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 September 30, 1995
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 October 10, 1995, there were issued and outstanding 10,703,012
common shares, no par value.
EXCEL INDUSTRIES, INC.
Index
Page No.
PART I Financial Information
Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 1
Consolidated Statements of Income -
Quarter Ended September 30, 1995 and 1994
Nine Months Ended September 30, 1995 and 1994 2
Consolidated Statements of Shareholders' Equity
Nine Months Ended September 30, 1995 and 1994 3
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 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
Financial Data Schedule Exhibit 27
EXCEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in thousands)
September 30, December 31,
1995 1994
ASSETS
Current assets
Cash and short-term investments $ 6,771 $ 175
Marketable securities 37,211 39,520
Accounts receivable 81,856 78,420
Customer tooling to be billed 28,222 16,015
Inventories 29,288 33,576
Prepaid expenses 4,240 8,434
Total current assets 187,588 176,140
Property, plant and equipment,
less accumulated depreciation
(1995 - $68,448; 1994 - $62,405) 66,619 62,876
Other assets 17,075 15,614
$271,282 $254,630
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 61,804 $ 52,459
Accrued liabilities 24,020 23,020
Accrued income taxes 974 3,158
Current portion of debt 1,162 1,358
Total current liabilities 87,960 79,995
Long-term debt 32,300 33,578
Other long-term liabilities 19,161 18,414
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 1995 - 10,998;
1994 - 10,974 95,092 94,831
Retained earnings 41,949 32,854
Unrecognized pension actuarial
losses, net of tax (587) (587)
Treasury shares, at cost,
1995 - 300; 1994 - 290 (4,593) (4,455)
Total shareholders' equity 131,861 122,643
$271,282 $254,630
NOTE: The balance sheet at December 31, 1994 has been derived
from the audited financial statements at that date.
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(thousands, except per share amounts)
Quarter Ended
September 30,
1995 1994
Net sales $126,867 $144,060
Cost of goods sold 117,748 131,304
Gross profit 9,119 12,756
Selling, administrative and engineering expenses 7,840 7,948
Operating income 1,279 4,808
Other income (expense):
Interest expense (829) (875)
Other income, net 2,100 581
Income before income taxes 2,550 4,514
Provision for taxes on income 250 1,670
Net income $ 2,300 $ 2,844
Net income per share:
Primary $ 0.22 $ 0.26
Fully diluted $ 0.22 $ 0.25
Cash dividends per share $ 0.11 $ 0.09
Nine Months Ended
September 30,
1995 1994
Net sales $447,605 $457,754
Cost of goods sold 406,111 411,212
Gross profit 41,494 46,542
Selling, administrative and engineering expenses 24,813 23,948
Operating income 16,681 22,594
Other income (expense):
Interest expense (2,501) (2,558)
Disposal of Canadian facility 1,582 --
Other income, net 3,175 1,247
Income before income taxes 18,937 21,283
Provision for taxes on income 6,313 7,875
Net income $ 12,624 $ 13,408
Net income per share:
Primary $ 1.18 $ 1.24
Fully diluted $ 1.09 $ 1.13
Cash dividends per share $ 0.33 $ 0.26
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(in thousands of dollars)
UNRECOGNIZED
PENSION
COMMON RETAINED ACTUARIAL TREASURY
SHARES EARNINGS LOSSES SHARES TOTAL
Balance at December 31, 1994$94,831$32,854 $(587) $(4,455) $122,643
Net income 12,624 12,624
Dividends (3,529) (3,529)
Purchase of 9,900 treasury
shares (138) (138)
Stock options exercised 57 57
16,368 shares issued under
employee stock purchase plan 204 204
Balance at September 30,
1995 $95,092 $41,949 $(587) $(4,593) $131,861
Balance at December 31, 1993$87,537$19,615 $(716) $ -- $106,436
Net income 13,408 13,408
Dividends (2,835) (2,835)
Issuance of 380,000
common shares 7,032 7,032
Purchase of 180,300 Treasury Shares (2,853) (2,853)
Stock options exercised 27 27
11,115 shares issued under
employee stock purchase plan 170 170
Balance at September 30,
1994 $94,766 $30,188 $(716) $ (2,853) $121,385
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities
Net income $ 12,624 $ 13,408
Adjustments to reconcile net income
to net cash from operating activities:
Gain on disposal of Canadian facility (1,582) --
Depreciation and amortization 10,861 9,396
Deferred income taxes and other (341) 2,058
Changes in current assets and liabilities
