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 July 1, 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 July 1, 1995, there were issued and outstanding 10,685,201 common
shares, no par value.
<PAGE>
EXCEL INDUSTRIES, INC.
Index
Page
Number
______
PART I Financial Information
Consolidated Balance Sheets -
July 1, 1995 and December 31, 1994 1
Consolidated Statements of Income -
Quarter Ended July 1, 1995 and June 30, 1994
Six Months Ended July 1, 1995 and
June 30, 1994 2
Consolidated Statements of Shareholders' Equity
Six Months Ended July 1, 1995 and
June 30, 1994 3
Consolidated Statements of Cash Flows -
Six Months Ended July 1, 1995 and
June 30, 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
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands of dollars)
July 1, December 31,
1995 1994
____ ____
ASSETS
Current assets
Cash and short-term investments $ 9,183 $ 175
Marketable securities 38,156 39,520
Accounts receivable 80,948 78,420
Customer tooling to be billed 23,293 16,015
Inventories 30,866 33,576
Prepaid expenses 4,893 8,434
________ ________
Total current assets 187,339 176,140
Property, plant and equipment,
less accumulated depreciation
(1995 - $65,122; 1994 - $62,405) 65,327 62,876
Other assets 15,552 15,614
________ ________
$268,218 $254,630
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 57,687 $ 52,459
Accrued liabilities 26,759 26,178
Current portion of debt 1,375 1,358
________ ________
Total current liabilities 85,821 79,995
Long-term debt 32,986 33,578
Other long-term liabilities 18,797 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 - 10,985;
1994 - 10,974 94,967 94,831
Retained earnings 40,827 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 130,614 122,643
________ ________
$268,218 $254,630
======== ========
NOTE: The balance sheet at December 31, 1994 has been derived
from the audited financial statements at that date.
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(thousands, except per share amounts)
Quarter Ended
July 1, June 30,
1995 1994
____ ____
Net sales $158,749 $161,722
Cost of goods sold 143,387 144,433
________ ________
Gross profit 15,362 17,289
Selling, administrative and engineering expenses 8,580 8,156
________ ________
Operating income 6,782 9,133
Other income (expense):
Interest expense (837) (844)
Other income, net 512 325
________ ________
Income before income taxes 6,457 8,614
Provision for taxes on income 2,389 3,188
________ ________
Net income $ 4,068 $ 5,426
======== ========
Net income per share:
Primary $ .38 $ 0.50
Fully diluted $ .35 $ 0.45
Cash dividends per share $ .11 $ 0.09
Six Months Ended
July 1, June 30,
1995 1994
____ ____
Net sales $320,738 $313,694
Cost of goods sold 288,363 279,908
________ ________
Gross profit 32,375 33,786
Selling, administrative and engineering expenses 16,973 16,000
________ ________
Operating income 15,402 17,786
Other income (expense):
Interest expense (1,672) (1,683)
Disposal of Canadian facility 1,582 ---
Other income, net 1,075 666
-------- --------
Income before income taxes 16,387 16,769
Provision for taxes on income 6,063 6,205
________ ________
Net income $ 10,324 $ 10,564
======== ========
Net income per share:
Primary $ .97 $ 0.98
Fully diluted $ .87 $ 0.88
Cash dividends per share $ .22 $ 0.17
<PAGE>
<TABLE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED JULY 1, 1995 AND JUNE 30, 1994
(in thousands of dollars)
<CAPTION>
UNRECOGNIZED
PENSION
COMMON RETAINED ACTUARIAL TREASURY
SHARES EARNINGS LOSSES SHARES TOTAL
------ -------- ------------ -------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $94,831 $32,854 $(587) $(4,455) $122,643
Net income 10,324 10,324
Dividends (2,351) (2,351)
Purchase of 9,900 treasury
shares (138) (138)
11,227 shares issued under
employee stock purchase plan 136 136
------- ------- ----- ------- --------
Balance at July 1, 1995 $94,967 $40,827 $(587) $(4,593) $130,614
======= ======= ====== ======== ========
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
11,115 shares issued under
employee stock purchase plan 170 170
------- ------- ----- ------- --------
Balance at June 30, 1994 $94,739 $28,315 $(716) $ -- $122,338
======= ======= ===== ======= ========
</TABLE>
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
Six Months Ended
July 1, June 30,
1995 1994
---- ----
Cash flows from operating activities
Net income $ 10,324 $ 10,564
--------- --------
Adjustments to reconcile net income
to net cash from operating activities:
Gain on disposal of Canadian facility (1,582) ---
Depreciation and amortization 7,227 6,041
Deferred income taxes and other 631 1,729
Changes in current assets and liabilities
Accounts receivable and other (1,062) (14,570)
Inventories and customer tooling (5,573) ( 8,408)
Accounts payable and accrued
liabilities 6,546 15,429
--------- --------
Total adjustments 6,187 221
--------- --------
Net cash provided by operating activities 16,511 10,785
--------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (12,245) (10,534)
Investment in marketable securities 1,364 2,209
Proceeds from disposal of Canadian
facility 6,306 ---
--------- --------
Net cash used for investing activities (4,575) (8,325)
--------- --------
Cash flows from financing activities
Issuance of common stock 136 7,202
Maturities of long-term debt (575) (830)
Dividends (2,351) (1,864)
Purchase of treasury shares (138) ---
--------- --------
Net cash from (for) financing activities (2,928) 4,508
--------- --------
Net change in cash and short-term investments 9,008 6,968
Cash and short-term investments at beginning
of year 175 6,767
--------- --------
Cash and short-term investments at end of
second quarter $ 9,183 $ 13,735
========= ========
<PAGE>
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)
July 1, December 31,
1995 1994
---- ----
Raw materials $17,705 $21,301
Work in process and
finished goods 13,923 13,037
LIFO reserve (762) (762)
------- -------
$30,866 $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 Six Months Ended
July 1, June 30, July 1, June 30,
1995 1994 1995 1994
____ ____ ____ ____
Primary 10,684 10,962 10,682 10,783
Fully-diluted 12,955 13,232 12,953 13,053
<PAGE>
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.
