<PAGE>
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
------------------
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995
COMMISSION FILE NO. 1-4474
--------------------------
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 June 30, 1995, the Company had outstanding 17,498,280 shares of Common
Stock, $0.01 par value per share.
=============================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
(Unaudited)
--------------------- ---------------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents....................... $ 39,418 $ 37,648
Receivables, less reserve....................... 38,882 31,731
Inventories:
Raw materials................................. $ 10,315 $ 9,652
Work in process............................... 19,565 18,446
Finished goods................................ 7,437 37,317 7,540 35,638
-------- ---------
Other current assets............................ 14,341 14,550
-------- --------
Total current assets......................... 129,958 119,567
Plant & Equipment, at cost........................ 107,381 100,452
Less - Accumulated depreciation................... (67,573) 39,808 (63,879) 36,573
-------- ---------
Deferred Income Taxes............................. 31,750 31,750
Goodwill and Other Intangible Assets, less
accumulated amortization of $9,351 and $8,374... 75,391 75,960
Other Assets...................................... 18,369 17,791
-------- --------
Total Assets................................. $295,276 $281,641
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............... $ 7,249 $ 13,118
Accounts payable................................ 11,580 12,558
Accrued liabilities............................. 21,289 21,823
-------- --------
Total current liabilities.................... 40,118 47,499
Other Liabilities................................. 6,750 6,058
Long-term Debt.................................... 26,327 34,403
Minority Interest................................. 31,869 26,531
Stockholders' Equity:
Common stock.................................... $ 175 $ 175
Additional paid-in capital...................... 279,425 278,976
Accumulated deficit............................. (87,866) (109,404)
Other........................................... (1,522) 190,212 (2,597) 167,150
--------- -------- --------- --------
Total Liabilities and Stockholders' Equity... $295,276 $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 For the Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................................ $ 66,932 $ 65,681 $138,532 $127,466
Cost of sales........................................ (39,961) (40,672) (83,046) (79,892)
-------- -------- -------- --------
Gross margin......................................... 26,971 25,009 55,486 47,574
Selling, general and administrative expenses......... (12,493) (11,429) (25,450) (22,631)
-------- -------- -------- --------
Operating Income..................................... 14,478 13,580 30,036 24,943
Interest expense..................................... (1,089) (1,745) (2,599) (3,481)
Interest income...................................... 514 280 975 502
Equity in net income of affiliated companies......... 437 542 935 1,035
Other income (expense)............................... 61 168 168 533
-------- -------- -------- --------
Income from continuing operations before
income taxes and minority interest................. 14,401 12,825 29,515 23,532
Income taxes......................................... (1,166) (92) (2,639) (1,221)
Minority interest in net income of subsidiaries...... (2,512) (2,447) (5,338) (4,633)
-------- -------- -------- --------
Net income........................................... $ 10,723 $ 10,286 $ 21,538 $ 17,678
======== ======== ======== ========
Income per common share
(primary and fully-diluted)........................ $ .58 $ .56 $ 1.16 $ .97
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
----------------------
1995 1994
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM:
OPERATING ACTIVITIES:
Income from continuing operations........................... $ 21,538 $ 17,678
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operations:
Depreciation and amortization........................... 5,672 5,204
Change in minority interest............................. 5,338 4,633
Change in assets and liabilities, net of effects
from acquisition of businesses........................ (10,196) (5,595)
Other................................................... (901) (2,019)
-------- --------
Net cash provided by continuing operations.................... 21,451 19,901
-------- --------
INVESTING ACTIVITIES:
Capital expenditures........................................ (6,607) (3,024)
Acquisition of businesses................................... -- (8,309)
Other....................................................... 61 253
-------- --------
Net cash used in investing activities......................... (6,546) (11,080)
-------- --------
FINANCING ACTIVITIES:
Principal repayments on long-term borrowings................ (14,162) (3,153)
Other....................................................... 163 188
-------- --------
Net cash used in financing activities......................... (13,999) (2,965)
-------- --------
Effect of exchange rates...................................... 864 81
-------- --------
CASH AND CASH EQUIVALENTS:
Net change during the period................................ 1,770 5,937
Balance, beginning of period................................ 37,648 27,367
-------- --------
Balance, end of period...................................... $ 39,418 $ 33,304
======== ========
</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 June 30, 1995 and December 31, 1994,
and the results of their operations for the three and six month periods ending
June 30, 1995 and 1994, and cash flows for the six month periods ending June
30, 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 For the Six Months
Ended June 30, Ended June 30,
------------------------ ------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary......... 18,558,413 18,315,604 18,533,491 18,289,291
Fully diluted... 18,558,528 18,316,858 18,534,002 18,312,974
</TABLE>
3. Interest paid on debt for the three months ending June 30, 1995 and 1994
was $931,000 and $1,669,000, respectively, and for the six months ending June
30, 1995 and 1994, was $2,274,000 and $2,745,000, respectively. Income taxes
paid during the three months ended June 30, 1995 and 1994 was $1,507,000 and
$605,000, respectively, and during the six months was $1,837,000 and $740,000,
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. In the second quarter of 1994, the Company recorded a nonrecurring gain of
$900,000 resulting from the enactment of a new state income tax law. The
Company's income tax liability was reduced, and the benefit was recorded in
the income taxes line in the Consolidated Statement of Operations.
