<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Mark One
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For fiscal year ended August 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 1-4651
ECHLIN INC.
(Exact name of registrant as specified in its charter)
CONNECTICUT NO: 06-0330448
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 DOUBLE BEACH ROAD
BRANFORD, CONNECTICUT 06405
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (203) 481-5751
Securities registered pursuant to Section l2(b) of the Act:
NEW YORK STOCK EXCHANGE INC.
COMMON STOCK, THE PACIFIC STOCK EXCHANGE INCORPORATED
$1.00 PAR VALUE INTERNATIONAL STOCK EXCHANGE IN LONDON
(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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 l2 months, and (2) has been subject to such filing requirements
for the past 90 days. YES X NO
--- ---
The aggregate market value of the voting stock of the registrant held by non-
affiliates of the registrant on November 4, 1994 was $1,796,560,980. On
November 4, 1994, there were 59,297,915 shares of common stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
l. Portions of Echlin's 1994 Annual Report to Shareholders are incorporated
into Parts I and II.
2. Portions of Echlin's 1994 Annual Proxy Statement are incorporated into
Part III.
1
<PAGE>
PART I
------
ITEM 1. BUSINESS
- -----------------
Echlin Inc. was incorporated in the state of Connecticut in 1959 and is
engaged in only one business segment as a worldwide supplier of products to
maintain or improve the efficiency and safety of motor vehicles. During the past
fiscal year, Echlin Inc. and its subsidiaries ("Echlin" or the "company")
continued to conduct its business in a manner consistent with prior years.
The company's principal products can be classified into the following
categories: brake system, engine system, other vehicle parts and non-vehicular
products. Brake system parts include hydraulic brake master cylinders, push rods
for master cylinders, brake shoes, drums, brake cables, hardware and wheel
cylinders for drum brake systems, disc pads, rotors and calipers for disc brake
systems, repair kits for hydraulic brakes, hoses and controllers for electrical
brakes. In addition, wheel oil seals, compressors, air dryers, valves, power
boosters, pressure converters, air brake actuating products, antilock brake
systems, spring brakes, brake block, remanufactured brake shoes, pneumatic and
electrical connectors and slack adjustors are manufactured for the heavy duty
brake market. Engine system parts include condensers, contacts, complete
distributors, distributor caps, ignition coils, rotors, control modules,
sensors, electronic voltage regulators, wire and cable products, carburetor and
emission control parts, fuel pumps, starter drives, solenoids, electronic fuel
injection systems, oxygen sensors, EGR valves, LPG carburetion parts and PCV
valves. Other vehicle parts include new and remanufactured clutches, bell
housings, automatic transmission parts, timing gears and chains, U-joints,
engine mounts, airhorns, mirrors, water pumps, power steering pumps, oil pumps
and steering and suspension system components, heavy duty windshield wiper
systems and shifters, traction bars, gaskets and accessories for the high
performance market. Non-vehicular products include small engine parts and
security access control products.
Sales by product class for the last three fiscal years ended August 31 were as
follows:
(In millions of dollars)
<TABLE>
<CAPTION>
Product Class 1994 1993 1992
- ------------- ---- ---- ----
<S> <C> <C> <C>
Brake System Parts $1,053.4 $ 872.6 $ 800.1
Engine System Parts 617.3 588.8 551.4
Other Vehicle Parts 508.6 423.0 369.0
Non-Vehicular Products 50.2 60.1 62.9
-------- -------- --------
Total $2,229.5 $1,944.5 $1,783.4
======== ======== ========
</TABLE>
The company's products are sold primarily as replacement products for use
by professional mechanics and by car and truck owners. Sales are made to
automotive warehouse distributors, heavy duty distributors, retailers, other
parts manufacturers and parts remanufacturers. The company also sells its
products to original equipment manufacturers in both the automotive and heavy
duty markets.
Raw Materials
- -------------
Echlin's principal requirements for raw materials consist of copper, brass,
steel, plastic, paperboard, rubber, resin, iron, zinc and aluminum. Echlin is
not dependent on any one source for the raw materials essential to its business,
and during the last year encountered no difficulties in obtaining raw materials.
2
<PAGE>
Patents and Licenses
- --------------------
Echlin holds a number of patents on its air brake system parts, hydraulic
brake system parts, engine system parts and security access control products.
The loss or expiration of any of these patents would not, however, have a
significant effect on Echlin's operations.
Seasonal Effects
- ----------------
Echlin's business does not have material seasonal characteristics.
Working Capital Items
- ---------------------
Inventories are kept at a sufficient level to service customer orders but
are not disproportionate to Echlin's sales. Echlin grants customers the right to
return goods where the conditions of Echlin's obsolescence and return policies
are met. This practice has not had materially adverse effects on its business.
Customers
- ---------
Members of the National Automotive Parts Association (NAPA) represent the
company's largest group of customers and accounted for 10.3% of consolidated net
sales for the year ended August 31, 1994. Included in this number are sales to
Genuine Parts Company and its affiliates, the largest member of NAPA, which
accounted for 10.2% of consolidated net sales in fiscal 1994. This long-standing
relationship with NAPA started in 1928. Products identified by the trademarks
"NAPA Echlin" and "NAPA United" are sold exclusively in the United States to
NAPA distribution centers. Echlin believes its relationship with NAPA and its
members are good, however, the loss of the NAPA members as customers would have
a materially adverse effect on its business.
Backlog
- -------
Most of Echlin's sales are from its inventory so that the amount of backlog
is not material to an understanding of its business.
Government Contracts
- --------------------
Government contracts are not material to Echlin's business.
Competitive Conditions
- ----------------------
As Echlin sells different product lines in various markets, there is no one
company which serves as its major competitor. There are a number of major
independent manufacturers of parts and supplies and the leading original
equipment manufacturers also supply virtually every part sold by Echlin. In
addition, the company faces competition in domestic markets from foreign
manufacturers.
Competition in all markets served by Echlin is based on product quality,
delivery, warranty, customer service and price. Echlin believes that its
products command good acceptance, and that it is one of the leading
manufacturers in the industry.
Environmental Regulations
- -------------------------
Echlin does not believe that compliance with federal, state or local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment will have a material effect on capital expenditures, earnings or its
competitive position.
3
<PAGE>
Employees
- ---------
Echlin employs approximately 20,600 people worldwide. The company believes
that relations with its employees are satisfactory.
Research and Development
- ------------------------
Echlin's basic parts and supplies business does not require it to make
substantial expenditures on research and development activities. However, Echlin
has developed several new products and continues to make expenditures for the
modification and improvement of existing products and services. For the years
ended August 31, 1994, 1993 and 1992, Echlin spent approximately $22,535,000,
$18,442,000 and $15,222,000, respectively, on research and developmental
efforts, substantially all of which was sponsored by Echlin.
Financial Information About Foreign and Domestic Operations and Export Sales
- ----------------------------------------------------------------------------
For information relating to Echlin's foreign and domestic operations for
fiscal 1994, 1993 and 1992, see Note 9 to the consolidated financial statements
appearing on pages 44 and 45 of Echlin's 1994 Annual Report to Shareholders,
which pages are incorporated herein by reference. Export sales represent less
than 10% of the company's consolidated trade sales.
4
<PAGE>
ITEM 2. PROPERTIES
- -------------------
The following table sets forth a summary description of Echlin's principal
physical properties as of November 1, 1994:
<TABLE>
<CAPTION>
Lease
Approximate Expiration
Location Principal Business Activity Square Feet Dates
- -------- --------------------------- ----------- ----------
<S> <C> <C> <C>
Prattville, AL Heavy duty brake parts 108,000
105,000* 1994
Azusa, CA Parts distribution center 145,000* 1996
Compton, CA Warehouse and distribution
center 71,000* 1995
Irvine, CA Remanufactured brake parts 68,000* 1998
Los Angeles, CA Parts distribution center 109,000* 1995
Modesto, CA Parts distribution center 150,000* 1999
Branford, CT Ignition and electrical parts 426,000
Newark, DE Parts distribution center 146,000* 2000
Jacksonville, FL Parts distribution center 70,000* 1994
Pensacola, FL Carburetor and emission
control parts 122,000
Chicago, IL Fuel pumps 217,000
Elmhurst, IL Parts distribution center 140,000* 1995
Franklin Park, IL Parts distribution center 142,000* 2001
Litchfield, IL Brake and small engine parts 525,000
McHenry, IL Brake parts 265,000
Naperville, IL Distribution center 100,000* 1998
Ottawa, IL Remanufactured clutches 185,000
Mishawaka, IN Wire and cable products 172,000
Michigan City, IN Heavy duty windshield wiper
systems 106,000* 1995
Columbus, KS Electrical rebuilder parts 169,000
Independence, KS Ignition and electrical parts 389,000
Iola, KS Air brake parts 173,000
Cuba, MO Air brake parts 128,000
Kansas City, MO Heavy duty parts distribution 150,000* 1998
center
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Lease
Approximate Expiration
Location Principal Business Activity Square Feet Dates
- -------- --------------------------- ----------- ----------
<S> <C> <C> <C>
Marion, NC Remanufactured heavy duty
parts 85,000
Cleveland, OH Gaskets and high performance
products 404,000
Upper Sandusky, OH Hydraulic and air brake products 194,000
Pittsburgh, PA Remanufactured brake shoes,
clutches and calipers 70,000* 1997
Nashville, TN Parts distribution center 337,000* 1997
Paris, TN Air brake parts 116,000
Fredericksburg, VA Remanufactured brake parts 118,000* 1998
Ponce, Puerto Rico Ignition, electrical and brake
parts; carburetor and emission
control parts 88,000* 1995, 1997
Sydney, Australia Warehouse and distribution center 195,000* 1997
Sao Paulo, Brazil Ignition and electrical parts;
water pumps 77,000
Anjou, Canada Brake parts 206,000* 1998, 2005
Mississauga, Canada Parts distribution center 153,000* 1995, 1997
Montreal, Canada Brake parts 206,000* 1994, 2005
Guelph, Canada Brake parts 79,000
Sudbury, Canada Disc brake rotor castings 147,000
Thetford Mines, Canada Brake parts 75,000* 1995
Nuneaton, England Product distribution center 154,000* 2001
Birmingham, England Carburetor and other fuel
system parts 216,000
Redditch, England Clutches; air brake parts 246,000
Strood, England Oil pumps and power steering 354,000
Ebern, Germany Brake and clutch manufacturer 887,000
Furth im Wald, Germany Brake hose assembly 80,000
Colwyn Bay, Wales Water pumps and steering and
suspension system components 225,000
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Lease
Approximate Expiration
Location Principal Business Activity Square Feet Dates
- -------- --------------------------- ------------ ----------
<S> <C> <C> <C>
Heidelberg, Germany Air brake systems 139,000* 1999
Los Reyes, Mexico Brake parts 169,000
Mexico City, Mexico Brake and electrical parts 204,000* 1994
Johannesburg, Electrical and brake parts 64,000
South Africa 34,000* 1995
Alava, Spain Shock absorbers 138,000
</TABLE>
*Leased facility
In addition to the properties listed above, Echlin owns or leases other
smaller facilities both in the United States and abroad. Echlin believes it will
be able to renew all leases upon expiration. Inability to do so, however, would
not have a materially adverse effect on Echlin's operations.
In the opinion of Echlin's management, its properties are in good condition
and provide adequate capacity for its current operations.
7
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- ---------------------------
The company and its consolidated subsidiaries are parties to various legal
proceedings arising in the normal course of business including administrative
and judicial proceedings in connection with environmental matters that involve
claims for damages and/or potential monetary sanctions. In management's opinion,
based on the advice of counsel, the outcome of such proceedings will not in the
aggregate have a materially adverse effect on the financial condition of the
company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Officers are elected to hold their offices until their respective
successors are duly elected or until their earlier resignation or removal. There
is no family relationship between the executive officers.
Listed below is the name, age, position and business experience of each
officer of the company during the past five years:
Frederick J. Mancheski (age 68) Chairman of the Board and Chief Executive
- ----------------------
Officer since 1969; a Director since 1963.
C. Scott Greer (age 44) President since September 1990; various managerial
- --------------
positions within Echlin's International Group from 1980 through 1990; a Director
since October 1990.
Jon P. Leckerling (age 46) Vice President, General Counsel and Corporate
- -----------------
Secretary since 1990; Managing Director of Long Wharf Capital Partners Inc. from
1988 to 1990.
