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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file no. 1-4651
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ECHLIN INC.
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(Exact name of registrant as specified in its charter)
Connecticut 06-0330448
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(State of incorporation) (I.R.S. employer
identification no.)
100 Double Beach Road
Branford, Connecticut 06405
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(Address of principal executive offices) (Zip code)
(203) 481-5751
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(Registrant's telephone number, including area code)
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(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
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(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of class Outstanding at March 31, 1994
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Common stock, $1 par value 59,050,427
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ECHLIN INC.
<TABLE>
INDEX
<CAPTION>
PART I. FINANCIAL INFORMATION Page
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<S> <C>
Item 1. Financial Statements
Consolidated balance sheets at February 28, 1994
and August 31, 1993. 3
Consolidated statements of income for the three
months ended February 28, 1994 and February 28, 1993;
for the six months ended February 28, 1994 and
February 28, 1993. 4
Consolidated statements of cash flows for the
six months ended February 28, 1994 and 1993. 5
Notes to consolidated financial statements at
February 28, 1994. 6
Item 2. Management's Financial Analysis 7
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
2
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PART I: FINANCIAL INFORMATION
<TABLE>
ECHLIN INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<CAPTION>
February 28, August 31,
1994 1993
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(unaudited) (A)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 31,720 $ 28,572
Accounts receivable, less-allowance for
doubtful accounts of $4,301 and $4,299 219,576 201,177
Inventories, at lower of cost (first-in,
first-out) or market:
Raw materials and component parts 155,415 137,646
Work in process 68,239 47,985
Finished goods 341,043 302,459
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Total inventories 564,697 488,090
Other current assets 25,254 21,006
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Total current assets 841,247 738,845
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Property, plant and equipment, at cost 773,666 671,741
Accumulated depreciation (363,050) (342,360)
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Property, plant and equipment, net 410,616 329,381
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Marketable securities 110,228 90,002
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Other assets 89,214 105,033
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Total assets $1,451,305 $1,263,261
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</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 7,464 $ 3,034
Current portion of long-term debt 2,315 3,658
Accounts payable, trade 137,425 135,569
Accrued taxes on income 46,040 64,053
Accrued liabilities 163,267 150,542
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Total current liabilities 356,511 356,856
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Long-term debt 312,585 157,540
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Deferred income taxes 37,234 35,043
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Shareholders' equity:
Preferred stock, without par value:
Authorized 1,000,000 shares, issued none - -
Common stock, $1 par value:
Authorized 150,000,000 shares,
issued 59,306,781 and 59,105,321 59,307 59,105
Capital in excess of par value 328,818 325,865
Retained earnings 399,764 371,963
Foreign currency translation adjustment (39,919) (40,116)
Treasury stock, at cost, 270,264 shares (2,995) (2,995)
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Total shareholders' equity 744,975 713,822
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Total liabilities and shareholders' equity $1,451,305 $1,263,261
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</TABLE>
See notes to consolidated financial statements.
(A) The balance sheet at August 31, 1993 has been derived from the audited
financial statements at that date.
3
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<TABLE>
ECHLIN INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
February 28, February 28,
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1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Net sales $497,153 $441,546 $996,417 $903,874
Cost of goods sold 354,511 316,513 708,675 645,374
-------- -------- -------- --------
Gross profit on sales 142,642 125,033 287,742 258,500
Selling and administrative
expenses 107,823 98,731 215,889 201,549
-------- -------- -------- --------
Income from operations 34,819 26,302 71,853 56,951
-------- -------- -------- --------
Interest expense 5,306 5,300 9,841 10,271
Interest income 2,481 2,805 5,401 5,731
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Interest expense, net 2,825 2,495 4,440 4,540
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Income before taxes 31,994 23,807 67,413 52,411
Provision for taxes 10,238 7,487 21,572 16,984
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Income before cumulative
effect of accounting
change 21,756 16,320 45,841 35,427
Cumulative effect of
accounting change - - 2,583 -
-------- -------- -------- --------
Net income $ 21,756 $ 16,320 $ 48,424 $ 35,427
======== ======== ======== ========
Average shares outstanding 58,999 58,478 58,938 58,386
======== ======== ======== ========
Per share data:
Income before accounting
change $0.37 $0.28 $0.78 $0.61
Cumulative effect of
accounting change - - 0.04 -
-------- -------- -------- --------
Net income $0.37 $0.28 $0.82 $0.61
======== ======== ======== ========
Cash dividends $0.175 $0.175 $0.35 $0.35
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
4
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<TABLE>
ECHLIN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<CAPTION>
Six Months Ended
February 28,
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1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $48,424 $35,427
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 33,227 29,766
Cumulative effect of accounting change (2,583) -
Changes in assets and liabilities, excluding
acquisitions' balance sheets:
Accounts receivable (15,245) (6,510)
Inventories (47,410) (31,632)
Other current assets (3,728) (7,695)
Accounts payable (965) (8,678)
Taxes on income (12,086) 7,510
Accrued liabilities 5,762 (11,867)
Other 3,362 9,575
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Cash provided by operating activities 8,758 15,896
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Cash flows from financing activities:
Long-term and short-term borrowings 216,187 136,105
Long-term and short-term repayments (62,431) (90,316)
Proceeds from common stock issuances 3,155 4,949
Dividends paid (20,623) (20,157)
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Cash provided by financing activities 136,288 30,581
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Cash flows from investing activities:
Capital expenditures, net (31,199) (17,761)
Purchases of marketable securities (20,226) (9,270)
Net assets of businesses acquired (90,467) (1,886)
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Cash used for investing activities (141,892) (28,917)
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Impact of changes in foreign currency
translation on cash (6) (8,235)
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Increase in cash and cash equivalents 3,148 9,325
Cash and cash equivalents at beginning of period 28,572 29,832
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Cash and cash equivalents at end of period $31,720 $39,157
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</TABLE>
See notes to consolidated financial statements.
