loss) income 25,593
Interest expense and other non-operating expense (11,798)
------------
Income (loss) before income taxes, minority interest in
income of subsidiaries, income (loss) from
unconsolidated joint ventures and equity in earnings of
subsidiaries 13,795
Income taxes (benefit) 5,242
Minority interest in income of subsidiaries (1,616)
Income (loss) from unconsolidated joint ventures (30)
Equity in earnings of subsidiaries -
------------
Net income (loss) $ 6,907
============
</TABLE>
________________________________________________________________________
(a) Elimination of intercompany sales and cost of sales.
(b) Elimination of equity in net income of consolidated subsidiaries.
10
<PAGE>
Delco Remy International, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
For the Six Month Period Ended January 31, 2000
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Delco Remy
International Inc. Non-
(Parent Subsidiary Guarantor
Company Only) Guarantors Subsidiaries Eliminations
------------------ ------------ -------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ - $541,458 $182,235 $ (186,467)(a)
Cost of goods sold - 459,117 146,404 (186,467)(a)
------------------ ------------ -------------- -----------------
Gross profit - 82,341 35,831 -
Selling, engineering and administrative expenses 6,669 39,809 15,278 -
Amortization of goodwill and intangibles 78 2,314 516 -
------------------ ------------ -------------- -----------------
Operating (loss) income (6,747) 40,218 20,037 -
Interest expense and other non-operating expense (13,953) (8,692) (1,277) -
------------------ ------------ -------------- -----------------
Income (loss) before income taxes, minority interest in
income of subsidiaries, income (loss) from
unconsolidated joint ventures and equity in earnings of
subsidiaries (20,700) 31,526 18,760 -
Income taxes (benefit) (6,796) 12,916 5,122 -
Minority interest in income of subsidiaries - (1,344) (2,083) -
Income (loss) from unconsolidated joint ventures - - (36) -
Equity in earnings of subsidiaries 28,785 - - (28,785)(b)
------------------ ------------ -------------- -----------------
Net income (loss) $ 14,881 $ 17,266 $ 11,519 $ (28,785)
================== ============ ============== =================
<CAPTION>
Consolidated
------------
<S> <C>
Net sales $537,226
Cost of goods sold 419,054
------------
Gross profit 118,172
Selling, engineering and administrative expenses 61,756
Amortization of goodwill and intangibles 2,908
------------
Operating (loss) income 53,508
Interest expense and other non-operating expense (23,922)
------------
Income (loss) before income taxes, minority interest in
income of subsidiaries, income (loss) from
unconsolidated joint ventures and equity in earnings of
subsidiaries 29,586
Income taxes (benefit) 11,242
Minority interest in income of subsidiaries (3,427)
Income (loss) from unconsolidated joint ventures (36)
Equity in earnings of subsidiaries --
------------
Net income (loss) $ 14,881
============
</TABLE>
_________________________________________________________________
(a) Elimination of intercompany sales and cost of sales.
(b) Elimination of equity in net income of consolidated subsidiaries.
11
<PAGE>
Delco Remy International, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
For the Three Month Period Ended January 31, 1999
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Delco Remy
International Inc. Non-
(Parent Subsidiary Guarantor
Company Only) Guarantors Subsidiaries Eliminations
------------------ ----------- ------------ ---------------
<S> <C> <C> <C> <C>
Net sales $ - $223,288 $65,595 $ (66,559)(a)
Cost of goods sold - 187,971 54,202 (66,559)(a)
------------------ ----------- ------------ ---------------
Gross profit - 35,317 11,393 -
Selling, engineering and administrative expenses 2,911 16,440 5,260 -
Amortization of goodwill and intangibles 15 1,087 174 -
------------------ ----------- ------------ ---------------
Operating (loss) income (2,926) 17,790 5,959 -
Interest expense and other non-operating expense (6,664) (4,097) (505) -
------------------ ----------- ------------ ---------------
Income (loss) from continuing operations before income
tax (benefit), minority interest in income of
subsidiaries, income from unconsolidated joint ventures
and equity in earning of subsidiaries (9,590) 13,693 5,454 -
Income taxes (benefit) (628) 2,595 1,760 -
Minority interest in income of subsidiaries - (650) (171) -
Income from unconsolidated joint ventures - - 847 -
Equity in earnings of subsidiaries 14,818 - - (14,818)(b)
------------------ ----------- ------------ ---------------
Net income (loss) $ 5,856 $ 10,448 $ 4,370 $ (14,818)
================== =========== ============ ===============
<CAPTION>
Consolidated
--------------
<S> <C>
Net sales $222,324
Cost of goods sold 175,614
--------------
Gross profit 46,710
Selling, engineering and administrative expenses 24,611
Amortization of goodwill and intangibles 1,276
--------------
Operating (loss) income 20,823
Interest expense and other non-operating expense (11,266)
--------------
Income (loss) from continuing operations before income
tax (benefit), minority interest in income of
subsidiaries, income from unconsolidated joint ventures
and equity in earning of subsidiaries 9,557
Income taxes (benefit) 3,727
Minority interest in income of subsidiaries (821)
Income from unconsolidated joint ventures 847
Equity in earnings of subsidiaries -
--------------
Net income (loss) $ 5,856
==============
</TABLE>
___________________________________________________________________
(a) Elimination of intercompany sales and cost of sales.