Milton J. Makoski (age 48) Vice President-Human Resources since 1986.
- -----------------
Joseph A. Onorato (age 45) Vice President and Treasurer since May 1994;
- -----------------
Treasurer from 1990 to 1994; Assistant Treasurer from 1985 to 1990.
Robert F. Tobey (age 49) Vice President Corporate Development since April
- ---------------
1994; various managerial positions within Echlin's International Group from 1991
to 1994; Vice President Corporate Development from 1985 to 1991.
Richard A. Wisot (age 48) Vice President and Controller since July 1990;
- ----------------
Treasurer from 1981 to 1990.
Kenneth T. Flynn Jr. (age 45) Assistant Corporate Controller since 1985.
- --------------------
Charles W. O'Connor (age 64) Assistant General Counsel and Assistant Secretary
- -------------------
since 1990; Attorney and Assistant Secretary from 1980 to 1990.
Edward C. Shalagan (age 42) Assistant Treasurer since 1988.
- ------------------
Edward D. Toole Jr. (age 64) Associate General Counsel and Assistant Secretary
- -------------------
since 1990; Vice President, Secretary and General Counsel from 1986 to 1990.
8
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
- --------------------------------------------------------------
SECURITY HOLDER MATTERS
- -----------------------
Echlin's common stock is listed on the New York Stock Exchange, the Pacific
Stock Exchange and the International Stock Exchange in London. Options on
Echlin's stock are also traded on the Pacific Stock Exchange. The number of
record holders of common stock on November 4, 1994 was 4,162. The quarterly
market price and dividend data appearing on page 48 of Echlin's 1994 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
- ---------------------------------
The presentation under "Historical Data" on pages 46 and 47 of Echlin's
1994 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
"Review of Operations and Financial Condition" on pages 5 and 6 of Echlin's
1994 Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The Consolidated Statements of Income, Consolidated Balance Sheets,
Consolidated Statements of Cash Flows, Consolidated Statements of Changes in
Shareholders' Equity, Notes to Consolidated Financial Statements, Quarterly
Financial Data and the Report of Independent Accountants as set forth on pages
33 through 45 of Echlin's 1994 Annual Report to Shareholders are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
There have been no changes in independent accountants or disagreements on
accounting and financial disclosure.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------------------------------
Information relating to Directors is set forth under the caption "Election
of Directors" on pages 2 through 8 in Echlin's 1994 Annual Proxy Statement and
is incorporated herein by reference. Certain information regarding Executive
Officers of the Registrant is contained in Item 4 of Part I of this Annual
Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
- ---------------------------------
Information relating to Executive Compensation is set forth under the
captions "Compensation of Directors" and "Executive Compensation" on pages 5
through 8 and 8 through 17, respectively, in Echlin's 1994 Annual Proxy
Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
Information relating to Security Ownership of Certain Beneficial Owners and
Management is set forth under the caption "Beneficial Ownership" on pages 5
through 7 in Echlin's 1994 Annual Proxy Statement and is incorporated herein by
reference.
9
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
Information relating to Certain Relationships and Related Transactions is
set forth under the caption "Election of Directors" in Echlin's 1994 Annual
Proxy Statement on pages 2 through 8 and page 12 are incorporated herein by
reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- ---------------------------------------------------------------------------
14. (a) Document List
-------------
1. Financial Statements
--------------------
Among the responses to this Item 14 (a) are the following financial
statements which are incorporated herein by reference in Item 8 above:
(i) Consolidated Statements of Income for the three years
ended August 31, 1994, 1993 and 1992
(ii) Consolidated Balance Sheets at August 31, 1994 and 1993
(iii) Consolidated Statements of Cash Flows for the three years ended
August 31, 1994, 1993 and 1992
(iv) Consolidated Statements of Changes in Shareholders' Equity
for the three years ended August 31, 1994, 1993 and 1992
(v) Notes to Consolidated Financial Statements
(vi) Report of Independent Accountants
2. Financial Statement Schedules
-----------------------------
<TABLE>
<CAPTION>
(A) Schedule Description Page
-------- ----------- ----
<S> <C> <C>
Report of Independent Accountants on
Financial Statement Schedules 13
Consent of Independent Accountants 13
V Property, plant and equipment 14
VI Accumulated depreciation, depletion, and
amortization of property, plant, and equipment 15
VIII Valuation and qualifying accounts 16
IX Short-term borrowings 17
X Supplementary income statement information 18
</TABLE>
All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the financial statements
or notes thereto.
3. Exhibits Required by Item 601 of Securities and Exchange Commission
-------------------------------------------------------------------
Regulation S-K.
--------------
(3)(i) By-Laws, as amended on December 22, 1987, June 21, 1988,
October 30, 1991, and June 29, 1994 is being filed as an
Exhibit.
(ii) Certificate of Incorporation, filed as Exhibit 3 (3)(ii) to
the Annual Report on Form 10-K for the fiscal year ended
August 31, 1987, is incorporated herein by reference.
(iii) Certificate of Amendment amending the Certificate of
Incorporation to Establish Series A Cumulative Participating
Preferred Stock, filed as Exhibit 3 (3)(iii) to the Annual
Report on Form 10-K for the fiscal year ended August 31,
1989, is incorporated herein by reference.
(iv) Certificate of Amendment, amending the Certificate of
Incorporation, to limit the liability of directors for
monetary damages under certain circumstances, filed as Item 2
to the 1989 Annual Proxy Statement, is incorporated herein by
reference.
10
<PAGE>
(4)(i) Specimen of Common Stock Certificate, filed as Exhibit 2(1)
to Registration No. 2-63494, is incorporated herein by
reference.
(ii) Rights Agreement, dated as of June 21, 1989, between Echlin
Inc. and The Connecticut Bank and Trust Company, N.A., as
Rights Agent, which includes the form of Amendment to the
company's Certificate of Incorporation as Exhibit A, the form
of Right Certificate as Exhibit B and the Summary of Rights
to Purchase Preferred Stock as Exhibit C, filed as Exhibit 1
to the Current Report on Form 8-K dated June 21, 1989 is
incorporated herein by reference.
(iii) Successor Rights Agent Agreement between Echlin Inc. and The
First National Bank of Boston appointing The First National
Bank of Boston as successor Rights Agent to replace The
Connecticut Bank and Trust Company, N.A. as Rights Agent,
filed as Exhibit 3(3)(iv) to the Annual Report on Form 10-K
for the fiscal year ended August 31, 1990, is incorporated
herein by reference.
(10)(i) (a) Deferred Compensation Plan filed as Exhibits (10)(c)(i)
to the Annual Report on Form 10-K for the fiscal year ended
August 31, 1981, is incorporated herein by reference; (b)
information set forth under the caption "Executive Bonus
Plan" in the 1992 Annual Proxy Statement is incorporated
herein by reference; (c) the Echlin Inc. 1992 Stock Option
Plan, filed as Appendix A to the 1992 Annual Proxy Statement,
is incorporated herein by reference; (d) Supplemental
Executive Retirement Plan dated as of December 19, 1990, as
amended, filed as Exhibit 3(10)(ii) to the Annual Report on
Form 10-K for the fiscal year ended August 31, 1991, is
incorporated herein by reference; (e) Change in Control
Severance Policy dated as of December 19, 1990, as amended,
filed as Exhibit 3(10)(ii) to the Annual Report on Form 10-K
for the fiscal year ended August 31, 1991, is incorporated
herein by reference; (f) the Echlin Inc. Performance Unit
Plan, filed as Appendix A to the 1994 Annual Proxy Statement,
is incorporated herein by reference.
(13) The financial section of Echlin's 1994 Annual Report to
Shareholders, which contains the information incorporated by
reference in this Annual Report on Form 10-K, is being filed
as an Exhibit.
(22) List of Subsidiaries of Echlin Inc. is being filed as an
Exhibit.
(27) Financial Data Schedule is being filed as an Exhibit.
All other exhibits are omitted because they are not applicable.
14 (b) Reports on Form 8-K
- ---------------------------
No Current Report on Form 8-K was required to be filed for the three months
ended August 31, 1994.
11
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section l3 or 15(d) 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.
By: /s/Frederick J. Mancheski
----------------------------
Frederick J. Mancheski
Chairman of the Board
and Chief Executive Officer
Date: November 15, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities* indicated on November 15, 1994.
/s/Frederick J. Mancheski
- -------------------------
Frederick J. Mancheski, Chairman of the Board
and Chief Executive Officer
/s/C. Scott Greer
- -------------------------
C. Scott Greer, President and Director
/s/Richard A. Wisot
- -------------------------
Richard A. Wisot, Vice President and
Controller, Chief Accounting Officer
/s/D. Allan Bromley
- -------------------------
D. Allan Bromley, Director
/s/John F. Creamer Jr.
- -----------------------
John F. Creamer Jr., Director
/s/Milton P. DeVane
- -------------------------
Milton P. DeVane, Director
/s/John E. Echlin Jr.
- ------------------------
John E. Echlin Jr., Director
/s/John F. Gustafson
- -------------------------
John F. Gustafson, Director
/s/Donald C. Jensen
- -------------------
Donald C. Jensen, Director
/s/Trevor O. Jones
- ------------------
Trevor O. Jones, Director
/s/Phillip S. Myers
- -------------------------
Phillip S. Myers, Director
/s/Frank R. O'Keefe Jr.
- ------------------------
Frank R. O'Keefe Jr., Director
/s/Jerome G. Rivard
- -------------------
Jerome G. Rivard, Director
*The position of Chief Financial Officer of the company is presently vacant.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
ON FINANCIAL STATEMENT SCHEDULES
--------------------------------
To the Board of Directors of Echlin Inc.
Our audits of the consolidated financial statements referred to in our report
dated September 23, 1994 appearing on page 33 of the 1994 Annual Report to
Shareholders of Echlin Inc. (which report and consolidated financial statements
are incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the Financial Statement Schedules listed in Item 14(a) of this Form
10-K. In our opinion, these Financial Statement Schedules present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
- -----------------------------
Price Waterhouse LLP
Stamford, Connecticut
September 23, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-66422, No. 33-15813, No. 2-92426, and No. 33-
15814) of Echlin Inc. of our report dated September 23, 1994 appearing on page
33 of the Annual Report to Shareholders which is incorporated in this Annual
Report on Form 10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedules, which appears above.
/s/ Price Waterhouse LLP
- -----------------------------
Price Waterhouse LLP
Stamford, Connecticut
November 15, 1994
13
<PAGE>
ECHLIN INC.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Balance at
beginning Other Balance at end
Description of period Additions at cost Retirements changes (b) of period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1994
- --------------------------
Land and improvements $ 19,029,000 $ 265,000 $ - $ 4,319,000 $ 23,613,000
Buildings and improvements 121,593,000 11,047,000 (89,000) 28,409,000 160,960,000
Machinery and equipment 531,119,000 64,536,000 (a) (12,635,000) 63,067,000 646,087,000
------------ ----------- ------------- ------------- ------------
$671,741,000 $75,848,000 $(12,724,000) $ 95,795,000 $830,660,000
============ =========== ============= ============= ============
Year ended August 31, 1993
- --------------------------
Land and improvements $ 19,320,000 (c) $ 384,000 $ (156,000) $ (519,000) $ 19,029,000
Buildings and improvements 122,916,000 (c) 1,853,000 (551,000) (2,625,000) 121,593,000
Machinery and equipment 503,150,000 (c) 45,501,000 (a) (10,626,000) (6,906,000) 531,119,000
------------ ----------- ------------- ------------- ------------
$645,386,000 $47,738,000 $(11,333,000) $(10,050,000) $671,741,000
============ =========== ============= ============= ============
Year ended August 31, 1992
- --------------------------
Land and improvements $ 17,125,000 $ 727,000 $ (237,000) $ 1,217,000 $ 18,832,000
Buildings and improvements 110,229,000 6,042,000 (716,000) 3,261,000 118,816,000
Machinery and equipment 447,893,000 44,942,000 (a) (15,700,000) 15,520,000 492,655,000
------------ ----------- ------------- ------------- ------------
$575,247,000 $51,711,000 $(16,653,000) $ 19,998,000 $630,303,000
============ =========== ============= ============= ============
</TABLE>
(a) Represents normal cash purchases of machinery and equipment.
(b) Includes additions from business acquisitions in the amounts of
$98,516,000, $25,793,000 and $14,021,000 for fiscal years ended August 31,
1994, 1993 and 1992, respectively. The remaining portion primarily
represents translation adjustments on property, plant and equipment located
in foreign countries.
