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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1994
COMMISSION FILE NO. 1-4474
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OAK INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1569000
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
BAY COLONY CORPORATE CENTER
1000 WINTER STREET
WALTHAM, MASSACHUSETTS 02154
(Address of principal executive offices)
(617) 890-0400
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
As of March 31, 1994, the Company had outstanding 17,214,929 shares of Common
Stock, $0.01 par value per share.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
March 31, 1994 December 31, 1993
(Unaudited)
--------------------- ---------------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents....................... $ 26,670 $ 27,367
Receivables, less reserves...................... 33,313 27,753
Inventories:
Raw materials................................. $ 9,574 $ 8,736
Work in process............................... 15,626 15,419
Finished goods................................ 7,910 33,110 7,170 31,325
-------- ---------
Other current assets............................ 10,063 10,013
-------- --------
Total current assets......................... 103,156 96,458
Plant & Equipment, at cost........................ 92,575 91,373
Less - Accumulated depreciation................... (59,359) 33,216 (57,944) 33,429
-------- ---------
Deferred Income Taxes............................. 22,400 22,400
Goodwill and Other Intangible Assets, less
accumulated amortization of $6,368 and $5,839... 70,346 70,999
Other Assets...................................... 14,659 14,441
-------- --------
Total Assets................................. $243,777 $237,727
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............... $ 5,103 $ 1,546
Accounts payable................................ 10,883 8,567
Accrued liabilities............................. 17,064 16,770
-------- --------
Total current liabilities.................... 33,050 26,883
Other Liabilities................................. 5,928 7,535
Long-term Debt.................................... 53,712 61,549
Minority Interest................................. 17,027 14,841
Stockholders' Equity:
Common stock.................................... $ 172 $ 172
Additional paid-in capital...................... 280,657 280,467
Accumulated deficit............................. (144,458) (151,850)
Other........................................... (2,311) 134,060 (1,870) 126,919
--------- -------- --------- --------
Total Liabilities and Stockholders' Equity... $243,777 $237,727
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
Net sales............................................ $ 61,785 $ 59,223
Costs, expenses and other income (expense):
Cost of sales...................................... (39,220) (40,092)
Selling, general and administrative expenses....... (10,514) (10,107)
Interest expense................................... (1,736) (2,044)
Interest income.................................... 222 170
Equity in net income of affiliated companies....... 493 352
Other income (expense)............................. (323) (398)
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Total costs, expenses and other income (expense). (51,078) (52,119)
-------- --------
Income from continuing operations before income
taxes and minority interest......................... 10,707 7,104
Income taxes....................................... (1,129) (558)
Minority interest in net income of subsidiaries.... (2,186) (1,531)
-------- --------
Net income........................................... $ 7,392 $ 5,015
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Net income per common share (primary and
fully diluted)..................................... $ .40 $ .28
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
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1994 1993
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<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM:
OPERATING ACTIVITIES:
Income from continuing operations........................... $ 7,392 $ 5,015
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Depreciation and amortization........................... 2,527 2,564
Change in minority interest............................. 2,186 1,531
Change in assets and liabilities, net of effects
from acquisition of businesses........................ (4,934) (6,961)
Other................................................... (1,980) (491)
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Net cash provided by continuing operations.................... 5,191 1,658
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INVESTING ACTIVITIES:
Capital expenditures........................................ (1,400) (1,383)
Acquisition of businesses and investments in
unconsolidated companies................................. -- (1,594)
Loan to unconsolidated affiliate............................ -- (2,650)
Other....................................................... 131 --
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Net cash used in investing activities......................... (1,269) (5,627)
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FINANCING ACTIVITIES:
Principal repayments on long-term borrowings................ (4,368) (6,177)
Reduction in cash restricted for letter of credit........... -- 3,000
Other....................................................... (34) --
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Net cash used in financing activities......................... (4,402) (3,177)
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Effect of exchange rate changes............................... (217) 84
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CASH AND CASH EQUIVALENTS:
Net change during the period................................ (697) (7,062)
Balance, beginning of period................................ 27,367 18,937
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Balance, end of period...................................... $ 26,670 $ 11,875
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
OAK INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements have been prepared by Oak
Industries Inc. (the "Company") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. The Company believes that
the disclosures made in this report are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form 10-K. In the
opinion of the Company, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position of Oak
Industries Inc. and subsidiaries as of March 31, 1994 and December 31, 1993
and the results of their operations and cash flows for the three month periods
ended March 31, 1994 and 1993, have been included. The results of operations
for such interim periods are not necessarily indicative of the results for the
full year.
2. Earnings per common share are based on the weighted average number of
shares of common stock and common stock equivalents outstanding as follows:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------
1994 1993
---------- ----------
<S> <C> <C>
Primary 18,262,114 17,947,269
Fully diluted 18,262,114 17,985,148
</TABLE>
3. Interest paid for the three months ended March 31, 1994 and 1993 was
$1,076,000 and $1,679,000 respectively. Income taxes paid for the same
periods were $135,000 and $885,000, respectfully.
4. Effective May 13, 1993, the Company's stockholders approved a one-for-five
reverse stock split of the Company's common stock (the "Reverse Split"). All
share amounts and earnings per share amounts have been restated to reflect the
Reverse Split.