(b) Elimination of equity in net income of consolidated subsidiaries.
12
<PAGE>
Delco Remy International, Inc. and Subsidiaries
Condensed Consolidating Statement of Operations
For the Six Month Period Ended January 31, 1999
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Delco Remy
International Inc. Non-
(Parent Subsidiary Guarantor
Company Only) Guarantors Subsidiaries Eliminations
------------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ - $458,228 $120,596 $(123,715)(a)
Cost of goods sold - 390,945 99,397 (123,715)(a)
------------------ -------------- -------------- ---------------
Gross profit - 67,283 21,199 -
Selling, engineering and administrative expenses 5,078 32,028 9,669 -
Amortization of goodwill and intangibles 30 2,061 245 -
------------------ -------------- -------------- ---------------
Operating (loss) income (5,108) 33,194 11,285 -
Interest expense (13,831) (7,316) (522) -
------------------ -------------- -------------- ---------------
Income (loss) from continuing operations before income
tax (benefit), minority interest in income of
subsidiaries, income from unconsolidated joint ventures
and equity in earning of subsidiaries (18,939) 25,878 10,763 -
Income taxes (benefit) (2,334) 6,035 3,203 -
Minority interest in income of subsidiaries - (1,238) (344) -
Income from unconsolidated joint ventures - - 2,028 -
Equity in earnings of subsidiaries 27,849 - - (27,849)(b)
------------------ -------------- -------------- ---------------
Net income (loss) $ 11,244 $ 18,605 $ 9,244 $ (27,849)
================== ============== ============== ===============
<CAPTION>
Consolidated
--------------
<S> <C>
Net sales $455,109
Cost of goods sold 366,627
--------------
Gross profit 88,482
Selling, engineering and administrative expenses 46,775
Amortization of goodwill and intangibles 2,336
--------------
Operating (loss) income 39,371
Interest expense (21,669)
--------------
Income (loss) from continuing operations before income
tax (benefit), minority interest in income of
subsidiaries, income from unconsolidated joint ventures
and equity in earning of subsidiaries 17,702
Income taxes (benefit) 6,904
Minority interest in income of subsidiaries (1,582)
Income from unconsolidated joint ventures 2,028
Equity in earnings of subsidiaries -
--------------
Net income (loss) $ 11,244
==============
</TABLE>
___________________________________________________________________
(a) Elimination of intercompany sales and cost of sales.
(b) Elimination of equity in net income of consolidated subsidiaries.