Accounts receivable and other (1,317) (17,255)
Inventories and customer tooling (8,924) (9,771)
Accounts payable and accrued
liabilities 8,898 24,708
Total adjustments 7,595 9,136
Net cash provided by operating activities 20,219 22,544
Cash flows from investing activities
Purchase of property, plant and equipment (17,358) (19,299)
Investment in marketable securities 2,309 3,525
Proceeds from disposal of Canadian
facility 6,306 --
Net cash used for investing activities (8,743) (15,774)
Cash flows from financing activities
Issuance of common stock 261 7,229
Maturities of long-term debt (1,474) (1,350)
Dividends (3,529) (2,835)
Purchase of treasury shares (138) (2,853)
Net cash from (for) financing activities (4,880) 191
Net change in cash and short-term investments 6,596 6,961
Cash and short-term investments at beginning
of year 175 6,767
Cash and short-term investments at end of
third quarter $ 6,771 $ 13,728
- 4 -
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.
Effective December 31, 1994, the accounting periods were changed to
end on the Saturday closest to the calendar quarter end so that each
quarter has thirteen weeks of activity.
Note 2 - Marketable Securities:
Marketable securities represent investments with maturities
generally longer than 90 days which are classified as "available for
sale" securities in accordance with SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."
Note 3 - Inventories:
Inventories consist of the following: (in thousands)
September 30, December 31,
1995 1994
Raw materials $17,442 $21,301
Work in process and
finished goods 12,608 13,037
LIFO reserve (762) (762)
$29,288 $33,576
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):
Quarter Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Primary 10,693 10,919 10,686 10,828
Fully-diluted 12,964 13,189 12,956 13,099
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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
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. 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.
-6-<PAGE>
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 September 30, 1995 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.
Note 6 - Common Shares
At September 30, 1995, there were options outstanding for 271,500
shares at an average exercise price of $12.375 and 4,000 shares at an
average exercise price of $18.125 under the 1994 Stock Compensation
Plan. Also at September 30, 1995, there were options outstanding for
8,250 shares at an average exercise price of $5.227 under the
Incentive Stock Option Plan approved by shareholders in 1984.
Note 7 - Disposal of Canadian Facility
Included in income in the first quarter of 1995 is a gain on the
disposition of Excel Metalcraft, Ltd., located in Aurora, Ontario in
the amount of $1,582,000 which amounts to 9 cents per share after
income taxes. This gain includes the return to profits of $970,000 of
the restructuring reserve which was created in 1992. The final phase
of the restructuring has now been completed with the sale of the
shares of Metalcraft.
Note 8 - Executive Life Insurance Proceeds
Included in other income in the third quarter of 1995 is $1,450,000
for the net proceeds from executive life insurance.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Financial Condition
The consolidated statement of cash flow for the nine months ended
September 30, 1995 reflects the sale of Excel Metalcraft, Ltd. Cash
flow from operations totalled $20.2 million in the nine months ended
September 30, 1995. Investment in inventories and customer tooling
increased $8.9 million due to tooling for new programs. This increase
was offset by an increase of $8.9 million in trade accounts payable
and accruals. Capital expenditures in the first three quarters
totalled $17.4 million and dividends paid totalled $3.5 million.
The Company received $6.3 million from the sale of Excel Metalcraft,
Ltd. Cash and short-term marketable securities amounted to
$44.0 million at September 30, 1995, an increase of $4.3 million from
December 31, 1994.
Material Changes in Results of Operations:
Quarter Ended September 30, 1995 Compared to
Quarter Ended September 30, 1994
Sales in the third quarter of 1995 decreased 12% or $17.2 million to
$126.9 million from the $144.1 million in 1994. The decrease occurred
primarily in sales of modular windows which were down $14.1 million.
