FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
________________________
For the quarterly period ended June 30, 1994
Commission File No. 1-8684
Excel Industries, Inc.
(Exact name of registrant as specified in its charter)
Indiana 35-1551685
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1120 North Main Street, Elkhart, IN 46514
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 264-2131
Indicate by an "X" 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At June 30, 1994, there were issued and outstanding 10,965,665 common
shares, no par value.
EXCEL INDUSTRIES, INC.
Index
Page No.
PART I Financial Information
Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 1
Consolidated Statements of Income -
Three Months Ended June 30, 1994 and 1993
Six Months Ended June 30, 1994 and 1993 2
Consolidated Statements of Shareholders' Equity
Six Months Ended June 30, 1994 and 1993 3
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993 4
Notes to Consolidated Financial Statements 5-7
Management's Discussion and Analysis of
Financial Condition and Results of Operation 8-9
PART II Other Information 10
Signatures 11
EXCEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, December 31,
1994 1993
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 13,735 $ 6,767
Marketable securities 37,577 39,786
Accounts receivable 87,380 70,653
Customer tooling to be billed 13,248 9,161
Inventories 34,188 29,867
Prepaid expenses 3,956 6,113
Total current assets 190,084 162,347
Property, plant and equipment,
less accumulated depreciation of
(1994 - $58,978; 1993 - $53,773) 54,142 49,746
Other assets 16,551 17,223
$260,777 $229,316
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 60,478 $ 46,983
Accrued liabilities 20,984 19,050
Current portion of debt 1,394 1,553
Total current liabilities 82,856 67,586
Long-term debt 34,423 35,094
Other long-term liabilities 21,160 20,200
Commitments and contingent liabilities -- --
Shareholders' equity
Preferred shares - no par value,
1,000 shares authorized,
none issued -- --
Common shares - authorized 20,000
shares without par value;
issued 1994 - 10,966;
1993 - 10,575 94,739 87,537
Retained earnings 28,315 19,615
Unrecognized pension actuarial
losses, net of tax (716) (716)
Total shareholders' equity 122,338 106,436
$260,777 $229,316
NOTE: The balance sheet at December 31, 1993 has been derived
from the audited financial statements at that date.
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EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(thousands, except per share amounts)
Three Months Ended
June 30,
1994 1993
Net sales $161,722 $138,875
Cost of goods sold 144,433 122,831
Gross profit 17,289 16,044
Selling, administrative and engineering expenses 8,156 8,371
Operating income 9,133 7,673
Other income and (expense):
Interest expense (844) (837)
Other income, net 325 562
Income before income taxes 8,614 7,398
Provision for taxes on income 3,188 2,907
Net income $ 5,426 $ 4,491
Net income per share:
Primary $ 0.50 $ 0.43
Fully diluted $ 0.45 $ 0.38
Cash dividends per share $ 0.09 $ 0.08
Six Months Ended
June 30,
Net sales $313,694 $266,215
Cost of goods sold 279,908 235,876
Gross profit 33,786 30,339
Selling, administrative and engineering expenses 16,000 16,252
Operating income 17,786 14,087
Other income and (expense):
Interest expense (1,683) (1,751)
Other income, net 666 764
Income before income taxes 16,769 13,100
Provision for taxes on income 6,205 5,187
Net income $ 10,564 $ 7,913
Net income per share:
Primary $ 0.98 $ 0.82
Fully diluted $ 0.88 $ 0.74
Cash dividends per share $ 0.17 $ 0.14
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EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(in thousands of dollars)
UNRECOGNIZED
PENSION
COMMON RETAINED ACTUARIAL
SHARES EARNINGS LOSSES TOTAL
Balance at December 31, 1993 $87,537 $19,615 $(716) $106,436
Net income 10,564 10,564
Dividends (1,864) (1,864)
Issuance of 380,000
Common Shares 7,032 7,032
Shares issued under employee
stock purchase plan 170 170
Balance at June 30, 1994 $94,739 $28,315 $(716) $122,338
Balance at December 31, 1992 $57,282 $10,346 $(598) $ 67,030
Net income 7,913 7,913
Dividends (1,479) (1,479)
Issuance of 2,000,000
Common Shares 30,019 30,019
Shares issued under employee
stock purchase plan 94 94
Balance at June 30, 1993 $87,395 $16,780 $(598) $103,577
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EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
Six Months Ended
June 30,
1994 1993
Cash flows from operating activities
Net income $ 10,564 $ 7,913
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 6,041 5,223
Deferred income taxes and other 1,231 1,787
Changes in current assets and liabilities
Accounts receivable and other (14,570) (17,094)
Inventories and customer tooling ( 8,408) ( 5,168)
Investment in marketable securities 2,209 (46,413)
Accounts payable and accrued
liabilities 15,429 13,011
Total adjustments 1,932 (48,654)
Net cash provided by operating activities 12,496 (40,741)
Cash flows from investing activities
Purchase of property, plant and equipment (10,534) (9,252)
Other 498 (133)
Net cash used for investing activities (10,036) (9,385)
Cash flows from financing activities
Issuance of common stock 7,202 30,113
Maturities of long-term debt (830) (767)
Issuance of long-term debt --- 481
Dividends (1,864) (1,479)
Net cash from financing activities 4,508 28,348
Net change in cash and cash equivalents 6,968 (21,778)
Cash and cash equivalents at beginning of year 6,767 27,510
Cash and cash equivalents at end of second
quarter $ 13,735 $ 5,732
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EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation:
The financial statements have been prepared from the unaudited
financial records of the Company. In the opinion of management, the
financial statements include all adjustments consisting only of normal
recurring adjustments necessary for a fair presentation of the results
of operations and financial position for the interim periods.