13
<PAGE>
Delco Remy International, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
January 31, 2000
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Delco Remy
International Inc. Non-
(Parent Subsidiary Guarantor
Company Only) Guarantors Subsidiaries Eliminations Consolidated
------------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ - $ (193) $ 17,750 $ - $ 17,557
Trade accounts receivable, net - 135,709 24,278 - 159,987
Other receivables - 6,860 8,272 - 15,132
Inventories - 193,291 48,730 (1,646)(c) 240,375
Deferred income taxes - 14,997 - - 14,997
Other current assets - 2,892 535 - 3,427
------------------ -------------- -------------- -------------- --------------
Total current assets - 353,556 99,565 (1,646) 451,475
Property and equipment 40 213,102 64,981 - 278,123
Less accumulated depreciation 40 64,947 8,916 - 73,903
------------------ -------------- -------------- -------------- --------------
Property and equipment, net - 148,155 56,065 - 204,220
Deferred financing costs 7,806 2,506 - - 10,312
Goodwill, net - 114,415 20,960 - 135,375
Investments in affiliates 396,823 - - (392,081)(a) 4,742
Other assets 1,937 677 2,738 - 5,352
------------------ -------------- -------------- -------------- --------------
Total assets $406,566 $619,309 $179,328 $(393,727) $811,476
================== ============== ============== ============== ==============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 381 $ 95,990 $ 28,756 $ - $125,127
Intercompany accounts (27,608) 37,421 (9,212) (601)(c) -
Accrued interest payable 8,993 1,754 99 - 10,846
Accrued restructuring charges - 4,777 - - 4,777
Other liabilities and accrued expenses 6,479 27,292 11,045 - 44,816
Current debt - 1,034 3,973 - 5,007
------------------ -------------- -------------- -------------- --------------
Total current liabilities (11,755) 168,268 34,661 (601) 190,573
Deferred income taxes - 4,561 8 - 4,569
Long-term debt, less current portion 285,000 138,200 14,486 - 437,686
Post-retirement benefits other than pensions - 23,097 - - 23,097
Accrued pension benefit - 2,744 - - 2,744
Other non-current liabilities 2,299 1,611 - - 3,910
Minority interests in subsidiaries - 13,227 10,470 - 23,697
Stockholders' equity:
Common stock:
Class A shares 182 - - - 182
Class B shares 63 - - - 63
Paid-in capital 104,176 - - - 104,176
Subsidiary investment - 214,993 83,847 (298,840)(a) -
Retained earnings (deficit) 27,033 52,608 41,678 (94,286)(b) 27,033
Accumulated other comprehensive income (loss) - - (5,822) - (5,822)
Stock purchase plan (432) - - - (432)
------------------ -------------- -------------- -------------- --------------
Total stockholders' equity 131,022 267,601 119,703 (393,126) 125,200
------------------ -------------- -------------- -------------- --------------
Total liabilities and stockholders' equity $406,566 $619,309 $179,328 $(393,727) $811,476
================== ============== ============== ============== ==============
</TABLE>
____________________________________________________________________
(a) Elimination of investments in subsidiaries.
(b) Elimination of investments in subsidiaries' earnings.
(c) Elimination of intercompany profit in inventory.
14
<PAGE>
Delco Remy International, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
July 31, 1999
(in thousands of dollars)
<TABLE>
<CAPTION>
Delco Remy
International Inc. Non-
(Parent Subsidiary Guarantor
Company Only) Guarantors Subsidiaries Eliminations Consolidated
------------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ - $ (242) $ 15,551 $ - $ 15,309
Trade accounts receivable, net - 122,957 25,031 - 147,988
Other receivables - 6,657 8,839 - 15,496
Inventories - 193,264 40,543 (1,642)(c) 232,165
Deferred income taxes - 14,997 - - 14,997
Other current assets - 2,125 778 - 2,903
--------- --------- --------- ---------- ---------
Total current assets - 339,758 90,742 (1,642) 428,858
Property and equipment 40 202,462 56,225 - 258,727
Less accumulated depreciation 40 55,664 7,828 - 63,532
--------- --------- --------- ---------- ---------
Property and equipment, net - 146,798 48,397 - 195,195
Deferred financing costs 8,352 2,840 - - 11,192
Goodwill, net - 116,710 20,719 - 137,429
