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 28, 1996
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 9, 1996, there were issued and outstanding 10,714,297
common shares, no par value.
<PAGE> EXCEL INDUSTRIES, INC.
<TABLE>
Index
<CAPTION>
Page
Number
<S> <C> <C>
PART I Financial Information
Consolidated Balance Sheets -
September 28, 1996 and December 30, 1995 1
Consolidated Statements of Income -
Quarter Ended September 28, 1996 and
September 30, 1995
Nine Months Ended September 28, 1996 and
September 30, 1995 2
Consolidated Statements of Shareholders' Equity
Nine Months Ended September 28, 1996 and
September 30, 1995 3
Consolidated Statements of Cash Flows -
Nine Months Ended September 28, 1996 and
September 30, 1995 4
Notes to Consolidated Financial Statements 5-8
Management's Discussion and Analysis of
Financial Condition and Results of Operation 9-11
PART II Other Information 12
Signatures 13
</TABLE>
<PAGE> EXCEL INDUSTRIES, INC.
<TABLE> CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands)
<CAPTION>
September 28, December 30,
1996 1995
ASSETS
<S> <C> <C>
Current assets
Cash and short-term investments $ 14,937 $ 391
Marketable securities 29,214 37,416
Accounts receivable 140,413 85,751
Customer tooling to be billed 21,424 26,090
Inventories 46,111 27,298
Prepaid expenses 8,404 7,018
Total current assets 260,503 183,964
Property, plant and equipment,
less accumulated depreciation
(1996 - $87,266; 1995 - $70,536) 156,826 68,997
Goodwill 36,090 6,356
Other assets 10,454 10,201
$463,873 $269,518
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 87,991 $ 57,811
Accrued liabilities 45,242 25,536
Current portion of debt 10,555 9,164
Total current liabilities 143,788 92,511
Long-term debt 131,053 24,021
Other long-term liabilities,
primarily employee benefits 41,511 18,669
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 1996 - 11,022;
1995 - 11,003 95,331 95,157
Warrants 1,500 --
Retained earnings 56,036 44,412
Minimum pension liability
adjustment, net of tax (659) (659)
Cumulative translation adjustment 66 --
Treasury shares, at cost,
1996-312 shares; 1995-300 shares (4,753) (4,593)
Total shareholders' equity 147,521 134,317
$463,873 $269,518
</TABLE>
NOTE: The balance sheet at December 30, 1995 has been derived
from the audited financial statements at that date.
<PAGE> EXCEL INDUSTRIES, INC.
<TABLE> CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(thousands, except per share amounts)
<CAPTION>
Quarter Ended
September 28, September 30,
1996 1995
<S> <C> <C>
Net sales $227,635 $126,867
Cost of goods sold 203,703 117,748
Gross profit 23,932 9,119
Selling, administrative and engineering
expenses 17,873 7,840
Operating income 6,059 1,279
Other income (expense):
Interest expense (2,963) (829)
Other income, net 549 2,100
Income before income taxes 3,645 2,550
Provision for taxes on income 1,422 250
Net income $ 2,223 $ 2,300
Net income per share:
Primary $ 0.21 $ 0.22
Fully diluted $ 0.21 $ 0.22
Cash dividends per share $ 0.11 $ 0.11
Nine Months Ended
September 28, September 30,
1996 1995
Net sales $652,390 $447,605
Cost of goods sold 576,568 406,111
Gross profit 75,822 41,494
Selling, administrative and engineering
expenses 45,623 24,813
Operating income 30,199 16,681
Other income (expense):
Interest expense (6,761) (2,501)
Disposal of Canadian facility -- 1,582
Other income, net 979 3,175
Income before income taxes 24,417 18,937
Provision for taxes on income 9,258 6,313
Net income $ 15,159 $ 12,624
Net income per share:
Primary $ 1.42 $ 1.18
Fully diluted $ 1.28 $ 1.09
Cash dividends per share $ 0.33 $ 0.33
</TABLE>
<PAGE>
<PAGE><TABLE> EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(in thousands of dollars)
<CAPTION>
MINIMUM
PENSION
COMMON RETAINED LIABILITY
SHARES WARRANTS EARNINGS ADJUSTMENT
<S> <C> <C> <C> <C>
Balance at 12/30/95 $95,157 $ -- $44,412 $(659)
Net income 15,159
Dividends (3,535)
Issue warrants for
381,000 shares 1,500
