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, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file no. 1-4651
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ECHLIN INC.
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(Exact name of registrant as specified in its charter)
Connecticut 06-0330448
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(State of incorporation) (I.R.S. employer
identification no.)
100 Double Beach Road
Branford, Connecticut 06405
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(Address of principal executive offices) (Zip code)
(203) 481-5751
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
---- ----
(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, 1994
- -------------------------- --------------------------------
Common stock, $1 par value 59,458,615
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<TABLE>
ECHLIN INC.
INDEX
<CAPTION>
PART I. FINANCIAL INFORMATION Page
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<S> <C>
Item 1. Financial Statements
Consolidated balance sheets--November 30, 1994
and August 31, 1994. 3
Consolidated statements of income--Three months ended
November 30, 1994 and 1993. 4
Consolidated statements of cash flows--Three months
ended November 30, 1994 and 1993. 5
Notes to consolidated financial statements--
November 30, 1994. 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>
2
<PAGE>
PART I: FINANCIAL INFORMATION
<TABLE>
ECHLIN INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
November 30, August 31,
1994 1994
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(unaudited) (A)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 54,509 $ 53,816
Accounts receivable, less-allowance for
doubtful accounts of $6,439 and $5,691 295,412 277,682
Inventories, at lower of cost (first-in,
first-out) or market:
Raw materials and component parts 153,023 143,766
Work in process 75,048 67,771
Finished goods 379,617 347,031
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Total inventories 607,688 558,568
Other current assets 29,377 22,777
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Total current assets 986,986 912,843
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Property, plant and equipment, at cost 858,388 830,660
Accumulated depreciation (407,321) (386,494)
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Property, plant and equipment, net 451,067 444,166
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Marketable securities 112,606 115,549
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Other assets 102,109 104,848
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Total assets $1,652,768 $1,577,406
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 4,611 $ 8,712
Current portion of long-term debt 2,108 2,285
Accounts payable, trade 164,223 168,175
Accrued taxes on income 48,754 43,439
Accrued liabilities 199,729 202,684
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Total current liabilities 419,425 425,295
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Long-term debt 342,317 297,307
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Deferred income taxes 56,211 55,833
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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 59,621,449 and 59,354,461 59,621 59,354
Capital in excess of par value 329,899 329,521
Retained earnings 476,119 452,550
Foreign currency translation adjustment (27,829) (39,459)
Treasury stock, at cost, 270,264 shares (2,995) (2,995)
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Total shareholders' equity 834,815 798,971
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Total liabilities and shareholders' equity $1,652,768 $1,577,406
========== ==========
</TABLE>
See notes to consolidated financial statements.
(A) The balance sheet at August 31, 1994 has been derived from the audited
financial statements at that date.
3
<PAGE>
<TABLE>
ECHLIN INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<CAPTION>
Three Months Ended
November 30,
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1994 1993
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<S> <C> <C>
Net sales $600,615 $499,264
Cost of goods sold 424,556 354,164
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Gross profit on sales 176,059 145,100
Selling and administrative expenses 126,298 108,066
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Income from operations 49,761 37,034
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Interest expense (6,545) (4,535)
Interest income 3,543 2,920
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Interest expense, net (3,002) (1,615)
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Income before taxes 46,759 35,419
Provision for taxes 14,963 11,334
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Income before cumulative effect
of accounting change 31,796 24,085
Cumulative effect of accounting change - 2,583
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Net income $31,796 $ 26,668
========= =========
Average shares outstanding
59,321 58,881
========= =========
Per share data:
Income before accounting change $0.54 $0.41
Cumulative effect of accounting change - 0.04
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Net income $0.54 $0.45
========= =========
Cash dividends per share $0.19 $0.175
========= =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
ECHLIN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<CAPTION>
Three Months Ended
November 30,
---------------------
1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $31,796 $26,668
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 18,732 16,180
Cumulative effect of change in accounting - (2,583)
Changes in assets and liabilities, excluding
acquisitions' balance sheets:
Accounts receivable (11,803) (2,659)
Inventories (40,780) (24,595)
Other current assets (5,499) (3,064)
Accounts payable (7,353) (4,172)
Taxes on income 6,737 (7,387)
Accrued liabilities (7,317) 8,698
Other 338 5,910
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Cash (used for) provided by operating (15,149) 12,996
activities -------- --------
Cash flows from financing activities:
Long-term and short-term borrowings 80,949 125,654
Long-term and short-term repayments (41,698) (43,597)
Proceeds from common stock issuances 635 1,781
Dividends paid (11,266) (10,300)
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Cash provided by financing activities 28,620 73,538
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Cash flows from investing activities:
Capital expenditures, net (17,892) (14,365)
Purchases of marketable securities 2,943 (1,702)
Net assets of businesses acquired (393) (54,847)
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Cash used for investing activities (15,342) (70,914)
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Impact of changes in foreign currency
translation on cash 2,564 (323)
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Increase in cash and cash equivalents 693 15,297
Cash and cash equivalents at beginning of period 53,816 28,572
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Cash and cash equivalents at end of period $54,509 $43,869
======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
ECHLIN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. General:
- ----------------
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, 1994 are not
necessarily indicative of the results that may be expected for the year
ending August 31, 1995. 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, 1994.
