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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1993
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file no. 1-4651
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ECHLIN INC.
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(Exact name of registrant as specified in its charter)
Connecticut 06-0330448
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(State of incorporation) (I.R.S. employer
identification no.)
100 Double Beach Road
Branford, Connecticut 06405
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(Address of principal executive offices) (Zip code)
(203) 481-5751
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
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(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Title of class Outstanding at December 31, 1993
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Common stock, $1 par value 59,254,626
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ECHLIN INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
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<S> <C>
Item 1. Financial Statements
Consolidated balance sheets--November 30, 1993
and August 31, 1993. 3
Consolidated statements of income--Three months ended
November 30, 1993 and 1992. 4
Consolidated statements of cash flows--Three months
ended November 30, 1993 and 1992. 5
Notes to consolidated financial statements--
November 30, 1993. 6
Item 2. Management's Financial Analysis 7
PART II. OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
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</TABLE>
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PART I: FINANCIAL INFORMATION
ECHLIN INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
November 30, August 31,
1993 1993
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(unaudited) (A)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 43,869 $ 28,572
Accounts receivable, less-allowance for
doubtful accounts of $4,049 and $4,299 203,688 201,177
Inventories, at lower of cost (first-in,
first-out) or market:
Raw materials and component parts 146,922 137,646
Work in process 69,065 47,985
Finished goods 325,189 302,459
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Total inventories 541,176 488,090
Other current assets 24,472 21,006
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Total current assets 813,205 738,845
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Property, plant and equipment, at cost 749,608 671,741
Accumulated depreciation (356,516) (342,360)
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Property, plant and equipment, net 393,092 329,381
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Marketable securities 91,704 90,002
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Other assets 86,331 105,033
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Total assets $1,384,332 $1,263,261
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</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 8,172 $ 3,034
Current portion of long-term debt 2,417 3,658
Accounts payable, trade 131,259 135,569
Accrued taxes on income 53,639 64,053
Accrued liabilities 180,504 150,542
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Total current liabilities 375,991 356,856
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Long-term debt 240,999 157,540
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Deferred income taxes 35,253 35,043
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Shareholders' equity:
Preferred stock, without par value:
Authorized 1,000,000 shares, issued none - -
Common stock, $1 par value:
Authorized 150,000,000 shares,
issued 59,223,886 and 59,105,321 59,224 59,105
Capital in excess of par value 327,527 325,865
Retained earnings 388,331 371,963
Foreign currency translation adjustment (39,998) (40,116)
Treasury stock, at cost, 270,264 shares (2,995) (2,995)
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Total shareholders' equity 732,089 713,822
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Total liabilities and shareholders' equity $1,384,332 $1,263,261
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</TABLE>
See notes to consolidated financial statements.
(A) The balance sheet at August 31, 1993 has been derived from the audited
financial statements at that date.
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ECHLIN INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
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1993 1992
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<S> <C> <C>
Net sales $499,264 $462,328
Cost of goods sold 354,164 328,861
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Gross profit on sales 145,100 133,467
Selling and administrative expenses 108,066 102,818
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Income from operations 37,034 30,649
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Interest expense (4,535) (4,971)
Interest income 2,920 2,926
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Interest expense, net (1,615) (2,045)
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Income before taxes 35,419 28,604
Provision for taxes 11,334 9,497
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Income before cumulative effect
of accounting change 24,085 19,107
Cumulative effect of accounting change 2,583 -
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Net income $ 26,668 $ 19,107
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Average shares outstanding 58,881 58,287
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Per share data:
Income before accounting change $0.41 $0.33
Cumulative effect of accounting change 0.04 -
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Net income $0.45 $0.33
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Cash dividends per share $0.175 $0.175
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</TABLE>
See notes to consolidated financial statements.
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ECHLIN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
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1993 1992
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<S> <C> <C>
Cash flows from operating activities:
Net income $26,668 $19,107
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,180 14,828
Cumulative effect of change in accounting (2,583) -
Changes in assets and liabilities, excluding
acquisitions' balance sheets:
Accounts receivable (2,659) 7,303
Inventories (24,595) (19,073)
Other current assets (3,064) (4,540)
Accounts payable (4,172) (5,344)
Taxes on income (7,387) 4,998
Accrued liabilities 8,698 1,888
Other 5,910 3,556
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Cash provided by operating activities 12,996 22,723
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Cash flows from financing activities:
Long-term and short-term borrowings 125,654 77,590
Long-term and short-term repayments (43,597) (58,328)
Proceeds from common stock issuances 1,781 1,613
Dividends paid (10,300) (10,064)
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Cash provided by financing activities 73,538 10,811
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Cash flows from investing activities:
Capital expenditures, net (14,365) (8,738)
Purchases of marketable securities (1,702) (7,328)
Net assets of businesses acquired (54,847) (1,482)
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Cash used for investing activities (70,914) (17,548)
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Impact of changes in foreign currency
translation on cash (323) (5,343)
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Increase in cash and cash equivalents 15,297 10,643
Cash and cash equivalents at beginning of period 28,572 29,832
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Cash and cash equivalents at end of period $43,869 $40,475
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</TABLE>
See notes to consolidated financial statements.