6. On June 10, 1994, the Company's subsidiary, Gilbert Engineering Co., Inc.
("Gilbert"), acquired all of the outstanding common stock of Cabel-Con A/S
("Cabel-Con"), a Danish manufacturer of connectors for the worldwide cable
television markets, for $9,250,000. Cabel-Con had cash of $941,000 at the
time of the acquisition. The acquisition was financed by borrowing on
Gilbert's revolving credit facility. Concurrent with the acquisition, Gilbert
paid off $2,625,250 of Cabel-Con's bank borrowings. The acquisition was
accounted for as a purchase and, accordingly, operating results of this
business subsequent to the date of acquisition were included in the Company's
Consolidated Statement of Operations. Substantially all of the goodwill
resulting from this acquisition is being amortized over 40 years.
7. Certain items in the 1994 Consolidated Statement of Operations have been
reclassified to conform with the 1995 presentation.
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, MA 02154.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash increased by $1.8 million during the first six months of
1995 to $39.4 million at June 30, 1995. Operations generated $21.5 million of
cash during the six months ending June 30, 1995 compared to $19.9 million for
the same period in the prior year. The Company spent $6.6 million for capital
equipment. Cash of $14.2 million was used to repay long-term borrowings.
At June 30, 1995, cash and unused lines of credit totaled $78.7 million of
which $14.9 million was available only to Gilbert and $63.8 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.
Second Quarter Results
Consolidated sales for the second quarter of 1995 were $66.9 million, a
$1.2 million or 1.9% increase over the second quarter of 1994. Components
Segment sales increased $0.8 million, or 1.3%, and Other Segment sales
increased $0.4 million, or 8.8% (see discussion under "Segment Data").
Consolidated net income for the three months ending June 30, 1995 increased
$0.4 million to $10.7 million from $10.3 million for the second quarter of
1994. Included in 1994 net income was a nonrecurring gain of $0.9 million
resulting from a state income tax law change. Exclusive of this nonrecurring
gain, income increased $1.3 million.
This $1.3 million increase in profitability arises from a $1.3 million
increase in segment operating profitability (see discussion under "Segment
Data"). Additionally, interest expense decreased $0.7 million due to lower
debt balances, and interest income increased $0.2 million due to higher
invested balances and higher interest rates. Minority interest expense
increased $0.1 million corresponding to increased income. Equity in net
income of affiliates decreased $0.1 million. Income tax expense, before the
nonrecurring tax gain of $0.9 million recorded in 1994, increased $0.2 million
due to higher state taxes due to higher earnings.
<TABLE>
<CAPTION>
Segment
Segment Data ($ millions) Sales Operating Income
-------------- ----------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
Components.............. $60.9 $60.1 $15.2 $14.2
Other................... 6.0 5.6 1.1 0.8
----- ----- ----- -----
Total................ $66.9 $65.7 $16.3 $15.0
===== ===== ===== =====
</TABLE>
Sales of the Components Segment increased $0.8 million, or 1.3%, in the
second quarter of 1995 compared to the second quarter of 1994. Sales of
communications products increased $4.2 million or 11.8%, 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
decreased $3.4 million, or 14.2%, due to general market softness. Components
Segment operating income increased $1.0 million, or 7.4%, due to the sales
increases discussed above and productivity improvements. Components Segment
order backlog was $69.1 million at June 30, 1995, up $18.3 million from June
30, 1994.