Cumulative translation
adjustment
Purchase of 11,700
treasury shares
Shares issued under
employee stock
purchase plan 174
Balance at 9/28/96 $95,331 $1,500 $56,036 $(659)
Balance at 12/31/94 $94,831 $ -- $32,854 $(587)
Net income 12,624
Dividends (3,529)
Purchase of 9,900
treasury shares
Stock options
exercised 57
Shares issued under
employee stock
purchase plan 204
Balance at 9/30/95 $95,092 $ -- $41,949 $(587)
<PAGE>
CUMULATIVE
TRANS. TREASURY
ADJ. SHARES TOTAL
<S> <C> <C> <C>
Balance at 12/30/95 $ -- $(4,593) $134,317
Net income 15,159
Dividends (3,535)
Issue warrants for
381,000 1,500
Cumulative translation
adjustment 66 66
Purchase of 11,700
treasury shares (160) (160)
Shares issued under
employee stock
purchase plan 174
Balance at 9/28/96 $ 66 $(4,753) $147,521
Balance at 12/31/94 $ -- $(4,455) $122,643
Net income 12,624
Dividends (3,529)
Purchase of 9,900
treasury shares (138) (138)
Stock options
exercised 57
Shares issued under
employee stock
purchase plan 204
Balance at 9/30/95 $ -- $(4,593) $131,861
/TABLE
<PAGE>
<PAGE>
<TABLE> EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
<CAPTION>
Nine Months Ended
September 28, September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income $ 15,159 $ 12,624
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 19,361 10,861
Deferred income taxes and other (3,194) (341)
Gain on disposal of Canadian facility -- (1,582)
Changes in current assets and liabilities
Accounts receivable and other 9,918 (1,317)
Inventories and customer tooling 19,172 (8,924)
Accounts payable and accrued
liabilities (651) 8,898
Total adjustments 44,606 7,595
Net cash provided by operating activities 59,765 20,219
Cash flows from investing activities
Purchase of property, plant and equipment (19,625) (17,358)
Investment in marketable securities 8,202 2,309
Business acquired (58,984) --
Proceeds from disposal of Canadian
facility -- 6,306
Net cash used for investing activities (70,407) (8,743)
Cash flows from financing activities
Issuance of common shares 174 261
New debt 100,000 --
Maturities of long-term debt (71,291) (1,474)
Dividends (3,535) (3,529)
Purchase of treasury shares (160) (138)
Net cash from (for) financing activities 25,188 (4,880)
Net change in cash and short-term investments 14,546 6,596
Cash and short-term investments at beginning
of year 391 175
Cash and short-term investments at end of
third quarter $ 14,937 $ 6,771
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activities:
In connection with the purchase of Atwood, the Company had certain
noncash costs totaling $3 million, including the issuance of warrants
valued at $1.5 million.
<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.
Note 2 - Inventories:
<TABLE>
Inventories consist of the following: (in thousands)
<CAPTION>
9/28/96 12/30/95
<S> <C> <C>
Raw materials $24,652 $16,911
Work in process and
finished goods 22,215 11,143
LIFO reserve (756) (756)
$46,111 $27,298
</TABLE>
Note 3 - 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):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
9/28/96 9/30/95 9/28/96 9/30/95
<S> <C> <C> <C> <C>
Primary 10,707 10,693 10,708 10,686
Fully-diluted 12,977 12,964 12,978 12,956
</TABLE>
Note 4 - 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 remedial action in the nature of air-stripping towers.
<PAGE>
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. On September 5, 1996, the United States Department of Justice
lodged with the United States District Court for the Northern District
of Indiana a proposed partial consent decree which specifies payment
of Federal Past Response Costs from certain PRP's which for Excel
amounted to approximately $3.2 million which together with amounts due
IDEM would bring Excel's total obligation to approximately
$3.4 million. This consent decree has not been accepted by the Court,
and comments objecting to the consent decree have been lodged with the
United States Department of Justice.
