<PAGE>
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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, 1995
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, 1995, the Company had outstanding 17,484,575 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)
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
(Unaudited)
--------------------- ---------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 35,137 $ 37,648
Receivables, less reserve....................... 41,821 31,731
Inventories:
Raw materials................................. $ 9,281 $ 9,652
Work in process............................... 18,166 18,446
Finished goods................................ 8,283 35,730 7,540 35,638
-------- ---------
Other current assets............................ 14,972 14,550
-------- --------
Total current assets......................... 127,660 119,567
Plant & Equipment, at cost........................ 103,534 100,452
Less - Accumulated depreciation................... (65,687) 37,847 (63,879) 36,573
-------- ---------
Deferred Income Taxes............................. 31,750 31,750
Goodwill and Other Intangible Assets, less
accumulated amortization of $8,704 and $8,374... 75,993 75,960
Other Assets...................................... 17,423 17,791
-------- --------
Total Assets................................. $290,673 $281,641
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............... $ 7,071 $ 13,118
Accounts payable................................ 12,899 12,558
Accrued liabilities............................. 21,672 21,823
-------- --------
Total current liabilities.................... 41,642 47,499
Other Liabilities................................. 6,576 6,058
Long-term Debt.................................... 33,863 34,403
Minority Interest................................. 29,357 26,531
Stockholders' Equity:
Common stock.................................... $ 175 $ 175
Additional paid-in capital...................... 279,283 278,976
Accumulated deficit............................. (98,589) (109,404)
Other........................................... (1,634) 179,235 (2,597) 167,150
--------- -------- --------- --------
Total Liabilities and Stockholders' Equity... $290,673 $281,641
======== ========
</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,
----------------------
1995 1994
-------- --------
<S> <C> <C>
Net sales........................................... $ 71,600 $ 61,785
Cost of sales....................................... (43,085) (39,220)
-------- --------
Gross margin........................................ 28,515 22,565
Selling, general and administrative expenses........ (12,957) (11,202)
-------- --------
Operating income.................................... 15,558 11,363
Interest expense.................................... (1,510) (1,736)
Interest income..................................... 461 222
Equity in net income of affiliated companies........ 498 493
Other income........................................ 107 365
-------- --------
Income from continuing operations before income
taxes and minority interest........................ 15,114 10,707
Income taxes........................................ (1,473) (1,129)
Minority interest in net income of subsidiaries..... (2,826) (2,186)
-------- --------
Net income.......................................... $ 10,815 $ 7,392
======== ========
Income per common share (primary and
fully-diluted).................................... $ .58 $ .40
======== ========
</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,
----------------------
1995 1994
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM:
OPERATING ACTIVITIES:
Income from continuing operations........................... $ 10,815 $ 7,392
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Depreciation and amortization........................... 2,939 2,527
Change in minority interest............................. 2,826 2,186
Change in assets and liabilities, net of effects
from acquisition of businesses........................ (10,017) (4,934)
Other................................................... (485) (1,980)
-------- --------
Net cash provided by continuing operations.................... 6,078 5,191
-------- --------
INVESTING ACTIVITIES:
Capital expenditures........................................ (2,756) (1,400)
Other....................................................... (22) 131
-------- --------
Net cash used in investing activities......................... (2,778) (1,269)
-------- --------
FINANCING ACTIVITIES:
Principal repayments on long-term borrowings................ (6,693) (4,368)
Other....................................................... 226 (34)
-------- --------
Net cash used in financing activities......................... (6,467) (4,402)
-------- --------
Effect of exchange rates...................................... 656 (217)
-------- --------
CASH AND CASH EQUIVALENTS:
Net change during the period................................ (2,511) (697)
Balance, beginning of period................................ 37,648 27,367
-------- --------
Balance, end of period...................................... $ 35,137 $ 26,670
======== ========
</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, 1995 and December 31, 1994,
and the results of their operations and cash flows for the three month periods
ending March 31, 1995 and 1994 have been included. The results of operations
for such interim periods are not necessarily indicative of the results for the
full year.
2. Primary and fully-diluted per share amounts 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,
------------------------
1995 1995
---------- ----------
<C> <C>
<S>
Primary 18,506,561 18,262,114
Fully-diluted 18,512,244 18,262,114
</TABLE>
3. Interest paid on debt for the three months ending March 31, 1995 and 1994
was $1,343,000 and $1,076,000, respectively. Income taxes paid during the
three months ended March 31, 1995 and 1994 were $330,000 and $135,000,
respectively.