(c) Restated to include property, plant and equipment for Sprague Devices, Inc.
and Frictiontech Inc. due to the pooling of interests transactions.
14
<PAGE>
ECHLIN INC.
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Balance at Additions charged
beginning to costs and Other Balance at end
Description of period expenses Retirements changes (a) of period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1994
- --------------------------
Land improvements $ 1,760,000 $ 227,000 $ - $ (5,000) $ 1,982,000
Buildings and improvements 38,017,000 5,568,000 (89,000) (391,000) 43,105,000
Machinery and equipment 302,583,000 55,322,000 (11,116,000) (5,382,000) 341,407,000
------------ ----------- ------------- ------------- ------------
$342,360,000 $61,117,000 $(11,205,000) $ (5,778,000) $386,494,000
============ =========== ============= ============= ============
Year ended August 31, 1993
- --------------------------
Land improvements $ 1,535,000 (b) $ 237,000 $ (7,000) $ (5,000) $ 1,760,000
Buildings and improvements 34,286,000 (b) 5,103,000 (194,000) (1,178,000) 38,017,000
Machinery and equipment 275,400,000 (b) 51,085,000 (8,849,000) (15,053,000) 302,583,000
------------ ----------- ------------- ------------- ------------
$311,221,000 $56,425,000 $ (9,050,000) $(16,236,000) $342,360,000
============ =========== ============= ============= ============
Year ended August 31, 1992
- --------------------------
Land improvements $ 1,309,000 $ 215,000 $ (31,000) $ 34,000 $ 1,527,000
Buildings and improvements 29,386,000 4,686,000 (411,000) (190,000) 33,471,000
Machinery and equipment 233,505,000 48,472,000 (13,174,000) 1,190,000 269,993,000
------------ ----------- ------------- ------------- ------------
$264,200,000 $53,373,000 $(13,616,000) $ 1,034,000 $304,991,000
============ =========== ============= ============= ============
</TABLE>
(a) Primarily represents translation adjustments on property, plant and
equipment located in foreign countries.
(b) Restated to include accumulated depreciation of property, plant and
equipment for Sprague Devices, Inc. and Frictiontech Inc. due to the pooling of
interests transactions.
15
<PAGE>
ECHLIN INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Additions
----------------------------------
Balance at Balances assumed Write-offs,
beginning Charged to costs in business net of Balance at end
Description of period and expenses acquisitions recoveries (b) of period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
- --------------------------------
Year ended August 31, 1994 $4,299,000 $3,288,000 - $(1,896,000) $5,691,000
Year ended August 31, 1993 $4,925,000 (a) $1,433,000 $1,425,000 $(3,484,000) $4,299,000
Year ended August 31, 1992 $5,732,000 $1,361,000 $ 368,000 $(2,680,000) $4,781,000
</TABLE>
(a) Restated to include the valuation accounts for Sprague Devices, Inc. and
Frictiontech Inc. due to the pooling of interests transactions.
(b) Includes translation adjustments on allowance for doubtful account balances
of non-U.S. divisions.
16
<PAGE>
ECHLIN INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Weighted average Maximum amount Average amount Weighted average
Balance interest rate outstanding outstanding interest rate
Category of at end of at end of during the during the during the
short-term borrowings period period period period period
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1994
- --------------------------
Notes payable (a) $8,712,000 8.44% $20,384,000 $8,768,000 7.28%
Domestic notes payable (b) $57,330,000 4.60% $160,150,000 $95,825,000 3.68%
Commercial paper (c) $105,000,000 4.68% $166,950,000 $105,417,000 3.91%
Year ended August 31, 1993
- --------------------------
Notes payable (a) $3,034,000 9.08% $10,070,000 $5,952,000 12.01%
Domestic notes payable (b) - - $90,000,000 $44,000,000 3.30%
Commercial paper (c) $24,000,000 3.26% $75,000,000 $44,445,000 3.42%
Year ended August 31, 1992
- --------------------------
Notes payable (a) $5,858,000 17.14% $8,392,000 $6,519,000 14.91%
Domestic notes payable (b) - - $107,000,000 $76,154,000 4.36%
Commercial paper (c) $60,250,000 3.78% $60,250,000 $48,503,000 4.77%
</TABLE>
(a) Year-end borrowing levels and interest rates represent borrowings by
foreign units in international money markets. Interest rate averages may
be impacted by rates charged in highly inflationary economies.
(b) Domestic notes payable mature generally within 30 days from their date of
issue. Domestic notes payable have been classified as long-term because of
the company's intent to refinance this debt on a long-term basis and the
availability of such financing under the terms of a noncancellable
Revolving Credit Agreement (RCA).
(c) Commercial paper matures generally within 30 days from its date of issue.
All commercial paper has been classified as long-term because of the
company's intent to refinance this debt on a long-term basis and the
availability of such financing under the terms of a noncancellable RCA.
17
<PAGE>
ECHLIN INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Item Charged to costs and expenses
- --------------------------------------------------------------------------------
Year ended August 31,
1994 1993 1992
------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs $33,249,000 $26,773,000 $25,382,000
Advertising expense $24,348,000 $19,724,000 $16,741,000
</TABLE>
Amounts for amortization of intangible assets, pre-operating costs and similar
deferrals, taxes other than payroll and income taxes, and royalties are not
presented as such amounts are less than 1% of total sales during each of the
above years.
18
<PAGE>
Exhibit 3(i) By-Laws, as amended on December 22, 1987, June 21, 1988, October
30, 1991 and June 29, 1994.
ECHLIN INC.
BY-LAWS
ARTICLE I. SHAREHOLDERS
SECTION 1. Place for Holding Meetings
- ---------- --------------------------
All Meetings of Shareholders, whether Annual or Special, shall be held at
the offices of the Company in the Town of Branford, County of New Haven and
State of Connecticut or at such other place within or outside the State of
Connecticut as shall be designated in the notice of such meeting.
SECTION 2. Annual Meeting of Shareholders
- ---------- ------------------------------
The Annual Meeting of Shareholders, for the election of directors and the
transaction of other business, shall be held during the month of December in
each year at a date and hour fixed by the Board of Directors. At each Annual
Meeting the shareholders entitled to vote shall, in accordance with their
respective voting rights, elect a Board of Directors, and they may transact such
other business as may properly come before the meeting.
SECTION 3. Special Meetings
- ---------- ----------------
The Chairman of the Board, the President, or the Board of Directors may,
and upon the written request of the holders of at least thirty-five per cent of
the voting power of all shares entitled to vote at the meeting the President
shall, call a Special Meeting of Shareholders for such purposes as may be
designated in
<PAGE>
the notice thereof.
SECTION 4. Quorum
- ---------- ------
The holders of a majority of the issued and outstanding stock entitled to
vote who shall be present in person or represented by proxy at any meeting duly
called will constitute a quorum for the transaction of business.
SECTION 5. Notice of Meetings of Shareholders
- ---------- ----------------------------------
Written notice of each Meeting of Shareholders, Annual or Special, stating
the day, hour and place thereof, and the general nature of the business to be
considered, shall be given to each shareholder entitled to vote thereat by
mailing a copy thereof to such shareholder's last known post office address as
last shown on the stock records of the corporation, postage prepaid, not less
than seven days nor more than fifty days before the date of the meeting. Notice
of any meeting may be waived before or after such meeting.
SECTION 6. Record Date
- ---------- -----------
The Board of Directors by resolution may fix a date as the record date for
the purpose of determining shareholders entitled to notice of and to vote at any
Meeting of Shareholders or any adjournment thereof, or entitled to receive any
distribution by the corporation or for any other purpose, such date to be not
earlier than the date such action is taken by the Board of Directors and not
more than seventy days, and, in case of a Meeting of
<PAGE>
Shareholders not less than ten full days, immediately preceding the date on
which the particular event requiring such determination of shareholders is to
occur.
SECTION 7. Voting
- ---------- ------
At each Meeting of Shareholders, each shareholder then entitled to vote may
vote in person or by proxy, and shall, unless otherwise provided in the
Certificate of Incorporation, have one vote for each share of stock registered
in his name on the record date. Unless otherwise provided by law or by the
Certificate of Incorporation, the affirmative vote, at any Meeting of
Shareholders duly held and at which a quorum is present, of a majority of the
voting power of the shares represented at such Meeting which are entitled to
vote on the subject matter shall be the act of the shareholders.
SECTION 8. Action without Meeting
- ---------- ----------------------
Any action which may be taken at a Meeting of Shareholders may be taken
without a meeting by consent in writing, setting forth the action so taken or to
be taken, signed by all the persons who would be entitled to vote upon such
action at a meeting.
SECTION 9. Adjournment
- ---------- -----------
The holders of a majority of the voting power of the shares entitled to
vote represented at a meeting may adjourn such meeting from time to time.
<PAGE>
SECTION 10. Proxies
- ----------- -------
Every person entitled to vote or execute consents, waivers or releases in
respect of his or her shares may do so either in person or by one or more agents
authorized by a written proxy executed by him or her. A photographic or similar
reproduction of a proxy or a telegram, cablegram, wireless or similar
transmission of a proxy sent by such person is a sufficient writing. All
proxies shall be filed with the Secretary of the corporation. No proxy shall be
valid after the expiration of eleven months from the date of its execution,
unless it specifies the length of time for which it is to continue in force or
limits its use to a particular meeting not yet held. No proxy shall be valid
after ten years from its date of execution.
ARTICLE II. DIRECTORS
SECTION 1. Number and Term
- ---------- ---------------
The Board of Directors shall consist of not less than three nor more than
twelve members, the number to be as the directors shall from time to time
direct; provided, however, that if the directors shall fail to fix the number of
directors, the number to be elected shall be the same aggregate number as
elected at the preceding Annual Meeting at which directors were elected and at
any intervening Meeting for the election of directors. The directors shall be
elected at the Annual Meeting of Shareholders, and each director shall be
elected to serve for one year or until the next Annual Meeting and until another
shall be chosen or have qualified in his stead; provided, that in the event of
failure to hold such
<PAGE>
Annual Meeting, or to hold such election thereat, it may be held at any Special
Meeting of Shareholders called for that purpose.
SECTION 2. Vacancies
- ---------- ---------
Upon the death, resignation or removal of any director, the vacancy may be
filled by a majority of the remaining directors, even though less than a quorum,
and each director so elected shall hold office until his successor is elected at
an Annual Meeting of Shareholders, or at a Special Meeting called for that
purpose. The shareholders may at any time elect directors to fill any vacancy
not filled by the directors, and may elect the additional directors at a Meeting
at which an amendment of the By-laws is approved authorizing an increase in the
number of directors. If the resignation of a director is to take effect at a
date later than the receipt thereof by the corporation, appropriate action to
elect a successor to take office when the resignation becomes effective may be
taken at any time after such receipt in the same manner as though such
resignation were effective on receipt.
SECTION 3. Quorum
- ---------- ------
A quorum of the Board of Directors shall consist of a majority of the
number of directorships at the time; provided, however, that in case any vacancy
or vacancies shall occur a majority of the remaining members shall constitute a
quorum until such vacancy or vacancies be filled and may fill the vacancy or
vacancies for the unexpired portion of the term or until the shareholders shall
fill such vacancy or vacancies.
<PAGE>
SECTION 4. Meetings - Notice
- ---------- -----------------
Meetings of the Board of Directors may be held within or without the State
of Connecticut and shall be called by the Secretary at any time when requested
by the Chairman of the Board, the President or by a majority of the Board of
Directors. A newly elected Board of Directors may hold its first Meeting for
the purpose of organization and the transaction of any other business
immediately after the Annual Meeting of Shareholders, without notice. At least
two days written or oral notice of any other Meeting of the Board of Directors
shall be given to each director. Neither the business to be transacted at, nor
the purpose of, any Meeting of the Board of Directors need be specified in the
notice or in any waiver of notice of any meeting, unless required by the
Connecticut Stock Corporation Act.
SECTION 5. Powers of Directors
- ---------- -------------------
The Board of Directors shall have the care and management of the business,
property and affairs of the Corporation, and subject to restrictions imposed by
the Connecticut Stock Corporation Act, by the Certificate of Incorporation or by
the By-laws, may exercise all the powers of the corporation and, so far as is
lawful, may delegate any and all such powers as it sees fit.