Note 2 - Marketable Securities:
Marketable securities consist of U.S. Government securities, tax-
free municipal securities and municipal fund par value preferred
shares and are classified as trading securities. Certain amounts for
1993 have been reclassified to conform to the 1994 classification.
Note 3 - Inventories:
Inventories consist of the following: (in thousands)
June 30, December 31,
1994 1993
Raw materials $19,641 $17,948
Work in process and
finished goods 15,006 12,378
LIFO reserve (459) (459)
$34,188 $29,867
Note 4 - Net Income per Share:
Primary net income per share is computed using the weighted
average number of shares outstanding during the period. In computing
fully diluted earnings per share, the conversion of the Company's 10%
Convertible Subordinated Notes is also assumed except when the effect
of the conversion is anti-dilutive. Shares used to compute net income
per share data are as follows (amounts in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
Primary 10,962 10,560 10,783 9,675
Fully-diluted 13,232 12,830 13,053 11,945
Note 5 - Contingencies
A chemical cleaning compound, trichlorethylene ("TCE"), has been
found in the soil and groundwater on the Company's property in
Elkhart, Indiana, and in 1981, TCE was found in a well field of the
City of Elkhart in close proximity to the Company's facility. The
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Company has been named as one of nine potentially responsible parties
(PRPs) in the contamination of this site.
The United States Environmental Protection Agency (EPA) and the
Indiana Department of Environmental Management (IDEM) have conducted a
preliminary investigation and evaluation of the site and have
undertaken temporary remedial action in the nature of air-stripping
towers.
In early 1992, the EPA issued a Unilateral Order under Section
106 of the Comprehensive Environmental Response, Compensation and
Liability Act which required the Company and other PRPs to undertake
remedial work. The Company and the other PRPs have reached an
agreement regarding the funding of groundwater monitoring and the
operation of the air-strippers as required by the Unilateral Order.
The Company was required to install and operate a soil vapor
extraction system to remove TCE from the Company's property. As of
February 1, 1994, the Company has installed and is operating the
equipment pursuant to the Unilateral Order. In addition, the EPA and
IDEM have asserted a claim for reimbursement of their investigatory
costs and the costs of installing and operating the air-strippers on
the municipal well field (the EPA Costs). On February 22, 1993, the
United States filed a lawsuit in the United States District Court for
the Northern District of Indiana against eight of the PRPs, including
the Company. On July 20,1993, IDEM joined in the lawsuit. The
lawsuit seeks recovery of the costs of enforcement, prejudgment
interest and an amount in excess of $6.8 million, which represents
costs incurred to date by the EPA and IDEM, and a declaration that the
eight defendant PRPs are liable for any future costs incurred by the
EPA and IDEM in connection with the site.
The Company does not believe the annual cost to the Company of
monitoring groundwater and operating the soil vapor extraction system
and the air-strippers will be material. Each of the PRPs, including
the Company, is jointly and severally liable for the entire amount of
the EPA Costs. Certain PRPs, including the Company, are currently
attempting to negotiate an agreed upon allocation of such liability.
The Company believes that adequate provisions have been recorded for
its costs and its anticipated share of EPA Costs and that its cash on
hand, unused lines of credit or cash from operations are sufficient to
fund any required expenditures.
The EPA has also named the Company as a PRP for costs at three
other disposal sites. It has also asked the Company for information
about contamination at other sites. The Company believes it either
has no liability as a responsible party or that adequate provisions
have been recorded for any costs to be incurred.
There are claims and pending legal proceedings against the
Company and its subsidiaries with respect to taxes, workers'
compensation, warranties and other matters arising out of the ordinary
conduct of the business. The ultimate result of these claims and
proceedings at June 30, 1994 is not determinable, but, in the opinion
of management, adequate provision for anticipated costs has been made
or insurance coverage exists to cover such costs.
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Note 6 - Share Ownership
On March 24, 1994, Ford Motor Company and Ford Motor Company Fund
disposed of their combined 24% ownership in the Company through a
secondary public offering.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Financial Condition:
Cash flow from operations totalled $12.5 million in the six months
ended June 30, 1994. Investment in receivables and inventories
increased $23.0 million due to higher level of sales. This increase
was partially offset by an increase of $15.4 million in trade accounts
payable and accruals. Capital expenditures in the first half totalled
$10.5 million and dividends paid totalled $1.8 million.