Investments in affiliates 362,247 14 5 (357,510)(a) 4,756
Other assets 2,411 858 1,964 - 5,233
--------- --------- --------- ---------- ---------
Total assets $ 373,010 $ 606,978 $ 161,827 $ (359,152) $ 782,663
========= ========= ========= ========== =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 636 $ 90,185 $ 28,518 $ - $ 119,339
Intercompany accounts (38,629) 56,721 (17,491) (601)(c) -
Accrued interest payable 9,001 2,592 10 - 11,603
Accrued restructuring charges - 5,866 - - 5,866
Other liabilities and accrued expenses (1,250) 27,622 10,733 - 37,105
Current debt - 1,227 11,369 - 12,596
--------- --------- --------- ---------- ---------
Total current liabilities (30,242) 184,213 33,139 (601) 186,509
Deferred income taxes - 4,560 8 - 4,568
Long-term debt, less current portion 285,000 136,867 13,064 - 434,931
Post-retirement benefits other than pensions - 21,050 - - 21,050
Accrued pension benefit - 2,719 - - 2,719
Other non-current liabilities 2,216 1,329 - - 3,545
Minority interests in subsidiaries - 10,663 9,158 - 19,821
Stockholders' equity:
Common stock:
Class A shares 182 - - - 182
Class B shares 63 - - - 63
Paid-in capital 104,176 851 (851) - 104,176
Subsidiary investment - 209,384 83,666 (293,050)(a) -
Retained earnings (deficit) 12,152 35,342 30,159 (65,501)(b) 12,152
Accumulated other comprehensive loss - - (6,516) - (6,516)
Stock purchase plan (537) - - - (537)
--------- --------- --------- ---------- ---------
Total stockholders' equity 116,036 245,577 106,458 (358,551) 109,520
--------- --------- --------- ---------- ---------
Total liabilities and stockholders' equity $ 373,010 $ 606,978 $ 161,827 $ (359,152) $ 782,663
========= ========= ========= ========== =========
</TABLE>
(a) Elimination of investments in subsidiaries.
(b) Elimination of investments in subsidiaries' earnings.
(c) Elimination of intercompany profit in inventory.
15
<PAGE>
Delco Remy International, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Six Month Period Ended January 31, 2000
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Delco Remy
International Inc. Non-
(Parent Subsidiary Guarantor
Company Only) Guarantors Subsidiaries Eliminations Consolidated
------------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income $ 14,881 $ 17,266 $ 11,519 $ (28,785)(a) $ 14,881
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Depreciation - 10,644 2,980 - 13,624
Amortization 78 2,314 516 - 2,908
Minority interest in income of subsidiaries - 1,344 2,083 - 3,427
Income from unconsolidated joint ventures - - 36 - 36
Equity in earnings of subsidiary (28,785) - - 28,785(a) -
Post-retirement benefits other than pensions - 2,047 - - 2,047
Accrued pension benefits - 25 - - 25
Non-cash interest expense 546 334 - - 880
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable - (12,752) 753 - (11,999)
Inventories - 2,351 (6,975) - (4,624)
Accounts payable (255) 5,804 239 - 5,788
Other current assets and liabilities 5,993 (811) 1,210 - 6,392
Intercompany accounts 12,758 (12,290) (468) - -
Accrued restructuring charges - (1,089) - - (1,089)
Other non-current assets and liabilities, net 517 (6,175) 7,823 - 2,165
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities 5,733 9,012 19,716 - 34,461
Investing activities:
Acquisitions, net of cash acquired (5,733) - - - (5,733)
Purchases of property and equipment - (10,105) (11,537) - (21,642)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities (5,733) (10,105) (11,537) - (27,375)
Financing activities:
Net borrowings (repayments) under revolving line of
credit and other - 1,142 (5,976) - (4,834)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing activities - 1,142 (5,976) - (4,834)
Effect of exchange rate changes on cash - - (4) - (4)
---------- ---------- ---------- ---------- ----------
Net increase in cash and cash equivalents - 49 2,199 - 2,248
Cash and cash equivalents at beginning of period - (242) 15,551 - 15,309
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period $ - $ (193) $ 17,750 $ - $ 17,557
=========== ========== ========== ========== ==========
</TABLE>
_________________________________
(a) Elimination of equity in earnings of subsidiaries.