SECTION 6. Committees
- ---------- ----------
The Board of Directors may, by resolution adopted by the affirmative vote
of directors holding a majority of the directorships, designate two or more
directors to constitute an
<PAGE>
Executive Committee. The Executive Committee shall have and may exercise all
powers which the Board of Directors possesses except (a) the power to alter or
amend the By-laws, or (b) the power to declare any dividend or other
distribution with respect to the stock of the corporation. The Board of
Directors may, by resolution adopted by the affirmative vote of directors
holding a majority of the directorships, designate two or more directors to
constitute any other committee or committees as it shall at any time or from
time to time deem appropriate, for the purposes specified in any resolution
authorizing such other committee. Notices of meetings of all committees shall
be given to each committee member as provided for Meetings of the Board of
Directors. A majority of members of a committee shall constitute a quorum. All
committees shall keep regular minutes of their proceedings and report the same
to the Board of Directors on a regular basis.
SECTION 7. Compensation of Directors
- ---------- -------------------------
Directors shall receive such reasonable compensation for their services as
directors as the Board shall at any time or from time to time fix, including
compensation for service upon any committee or committees of the Board.
SECTION 8. Consent - Waiver of Notice
- ---------- --------------------------
If all the directors, or all members of a committee of the Board of
Directors, as the case may be, severally or collectively consent in writing to
any action taken or to be taken by the
<PAGE>
corporation, and the number of such directors or members constitutes a quorum
for such action, such action shall be as valid corporate action as though it had
been authorized at a Meeting of the Board of Directors or such committee, as the
case may be. Notice of any Meeting of the Board of Directors or any committee
thereof may be waived either before or after such meeting. All such waivers and
consents shall be filed with the minutes of any such Meeting by the Secretary.
SECTION 9. Mandatory Retirement of Directors
- ---------- ---------------------------------
Except with respect to Directors of the Company elected prior to January 1,
1981, no person shall be elected to the Board of Directors who has reached his
or her 70th birthday.
ARTICLE III. OFFICERS
SECTION 1. Officers
- ---------- --------
The officers of the corporation shall be a Chairman of the Board, a
President, a Vice President, a Secretary, a Treasurer and a Controller. The
corporation may also have, at the discretion of the Board, one or more
additional Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers as may be appointed. Officers
other than the President and Chairman of the Board need not be directors. The
office of Chairman of the Board and President may be held by the same person but
neither the Chairman of the Board nor the President may occupy any other office.
Other than the Chairman of the Board and President one person may hold two or
more offices. All
<PAGE>
officers shall serve at the pleasure of the Board of Directors.
SECTION 2. Chairman of the Board
- ---------- ---------------------
The Chairman of the Board shall be the chief executive officer of the
corporation. The Chairman shall preside at all Meetings of Shareholders and of
the Board of Directors and, subject to the Board of Directors, the Chairman
shall direct the policies and management of the corporation. The Chairman shall
be an ex officio member of all standing committees except the Audit Committee
-- -------
and the Compensation and Management Development Committee or any successor
committees thereto. Except where by law the signature of the President is
required, the Chairman of the Board shall possess the same power as the
President to sign all contracts and other instruments of the corporation which
may be authorized by these By-laws or by the Board of Directors; and the
Chairman shall have the power to do any and all other things for and in behalf
of the corporation as may be specifically authorized by the Board of Directors
from time to time, and which do not contravene the provisions of these By-laws
or the laws of the State of Connecticut.
SECTION 3. President
- ---------- ---------
The President, subject to the control of the Board of Directors and the
Chairman of the Board, shall have general supervision, direction and control of
the business and officers of the corporation. In the absence of the Chairman of
the Board, the President shall preside at all Meetings of Shareholders and of
the
<PAGE>
Board of Directors. The President shall sign all certificates, contracts and
other instruments of the corporation which may be authorized by these By-laws or
by the Board of Directors. The President shall also have the general powers and
duties of management usually vested in the office of president of a corporation,
and shall have such other powers and duties as may be prescribed by the Chairman
of the Board or by the Board of Directors.
SECTION 4. Vice Presidents
- ---------- ---------------
In the absence or disability of the Chairman of the Board and President,
the Vice President designated by the Board of Directors shall perform all the
duties of the President, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the President. The Vice Presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Chairman of the Board, the Board of
Directors or the President.
SECTION 5. Secretary
- ---------- ---------
The Secretary shall keep, or cause to be kept, a book of minutes at the
principal office or such other place as the Board of Directors may order, of all
Meetings of the Board of Directors and Shareholders, with the time and place of
holding, the notice thereof given, the names of those present at Meetings of the
Board of Directors, the number of shares present or represented at Meetings of
Shareholders and the proceedings thereof.
<PAGE>
The Secretary shall keep, or cause to be kept, at the principal office, or
at the office of the corporation's transfer agent, a share register or a
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the Meetings
of Shareholders and of the Board of Directors required by the By-laws or by law
to be given, and the Secretary shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Chairman of the Board, the Board of Directors or the
President.
SECTION 6. Treasurer
- ---------- ---------
The Treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus and shares. Any surplus,
including earned surplus, paid-in surplus and surplus arising from a reduction
of stated capital, shall be classified according to source and shown in a
separate account.
The Treasurer shall deposit all monies and other valuables in the name and
to the credit of the corporation with such depositaries as may be, from time to
time designated by the Chairman of the Board or the President. The Treasurer
shall render
<PAGE>
to the Chairman of the Board, to the President and to the Board of Directors
whenever the Chairman, the President or the Board requests it, an account of all
transactions as Treasurer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the Chairman of the Board, the Board of Directors or the President.
SECTION 7. Controller
- ---------- ----------
The Controller shall be the principal accounting officer of the Company.
The Controller shall have general supervision over the books and accounts of the
Company relating to receipts and disbursements and shall arrange the form of all
vouchers, accounts, reports and returns required by the Company and by the
various divisions. The Controller shall be responsible for and in charge of
accounting and accounting methods, office procedures and routines, budgets and
preparation of statistics to assist in executive control of the business of the
Company. The Controller shall perform such other duties, and shall render such
reports as shall, from time to time, be required of the Controller by the
Chairman of the Board, the Board of Directors, or the President.
ARTICLE IV. CAPITAL STOCK
SECTION 1. Form and Execution of Certificates
- ---------- ----------------------------------
Shares certificates shall be in such form as shall be adopted by the Board
of Directors. The shares certificates may be under seal, or facsimile seal of
the corporation and shall be signed by the President or a Vice President and by
the Secretary or an
<PAGE>
Assistant Secretary or the Treasurer or an Assistant Treasurer except that such
signatures may be facsimile if the certificate is signed by a transfer agent,
transfer clerk acting on behalf of the corporation or registrar. If any officer
who has signed or whose facsimile signature has been used on any such
certificate ceases to serve the corporation as an officer in the capacity as to
which his or her signature was so used before such certificate has been
delivered by the corporation, the certificate may, nevertheless, be adopted by
the corporation and be issued and delivered as though such officer had not
ceased to hold such office.
SECTION 2. Transfer
- ---------- --------
Transfer of shares shall be made only upon the books of the corporation by
the registered holder in person or by attorney, duly authorized, and upon
surrender of the certificate or certificates for such shares properly assigned
for transfer.
SECTION 3. Lost or Destroyed Certificates
- ---------- ------------------------------
The holder of any certificate representing shares of stock of the
corporation may notify the corporation of any loss, theft or destruction
thereof, and the Secretary or any Assistant Secretary may thereupon, in his
discretion, instruct that a new certificate be issued for the same number of
shares to be issued to such holder upon satisfactory proof of such loss, theft
or destruction, and the deposit of indemnity by way of bond or otherwise, in
such form and amount and with such surety or sureties as the Secretary or such
Assistant Secretary may require, to indemnify the corporation
<PAGE>
against loss or liability by reason of the issuance of such new certificate.
ARTICLE V. SEAL
The corporation shall have a corporate seal, in such form as shall be
approved by the Board of Directors.
ARTICLE VI.
EXECUTION AND DELIVERY OF CONTRACTS AND OTHER INSTRUMENTS
All officers shall have authority to enter into any contract or to execute
any instrument in the name and on behalf of the corporation, provided that such
contract or instrument is of a nature usual and common in the ordinary conduct
of the business affairs of the corporation. Such authority is general, but
shall not be understood in any way to contravene the supervisory powers and
authority of the Chairman of the Board, the President or the Treasurer as set
forth in Article III of these By-laws. The authority of any officer or
officers, agent or agents to enter into any contract or to execute any
instrument in the name of and on behalf of the corporation for purposes other
than the ordinary conduct of the business is subject to the approval of the
Board of Directors, and unless so authorized, no officer, agent or employee
shall have any power or authority to bind the corporation by any contract or
other instrument or to pledge its credit or to render it liable for any purpose
or to any amount except as provided herein.
<PAGE>
ARTICLE VII. FISCAL YEAR
The fiscal year of the corporation shall begin on September 1 of each year
and end on August 31 of the next year.
ARTICLE VIII. AMENDMENTS
SECTION 1. Power of Shareholders
- ---------- ---------------------
By-laws may be adopted, amended or repealed either at a Meeting by the
vote of shareholders entitled to exercise a majority of the voting power or by
the written consent of such shareholders.
SECTION 2. Power of Directors
- ---------- ------------------
The authority to adopt, repeal and amend the By-laws is hereby
delegated to the Board of Directors, subject to the power of the shareholders to
adopt, amend or repeal such By-laws or to revoke this delegation of authority;
provided, also, that the directors may increase the number of directorships,
without numerical limit, and may fill any vacancy so created, or may decrease
the number of directorships, by the concurring vote of the directors holding a
majority of the directorships, which number of directorships shall be the number
prior to the vote on the increase.
<PAGE>
EXHIBIT 13. Financial Section of Echlin Inc.'s 1994 Annual Report to
Shareholders
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
REVIEW OF OPERATIONS AND FINANCIAL CONDITION
Echlin's net sales surpassed $2 billion this year, climbing 14.7 percent to
$2.23 billion. New acquisitions -- including the brake and clutch division of
FAG Kugelfisher, Neelon Casting Ltd. and Import Parts America -- provided 8.2
percent of the growth. Comparable operations -- those with Echlin at least a
year -- produced the remaining 6.5 percent, as price increases, unit volume
gains and new products offset declines due to currency exchange losses.
In 1993, total sales went up 9 percent. Existing businesses supplied
close to a third of that amount, and new businesses furnished the balance.
DOMESTIC SALES ADVANCED
Revenues from U.S. divisions (excluding acquisitions) rose 7.4 percent in
1994. Countrywide, sales benefited from greater demand by end-users, as well
as business from new customers. Although all product categories showed gains,
our automotive brake operations performed the best, followed by our heavy
duty group.
Domestic sales progressed 7.6 percent in 1993, nearly the same rate as
this year.
FOREIGN BUSINESS CLIMBED
Echlin's offshore sales (not counting acquisitions) were up 3.8 percent,
marking their first annual growth since 1991. A 3.9 percent rise in unit
volume, combined with higher prices and new products, countered declines
caused by a strong U.S. dollar, which lowered translation rates.
Business grew for most of our international divisions, due, in part, to
healthier economies. Two notable exceptions were our Brazilian subsidiary and
German heavy duty brake operations, where sales dropped in 1994; nonetheless,
unit volume picked up in the fourth quarter, a trend that will likely
continue into 1995.
Foreign revenues decreased 8.5 percent in 1993, mainly because of the
general recession in Europe.
PROFIT MARGINS STRENGTHENED
Gross margins moved up in 1994, from 29.1 to 29.5 percent. Echlin achieved
this -- despite the rising costs of materials and services -- by working hard
to maximize productivity and efficiency.
Domestically, all product lines posted higher profits this year, as we
stepped up production to accommodate greater sales activity, and contained
costs throughout our divisions.
While profit margins strengthened in most offshore divisions, those at
our Brazilian facilities were hurt by high inflation this year. The economy
in Brazil, however, has begun to stabilize; therefore, we believe our margins
will improve.
In 1993, gross margins gained 1.3 percentage points. By cutting costs
and streamlining operations, we compensated for slower sales and scaled-back
production in our foreign business units.
SALES OUTPACED EXPENSES
Selling and administrative expenses advanced 11 percent in 1994, yet for the
third year in a row, Echlin's sales grew faster than its operating costs. As
a result, expenses as a percentage of sales edged down, from 21.6 to 21.0
percent. This followed 1993's decrease of .2 percentage point from 1992.