Overall third quarter production of light vehicles in North America
totalled approximately 3.0 million units, compared to 3.1 million
units in the year-ago quarter. Ford Motor Company (our largest
customer) reported passenger car production in the third quarter of
1995 to be 302,000 units compared to 418,000 in the same period in
1994.
Gross profit was $9.1 million in the current quarter or 7.2% of sales
down from gross profit of $12.8 million or 8.9% of sales in the third
quarter of 1994. The decrease in gross profit in the quarter was due
to the decreased sales, a change in product mix (0.6%), a shortfall of
cost reductions against productivity commitments (0.7%), and the
adverse impact of new program launch costs.
Selling, administrative and engineering expenses totalled $7.8 million
in the third quarter down from $7.9 million in the 1994 third quarter.
Expenses in 1995 reflect a reduction in incentive compensation offset
by increased personnel costs and consultants.
Interest expense totalled $829,000 in 1995 and compares with $875,000
in the year-ago second quarter.
Other income of $2,100,000 includes $1,450,000 from executive life
insurance proceeds and interest income on marketable debt securities.
Other income in 1994 was primarily interest income on marketable debt
securities.
Provision for taxes on income was at an effective rate of 10% for the
third quarter in 1995 compared to 37% for the previous year third
quarter. The change was due to the life insurance proceeds being non-
taxable as well as a disproportionate percentage of non-taxable
interest income.
Material Changes in Results of Operations:
Nine Months Ended September 30, 1995 Compared to
Nine Months Ended September 30, 1994
Sales in the first three quarters of 1995 decreased 2% or
$10.2 million to $447.6 million from the $457.8 million in 1994. The
decreased sales occurred primarily in automotive original equipment
products in the first and third quarters. Overall first three
quarters production of light vehicles totalled approximately
10.6 million units in both 1995 and 1994.
Gross profit was $41.5 million in the first three quarters of 1995 or
9.3% of sales down from gross profit of $46.5 million or 10.2% of
sales in the first three quarters of 1994. The decrease in gross
profit in 1995 was due to a change in product mix (.5%), a shortfall
of cost reductions against productivity commitments (0.7%), and the
adverse impact of lower sales and new program launch costs.
Selling, administrative and engineering expenses totalled
$24.8 million in the first three quarters up from $23.9 million for
the same period in 1994. The increase was due to increases in
consulting fees (Kaizen and employee empowerment programs), personnel
costs, travel and depreciation.
Interest expense totalled $2,501,000 in 1995 and compares with
$2,558,000 in the year-ago period.
Included in income is a gain on the disposition of Excel Metalcraft,
Ltd., located in Aurora, Ontario in the amount of $1,582,000 which
amounts to 9 cents per share after income taxes. This gain includes
the return to profits of $970,000 of the restructuring reserve which
was created in 1992. The final phase of the restructuring has now
been completed with the sale of the shares of Metalcraft.
Other income of $3,175,000 includes $1,450,000 from executive life
insurance proceeds plus interest income on marketable debt securities.
Other income in 1994 of $1,247,000 consists primarily of interest
income offset by recording $200,000 for Excel's share of operating
losses in the joint venture in Brazil which resulted from production
start-up.
Provision for taxes on income was at an effective rate of 33% for 1995
and 37% for 1994. The change was due to the life insurance proceeds
being non-taxable as well as higher non-taxable interest income.
-9-<PAGE>
PART II
OTHER INFORMATION
All items in Part II are either not applicable or answerable in the
negative.
- 10 -
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: November 10, 1995 s/James O. Futterknecht
James O. Futterknecht
Chairman, President and
Chief Executive Officer
Date: November 10, 1995 s/Joseph A. Robinson
Joseph A. Robinson
Secretary/Treasurer and
Chief Financial Officer
- 11 -
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: November 10, 1995 ______________________
James O. Futterknecht
Chairman, President and
Chief Executive Officer
Date: November 10, 1995 _______________________
Joseph A. Robinson
Secretary/Treasurer and
Chief Financial Officer
- 11 -
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