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. 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 seven other
disposal sites. The remedial investigations and feasibility studies
have been completed, and the results of those studies forwarded to the
EPA. The studies indicated a range of viable remedial approaches, but
agreement has not yet been reached with the EPA on the final
remediation approach. Furthermore, the PRPs for these sites have not
reached an agreement on the allocation of costs between the PRPs. The
Company believes it either has no liability as a responsible party or
that adequate provisions have been recorded for current estimates of
the Company's liability and estimated legal costs associated with the
settlement of these claims. It is reasonably possible that the
Company's recorded estimate of its obligation may change in the near
term.
<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 28, 1996 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 5 - Acquisition
On April 3, 1996, the Company completed the purchase of all of the
outstanding common shares of Anderson Industries, Inc. (Anderson) for
approximately $62,562,000 including five-year warrants for 381,000
shares of Excel common stock exercisable at $13.25 per share and
expenses of the transaction. The Company also assumed approximately
$85 million of Anderson's debt. On April 1, 1996, the Company entered
into a $120,000,000 Credit Agreement to facilitate the completion of
this acquisition. On May 3, 1996, the Company borrowed $100,000,000
in 7.78% Senior Notes payable for 15 years in semi-annual installments
beginning in 2000.
Anderson, located in Rockford, Illinois, is a holding company whose
main asset is Atwood Industries, Inc. Atwood Industries manufactures
products for the automotive and recreational vehicle industries and is
headquartered in Rockford, Illinois.
The acquisition of Anderson was accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair market values. The excess of
the purchase price over the estimated fair value of net assets
acquired has been accounted for as goodwill and is being amortized
over 35 years using the straight line method. This allocation was
based on preliminary estimates and may be revised at a later date.
The accompanying consolidated statements of income include the
operating results of Anderson since the effective date of the
acquisition. Pro forma unaudited consolidated operating results of
the Company and Anderson for the nine months ended September 28, 1996
and September 30, 1995, assuming the acquisition had been made as of
the beginning of 1996 and 1995, are summarized below (in thousands
except per share amounts):
<TABLE>
<CAPTION>
Nine months ended
9/28/96 9/30/95
<S> <C> <C>
Net sales $750,204 $755,135
Net income 16,831 6,837
Net income per share, primary 1.57 0.64
Net income per share, fully diluted 1.41 0.63
</TABLE>
Net income for the nine months ended September 30, 1995, includes a
charge which reduced net income by $4,978,000 for a warranty issue on
a component part manufactured by Atwood that was recalled by a major
automotive customer.
The unaudited pro forma financial information presented is not
necessarily indicative either of the results of operations that would
have occurred had the transactions been completed on the indicated
dates or of future results of operations of the combined companies.
<PAGE>
<PAGE> MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Financial Condition:
Cash flow from operations totalled $59.8 million for the nine months
ended September 28, 1996 which was in part attributed to the
completion of customer tooling projects and the concerted effort to
reduce inventories. Capital expenditures in the first nine months
totalled $19.6 million of the total budgeted $37.0 million for the
year.
On April 3, 1996, the Company completed the purchase of all of the
outstanding common shares of Anderson Industries, Inc. (Anderson) for
approximately $62,562,000 including five-year warrants for 381,000
shares of Excel common stock exercisable at $13.25 per share and
expenses of the transaction. The Company also assumed approximately
$85 million of Anderson's debt. On April 1, 1996 the Company entered
into a $120,000,000 Credit Agreement to facilitate the completion of
this acquisition. On May 3, 1996 the Company issued 7.78% Senior
Notes for $100,000,000 at which time the Credit Agreement was amended
to reduce the committed line of credit to $60,000,000. Interest only
is payable in quarterly installments until 2000 at which time
principal and interest payments will be made to 2015.
Anderson, located in Rockford, Illinois, is a holding company whose
main asset is Atwood Industries, Inc. Atwood Industries manufactures
products for the automotive, manufactured housing and recreational
vehicle industries and is headquartered in Rockford, Illinois.
Cash and short-term marketable securities amounted to $44.2 million at
September 28, 1996, an increase of $6.4 million from December 30,
1995.
Material Changes in Results of Operations:
Quarter Ended September 28, 1996 Compared to
Quarter Ended September 30, 1995
Sales in the third quarter of 1996 increased 79% or $100.7 million to
$227.6 million from the $126.9 million in 1995. The acquisition of
Atwood added $90.4 million in 1996.