INTEREST EXPENSE INCREASED
Both interest rates and the company's average debt levels rose this year,
boosting our interest expense 21 percent to $23.5 million.
Interest income also went up in 1994. Due to growth in our Puerto Rican
investment portfolio, it climbed from $10.9 to $11.8 million, an 8 percent
jump.
5
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
In contrast, net interest expense fell sharply in 1993 -- 31 percent:
lower interest rates and lower debt levels played a role, as did higher
interest income.
ACCOUNTING CHANGE AFFECTED INCOME
Effective September 1, 1993, Echlin adopted the provisions of the Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes,"
which changed the way we recognize deferred taxes. The cumulative impact
added, on a one-time basis, $2.583 million to net income.
OPERATIONS PRODUCED POSITIVE CASH FLOW
Operating cash flow totaled $149.9 million in 1994, versus $165.1 million in
1993 and $181.5 million in 1992.
Greater income, coupled with our success in collecting accounts
receivable, helped generate cash this year. To meet escalating sales demand,
we used some of this cash to build inventories, a measure that allowed us to
fill customers' orders at competitively superior rates.
FINANCIAL POSITION REMAINED SOUND
Echlin took several steps this year to enhance its financial condition. We
started by renegotiating our revolving credit agreement, which was scheduled
to expire September 1, 1994. The new arrangement lets us borrow, over the
next five years, up to $375 million.
We also repaid $3 million of senior debt, due to mature in 1996. This
helped reduce interest costs.
Our purchase of new businesses, along with greater working capital
needs, pushed Echlin's total debt up $144.1 million to $308.3 million.
Consequently, debt as a percentage of capital was 27.8 percent, compared with
18.7 percent last year. During 1993, we pared down our borrowings by $46.7
million.
In addition, the company distributed $43.1 million in dividends this
year, $2.5 million more than last year. We increased our cash payout 9
percent, to an annual rate of 76 cents per share.
Echlin's debt ratings were upgraded in 1994. During the third quarter,
Moody's Investors Service raised our senior debt from A3 to A2, and
commercial paper from Prime-2 to Prime-1; last year, Standard & Poor's also
elevated our ratings, revising our debt to A and commercial paper to A1. The
moves help keep our debt cost down.
SPENDING WENT UP
Capital spending reached $75.6 million this year, $27.9 million above last
year's amount. Most of the difference involved our U.S. automotive brake
group, where in response to higher sales, we expanded our manufacturing
capacity and tooled for new parts.
In 1993, Echlin spent $47.7 million, primarily for new machinery and
tooling. We covered these expenses, in part, by selling several plants as a
result of our consolidation program.
6
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the fairness, integrity and objectivity of
Echlin Inc.'s financial statements including all related information
presented in this annual report. These statements have been prepared in
accordance with generally accepted accounting principles and include amounts
based on management's best estimates and judgements.
Management maintains and relies on a system of internal controls which
provides reasonable assurance that assets are safeguarded and transactions are
properly recorded. The system includes written policies and procedures and an
organizational structure that provides for segregation of responsibilities and
the selection and training of qualified personnel. In addition, the company has
an internal audit function which evaluates existing controls and recommends
changes and improvements whenever deemed necessary.
The Audit Committee of the Board of Directors, which is composed of four
non-management directors, meets periodically with management, the independent
accountants and the internal auditors. They review significant financial
transactions, the scope and major findings of the independent accountants' and
internal auditors' examinations and the adequacy of the system of internal
controls.
Management believes that Echlin's policies, procedures, internal
control system, and the activities of the internal auditors, the independent
accountants and the Audit Committee, provide you, the shareholder, with
reasonable assurance as to the integrity of the financial statements.
/s/ Fred Mancheski /s/ C. Scott Greer
Chairman of the Board President
and Chief Executive Officer
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP [LOGO]
To the Shareholders and Board of Directors of Echlin Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of changes in shareholders'
equity present fairly, in all material respects, the financial position of
Echlin Inc. and its subsidiaries at August 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended August 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 7 to the financial statements, the company changed
its method of accounting for income taxes in fiscal 1994.
/s/ Price Waterhouse LLP
Stamford, Connecticut
September 23, 1994
33
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended August 31,
(In thousands, except per share data) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,229,474 $1,944,463 $1,783,362
Cost of goods sold 1,571,256 1,377,954 1,287,041
- --------------------------------------------------------------------------------------------------------------
Gross profit on sales 658,218 566,509 496,321
Selling and administrative expenses 468,511 420,460 389,470
- --------------------------------------------------------------------------------------------------------------
Income from operations 189,707 146,049 106,851
- --------------------------------------------------------------------------------------------------------------
Interest expense 23,504 19,403 22,127
Interest income 11,843 10,930 9,768
- --------------------------------------------------------------------------------------------------------------
Interest expense, net 11,661 8,473 12,359
- --------------------------------------------------------------------------------------------------------------
Income before taxes 178,046 137,576 94,492
Provision for taxes 56,975 44,025 30,237
- --------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 121,071 93,551 64,255
Cumulative effect of accounting change 2,583 -- --
- --------------------------------------------------------------------------------------------------------------
Net income $ 123,654 $ 93,551 $ 64,255
==============================================================================================================
Average shares outstanding 58,996 58,560 55,976
==============================================================================================================
Earnings per share:
Income before cumulative effect of accounting change $2.06 $1.60 $1.15
Cumulative effect of accounting change 0.04 -- --
- --------------------------------------------------------------------------------------------------------------
Net income $2.10 $1.60 $1.15
==============================================================================================================
</TABLE>
See notes to consolidated financial statements.
NET SALES
Echlin Compared to Fortune 500
[GRAPH APPEARS HERE]
34
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
August 31,
(In thousands, except share and per share data) 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 53,816 $ 28,572
Accounts receivable, less allowance for doubtful accounts of $5,691 and $4,299 277,682 201,177
Inventories:
Raw materials and component parts 143,766 137,646
Work in process 67,771 47,985
Finished goods 347,031 302,459
- -------------------------------------------------------------------------------------------------------------------
Total inventories 558,568 488,090
Other current assets 22,777 21,006
- -------------------------------------------------------------------------------------------------------------------
Total current assets 912,843 738,845
- -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment:
Land 23,613 19,029
Buildings 160,960 121,593
Machinery and equipment 646,087 531,119
- -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost 830,660 671,741
Accumulated depreciation (386,494) (342,360)
- -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 444,166 329,381
- -------------------------------------------------------------------------------------------------------------------
Marketable securities 115,549 90,002
- -------------------------------------------------------------------------------------------------------------------
Other assets 104,848 105,033
- -------------------------------------------------------------------------------------------------------------------
Total assets $1,577,406 $1,263,261
===================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable to banks $ 8,712 $ 3,034
Current portion of long-term debt 2,285 3,658
Accounts payable, trade 168,175 135,569
Accrued taxes on income 43,439 64,053
Accrued compensation 72,669 51,565
Other accrued liabilities 130,015 98,977
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 425,295 356,856
- -------------------------------------------------------------------------------------------------------------------
Long-term debt 297,307 157,540
- -------------------------------------------------------------------------------------------------------------------
Deferred income taxes 55,833 35,043
- -------------------------------------------------------------------------------------------------------------------
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 59,354,461 and 59,105,321 59,354 59,105
Capital in excess of par value 329,521 325,865
Retained earnings 452,550 371,963
Foreign currency translation adjustments (39,459) (40,116)
Treasury stock, at cost, 270,264 shares (2,995) (2,995)
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 798,971 713,822
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,577,406 $1,263,261
===================================================================================================================
</TABLE>
See notes to consolidated financial statements.
35
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended August 31,
(In thousands) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $123,654 $ 93,551 $ 64,255
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 64,174 59,671 55,896
Cumulative effect of accounting change (2,583) -- --
Changes in assets and liabilities, excluding acquisitions' balance sheets:
Accounts receivable (62,610) (15,056) (16,641)
Inventories (20,305) (15,091) 33,719
Other current assets 2,141 (3,213) 3,694
Accounts payable 24,295 8,251 17,047
Accrued taxes on income (21,108) 16,835 12,679
Deferred income taxes 12,166 1,582 (7,095)
Accrued liabilities 42,759 7,830 20,473
Other (12,702) 10,690 (2,488)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 149,881 165,050 181,539
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term and short-term borrowings 361,129 93,429 142,846
Long-term and short-term repayments (231,127) (150,275) (194,840)
Sales of accounts receivable -- 25,000 --
Proceeds from common stock issuances 3,905 7,840 4,090
Dividends paid (43,067) (40,573) (39,178)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities 90,840 (64,579) (87,082)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (75,645) (47,738) (51,711)
Net book value of property, plant and equipment disposals 1,842 6,210 3,456
Purchases of marketable securities (25,547) (16,898) (23,059)
Purchases of businesses:
Net working capital items (22,103) (7,930) (12,073)
Property, plant and equipment and intangibles (102,256) (34,641) (17,320)
Debt assumed 7,101 5,835 --
- ---------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (216,608) (95,162) (100,707)
- ---------------------------------------------------------------------------------------------------------------------------------
Impact of changes in foreign currency translation on cash 1,131 (6,569) 3,067
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 25,244 (1,260) (3,183)
Cash and cash equivalents at beginning of year 28,572 29,832 33,015
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 53,816 $ 28,572 $ 29,832
=================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
36
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Capital Foreign
in Excess Currency Total
Common of Par Retained Translation Treasury Shareholders'
(In thousands, except per share data) Stock Value Earnings Adjustments Stock Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1991 $56,116 $316,634 $284,372 $ (4,711) $(2,995) $649,416
Net income -- -- 64,255 -- -- 64,255
Cash dividends paid ($0.70 per share) -- -- (39,178) -- -- (39,178)
Shares issued under stock option plans 367 3,723 -- -- -- 4,090
Foreign currency translation adjustment -- -- -- 15,365 -- 15,365
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at August 31, 1992 56,483 320,357 309,449 10,654 (2,995) 693,948
Net income -- -- 93,551 -- -- 93,551
Cash dividends paid ($0.70 per share) -- -- (40,573) -- -- (40,573)
Shares issued under stock option plans 613 7,227 -- -- -- 7,840
Foreign currency translation adjustment -- -- -- (50,770) -- (50,770)
Shares issued for acquisitions 2,009 (1,719) 9,536 -- -- 9,826
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at August 31, 1993 59,105 325,865 371,963 (40,116) (2,995) 713,822
Net income -- -- 123,654 -- -- 123,654
Cash dividends paid ($0.73 per share) -- -- (43,067) -- -- (43,067)
Shares issued under stock option plans 249 3,656 -- -- -- 3,905
Foreign currency translation adjustment -- -- -- 657 -- 657
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at August 31, 1994 $59,354 $329,521 $452,550 $(39,459) $(2,995) $798,971
==================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
PROFIT AFTER TAX
Echlin Compared to Fortune 500
[GRAPH APPEARS HERE]
37
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Echlin and all majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Investments in
less than majority-owned companies are accounted for on the equity method.
TRANSLATION OF FOREIGN CURRENCIES--Balance sheets and monthly income
statements of most foreign subsidiaries have been translated into U.S.
dollars at the current exchange rate with any resulting adjustment being
charged or credited to shareholders' equity. In countries with highly
inflationary economies, balance sheet accounts (principally inventory and fixed
assets) and the related income statement accounts (cost of sales and
depreciation) have been translated at historical exchange rates, and all
translation adjustments have been included in the determination of net
income.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include short-term
interest bearing securities with maturities of three months or less. Cash
equivalents were $21,558,000 and $16,960,000 at August 31, 1994 and 1993,
respectively. These securities are carried at cost which approximates market.
ACCOUNTS RECEIVABLE--Under the terms of an agreement with a financial
institution which expires in April 1995, the company has sold undivided
fractional interests in designated pools of trade receivables. Accounts
receivable at August 31, 1994 and 1993 were net of $125,000,000 representing
receivables sold.
INVENTORIES--Inventories are stated at the lower of cost (first-in,
first-out) or market.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION--Property, plant and equipment
are stated at cost. At the time property, plant and equipment are sold or
otherwise disposed of, the accounts are relieved of the cost of the assets
and the related accumulated depreciation, and any resulting profit or loss is
credited or charged to income. Depreciation is computed principally on the
straight-line method over the estimated useful lives of the assets.