5. As part of the credit agreement between Gilbert Engineering Co., Inc.
("Gilbert") and General Electric Capital Corporation, Gilbert is required to
make mandatory debt payments equal to 90% of its annual cash flow from
operations less capital expenditures and other expenditures as defined in the
credit agreement. As a result, in January 1994, Gilbert borrowed $10,005,000
on the revolving credit facility and used $7,123,000 to pay off Term Loan B in
its entirety and $2,882,000 to pay down Term Loan A.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This report has been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information normally included in
annual reports has been condensed or omitted pursuant to such rules and
regulations. It is suggested that this report be read in conjunction with the
Company's latest Annual Report, a copy of which may be obtained by writing to
Oak Industries Inc., Bay Colony Corporate Center, 1000 Winter Street, Waltham,
Massachusetts, 02154.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash decreased by $0.7 million during the quarter to $26.7
million at March 31, 1994. Operations generated $5.2 million of cash during
the three months ended March 31, 1994 compared to $1.7 million for the same
period in the prior year. The Company used $1.4 million of cash to purchase
capital equipment and cash of $4.4 million was used to repay long-term
borrowings.
At March 31, 1994, the Company had cash and unused lines of credit totaling
$69.0 million of which $15.1 million was available only to Gilbert Engineering
Co., Inc. and $53.9 million was available to the Company for general corporate
purposes including acquisitions. The Company believes its current financial
resources are sufficient to meet its continuing operating requirements,
service its long-term debt, and provide for future growth.
Although the Company operates internally with several businesses
functioning as profit centers, these businesses are also managed as a group.
That is, if a given business is performing strongly, corporate management may
use this opportunity to invest additional funds in product development and
marketing in another business. Certain agreements applicable to Gilbert limit
Gilbert's ability to make distributions or advances to the Company.
RESULTS OF OPERATIONS
The Company's operations are conducted in two industry segments, the
Components Segment and the Other Segment. The Company's Components Segment
manufactures connectors for CATV systems and other precision applications,
frequency control devices, controls for gas and electric appliances,
electromechanical switches and other products which generally have the common
function of controlling or regulating the flow of energy. The Other Segment
is composed of the Company's railway maintenance equipment and emergency
lighting divisions.
First Quarter Results
Consolidated sales for the first quarter of 1994 were $61.8 million, up
$2.6 million, or 4.3 percent, from 1993. Components Segment sales were up
$1.3 million, or 2.4 percent, and Other Segment sales increased $1.3 million,
or 24.5 percent (see discussion under "Segment Data").
Consolidated net income for the first three months of 1994 was $7.4 million
compared to $5.0 million for the first three months of 1993. This $2.4
million, or 47.4 percent, increase in net income was largely due to an
increase in segment operating profitability which increased $3.4 million over
1993 (see discussion under "Segment Data"). Interest expense decreased $0.3
million due to lower debt levels at Gilbert and Nordco. Income tax expense
increased $0.6 million due to higher foreign and state taxes, reflecting
higher earnings levels, and minority interest expense increased $0.7 million.
<TABLE>
<CAPTION>
Segment Data ($ millions) Sales Operating Income
-------------- ----------------
1994 1993 1994 1993
----- ----- ----- -----
<S> <C> <C> <C> <C>
Components.............. $55.3 $54.0 $12.7 $9.6
Other................... 6.5 5.2 0.8 0.5
</TABLE>
Components Segment sales increased $1.3 million, or 2.4 percent, compared
to the first quarter of 1993. Sales of communications products increased $2.1
million, or 6.9 percent, due primarily to strong sales of connector products.
Sales of controls products decreased $0.8 million, or 3.3 percent, as lower
volumes of appliance control products was partially offset by higher volumes
of electromechanical products. Components Segment's net outside order backlog
was $49.1 million at quarter-end, up $7.6 million from a year earlier.
First quarter operating income in 1994 for the Components Segment increased
$3.1 million, or 31.8 percent, due primarily to additional profits resulting
from the sales increase discussed above and an increase in sales of higher
margin products. Operating income in 1993 included a one-time charge of $0.8
million resulting from the flow through of higher inventory costs resulting
from valuations required in purchase accounting for the Gilbert acquisition in
December 1992.
Other Segment sales increased $1.3 million, or 24.5 percent, due to
increased volume at the Company's railway maintenance equipment division and
increased volume at the emergency lighting division. Operating income
increased $0.3 million, or 67.8 percent, due to additional profits resulting
from the volume increase and cost reductions. Net order backlog for the Other
Segment increased $0.5 million from a year earlier to $1.9 million at quarter-
end.
Consolidated gross profit increased as a percentage of sales in the first
quarter of 1994 to 36.5 percent from 32.3 percent in the comparable 1993
period due to higher sales volumes of higher margin products and productivity
enhancements. Additionally, gross profit for the three months ended March 31,
1993 included a one-time charge of $0.8 million (1.3 percent of sales)
resulting from the flow through of higher inventory costs resulting from
valuations required in purchase accounting for the Gilbert acquisition in
December 1992.
<PAGE>
PART II. OTHER INFORMATION
ITEM I. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
<PAGE>
OAK INDUSTRIES INC.
SIGNATURES
Pursuant to the requirement 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.
OAK INDUSTRIES INC.
Date: April 26, 1994 /S/ WILLIAM C. WEAVER
William C. Weaver
Senior Vice President and
Chief Financial Officer