16
<PAGE>
Delco Remy International, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Six Month Period Ended January 31, 1999
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Delco Remy
International Inc. Non-
(Parent Subsidiary Guarantor
Company Only) Guarantors Subsidiaries Eliminations
------------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Operating activities:
Net income $ 11,244 $ 18,605 $ 9,244 $(27,849)
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation - 7,306 1,206 -
Amortization 30 2,061 245 -
Minority interest in income of subsidiaries - 1,238 344 -
Income from unconsolidated joint ventures - - (2,028) -
Equity in earnings of subsidiaries (27,849) - - 27,849(a)
Deferred income taxes (150) 3,264 (67) -
Post-retirement benefits other than pensions - 1,912 - -
Accrued pension benefits - 403 - -
Non-cash interest expense 546 221 - -
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable - (6,616) 3,000 -
Inventories - (4,913) (6,004) -
Accounts payable 113 1,996 (505) -
Intercompany accounts 51,484 (50,956) (528) -
Other current assets and liabilities 1,215 (12,644) (3,455) -
Accrued restructuring charges - (10,619) - -
Other non-current assets and liabilities, net 3,515 700 (4,029) -
------------------ ---------- ------------ ------------
Net cash provided by (used in) operating activities 40,148 (48,042) (2,577) -
Investing activities:
Acquisition, net of cash acquired (40,148) - - -
Purchases of property and equipment - (8,081) (3,080) -
------------------ ---------- ------------ ------------
Net cash used in investing activities (40,148) (8,081) (3,080) -
Financing activities:
Net borrowings under revolving line of credit and other
- 57,794 6,061 -
------------------ ---------- ------------ ------------
Net cash provided by financing activities - 57,794 6,061 -
------------------ ---------- ------------ ------------
Effect of exchange rate changes on cash - - (47) -
------------------ ---------- ------------ ------------
Net increase in cash and cash equivalents - 1,671 357 -
Cash and cash equivalents at beginning of period - 125 7,988 -
------------------ ---------- ------------ ------------
Cash and cash equivalents at end of period $ - $ 1,796 $ 8,345 $ -
================== ========== ============ ============
<CAPTION>
Consolidated
--------------
<S> <C>
Operating activities:
Net income $ 11,244
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation 8,512
Amortization 2,336
Minority interest in income of subsidiaries 1,582
Income from unconsolidated joint ventures (2,028)
Equity in earnings of subsidiaries -
Deferred income taxes 3,047
Post-retirement benefits other than pensions 1,912
Accrued pension benefits 403
Non-cash interest expense 767
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable (3,616)
Inventories (10,917)
Accounts payable 1,604
Intercompany accounts -
Other current assets and liabilities (14,884)
Accrued restructuring charges (10,619)
Other non-current assets and liabilities, net 186
--------------
Net cash provided by (used in) operating activities (10,471)
Investing activities:
Acquisition, net of cash acquired (40,148)
Purchases of property and equipment (11,161)
--------------
Net cash used in investing activities (51,309)
Financing activities:
Net borrowings under revolving line of credit and other
63,855
--------------
Net cash provided by financing activities 63,855
--------------
Effect of exchange rate changes on cash (47)
--------------
Net increase in cash and cash equivalents 2,028
Cash and cash equivalents at beginning of period 8,113
--------------
Cash and cash equivalents at end of period $ 10,141
==============
</TABLE>
_________________________________________________________
(a) Elimination of equity in earnings of subsidiaries.
17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended January 31, Ended January 31,
----------------------------------------------------------------------------------------
2000 1999 2000 1999
-------------------- --------------------- ---------------------- ------------------
(Thousands of Dollars) Amount % Amount % Amount % Amount %
--------- --------- ---------- --------- ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 260,037 100.0% $ 222,324 100.0% $ 537,226 100.0% $455,109 100.0%
Cost of goods sold 202,290 77.8% 175,614 79.0% 419,054 78.0% 366,627 80.6%
--------- -------- ---------- ------- --------- ------ ------- ------
Gross profit 57,747 22.2% 46,710 21.0% 118,172 22.0% 88,482 19.4%
Selling, engineering and administrative
expenses 30,886 11.9% 24,611 11.0% 61,756 11.5% 46,775 10.3%
Amortization of goodwill and intangibles 1,268 0.5% 1,276 0.6% 2,908 0.5% 2,336 0.5%
--------- -------- ---------- ------- --------- ------ ------- ------
Operating income 25,593 9.8% 20,823 9.4% 53,508 10.0% 39,371 8.6%
Interest expense and other non-operating
expense (11,798) (4.5)% (11,266) (5.1)% (23,922) (4.5)% (21,669) (4.8)
Provision for income taxes 5,242 2.0% 3,727 1.7% 11,242 2.1% 6,904 1.5%
Minority interest (1,616) (0.6)% (821) (0.4)% (3,427) (0.6)% (1,582) (0.3)%
Income from unconsolidated joint ventures (30) 0.0% 847 0.4% (36) 0.0% 2,028 0.5%
--------- -------- ---------- ------- --------- ------ ------- ------
Net income $ 6,907 2.7% $ 5,856 2.6% $ 14,881 2.8% $11,244 2.5%
========= ======== ========== ======= ========= ====== ======= ======
</TABLE>
Three Months Ended January 31, 2000 Compared to Three Months Ended January 31,
1999
Net Sales Net sales of $260.0 million in the second quarter of fiscal year 2000
increased $37.7 million, or 17.0%, from the second quarter of fiscal year 1999.