INTANGIBLE ASSETS--The excess of cost over fair value of the net assets of
businesses acquired is amortized on the straight-line method over periods
expected to be benefited (currently up to forty years). Costs of acquired
patents and trademarks are amortized using the straight-line method over the
shorter of their estimated useful lives or thirty years.
MARKETABLE SECURITIES--Marketable securities consist principally of
investments in mortgage-backed securities held by Echlin's subsidiary in
Puerto Rico, which are carried at cost and will be held to maturity. The
aggregate market value of securities held at August 31, 1994 and 1993 were
$120,782,000 and $93,566,000, respectively.
RESEARCH AND DEVELOPMENT COSTS--Research and development costs are charged to
income as incurred and aggregated $22,535,000, $18,442,000 and $15,222,000 in
fiscal years 1994, 1993 and 1992, respectively.
INCOME TAXES--Deferred income taxes have been provided due to temporary
differences in the reporting of certain items for financial accounting and
income tax purposes. As it is the company's intention to reinvest the
undistributed earnings of its foreign subsidiaries, federal income taxes have
not been provided thereon. Any additional federal income taxes payable upon
the remittance of these undistributed earnings would not be material, after
utilization of available foreign tax credits. The impact of adopting
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 109 (FAS 109) during fiscal 1994 is described in Note 7.
EARNINGS PER SHARE--Earnings per share are calculated by dividing net income
by the average number of shares of common stock outstanding. Employee stock
options have been excluded from the calculations as their dilutive effect is
not significant.
38
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
NOTE 2
BUSINESS COMBINATIONS
In June 1994, Echlin purchased Import Parts America (IPA), based in
California, for $27,808,000. IPA is a nationwide distributor of automotive
products used for the repair and maintenance of non-U.S. made vehicles. The
acquisition was accounted for by the purchase method.
In February 1994, the company purchased Neelon Casting Ltd. (Neelon),
located in Canada, for $23,049,000. 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.
In October 1993, the company purchased the Hydraulic Brake and Clutch
Division of FAG Kugelfischer Georg Schafer A.G., located in Germany, for
$67,357,000. In addition, if this acquired business 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 $15,120,000. The
acquisition was accounted for by the purchase method.
In June 1993, the company acquired the outstanding common stock of
Frictiontech Inc., a Canadian manufacturer of integrally molded, non-asbestos
brake pads for the motor vehicle replacement parts market, by issuing 768,138
shares of Echlin Inc. common stock. At the date of the acquisition,
Frictiontech had property, plant and equipment of $3,713,000, net current
liabilities of $1,598,000 and long-term debt of $1,264,000. The transaction
was accounted for as a pooling of interests. Since the acquisition did not
have a material impact on the company, prior years' results were not
restated.
In May 1993, the company purchased certain assets of Mr. Gasket
Company, located in Ohio, for $34,400,000. Mr. Gasket manufactures and
distributes a broad range of products for the high performance car parts
market. The acquisition was accounted for by the purchase method.
In September 1992, the company acquired the outstanding common stock of
Sprague Devices, Inc., an Indiana-based manufacturer of windshield wiper
systems for the heavy duty truck market, by issuing 1,240,794 shares of
Echlin Inc. common stock. At the time of the acquisition, Sprague had net
working capital items of $8,379,000, property, plant and equipment and
intangibles of $6,608,000 and long-term debt of $5,884,000. The transaction
was accounted for as a pooling of interests. Since the acquisition did not
have a material impact on the company, prior years' results were not
restated.
NOTE 3
BORROWING ARRANGEMENTS
Notes payable to banks of $8,712,000 and $3,034,000 at August 31, 1994 and
1993, respectively, were comprised of local borrowings by Echlin's foreign
subsidiaries, due within ninety days. Interest rates were between 4.20% and
15.00% at August 31, 1994, and between 5.89% and 16.00% at August 31, 1993.
Long-term debt was comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
August 31,
(In thousands) 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $105,000 $ 24,000
8.90%-9.22% Senior note 125,000 125,000
5.25% Note 57,330 --
8.45% Senior note -- 3,001
6.20%-10.36% Foreign obligations, repayable in varying installments to 1998 6,248 3,918
3.15% Obligation under terms of a lease agreement with a municipality,
repayable at $740 per year from 1997 to 2001 3,700 3,700
7.50%-17.30% Capitalized lease obligations, net of interest of $337 and $319,
repayable in varying installments to 1998 2,314 1,579
- --------------------------------------------------------------------------------------------------------------
Total 299,592 161,198
Less-current portion 2,285 3,658
- --------------------------------------------------------------------------------------------------------------
Total long-term debt $297,307 $157,540
==============================================================================================================
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
The weighted average interest rates on commercial paper outstanding at
August 31, 1994 and 1993 were 4.68% and 3.26%, respectively. Commercial paper
has been classified as long-term debt because of the company's intent to
refinance this debt on a long-term basis and the availability of such financing
under the terms of a revolving credit agreement (RCA).
The company's $125,000,000 senior note matures as follows: $50,000,000
due March 1, 1995; $45,000,000 due March 1, 1996; and $30,000,000 due March 1,
1998. The portion of this debt due March 1, 1995 has been classified as long-
term debt due to the company's intent to refinance this debt on a long-term
basis and the availability of such financing under the terms of the RCA.
The 5.25% note is with a German bank and has been classified as long term
because of the company's intent to refinance it on a long-term basis and the
availability of such financing under the terms of the RCA.
Minimum annual principal repayments of long-term debt, excluding
commercial paper, the 5.25% note and the senior note, in each of the next
five fiscal years are as follows: 1995 - $2,235,000; 1996 - $3,790,000;
1997 - $2,603,000; 1998 - $1,364,000; and 1999 - $740,000.
For the years ended August 31, 1994, 1993 and 1992, interest paid was
$23,500,000, $19,632,000 and $22,872,000, respectively.
In July 1994, the company renegotiated its RCA which was due to expire on
September 1, 1994. Under the terms of the new agreement with twelve banking
institutions, the company has the availability through September 1, 1999 of
maximum borrowings of $375,000,000. The prior agreement provided for maximum
borrowings of $350,000,000. The company also has a credit agreement with a
United Kingdom bank enabling it to borrow up to $15,000,000 through March 31,
1995. At August 31, 1994 and 1993, there were no borrowings under these
agreements. Both agreements require nominal commitment fees to be paid on the
unused portion of the credit.
Under various credit lines, Echlin could have borrowed at August 31, 1994
and 1993, a maximum of $128,566,000 and $32,610,000, respectively, from
foreign-based banks, mostly at their equivalent of the prime rate.
The company's RCA and senior note agreements contain restrictive
covenants regarding the payment of cash dividends, the maintenance of working
capital and shareholders' equity, and the issuance of new debt. Under the
most restrictive covenant, cash dividends paid since September 1, 1993 shall
not exceed the sum of $60,000,000 plus 60% of cumulative net income, as
defined, plus 50% of the net proceeds from the sale of common stock of the
company since September 1, 1993. The company is in compliance with all
covenants of these agreements.
NOTE 4
SHAREHOLDER RIGHTS PLAN
Under the terms of a Shareholder Rights Plan approved by the Board of
Directors in June 1989, a Preferred Share Right (Right) is attached to and
automatically trades with each outstanding share of Echlin common stock.
The Rights, which are redeemable, will become exercisable only in the
event that any person or group becomes a holder of 20% or more of the company's
common stock, or commences a tender or exchange offer which, if consummated,
would result in that person or group owning at least 20% of the common stock.
Once the Rights become exercisable they entitle all other shareholders to
purchase, by payment of a $65.00 exercise price, Echlin common stock (or, in
certain circumstances, other consideration) with a value of twice the exercise
price. In addition, at any time after a 20% position is acquired, the Board of
Directors may, at its option, require each outstanding Right (other than Rights
held by the acquiring person or group) to be exchanged for one share of common
stock or its equivalent. The Rights will expire on June 30, 1999 unless redeemed
or exchanged earlier.
NOTE 5
STOCK OPTION PLAN
Under the 1992 stock option plan, options may be granted to officers and key
employees in the form of incentive stock options or nonqualified stock
options. Options may be accompanied by stock appreciation rights which
entitle a holder to surrender an unexercised option and to receive in
exchange a payment equal to the difference between the option and the market
price on the surrender date. Options are granted at 100 percent of the fair
market value on the date of grant. They are exercisable one year from the
date of grant and expire ten years after the date of grant, except in the
event of the retirement or death of the employee. Upon the exercise of stock
options, payment may be made using cash, shares of the company's common stock
or any combination thereof.
40
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
Information regarding the plan is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Number of Price per
Shares Share
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at August 31, 1992 2,020,330 $8.13-$19.25
Granted 421,650 $19.75
Exercised (617,475) $8.13-$19.75
Terminated (102,480) $8.13-$19.75
- ------------------------------------------------------------------------------------------
Outstanding at August 31, 1993 1,722,025 $10.25-$19.75
Granted 433,750 $32.25
Exercised (249,540) $10.25-$19.75
Terminated (23,275) $10.25-$32.25
- ------------------------------------------------------------------------------------------
Outstanding at August 31, 1994 1,882,960 $10.25-$32.25
==========================================================================================
</TABLE>
At August 31, 1994 there were 1,458,985 options exercisable. Shares
available for future grants at August 31, 1994 and 1993 were 2,576,025 and
3,000,000, respectively. There were no options outstanding with stock
appreciation rights at August 31, 1994 and 1993.
NOTE 6
RETIREMENT PLANS
Echlin sponsors several noncontributory defined benefit pension plans
covering a majority of its domestic employees. Nonunion employees are covered
primarily by a plan which provides pension benefits based upon years of
service and the employee's compensation during the five highest consecutive
years during the ten-year period prior to retirement. Benefits under the
plans covering other employees are based upon a stated amount for each year
of service. It is the company's normal policy to fund the maximum amount that
can be deducted for federal income tax purposes. The company also contributes
to multi-employer pension plans covering certain domestic union employees and
to pension plans for employees of certain foreign subsidiaries.
A majority of domestic nonunion employees are eligible to make
contributions to the company's 401(k) retirement savings plan. The company
matches a portion of the employee's annual contributions based upon the
company's return on assets. Company contributions were $777,000, $503,000 and
$364,000 for the fiscal years ended August 31, 1994, 1993 and 1992,
respectively.
Net pension cost for all pension plans was $7,396,000, $6,429,000 and
$3,848,000 for the fiscal years ended August 31, 1994, 1993 and 1992,
respectively. Net pension cost included the following components:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Year ended August 31,
1994 1993 1992
-------------------- ------------------- --------------------
(In thousands) Domestic Foreign Domestic Foreign Domestic Foreign
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost--benefits earned during
the period $ 4,926 $ 4,663 $ 4,339 $ 3,575 $ 3,808 $ 3,608
Interest on projected benefit
obligation 6,778 6,053 5,949 5,431 5,250 5,584
Actual return on plan assets (5,624) (6,600) (9,074) (15,826) (7,531) 3,103
Net amortization and deferrals (3,220) 210 1,067 10,734 345 (10,472)
Multi-employer plans 210 -- 234 -- 153 --
- ---------------------------------------------------------------------------------------------------------------------
Net pension cost $ 3,070 $ 4,326 $ 2,515 $ 3,914 $ 2,025 $ 1,823
=====================================================================================================================
</TABLE>
41
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
The following table sets forth the funded status of the various company
pension plans:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
August 31,
1994 1993
----------------------- ------------------------
(In thousands) Domestic Foreign Domestic Foreign
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $75,264 $ 74,666 $67,294 $58,376
Accumulated benefit obligation $77,354 $ 78,718 $69,563 $61,748
===================================================================================================================
Plan assets at fair value $93,485 $ 77,020 $87,930 $67,055
Projected benefit obligation 95,111 94,207 83,278 71,051
- -------------------------------------------------------------------------------------------------------------------
Plan assets (less than) in excess of
projected benefit obligation (1,626) (17,187) 4,652 (3,996)
Unrecognized net loss 20,307 3,235 13,006 4,130
Unrecognized prior service cost 3,794 2,440 4,213 2,440
Unrecognized net assets (3,690) (7,462) (4,596) (7,794)
Adjustment to minimum liability (2) (24) -- (42)
- -------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $18,783 $(18,998) $17,275 $(5,262)
===================================================================================================================
Actuarial assumptions:
Discount rate 8.00% 7.00%-8.50% 8.00% 7.50%-8.50%
Rate of increase in compensation levels 4.63% 3.00%-6.50% 4.63% 4.00%-6.50%
Expected long-term rate of return on
plan assets 10.00% 8.50%-9.50% 10.00% 8.50%-9.50%
===================================================================================================================
</TABLE>
The company also has a Supplemental Executive Retirement Plan which
provides certain key employees with pension benefits they would have received
under the normal company plan had there not been limitations imposed by the
Internal Revenue Code of 1986. An unfunded projected benefit obligation of
$1,882,000 and $1,401,000 at August 31, 1994 and 1993, respectively, is included
under domestic in the table above.