4. 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. In connection with this obligation, in February 1995,
Gilbert borrowed $17,710,000 on the revolving credit facility to pay down a
like amount on Term Loan A.
5. Certain items in the 1994 consolidated statement of operations have been
reclassified to conform with the 1995 presentation.
<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 on Form 10-K, 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 $2.5 million during the first three months
of 1995 to $35.1 million at March 31, 1995. Operations generated $6.1 million
of cash during the three months ending March 31, 1995 compared to $5.2 million
for the same period in the prior year. The Company spent $2.8 million for
capital equipment. Cash of $6.7 million was used to repay long-term
borrowings.
At March 31, 1995, cash and unused lines of credit totaled $68.6 million of
which $8.4 million was available only to Gilbert and $60.2 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, make expected capital expenditures, 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 business.
First Quarter Results
Consolidated sales for the first quarter of 1995 were $71.6 million, a $9.8
million or 15.9% increase over the first quarter of 1994. Components Segment
sales increased $10.3 million, or 18.5%, and Other Segment sales decreased $.5
million, or 6.9% (see discussion under "Segment Data").
Consolidated net income for the three months ending March 31, 1995
increased $3.4 million to $10.8 million from $7.4 million for the first
quarter of 1994.
This $3.4 million increase in profitability arises from a $4.3 million
increase in segment operating profitability (see discussion under "Segment
Data") offset, in part, by several non-operating items. Interest expense
decreased $.2 million due to lower debt balances and lower interest rates.
Interest income increased $.2 million due to higher invested balances and
higher interest rates. Minority interest expense increased $.6 million
corresponding to increased income. Income tax expense increased $.3 million
due to higher state taxes reflecting higher earnings.
<PAGE>
<TABLE>
<CAPTION>
Segment
Segment Data ($ millions) Sales Operating Income
-------------- ----------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
Components.............. $65.6 $55.3 $16.9 $12.7
Other................... 6.0 6.5 0.9 0.8
----- ----- ----- -----
Total.............. $71.6 $61.8 $17.8 $13.5
===== ===== ===== =====
</TABLE>
Sales of the Components Segment increased $10.3 million, or 18.5%, in the
first quarter of 1995 compared to the first quarter of 1994. Sales of
communications products increased $9.2 million or 28.5%, due primarily to
growth in domestic and international markets and to the incremental sales of
Cabel-Con, which was acquired in June of 1994. Sales of controls products
increased $1.1 million, or 4.6%, due primarily to industry growth. Components
segment operating income increased $4.2 million, or 33.3%, due to the sales
increases discussed above and productivity improvements. Components Segment
order backlog was $63.9 million at March 31, 1995, up $14.9 million from March
31, 1994.
Other Segment sales decreased $.5 million, or 6.9%, compared to the first
quarter of 1994 due to the sale of the Carpenter Emergency Lighting business
in November 1994, offset by an increase in railway repair and maintenance
equipment sales. Operating income was $.1 million higher than the first
quarter of 1994, however, due to productivity improvements and cost reduction
programs. Order backlog for the segment was $3.0 million at March 31, 1995,
up $1.1 million from March 31, 1994.
Consolidated gross profit for the first quarter increased as a percentage
of sales from 36.5% in 1994 to 39.8% in 1995 due to higher sales of higher
margin products, cost reductions and productivity improvements.
<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, 1994.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
27. Financial Data Schedule (submitted only to the Securities and
Exchange Commission in electronic format for its information only).
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the first quarter ended
March 31, 1995.
<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, 1995 /S/ WILLIAM C. WEAVER
William C. Weaver
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Mar-31-1995
<CASH> 35,137
<SECURITIES> 0
<RECEIVABLES> 41,821
<ALLOWANCES> 0
<INVENTORY> 35,730
<CURRENT-ASSETS> 127,660
<PP&E> 103,534
<DEPRECIATION> 65,687
<TOTAL-ASSETS> 290,673
<CURRENT-LIABILITIES> 41,642
<BONDS> 0
<COMMON> 175
0
0
<OTHER-SE> 179,060
<TOTAL-LIABILITY-AND-EQUITY> 290,673
<SALES> 71,600
<TOTAL-REVENUES> 71,600
<CGS> 43,085
<TOTAL-COSTS> 43,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,510
<INCOME-PRETAX> 15,114
<INCOME-TAX> 1,473
<INCOME-CONTINUING> 10,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,815
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>