This increase was due to higher demand for electrical products in the
aftermarket and OEM automotive and heavy duty/industrial markets, the
consolidation of results for Remy Korea Ltd. effective in the fourth quarter of
fiscal 1999, increased demand for powertrain/drivetrain products in the
aftermarket and the effect of the acquisitions of Engine Master in the first
quarter of fiscal year 2000 and Williams Technologies in the second quarter of
fiscal year 1999.
Gross Profit Gross profit of $57.7 million increased $11.0 million, or 23.6%,
and as a percentage of sales improved from 21.0% in the second quarter of 1999
to 22.2% in the second quarter of 2000. The growth in gross profit dollars
reflects the sales growth discussed above. The improvement in margins was due to
the realization of cost efficiencies generated by the OEM restructuring, the
benefits of lean manufacturing initiatives, leveraging of fixed manufacturing
costs and growth in the higher margin aftermarket.
Selling, Engineering and Administrative Expenses Selling, engineering and
administrative (SE&A) expenses increased $6.3 million, or 25.5%, and as a
percentage of sales increased from 11.1% to 11.9% due primarily to the effect of
acquisition related activities and aftermarket marketing initiatives.
Operating Income Operating income of $25.6 million increased $4.8 million, or
22.9%, and as a percentage of sales improved from 9.4% in the second quarter of
fiscal
18
<PAGE>
year 2000. This improvement reflects the sales and gross margin issues discussed
above, partially offset by higher SE&A expense.
Interest Expense and Other Non-operating Expenses Interest expense of $11.4
million compares with $11.3 million in the second quarter of fiscal 1999. Debt
balances were higher at the beginning of the quarter, versus last year, due to
acquisitions and capital spending, and declined throughout the quarter as debt
was paid down with cash generated by operating activities. The Company's overall
cost of funds was essentially unchanged year over year.
Income Taxes Income tax expense in the second quarter of fiscal year 2000 was
$5.2 million compared to $3.7 million in the comparable period last year. The
Company's consolidated effective income tax rate of 38.0% was down from 39.0%
due to the implementation of various tax planning initiatives and the effect of
the acquisition of certain foreign subsidiaries.
Minority Interest in Income of Subsidiaries and Income (Loss) From
Unconsolidated Joint Ventures The year over year change in these items primarily
reflects the Company's acquisition of an additional 31% (resulting in total
ownership of 81%) of the capital shares of Remy Korea Ltd., effective June 25,
1999. This subsidiary was accounted for under the equity method prior to that
date.
Six Months Ended January 31, 2000 Compared to Six Months Ended January 31, 1999
Net Sales Net sales of $537.2 million in the first half of fiscal year 2000
increased $82.1 million, or 18.0%, from the comparable period of fiscal year
1999. This increase was due to higher demand for electrical products in the
aftermarket and OEM automotive and heavy duty/industrial markets, the
consolidation of results for Remy Korea Ltd., increased demand for
powertrain/drivetrain products in the aftermarket and the effect of the
acquisitions of Williams Technologies and Engine Master.
Gross Profit Gross profit of $118.2 million increased $29.7 million, or 33.6%,
and as a percentage of sales improved from 19.4% to 22.0%. The growth in gross
profit dollars reflects the sales growth discussed above. The improvement in
margins was due to the realization of cost efficiencies generated by the OEM
restructuring, the benefits of lean manufacturing initiatives, leveraging of
fixed manufacturing costs and growth in the higher margin aftermarket.