Pension plans in certain foreign countries are not funded. At August
31, 1994 and 1993, the company had recorded an accrued liability for
$18,905,000 and $5,237,000, respectively, relating to such plans which are
included in the table above. The increase in the accrued pension liability
resulted from acquisition liabilities assumed during the current year.
The majority of domestic pension plan assets are invested in short-term
investments and common stock including 50,000 shares of Echlin Inc. common
stock. The balance is primarily invested in corporate bonds, limited
partnership interests, preferred stocks and mutual funds.
During fiscal 1993 the company adopted the Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Post Retirement Benefits Other Than Pensions" and No. 112,
"Employers' Accounting for Post Employment Benefits." The impact on the
results of operations by adopting both statements was immaterial.
NOTE 7
INCOME TAXES
Effective September 1, 1993 the company adopted FAS No. 109, "Accounting for
Income Taxes," which changed the method for determining the recognition of
deferred taxes from the deferred method to the liability method. The
cumulative effect of adopting this accounting change was a $2,583,000
increase in net income. As provided by the new statement, prior years'
financial statements have not been restated.
42
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
The provision for taxes was comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Year ended August 31,
(In thousands) 1994 1993 1992
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $24,678 $18,423 $13,645
State 8,050 6,600 3,900
Foreign 20,390 20,066 18,311
- --------------------------------------------------------------------------------------
Total current provision 53,118 45,089 35,856
- --------------------------------------------------------------------------------------
Deferred:
Federal 324 (724) (5,733)
Foreign 3,533 (340) 114
- --------------------------------------------------------------------------------------
Total deferred provision 3,857 (1,064) (5,619)
- --------------------------------------------------------------------------------------
Total provision $56,975 $44,025 $30,237
======================================================================================
</TABLE>
The tax effect of major temporary differences is summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Year ended August 31,
(In thousands) 1994 1993 1992
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation $1,964 $ 1,083 $ 302
Valuation of inventories (1,971) (2,047) (4,124)
All other, net 3,864 (100) (1,797)
- ---------------------------------------------------------------------------------------
Total deferred provision $3,857 $(1,064) $(5,619)
=======================================================================================
</TABLE>
A reconciliation setting forth the differences between Echlin's
effective tax rate and the U.S. statutory federal tax rate is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year ended August 31,
(In thousands) 1994 1993 1992
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 34.7% 34.0%
Earnings in Puerto Rico not subject to U.S. taxes (5.1) (7.0) (7.6)
Net tax effect relating to foreign operations 2.7 3.8 3.5
State taxes 2.9 3.1 2.7
Other (3.5) (2.6) (0.6)
- -------------------------------------------------------------------------------------
Effective tax rate 32.0% 32.0% 32.0%
=====================================================================================
</TABLE>
The company has a subsidiary operating in Puerto Rico under a tax
exemption grant which expires in 2009.
For the years ended August 31, 1994, 1993 and 1992, taxes paid were
$54,216,000, $27,376,000 and $24,476,000, respectively.
Deferred income taxes reflect the net tax effects of temporary
differences between the amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The
following is a summary of the significant components of the company's
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(In thousands) August 31, 1994
- -------------------------------------------------------------------------------------
<S> <C>
Assets:
Inventories $ 4,220
Accrued expenses 5,361
Other employee benefits 8,942
Other 918
- -------------------------------------------------------------------------------------
Gross deferred assets 19,441
- -------------------------------------------------------------------------------------
Liabilities:
Depreciation 49,583
Pension 9,331
Other 2,352
- -------------------------------------------------------------------------------------
Gross deferred liabilities 61,266
- -------------------------------------------------------------------------------------
Net deferred liabilities $41,825
=====================================================================================
</TABLE>
43
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
NOTE 8
RENTAL COMMITMENTS
Total rental expense for the years ended August 31, 1994, 1993 and 1992 was
$31,179,000, $30,608,000 and $30,968,000, respectively.
Minimum rental commitments under noncapitalized, noncancellable lease
agreements are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Year ending August 31, Real All
(In thousands) Estate Computers Others Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 $14,195 $2,601 $4,621 $21,417
1996 11,772 1,017 3,272 16,061
1997 10,173 160 984 11,317
1998 6,989 16 584 7,589
1999 4,570 15 441 5,026
2000 and thereafter 9,742 -- 12 9,754
- ------------------------------------------------------------------------------------------
Total commitments $57,441 $3,809 $9,914 $71,164
==========================================================================================
</TABLE>
Capitalized leases relating to machinery and equipment, at August 31, 1994
and 1993 were $3,662,000 and $2,849,000, respectively, less accumulated
depreciation of $915,000 and $1,231,000, respectively.
NOTE 9
BUSINESS SEGMENT INFORMATION
Echlin, as a worldwide supplier of parts and supplies for motor vehicles, is
engaged in only one business segment.
An analysis of the company's operations by geographic location is as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year ended August 31, North
(In thousands) America Europe All Other Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales to unaffiliated customers $1,688,347 $429,212 $111,915 -- $2,229,474
Sales between geographic areas 7,566 8,725 759 $(17,050) --
- ----------------------------------------------------------------------------------------------------------------------
Total sales $1,695,913 $437,937 $112,674 $(17,050) $2,229,474
======================================================================================================================
Income before taxes $147,390 $28,634 $2,022 -- $178,046
======================================================================================================================
Identifiable assets $1,011,388 $419,941 $87,126 -- $1,518,455
========================================================================================================
Corporate assets 58,951
------
Total assets $1,577,406
======================================================================================================================
1993
Sales to unaffiliated customers $1,525,203 $304,455 $114,805 -- $1,944,463
Sales between geographic areas 5,839 7,561 839 $(14,239) --
- ----------------------------------------------------------------------------------------------------------------------
Total sales $1,531,042 $312,016 $115,644 $(14,239) $1,944,463
======================================================================================================================
Income before taxes $124,694 $12,516 $366 -- $137,576
======================================================================================================================
Identifiable assets $909,605 $222,948 $77,985 -- $1,210,538
========================================================================================================
Corporate assets 52,723
------
Total assets $1,263,261
======================================================================================================================
1992
Sales to unaffiliated customers $1,328,520 $340,463 $114,379 -- $1,783,362
Sales between geographic areas 7,181 6,331 584 $(14,096) --
- ----------------------------------------------------------------------------------------------------------------------
Total sales $1,335,701 $346,794 $114,963 $(14,096) $1,783,362
======================================================================================================================
Income before taxes $64,894 $25,918 $3,680 -- $94,492
======================================================================================================================
Identifiable assets $828,687 $267,793 $83,918 -- $1,180,398
========================================================================================================
Corporate assets 60,795
------
Total assets $1,241,193
======================================================================================================================
</TABLE>
44
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
Sales between geographic areas are made at prices based upon standard cost
plus an appropriate markup. Income before taxes included realized and unrealized
foreign currency transaction (losses) gains for the years ended August 31, 1994,
1993 and 1992 of $(416,000), $1,844,000 and $(317,000), respectively, and
translation losses of $1,427,000, $6,176,000 and $4,677,000, respectively.
Members of the National Automotive Parts Association (NAPA) represent
the company's largest group of customers and accounted for 10.3% of
consolidated net sales for the year ended August 31, 1994 (11.2% in 1993 and
1992). Included in this number are sales to Genuine Parts Company and its
affiliates, the largest member of NAPA, which accounted for 10.2% of sales in
1994 (10.8% in 1993 and 10.7% in 1992).
NOTE 10
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Year ended August 31, Net Gross Net Earnings
(In thousands, except per share data) Sales Profit Income Per Share
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
First quarter $ 499,264 $145,100 $ 26,668 $0.45
Second quarter 497,153 142,642 21,756 0.37
Third quarter 610,034 183,760 39,008 0.66
Fourth quarter 623,023 186,716 36,222 0.62
- -------------------------------------------------------------------------------------------------------------------
Total fiscal year $2,229,474 $658,218 $123,654 $2.10
===================================================================================================================
1993
First quarter $ 462,328 $133,467 $ 19,107 $0.33
Second quarter 441,546 125,033 16,320 0.28
Third quarter 519,726 154,234 29,892 0.51
Fourth quarter 520,863 153,775 28,232 0.48
- -------------------------------------------------------------------------------------------------------------------
Total fiscal year $1,944,463 $566,509 $ 93,551 $1.60
===================================================================================================================
1992
First quarter $ 416,695 $114,899 $ 13,076 $0.23
Second quarter 413,350 113,179 11,209 0.20
Third quarter 474,966 131,880 20,049 0.36
Fourth quarter 478,351 136,363 19,921 0.36
- -------------------------------------------------------------------------------------------------------------------
Total fiscal year $1,783,362 $496,321 $ 64,255 $1.15
===================================================================================================================
</TABLE>
As a result of adopting FAS 109 in the first quarter of fiscal 1994, net
income and earnings per share were increased by $2,583,000 and $0.04,
respectively.
45
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
HISTORICAL DATA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
10-year Change
Compound 1994 vs.