Gross profit was $23.9 million in the current quarter or 10.5% of
sales, a large improvement over the $9.1 million or 7.2% of sales in
the third quarter of 1995. Part of the increase was due to product
mix as a result of the Atwood operations having gross profits of
$8.7 million or 9.7% of sales. Additionally, emphasis on cost
reduction and lack of significant launch costs as incurred in 1995
contributed to improved margin performance.
Selling, administrative and engineering expenses totalled
$17.9 million or 7.9% of sales in the third quarter, up from
$7.8 million or 6.2% of sales in the 1995 third quarter. The increase
was due to the addition of the Atwood expenses ($8.4 million) and
increases in salary, fringes and related costs associated with
engineering design and development activities.
<PAGE>
Interest expense totalled $2,963,000 in 1996 up from $829,000 in the
year ago third quarter due to the increased long-term debt outstanding
including new Senior Notes issued in connection with the Anderson
acquisition.
Other income of $549,000 is primarily interest income on marketable
debt securities. Other income of $2,100,000 in the 1995 third quarter
included $1,450,000 from executive life insurance proceeds.
Provision for taxes on income was at an effective rate of 39% for the
1996 third quarter compared to 10% for the same quarter in 1995. The
increase was due to the effect of the increased blended state income
tax rates which resulted from the inclusion of Atwood Industries
operating results and due to non-taxable life insurance proceeds.
Material Changes in Results of Operations:
Nine Months Ended September 28, 1996 Compared to
Nine Months Ended September 30, 1995
Sales in the first nine months of 1996 increased 45.8% or $204.8
million to $652.4 million from the $447.6 million in 1995. The
increased sales reflect the addition of Atwood of $199.7 million.
Gross profit was $75.8 million in the first three quarters of 1996 or
11.6% of sales up from gross profit of $41.5 million or 9.3% of sales
in the first three quarters of 1995. The increase in gross profit was
due to product mix as a result of the Atwood operations having gross
profits of $25.4 million or 12.7% of sales and continued cost
reduction efforts.
Selling, administrative and engineering expenses totalled $45.6
million in the first three quarters of 1996 up from $24.8 million in
the same period in 1995. The increase was due to the addition of the
Atwood expense ($18.2 million) and increases in salary, fringes and
related costs associated with engineering design and development
activities.
Interest expense totalled $6,761,000 in 1996 up from $2,501,000 in the
year ago first three quarters due to the increased long-term debt
outstanding including new Senior Notes issued in connection with the
Anderson acquisition.
Included in income in 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>
<PAGE>
Other income of $979,000 consists primarily of interest income on
marketable debt securities offset by the recognition of our equity in
losses of our Brazilian joint venture. Other income in 1995 of
$3,175,000 was higher due to having more earnings from investments in
marketable securities and proceeds from executive life insurance.
Provision for taxes on income was at an effective rate of 37.9% for
1996, up from 33.3% in 1995. The increase was due to the effect of
the increased blended state income tax rates which resulted from the
inclusion of Atwood Industries operating results starting in the
second quarter and due to the life insurance proceeds being non-
taxable.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
All items in Part II are either not applicable or answerable in the
negative.
<PAGE>
<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.
<TABLE>
<CAPTION>
EXCEL INDUSTRIES, INC.
(Registrant)
<S> <C>
Date: November 13, 1996 s/ James O. Futterknecht
James O. Futterknecht
Chairman, President and
Chief Executive Officer
Date: November 13, 1996 s/ Joseph A. Robinson
Joseph A. Robinson
Secretary/Treasurer and
Chief Financial Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 14,937
<SECURITIES> 29,214
<RECEIVABLES> 142,278
<ALLOWANCES> 1,865
<INVENTORY> 46,111
<CURRENT-ASSETS> 260,503
<PP&E> 244,092
<DEPRECIATION> 87,266
<TOTAL-ASSETS> 463,873
<CURRENT-LIABILITIES> 143,788
<BONDS> 0
0
0
<COMMON> 95,331
<OTHER-SE> 52,190
<TOTAL-LIABILITY-AND-EQUITY> 463,873
<SALES> 652,390
<TOTAL-REVENUES> 652,390
<CGS> 576,568
<TOTAL-COSTS> 622,191
<OTHER-EXPENSES> (979)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,761
<INCOME-PRETAX> 24,417
<INCOME-TAX> 9,258
<INCOME-CONTINUING> 15,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,159
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.28
</TABLE>