The Company received $7.2 million from the sale of common shares in
connection with the sale of shares by Ford. Cash and short-term
marketable securities amounted to $51.3 million at June 30, 1994, an
increase of $4.8 million from December 31, 1993.
Material Changes in Results of Operations:
Three Months Ended June 30, 1994 Compared to
Three Months Ended June 30, 1993
Sales in the second quarter of 1994 increased 17% or $22.8 million to
$161.7 million from the $138.9 million in 1993. The increased sales
occurred primarily in automotive original equipment products as
production and sales of light vehicles in North America remained
strong. Overall second quarter production of light vehicles totalled
approximately 3.8 million units, an increase of 9% over the year ago
second quarter.
Gross profit was $17.3 million in the current quarter or 10.7% of
sales and compares with gross profit of $16.0 million or 11.6% of
sales in the second quarter of 1993. The increase in gross profit in
the quarter is due to the increased sales. The decline in gross
profit as a percent of sales results from a change in product mix
(.7%), a shortfall of cost reductions against productivity commitments
and the adverse impact of new program launch costs.
Selling, administrative and engineering expenses totalled $8.2 million
in the second quarter which was comparable with the $8.4 million in
the 1993 second quarter. Offsetting increased personnel costs for
research, engineering and development were reductions in incentive
compensation.
Interest expense totalled $844,000 in 1994 and compares with $837,000
in the year ago second quarter.
Other income of $325,000 consists primarily of interest income on
marketable debt securities, less $200,000 for Excel's share of
operating losses in the joint venture in Brazil from production start-
up. This compares to other income of $562,000 in the 1993 second
quarter.
Provision for taxes on income was at an effective rate of 37% as
compared to 39% in 1993. The decline in the overall effective rate
results from reduction in effective state rates.
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Material Changes in Results of Operations:
Six Months Ended June 30, 1994 Compared to
Six Months Ended June 30, 1993
Sales in the first half of 1994 increased 18% or $47.5 million to
$313.7 million from the $266.2 million in 1993. The increased sales
occurred primarily in automotive original equipment products as
production and sales of light vehicles in North America remained
strong. Overall first half production of light vehicles totalled
approximately 7.5 million units, an increase of 11% over the year ago
first quarter.
Gross profit was $33.8 million in the current half or 10.8% of sales
and compares with gross profit of $30.3 million or 11.4% of sales in
the first half of 1993. The increase in gross profit in the half is
due to the increased sales. The decline in gross profit as a percent
of sales results from a change in product mix (.4%), a shortfall of
cost reductions against productivity commitments and the adverse
impact of new program launch costs.
Selling, administrative and engineering expenses totalled $16.0
million in the first half which was comparable with the $16.3 million
in the 1993 first half. Offsetting a reduction in the provision for
doubtful accounts and deferred compensation costs were increased
personnel costs for research, engineering and development.
Interest expense totalled $1,683,000 in 1994 and compares with
$1,751,000 in the year ago first half.
Other income of $666,000 consists primarily of interest income on
marketable debt securities less $200,000 for Excel's share of
operating losses in the joint venture in Brazil from production start-
up. This compares to other income of $764,000 in the 1993 first half.
Provision for taxes on income was at an effective rate of 37% as
compared to 39.5% in 1993. The decline in the overall effective rate
results from reduction in effective state rates.
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PART II
OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
At the annual Shareholders' Meeting on May 5, 1994, the
shareholders approved by a vote of 9,013,413 For, 393,280 Against,
11,423 Abstaining, and 1,159,820 Broker Non-Voting, a new 1994 Stock
Compensation Plan (the "Plan"). The Plan reserves 500,000 common
shares for issuance under the Plan. Participants include officers,
other key employees and non-employee directors. The Plan will
terminate on December 16, 2003. The Plan provides for the granting of
incentive stock options within the meaning of Section 422 of the
Internal Revenue Code, as amended, non-statutory options or
performance units. Terms of performance units will be established by
the Compensation Committee of the Board of Directors of the Company at
the time of grant.
In an uncontested election of Directors, the following were
elected:
Authority
For Withheld
James J. Lohman 9,354,454 63,661
James O. Futterknecht, Jr. 9,354,447 63,668
Joseph A. Robinson 9,354,347 63,768
John G. Keane 9,371,597 46,518
James K. Sommer 9,354,447 63,668
Ralph R. Whitney, Jr. 9,371,531 46,584
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SIGNATURES
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 hereunto duly authorized.
EXCEL INDUSTRIES, INC.
(Registrant)
Date: August 12, 1994 s/ James J. Lohman
James J. Lohman
Chairman and
Chief Executive Officer
Date: August 12, 1994 s/ Joseph A. Robinson
Joseph A. Robinson
Secretary/Treasurer and
Chief Financial Officer
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