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 July 1, 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 July 1, 1995, there were options outstanding for 278,500
shares at an average exercise price of $12.375 under the 1994 stock
compensation plan. Also at July 1, 1995, there were options
outstanding for 15,750 shares at an average exercise price of $6.364
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.
<PAGE>
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 six months ended July
1, 1995 reflects the sale of Excel Metalcraft, Ltd. Cash flow from
operations totalled $16.5 million in the six months ended
July 1, 1995. Investment in inventories and customer tooling
increased $5.6 million due to tooling for new programs. This increase
was offset by an increase of $6.5 million in trade accounts payable
and accruals. Capital expenditures in the first half totalled $12.2
million and dividends paid totalled $2.4 million.
The Company received $6.3 million from the sale of Excel Metalcraft,
Ltd. Cash and short-term marketable securities amounted to $47.3
million at July 1, 1995, an increase of $7.6 million from December 31,
1994.
Material Changes in Results of Operations:
Quarter Ended July 1, 1995 Compared to
Quarter Ended June 30, 1994
Sales in the second quarter of 1995 decreased 2% or $3.0 million to
$158.7 million from the $161.7 million in 1994. The decrease occurred
primarily in sales of regulators. Modular window sales were down
$10.6 million compared with a $9.3 million gain in drop glass sales.
Overall second quarter production of light vehicles in North America
totalled approximately 3.7 million units, compared to 3.8 million
units in the year ago quarter.
Gross profit was $15.4 million in the current quarter or 9.7% of sales
down from gross profit of $17.3 million or 10.7% of sales in the
second quarter of 1994. The decrease in gross profit in the quarter
is due to the decreased sales, a change in product mix (.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 $8.6 million
in the second quarter up from $8.2 million in the 1994 second quarter.
Increases incurred in personnel costs, travel, consultants for KAIZEN
and employee empowerment training and depreciation on engineering CAD
equipment.
Interest expense totalled $837,000 in 1995 and compares with $844,000
in the year ago second quarter.
Other income of $512,000 consists primarily of interest income on
marketable debt securities. Other income in 1994 of $325,000 was
lower due to recording $200,000 for Excel's share of start-up losses
in the joint venture in Brazil.
Provision for taxes on income was at an effective rate of 37% as for
both 1995 and 1994.
<PAGE>
Material Changes in Results of Operations:
Six Months Ended July 1, 1995 Compared to
Six Months Ended June 30, 1994
Sales in the first half of 1995 increased 2% or $7.0 million to $320.7
million from the $313.7 million in 1994. The increased sales occurred
primarily in automotive original equipment products in the first
quarter. Overall first half production of light vehicles totalled
approximately 7.5 million units in both 1995 and 1994.
Gross profit was $32.4 million in the current half or 10.1% of sales
down from gross profit of $33.8 million or 10.8% of sales in the first
half of 1994. The decrease in gross profit in the half is due to a
change in product mix (.5%), 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 $17.0
million in the first half up from $16.0 in the 1994 first half. The
increase was due to increases in consulting fees (KAIZEN and employee
empowerment programs), personnel costs, travel and depreciation.
Interest expense totalled $1,672,000 in 1995 and compares with
$1,683,000 in the year ago first half.
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 $1,075,000 consists primarily of interest income on
marketable debt securities. Other income in 1994 of $666,000 was
lower due to recording $200,000 for Excel's share of operating losses
in the joint venture in Brazil from production start-up and due to
changes in interest rates.
Provision for taxes on income was at an effective rate of 37% for both
1995 and 1994.
<PAGE>
PART II. OTHER INFORMATION
All items in Part II are either not applicable or answerable in the
negative.
<PAGE>
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 7, 1995 s/ James J. Lohman
James J. Lohman
Chairman and
Chief Executive Officer
Date: August 7, 1995 s/ Joseph A. Robinson
Joseph A. Robinson
Secretary/Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-01-1995
<CASH> 9,183
<SECURITIES> 38,156
<RECEIVABLES> 81,661
<ALLOWANCES> 713
<INVENTORY> 30,866
<CURRENT-ASSETS> 187,339
<PP&E> 130,449
<DEPRECIATION> 65,122
<TOTAL-ASSETS> 268,218
<CURRENT-LIABILITIES> 85,821
<BONDS> 0
<COMMON> 94,967
0
0
<OTHER-SE> 35,647
<TOTAL-LIABILITY-AND-EQUITY> 268,218
<SALES> 320,738
<TOTAL-REVENUES> 320,738
<CGS> 288,363
<TOTAL-COSTS> 288,363
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,672
<INCOME-PRETAX> 16,387
<INCOME-TAX> 6,063
<INCOME-CONTINUING> 10,324
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,324
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.87
</TABLE>