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ECHLIN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1.
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The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair statement have been included. Operating
results for the three month period ended November 30, 1993 are not
necessarily indicative of the results that may be expected for the year
ending August 31, 1994. For further information, refer to the consolidated
financial statements and footnotes thereto included in the company's Annual
Report on Form 10-K for the year ended August 31, 1993.
NOTE 2.
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Fiscal 1993 results have been restated for the Frictiontech Inc. pooling of
interests transaction which occurred in June 1993.
NOTE 3.
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Effective October 1, 1993, the company purchased the Hydraulic Brake and
Clutch Division of FAG Kugelfischer, located in Germany, for approximately
$75,000,000. In addition, if this division exceeds certain net income
thresholds during the first five years subsequent to the acquisition date,
the purchase price will be increased by not more than $14,000,000. The
acquisition was accounted for by the purchase method.
NOTE 4.
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During the first quarter of fiscal 1994, the company adopted the provisions
of Statement of Financial Accounting Standards No. 109 (FAS 109),
"Accounting for Income Taxes." FAS 109 changes the accounting for income
taxes from the deferred to an asset and liability method. The cumulative
effect of adopting this accounting change, which is included in the
preceding results of operations, was a $2,583,000 increase in net income.
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ECHLIN INC.
MANAGEMENT'S FINANCIAL ANALYSIS
Net sales for the first three months of fiscal 1994 increased
$36,936,000 or eight percent. Recent acquisitions provided nearly
half of this growth while comparable operations provided the
remainder. Domestic comparable operations net sales increased eight
percent primarily due to unit volume increases and price changes.
Our automotive brake and heavy duty businesses provided the
strongest improvement. Foreign comparable operations declined eight
percent due largely to the negative translation impact upon sales as
the U.S. dollar strengthened in relation to the British pound,
Canadian dollar and German mark. Although overall foreign unit
volume was down slightly, only our German, Brazilian and Mexican
operations reported declines.
The percentage of gross profit to sales for the first three months
of fiscal 1994 increased to 29.1 percent from 28.9 percent a year
ago due to higher domestic production levels.
Although selling and administrative expenses increased $5,248,000
over the prior year, as a percentage of sales they declined to 21.6
percent as compared to 22.2 percent last year. The dollar increase
was primarily a result of acquisitions.
Interest expense declined $436,000 from the previous year due to
lower average interest rates and debt levels.
Net income for the quarter ended November 30, 1993 included income
of $2,583,000, which represented the cumulative effect of adopting
the provisions of FAS 109, "Accounting for Income Taxes."
During the first three months of fiscal 1994, operations provided
$12,996,000 of cash flow vs. $22,723,000 a year ago. The increase
in net income was offset by larger cash outflows reflecting changes
in working capital items. Accounts receivable were higher due to
increased sales levels while inventories were up in anticipation of
sales forecasts for the remainder of the fiscal year. Outflows for
the payment of taxes were higher due to the company's increased
income levels.
Debt levels at November 30, 1993 increased $87,356,000 from year end
primarily due to borrowings for acquisitions. Total debt as a
percentage of total capital was 26 percent, the same level as a year
ago, but higher than the 19 percent reported at August 31, 1993.
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ECHLIN INC.
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
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The Annual Meeting of Shareholders was held on December 15, 1993,
for the purpose of electing twelve Directors of the company and
approving the designation of Price Waterhouse as independent
accountants for fiscal 1994. All of the company's nominees for
directors as listed in the proxy statement were elected. The vote
for each nominee was as follows:
<TABLE>
<CAPTION>
Affirmative Negative Abstentions
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<S> <C> <C> <C>
D. Allan Bromley 52,223,049 32,832 152,909
John F. Creamer, Jr. 52,254,095 1,786 152,909
Milton P. DeVane 52,242,858 13,023 152,909
John E. Echlin, Jr. 52,255,393 488 152,909
C. Scott Greer 52,255,881 - 152,909
John F. Gustafson 52,244,837 11,044 152,909
Donald C. Jensen 52,248,836 7,045 152,909
Trevor O. Jones 52,252,206 3,675 152,909
Frederick J. Mancheski 52,247,199 8,682 152,909
Phillip S. Myers 52,233,463 22,418 152,909
Frank R. O'Keefe 52,244,133 11,748 152,909
Jerome G. Rivard 52,250,651 5,230 152,909
</TABLE>
The proposal for the approval of Price Waterhouse was adopted. The
proposal received 52,038,114 affirmative votes, 41,046 negative
votes and 329,631 abstentions.
Item 6. Exhibits and Reports on Form 8-K.
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During the quarter ended November 30, 1993 the company did not file
any reports on Form 8-K.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Echlin Inc.
Date: January 10, 1994 /s/ Richard A. Wisot
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Richard A. Wisot
Vice President and
Controller
Date: January 10, 1994 /s/ Jon P. Leckerling
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Jon P. Leckerling
Vice President, General Counsel
and Corporate Secretary
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