Selling, Engineering and Administrative Expenses SE&A expenses increased $15.0
million, or 32.0%, and as a percentage of sales increased from 10.3% to 11.5%
due primarily to the effect of acquisition related activities and aftermarket
marketing initiatives.
Operating Income Operating income of $53.5 million increased $14.1 million, or
35.9%, and as a percentage of sales improved from 8.7% in the first half of
fiscal year 1999 to 10.0% in the first half of fiscal year 2000. This
improvement reflects the sales and gross margin issues discussed above,
partially offset by higher SE&A expense.
Interest Expense and Other Non-operating Expenses Interest expense of $23.5
million compares with $21.7 million in the first half of fiscal 1999. Debt
balances were higher in the first quarter and at the beginning of the second
quarter, versus last year, due to acquisitions and capital spending, and
declined throughout the
19
<PAGE>
second quarter as debt was paid down with cash generated by operating
activities. The Company's overall cost of funds was up marginally year over
year.
Income Taxes Income tax expense in the first half of fiscal year 2000 was $11.2
million compared to $6.9 million in the comparable period last year. The
Company's consolidated effective income tax rate of 38.0% was down from 39.0%
due to the implementation of various tax planning initiatives and the effect of
the acquisition of certain foreign subsidiaries.
Minority Interest in Income of Subsidiaries and Income (Loss) From
Unconsolidated Joint Ventures The year over year change in these items primarily
reflects the Company's acquisition of an additional 31% of the capital shares of
Remy Korea Ltd., effective June 25, 1999.
Liquidity and Capital Resources
The Company's short-term liquidity needs include required debt service,
including capital lease payments, day to day operating expenses, working capital
requirements and the funding of capital expenditures. Long-term liquidity
requirements include principal payments of long-term debt and the funding of
acquisitions. The Company's principal sources of cash to fund its short-term
liquidity needs consist of cash generated by operations and borrowing under the
Senior Credit Facility. As of January 31, 2000, borrowings under the Senior
Credit Facility were $99.4 million and utilization of letters of credit totaled
$12.2 million, leaving $188.4 million available under the $300 million facility.
In the first half of fiscal year 2000, cash provided by operating activities was
$34.5 million compared to cash used of $10.5 million in the first half of fiscal
year 1999. This improvement reflects increased earnings and depreciation, a
smaller increase in net working capital from year-end and lower restructuring
payments and charges. Accounts receivable increased $12.0 million from July 31,
1999 due to higher shipments year over year to both OEM and aftermarket
customers, but have decline $25.7 million since the end of the first quarter due
to improved collections and lower sales in the second quarter compared with the
first quarter. Accounts payable increased $5.9 million due to second quarter
production levels and the timing of payments. The Company's net trade cycle,
including accounts receivable, inventory and accounts payable days, declined
compared with both year-end and second quarter 1999.
Capital expenditures of $21.6 million in the first two quarters were in line
with planned spending and included investments in machinery and equipment in
certain foreign operations. Total capital spending in fiscal year 2000 is
expected to be approximately $30.0 million. In the first quarter, the Company
completed the acquisition of Engine Master, a remanufacturer of engines.
Net borrowings under the Company's revolving line of credit and other debt
declined $19.6 million in the second quarter compared to a $33.2 million
increase in the second quarter of fiscal year 1999. This improvement reflects
the increase in cash generated by operating activities discussed above and
borrowing in fiscal year 1999 to fund the acquisition of William Technology,
partially offset by higher capital spending. On a year to date basis, net
repayments of $4.8 million in 2000 compare with net borrowings of $63.9 million
in 1999.
The Company believes that cash generated from operations, together with the
amounts available under the Senior Credit Facility, will be adequate to meet its
debt service requirements, capital expenditures and
20
<PAGE>
working capital needs for the foreseeable future, although no assurance can be
given in this regard. The Company's future operating performance and ability to
service, extend, or refinance its indebtedness will be subject to future
economic conditions and to financial, business and other factors that are beyond
the Company's control.
Seasonality
The Company's business is moderately seasonal, as its major OEM customers
historically have one- to two-week summer shutdowns of operations during the
fourth fiscal quarter. In addition, the Company typically has shut down its own
operations for one week each July, depending on backlog, scheduled maintenance
and inventory buffers, as well as an additional week during the December
holidays. Consequently, the Company's second and fourth quarter results reflect
the effects of these shutdowns.