(In thousands, except per share data) Growth 1993 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Net sales 12.5% 14.7% $2,229,474 $1,944,463 $1,783,362
Cost of goods sold 12.7 14.0 1,571,256 1,377,954 1,287,041
-----------------------------------------
Gross profit on sales 11.9 16.2 658,218 566,509 496,321
Selling and administrative expenses 13.1 11.4 468,511 420,460 389,470
-----------------------------------------
Income from operations 9.5 29.9 189,707 146,049 106,851
-----------------------------------------
Interest expense 12.1 21.1 23,504 19,403 22,127
Interest income 5.4 8.4 11,843 10,930 9,768
-----------------------------------------
Interest expense, net 37.2 37.6 11,661 8,473 12,359
-----------------------------------------
Income before taxes 8.9 29.4 178,046 137,576 94,492
Provision for taxes 5.9 29.4 56,975 44,025 30,237
-----------------------------------------
Income before cumulative effect of accounting change 10.7 29.4 121,071 93,551 64,255
Cumulative effect of accounting change -- -- 2,583 -- --
-----------------------------------------
Net income 10.9 32.2 $ 123,654 $ 93,551 $ 64,255
=========================================
Average shares outstanding 3.6 0.7 58,996 58,560 55,976
Earnings per share:
Income before cumulative effect of accounting change 6.9 28.8 $2.06 $1.60 $1.15
Net income 7.1 31.3 $2.10 $1.60 $1.15
Dividends per share 7.6 4.3 $0.73 $0.70 $0.70
Financial Position at Year-end:
Working capital 10.7 27.6 $487,548 $381,989 $417,407
Current ratio -- -- 2.1/1 2.1/1 2.3/1
Property, plant and equipment, net 15.4 34.8 $444,166 $329,381 $325,312
Total assets 12.8 24.9 $1,577,406 $1,263,261 $1,241,193
Total debt 14.6 87.7 $308,304 $164,232 $210,948
Shareholders' equity 11.8 11.9 $798,971 $713,822 $693,948
--per share 8.0 11.5 $13.52 $12.13 $12.34
Total debt to capitalization -- -- 27.8% 18.7% 23.3%
Other Data:
Capital expenditures, net of disposals 15.7 77.7 $73,803 $41,528 $48,255
Depreciation and amortization 16.4 7.5 $64,174 $59,671 $55,896
Cash flow from operations 11.8 (9.2) $149,881 $165,050 $181,539
Effective tax rate -- -- 32.0% 32.0% 32.0%
Net income as a percent of:
Net sales -- -- 5.5% 4.8% 3.6%
Beginning shareholders' equity -- -- 17.3% 13.5% 9.9%
Average number of employees 9.5 10.8 20.6 18.6 17.9
================================================================================================================================
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Year ended August 31,
1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net sales $1,685,876 $1,601,254 $1,454,492 $1,294,297
Cost of goods sold 1,232,726 1,147,940 1,054,650 935,531
-----------------------------------------------------------
Gross profit on sales 453,150 453,314 399,842 358,766
Selling and administrative expenses 371,980 368,380 326,221 263,605
-----------------------------------------------------------
Income from operations 81,170 84,934 73,621 95,161
-----------------------------------------------------------
Interest expense 29,009 21,886 24,594 13,229
Interest income 9,049 5,903 13,677 11,368
-----------------------------------------------------------
Interest expense, net 19,960 15,983 10,917 1,861
-----------------------------------------------------------
Income before taxes 61,210 68,951 62,704 93,300
Provision for taxes 19,557 21,746 18,285 31,228
-----------------------------------------------------------
Income before cumulative effect of accounting change 41,653 47,205 44,419 62,072
Cumulative effect of accounting change -- -- -- --
-----------------------------------------------------------
Net income $ 41,653 $ 47,205 $ 44,419 $ 62,072
===========================================================
Average shares outstanding 55,835 55,797 55,733 55,613
Earnings per share:
Income before cumulative effect of accounting change $0.75 $0.85 $0.80 $1.12
Net income $0.75 $0.85 $0.80 $1.12
Dividends per share $0.70 $0.70 $0.66 $0.59
Financial Position at Year-end:
Working capital $479,174 $509,260 $436,972 $347,500
Current ratio 2.9/1 3.0/1 2.8/1 2.2/1
Property, plant and equipment, net $311,047 $310,381 $264,734 $242,169
Total assets $1,191,793 $1,192,496 $1,034,254 $1,086,568
Total debt $261,822 $262,069 $128,938 $130,651
Shareholders' equity $649,416 $662,430 $640,623 $634,267
--per share $11.63 $11.87 $11.48 $11.39
Total debt to capitalization 28.7% 28.3% 16.8% 17.1%
Other Data:
Capital expenditures, net of disposals $56,166 $63,170 $56,780 $55,871
Depreciation and amortization $56,489 $47,282 $40,639 $35,230
Cash flow from operations $146,519 $37,228 $29,932 $94,628
Effective tax rate 32.0% 31.5% 29.2% 33.5%
Net income as a percent of:
Net sales 2.5% 2.9% 3.1% 4.8%
Beginning shareholders' equity 6.3% 7.4% 7.0% 10.3%
Average number of employees 17.8 17.3 16.2 14.7
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended August 31,
1987 1986 1985 1984
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net sales $1,099,703 $901,890 $771,390 $688,971
Cost of goods sold 790,152 613,606 533,195 476,033
------------------------------------------------------
Gross profit on sales 309,551 288,284 238,195 212,938
Selling and administrative expenses 234,255 199,545 158,164 136,428
------------------------------------------------------
Income from operations 75,296 88,739 80,031 76,510
------------------------------------------------------
Interest expense 11,676 12,335 11,155 7,490
Interest income 9,395 7,565 7,770 6,997
------------------------------------------------------
Interest expense, net 2,281 4,770 3,385 493
------------------------------------------------------
Income before taxes 73,015 83,969 76,646 76,017
Provision for taxes 27,381 35,125 31,043 32,197
------------------------------------------------------
Income before cumulative effect of accounting change 45,634 48,844 45,603 43,820
Cumulative effect of accounting change -- -- -- --
------------------------------------------------------
Net income $ 45,634 $ 48,844 $ 45,603 $ 43,820
======================================================
Average shares outstanding 52,098 44,123 41,609 41,393
Earnings per share:
Income before cumulative effect of accounting change $0.88 $1.11 $1.10 $1.06
Net income $0.88 $1.11 $1.10 $1.06
Dividends per share $0.53 $0.47 $0.41 $0.35
Financial Position at Year-end:
Working capital $359,320 $268,654 $195,225 $176,684
Current ratio 3.1/1 2.9/1 2.3/1 2.4/1
Property, plant and equipment, net $207,030 $168,355 $137,869 $106,191
Total assets $869,065 $685,750 $574,046 $472,400
Total debt $91,825 $101,549 $128,851 $78,684
Shareholders' equity $603,469 $423,043 $289,721 $260,855
--per share $10.88 $8.79 $6.95 $6.24
Total debt to capitalization 13.2% 19.4% 30.8% 23.2%
Other Data:
Capital expenditures, net of disposals $37,890 $33,420 $27,442 $17,205
Depreciation and amortization $29,176 $20,836 $16,612 $14,088
Cash flow from operations $25,172 $30,116 $64,723 $49,318
Effective tax rate 37.5% 41.8% 40.5% 42.4%
Net income as a percent of:
Net sales 4.1% 5.4% 5.9% 6.4%
Beginning shareholders' equity 10.8% 16.9% 17.5% 18.9%
Average number of employees 13.5 10.9 9.5 8.3
=============================================================================================================================
</TABLE>
47
<PAGE>
- --------------------------------------------------------------------------------
Echlin Inc. 1994 Annual Report
- --------------------------------------------------------------------------------
QUARTERLY DATA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Dividends Market Price Per Share Price to
Year ended August 31, Per Share High Low Close Earnings Ratio/1/
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
First quarter $0.175 $13 1/2 $ 9 7/8 $10 1/8 13.0
Second quarter 0.175 16 3/8 10 16 1/8 19.0
Third quarter 0.175 19 1/2 16 18 1/4 18.1
Fourth quarter 0.175 20 3/4 17 1/4 18 1/4 15.9
______
Total fiscal year $0.70 $20 3/4 $ 9 7/8 $18 1/4 15.9
1993
First quarter $0.175 $20 7/8 $18 $20 3/4 16.6
Second quarter 0.175 27 3/8 20 5/8 24 1/8 18.1
Third quarter 0.175 27 1/4 22 1/2 26 1/4 17.7
Fourth quarter 0.175 31 1/8 26 28 17.5
______
Total fiscal year $0.70 $31 1/8 $18 $28 17.5
1994
First quarter $0.175 $33 7/8 $27 3/4 $33 1/8 19.3
Second quarter 0.175 35 1/4 29 3/8 29 7/8 16.5
Third quarter 0.19 32 1/8 24 1/2 27 1/8 13.8
Fourth quarter 0.19 33 5/8 27 30 7/8 14.7
______
Total fiscal year $0.73 $35 1/4 $24 1/2 $30 7/8 14.7
============================================================================================================
</TABLE>
/1/ Computed using closing price and most recent 4 quarters' earnings per share.
EARNINGS PER SHARE
[GRAPH APPEARS HERE]
48
<PAGE>
Echlin Inc. 1994 Annual Report
Graphics Appendix List
Annual Report Page Where
Graphic Appears Description of Graphic or Cross-Reference
------------------------ -----------------------------------------
Page 34 Comparison of Echlin Inc.'s compound sales
growth as compared to the Fortune 500 for
the years 1959 through 1994.
Page 37 Comparison of Echlin Inc.'s compound profit
after tax growth as compared to the Fortune
500 for the years 1959 to 1994.
Page 48 Echlin Inc.'s quarterly earnings per share
for fiscal years 1991 - 1994.
<PAGE>
Exhibit 22. Subsidiaries of Echlin Inc. (indirect subsidiaries are indented)
<TABLE>
<CAPTION>
State or Jurisdiction Percentage of
Name Where Organized Securities Owned
- ------ --------------------- ----------------
<S> <C> <C>
Ace Electric Company, Inc. Missouri 100
Automotive Brake Company Inc. Delaware 100
Brake Parts Inc. Delaware 100
Friction Inc. Delaware 100
Hydraulics Inc. Delaware 100
Automotive Controls Corp. Connecticut 100
Beck/Arnley Worldparts Corp. Delaware 100
Blackstone Manufacturing Co., Inc. Illinois 100
BWD Automotive Corporation Delaware 100
BWD Automotive of Puerto Rico, Inc. Puerto Rico 70
Corporation Lusac and Comfhia, S.A. de C.V. Mexico 100
Frenos Lusac, S.A. de C.V. Mexico 100
Echlin Argentina S.A. Argentina 100
Echlin Asset Funding Corp. Connecticut 100
Echlin Australia (Pty.) Ltd. Australia 100
Echlin (Bermuda) Ltd. Bermuda 99
Echlin Canada Inc. Canada 100
Brake Parts Canada Inc. Ontario 100
Distex Ind. Inc. Ontario 100
Neelon Casting Ltd. Ontario 100
Echlin Charger Mfg. Co. (Pty.) Ltd. South Africa 92
Echlin China Limited Hong Kong 100
Echlin Comercial, S.A. de C.V. Mexico 100
Echlin Dominicana, S.A. Dominican Republic 100
Echlin de Saltillo, S.A. de C.V. Mexico 100
Echlin Europe Limited England 100
Grau Limited England 100
Hobourn Automotive Limited England 100
Lipe Limited England 100
Quinton Hazell plc England 100
Motaproducts Automotive Limited England 100
Quinton Hazell Holdings Espana, S.A. England 100
La Industrial Plastica Y
Metalurgica, S.A. Spain 100
Echlin Holding Deutschland GmbH Germany 100
Echlin Grundstucksverwaltung
(Deutschland) GmbH Germany 100
Fahrzeugtechnik Ebern GmbH Germany 100
Move Brems - und Kupplungsschlauch GmbH Germany 100
Echlin International, V.I., Inc. Virgin Islands 100
Echlin-Ponce, Inc. Delaware 100
The Echlin Sales Company Connecticut 100
Echlin Taiwan Ltd. Taiwan 100
Emboabas Industria e Comercio Limitada Brazil 100
Echlin do Brasil S.A. Brazil 100
Grau GmbH Germany 100
Grupo Echlin Automotriz, S.A. de C.V. Mexico 100
Inversiones Echlin, S.A. de C.V. Mexico 100
Echlin Mexicana, S.A. de C.V. Mexico 100
Itapsa, S.A. de C.V. Mexico 100
Servicios Administrativos Itapsa,
S.A. de C.V Mexico 100
Inversora Sabana, S.A. Venezuela 100
Echlin de Venezuela, C.A. Venezuela 100
Echlin de Colombia, Ltda. Colombia 100
Midland Brake, Inc. Delaware 100
Mr. Gasket, Inc. Delaware 100
Pacer Industries, Inc. Missouri 100
PAH Mexico Inc. Delaware 100
Balatas American Brakebloks, S.A. de C.V. Mexico 100
Prattville Mfg., Inc. Delaware 100
Ristance Corporation Indiana 100
Sierra International Inc. Illinois 100
</TABLE>
<PAGE>
Exhibit 22. Subsidiaries of Echlin Inc. (continued)
<TABLE>
<CAPTION>
State or Jurisdiction Percentage of
Name Where Organized Securities Owned
- ---- --------------------- ----------------
<S> <C> <C>
Sprague Devices, Inc. Indiana 100
Tekonsha Engineering Company Michigan 100
Theodore Bargman Co. Michigan 100
United Brake Systems Inc. Delaware 100
WAWD-EAP Automotive Products, Inc. Delaware 100
W.M. Holding Co., Inc. Delaware 100
Producciones Automotrices, S.A. de C.V. Mexico 100
Windsor Products Company, Inc. New Jersey 100
479152 British Columbia Ltd. British Columbia 100
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the company's annual report on Form 10-K for the year ended August 31, 1994
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-END> AUG-31-1994
<CASH> 53,816
<SECURITIES> 0
<RECEIVABLES> 283,373
<ALLOWANCES> 5,691
<INVENTORY> 558,568
<CURRENT-ASSETS> 912,843
<PP&E> 830,660
<DEPRECIATION> 386,494
<TOTAL-ASSETS> 1,577,406
<CURRENT-LIABILITIES> 425,295
<BONDS> 0
<COMMON> 59,354
0
0
<OTHER-SE> 739,617
<TOTAL-LIABILITY-AND-EQUITY> 1,577,406
<SALES> 2,229,474
<TOTAL-REVENUES> 2,229,474
<CGS> 1,571,256
<TOTAL-COSTS> 468,511
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,661
<INCOME-PRETAX> 178,046
<INCOME-TAX> 56,975
<INCOME-CONTINUING> 121,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 2,583
<NET-INCOME> 123,654
<EPS-PRIMARY> 2.10
<EPS-DILUTED> 2.10
</TABLE>