NOTE 2. Business Combinations:
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During October, 1994 the company acquired the outstanding common stock of
the Theodore Bargman Company, an Indiana based manufacturer of lighting
products, electrical connectors and hardware for recreational vehicles and
mobile homes, by issuing 217,428 shares of Echlin Inc. common stock. The
transaction has been accounted for as a pooling of interests and as a
result the financial statements for the three months ended November 30,
1994 include Bargman's results of operations. Since the acquisition did
not have a material impact on the company, prior years' results have not
been restated.
NOTE 3. Subsequent Event:
- -------------------------
During December, 1994 the company purchased the common stock of Preferred
Technical Group International, Inc. (PTG), based in Rochester Hills,
Michigan, for approximately $190 million. PTG manufactures coupled hose
assemblies for motor vehicle brake, power steering, air conditioning and
heating systems, and extruded plastic for automobile, truck and industrial
applications. The acquisition was accounted for by the purchase method.
6
<PAGE>
ECHLIN INC.
MANAGEMENT'S FINANCIAL ANALYSIS
Results of Operations:
Net sales for the first three months of fiscal 1995 increased
$101,351,000 or 20.3 percent as compared to the same period a year
ago. This growth is largely attributable to higher unit volume and
the impact of recent acquisitions. Domestic comparable operations
net sales increased 7.5 percent while foreign comparable operations
increased 20.1 percent. These favorable results primarily relate to
unit volume growth as the demand for replacement parts continues to
be strong in most markets. Our automotive brake and international
businesses provided the strongest improvements this quarter. The
results were also positively impacted by the weakening of the U.S.
dollar in relation to the British pound and German mark.
The percentage of gross profit to sales for the quarter increased to
29.3 percent from 29.1 percent due primarily to higher domestic
production levels.
Selling and administrative expenses increased $18,232,000 or 16.9
percent over the prior year. Expenses as a percentage of sales
declined favorably to 21.0 percent from 21.6 percent a year ago.
The dollar increase is attributable to the higher sales volume and
expense levels generated by acquisitions.
Net interest expense increased $1,387,000 over the previous year
primarily due to higher 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."
Liquidity and Sources of Capital:
During the first three months of fiscal 1995, operations used
$15,149,000 of cash vs. the prior year when operations provided
$12,996,000 of cash. This year, the increase in net income was
offset by larger cash outflows reflecting changes in working capital
items, primarily accounts receivable and inventory. Accounts
receivable were higher due to the growth in sales. Inventory levels
are being increased in anticipation of higher demand for our
products during the second half of the fiscal year.
The debt level at November 30, 1994 increased $40,732,000 from year-
end primarily due to working capital requirements and funding of
current-year capital expenditures. Total debt as a percentage of
total capital was 29 percent at November 30, 1994 as compared to 28
percent at August 31, 1994.
7
<PAGE>
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 Shareowners was held on December 15, 1994, for
the purpose of electing twelve Directors of the company, approving
the Echlin Inc. Performance Unit Plan, and approving the designation
of Price Waterhouse LLP as independent accountants for fiscal 1995.
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>
Shares Shares
voting "For" "Withheld"
----------- --------
<S> <C> <C>
D. Allan Bromley 51,675,653 501,506
John F. Creamer, Jr. 51,618,151 559,008
Milton P. DeVane 51,601,831 575,328
John E. Echlin, Jr. 51,704,993 472,166
C. Scott Greer 51,628,480 548,679
John F. Gustafson 51,695,305 481,854
Donald C. Jensen 51,701,088 476,071
Trevor O. Jones 51,623,031 554,128
Frederick J. Mancheski 51,622,349 554,810
Phillip S. Myers 51,614,919 562,240
Frank R. O'Keefe 51,682,007 495,152
Jerome G. Rivard 51,624,718 552,441
</TABLE>
The proposal for the approval of the Echlin Inc. Performance Unit
Plan was adopted. The proposal received 48,417,880 "For" votes,
2,483,842 "Against" votes and 1,077,171 abstentions.
The proposal for the approval of Price Waterhouse LLP was adopted.
The proposal received 52,077,721 "For" votes, 36,494 "Against" votes
and 62,944 abstentions.
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
During the quarter ended November 30, 1994 the company did not file
any reports on Form 8-K. On January 3, 1995 the company did file a
Form 8-K concerning the acquisition of Preferred Technical Group
International, Inc.
8
<PAGE>
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 11, 1995 /s/ Richard A. Wisot
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Richard A. Wisot
Vice President and
Controller
Date: January 11, 1995 /s/ Jon P. Leckerling
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Jon P. Leckerling
Vice President, General
Counsel and Corporate
Secretary
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the company's SEC
Form 10-Q for the quarterly period ended November 30, 1994 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> NOV-30-1994
<CASH> 54,509
<SECURITIES> 0
<RECEIVABLES> 301,851
<ALLOWANCES> 6,439
<INVENTORY> 607,688
<CURRENT-ASSETS> 986,986
<PP&E> 858,388
<DEPRECIATION> 407,321
<TOTAL-ASSETS> 1,652,768
<CURRENT-LIABILITIES> 419,425
<BONDS> 0
<COMMON> 59,621
0
0
<OTHER-SE> 775,194
<TOTAL-LIABILITY-AND-EQUITY> 1,652,768
<SALES> 600,615
<TOTAL-REVENUES> 600,615
<CGS> 424,556
<TOTAL-COSTS> 126,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,002
<INCOME-PRETAX> 46,759
<INCOME-TAX> 14,963
<INCOME-CONTINUING> 31,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,796
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