Impact of Year 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In December 1999, the Company completed its remediation
and testing of all major information technology based systems. As a result of
those planning and implementation efforts, the Company experienced no
significant disruptions in mission critical information technology and non-
information technology systems and believes those systems successfully responded
to the Year 2000 date change. The Company expensed approximately $2.0 million in
connection with remediating its systems. The Company is not aware of any
material problems resulting from Year 2000 issues, either with its products, its
internal systems, or the products and services of third parties. The Company
will continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout calendar year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.
Foreign Sales
A portion of the Company's sales are derived from sales made to customers in
foreign countries. Because of these foreign sales, the Company's business is
subject to the risks of doing business abroad, including currency exchange rate
fluctuations, limits on repatriation of funds, compliance with foreign laws and
other economic and political uncertainties.
21
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on December 16, 1999.
Matters voted upon by proxy were: the election of directors for terms expiring
at the Company's next annual meeting of shareholders and the ratification of the
Board of Directors' appointment of Ernst & Young LLP, Certified Public
Accountants, as independent accountants to examine the financial statements of
the Company for the fiscal year 2000.
<TABLE>
<CAPTION>
Voted For Voted Against Abstained
------------- --------------- -------------
<S> <C> <C> <C>
Election of Directors:
Harold K. Sperlich 15,662,526 ___ 18,293
Thomas J. Snyder 15,662,627 ___ 18,192
E.H. Billig 15,662,182 ___ 18,637
Richard M. Cashin, Jr. 14,992,127 ___ 688,692
Michael A. Delaney 15,662,182 ___ 18,637
James R. Gerrity 15,662,182 ___ 18,637
Robert J. Schultz 15,662,627 ___ 18,192
Proposal to ratify Ernst & Young LLP as
the Company's independent
accountants 15,668,969 7,173 4,677
</TABLE>
Item 5. Other Information
Disclosure Regarding Forward Looking Statements
From time to time, the Company makes oral and written statements that may
constitute "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 (the "Act") or by the SEC in its rules,
regulations and releases. The Company desires to take advantage of the "safe
harbor" provisions in the Act for forward-looking statements made from time to
time, including, but not limited to, the forward-looking statements relating to
the future performance of the Company contained in Management's Discussion and
Analysis, and Notes to Condensed Consolidated Financial Statements and other
statements made in this Form 10-Q and in other filings with the SEC.
The Company cautions readers that any such forward-looking statements are based
on assumptions that the Company believes are reasonable, but are subject to a
wide range of risks including, but not limited to risks associated with the
uncertainty of future financial results, acquisitions, additional financing
requirements, development of new products and services, the effect of
competitive products or pricing, the effect of economic conditions and other
uncertainties. Due to these uncertainties, the Company cannot assure readers
that any forward-looking statements will prove to have been correct.
22
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (Filed via EDGAR only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
January 31, 2000.
23
<PAGE>
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.
DELCO REMY INTERNATIONAL, INC.
------------------------------
(Registrant)
Date: March 3, 2000 By: /s/ David E. Stoll
--------------------------
David E. Stoll
Vice President and Controller
Chief Accounting Officer
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOR DELCO REMY
INTERNATIONAL, INC. AND SUBSIDIARIES, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 17,557
<SECURITIES> 0
<RECEIVABLES> 161,937
<ALLOWANCES> 1,950
<INVENTORY> 240,375
<CURRENT-ASSETS> 451,475
<PP&E> 278,123
<DEPRECIATION> 73,903
<TOTAL-ASSETS> 811,476
<CURRENT-LIABILITIES> 190,573
<BONDS> 437,686
0
0
<COMMON> 245
<OTHER-SE> 124,955
<TOTAL-LIABILITY-AND-EQUITY> 811,476
<SALES> 537,226
<TOTAL-REVENUES> 537,226
<CGS> 419,054
<TOTAL-COSTS> 419,054
<OTHER-EXPENSES> 64,664
<LOSS-PROVISION> 800
<INTEREST-EXPENSE> 23,539
<INCOME-PRETAX> 29,586
<INCOME-TAX> 11,242
<INCOME-CONTINUING> 14,881
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,881
<EPS-BASIC> .61
<EPS-DILUTED> .57
</TABLE>