Other Segment sales increased $0.4 million, or 8.8%, compared to the second
quarter of 1994 due to an increase in railway repair and maintenance equipment
sales offset by a decrease in sales due to the November 1994 sale of Carpenter
Emergency Lighting. Operating income was $0.3 million higher than the second
quarter of 1994, due to the sales increase, productivity improvements and cost
reduction programs. Order backlog for the segment was $2.9 million at June 30,
1995, up $2.5 million from June 30, 1994.
Consolidated gross profit for the second quarter increased as a percentage
of sales from 38.1% in 1994 to 40.3% in 1995 due to higher sales of higher
margin products, cost reductions and productivity improvements.
Six Month Results
Consolidated sales for the first six months of 1995 were $138.5 million, a
$11.0 million or 8.7% increase, over 1994. Components Segment sales increased
$11.0 million, or 9.5%, and Other Segment sales were unchanged. (see
discussion under "Segment Data").
Net income during the first half of 1995 was $21.5 million compared to
$17.7 million in the same period of 1994. Included in 1994 net income was a
nonrecurring gain of $0.9 million resulting from a state income tax law
change. Exclusive of this nonrecurring gain, income increased $4.7 million.
The $4.7 million improvement in profitability for the first six months of
1995 results primarily from a $5.6 million increase in segment operating
profitability (see discussion under "Segment Data") offset in part, by the net
effect of several non-operating items. Interest income increased $0.5 million
due to higher invested balances and higher interest rates, and interest
expense decreased $0.9 million due to lower debt balances. Minority interest
expense increased $0.7 million corresponding to increased income. Equity in
net income of affiliates decreased $0.1 million. Income tax expense,
exclusive of the nonrecurring gain, increased $0.5 million due to higher state
taxes due to higher earnings.
<TABLE>
<CAPTION>
Segment
Segment Data ($ millions) Sales Operating Income
-------------- ----------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
Components.............. $126.5 $115.5 $32.1 $26.9
Other................... 12.0 12.0 2.0 1.6
------ ------ ----- -----
Total................ $138.5 $127.5 $34.1 $28.5
====== ====== ===== =====
</TABLE>
Sales of the Components Segment increased $11.0 million, or 9.5% compared
to the first six months of 1994. Sales of communications products increased
$13.4 million, or 19.7%, 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 decreased $2.4 million, or 5.1%, due
primarily to general market softness in the second quarter of 1995.
Components Segment operating income increased $5.2 million, or 19.6%, from the
first half of 1994 due primarily to the sales increase discussed above and
higher sales of higher margin products and productivity improvements.
Other Segment sales were unchanged compared to the first half of 1994;
sales increases in the railway repair and maintenance business were offset by
a decrease due to the sale of the Carpenter Emergency Lighting business.
Operating income was $0.4 million higher than the prior year due to
productivity improvements and cost reduction programs.
Consolidated gross profit increased as a percentage of sales for the first
six months of 1995 to 40.1% from 37.3% in the comparable 1994 period 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 and to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995.
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 second quarter ended
June 30, 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: July 31, 1995 /S/ THOMAS F. SHEEHAN
Thomas F. Sheehan
Vice President and Controller
(Chief Accounting Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Jun-30-1995
<CASH> 39,418
<SECURITIES> 0
<RECEIVABLES> 38,882
<ALLOWANCES> 0
<INVENTORY> 37,317
<CURRENT-ASSETS> 129,958
<PP&E> 107,381
<DEPRECIATION> 67,573
<TOTAL-ASSETS> 295,276
<CURRENT-LIABILITIES> 40,118
<BONDS> 0
<COMMON> 175
0
<OTHER-SE> 190,037
<TOTAL-LIABILITY-AND-EQUITY> 295,276
<SALES> 138,532
<TOTAL-REVENUES> 138,532
<CGS> 83,046
<TOTAL-COSTS> 83,046
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,599
<INCOME-PRETAX> 29,515
<INCOME-TAX> 2,639
<INCOME-CONTINUING> 21,538
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,538
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
</TABLE>