5
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ECHLIN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1.
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The accompanying unaudited 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
Rule 10-01 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 statement have been included. Operating
results for the six month period ended February 28, 1994 are not
necessarily indicative of the results that may be expected for the year
ending August 31, 1994. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
company's Annual Report on Form 10-K for the year ended August 31, 1993.
NOTE 2.
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Fiscal 1993 results have been restated for the Frictiontech Inc. pooling
of interests transaction which occurred in June 1993.
NOTE 3.
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During February 1994, Echlin acquired Neelon Casting Ltd.("Neelon"),
located in Canada, for approximately $22,900,000. Neelon is a producer
of automotive disc brake rotor castings for the replacement and original
equipment markets. The acquisition was accounted for by the purchase
method.
Effective October 1, 1993, the company purchased the Hydraulic Brake and
Clutch Division of FAG Kugelfischer, located in Germany, for
approximately $75,000,000. In addition, if this division exceeds
certain net income thresholds during the first five years subsequent to
the acquisition date, the purchase price will be increased by not more
than $14,000,000. The acquisition was accounted for by the purchase
method.
NOTE 4.
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During the first quarter of fiscal 1994, the company adopted the
provisions of Statement of Financial Accounting Standards No. 109 (FAS
109), "Accounting for Income Taxes." FAS 109 changes the accounting for
income taxes from the deferred to an asset and liability method. The
cumulative effect of adopting this accounting change was a $2,583,000
increase in net income.
6
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ECHLIN INC.
MANAGEMENT'S FINANCIAL ANALYSIS
Results of Operations:
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For the three and six months ended February 28, 1994, net sales
increased 12.6 percent and 10.2 percent, respectively, over the
corresponding periods of a year ago. Net sales of comparable operations
rose 4.0 and 3.6 percent for the three and six month periods,
respectively, due to the impact of price increases, introduction of new
products, and unit volume gains. Domestic comparable operations were up
3.6 percent for the quarter and 6.0 percent for the six months with the
largest improvements reported by our automotive brake and heavy duty
groups. During the second quarter, foreign comparable operations
improved 4.8 percent, while they were 1.9 percent below last year for
the six months. Only our German and Brazilian operations reported
results below those of a year ago.
For the second quarter, the percentage of gross profit to sales
increased to 28.7 percent from 28.3 percent last year while the six
month percentage increased to 28.9 percent from 28.6 percent. These
favorable trends are primarily attributable to unit volume gains,
ongoing cost reductions, and continued improvements in operational
efficiencies and employee productivity.
Although selling and administrative expenses increased $9,092,000 and
$14,340,000 for the three and six month periods, respectively, these
expenses declined as a percentage of sales. For the second quarter they
declined to 21.7 percent from 22.4 percent a year ago, while for the six
month period expenses as a percentage of sales edged downward to 21.7
percent from 22.3 percent. The dollar increase for both periods was
primarily due to expense levels for current year acquisitions.
Net interest expense for the three month period increased $330,000,
while for the six month period it declined $100,000 as compared to the
prior year. Average debt levels increased during the quarter due to
funds required to acquire new businesses.
Net income for the six months ended February 28, 1994 included income of
$2,583,000, which represented the cumulative effect of adopting the
provisions of FAS 109, "Accounting for Income Taxes," during the first
quarter.
Liquidity and Sources of Capital:
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During the first six months of fiscal 1994, cash provided by operations
was $8,758,000 vs. $15,896,000 a year ago. The increase in net income
was offset by larger cash outflows for working capital items. Accounts
receivable were higher due to increased sales levels while inventories
were up in anticipation of higher sales forecasted for the remainder of
the fiscal year. Higher outflows for taxes were a result of the
company's higher earnings.
7
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ECHLIN INC.
MANAGEMENT'S FINANCIAL ANALYSIS(cont.'d)
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Debt levels, net of acquisition debt assumed, increased $153,756,000
from year end primarily due to funds required to acquire new businesses.
Total debt to total capital was 30 percent, up from 28 percent a year
ago and 19 percent at August 31, 1993.
Net capital expenditures, which were $13,438,000 above last year,
represent outlays for new product development and manufacturing
improvements.
During March 1994, Echlin's Board of Directors increased the regular
quarterly dividend to 19 cents per share, payable April 18, 1994 to
shareholders of record on April 5, 1994. This increase represents a 9
percent increase over the previous rate of 17.5 cents per share.
8
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ECHLIN INC.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
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During the quarter ended February 28, 1994, the company did not file any
reports on Form 8-K.
9
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SIGNATURES
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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.
Echlin Inc.
Date: April 11, 1994 /s/ Richard A. Wisot
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Richard A. Wisot
Vice President and
Controller
Date: April 11, 1994 /s/ Jon P. Leckerling
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Jon P. Leckerling
Vice President, General
Counsel and Corporate
Secretary
10
