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 29, 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 July 10, 1996, there were issued and outstanding 10,711,299 common
shares, no par value.
<PAGE> EXCEL INDUSTRIES, INC.
<TABLE>
Index
<CAPTION>
Page
Number
<S> <C> <C>
PART I Financial Information
Consolidated Balance Sheets -
June 29, 1996 and December 30, 1995 1
Consolidated Statements of Income -
Quarter Ended June 29, 1996 and July 1, 1995
Six Months Ended June 29, 1996 and
July 1, 1995 2
Consolidated Statements of Shareholders' Equity
Six Months Ended June 29, 1996 and
July 1, 1995 3
Consolidated Statements of Cash Flows -
Six Months Ended June 29, 1996 and
July 1, 1995 4
Notes to Consolidated Financial Statements 5-7
Management's Discussion and Analysis of
Financial Condition and Results of Operation 8-10
PART II Other Information 11
Signatures 12
</TABLE>
<PAGE>
<TABLE> EXCEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands)
<CAPTION>
June 29, December 30,
1996 1995
ASSETS
<S> <C> <C>
Current assets
Cash and short-term investments $ 11,952 $ 391
Marketable securities 22,475 37,416
Accounts receivable 156,375 85,751
Customer tooling to be billed 23,309 26,090
Inventories 50,018 27,298
Prepaid expenses 9,494 7,018
Total current assets 273,623 183,964
Property, plant and equipment,
less accumulated depreciation
(1996 - $79,368; 1995 - $70,536) 158,726 68,997
Goodwill 32,651 6,356
Other assets 11,086 10,201
$476,086 $269,518
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 95,472 $ 57,811
Accrued liabilities 49,128 25,536
Current portion of debt 10,496 9,164
Total current liabilities 155,096 92,511
Long-term debt 131,732 24,021
Other long-term liabilities,
primarily employee benefits 42,882 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 - 11,008;
1995 - 11,003 95,224 95,157
Warrants 1,500 --
Retained earnings 54,992 44,412
Minimum pension liability
adjustment, net of tax (659) (659)
Cumulative translation adjustment (88) --
Treasury shares, at cost,
300 shares (4,593) (4,593)
Total shareholders' equity 146,376 134,317
$476,086 $269,518
NOTE: The balance sheet at December 30, 1995 has been derived
from the audited financial statements at that date.
</TABLE>
<PAGE>
<TABLE> EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(thousands, except per share amounts)
<CAPTION>
Quarter Ended
June 29, July 1,
1996 1995
<S> <C> <C>
Net sales $274,148 $158,749
Cost of goods sold 238,161 143,387
Gross profit 35,987 15,362
Selling, administrative and engineering expenses 19,827 8,580
Operating income 16,160 6,782
Other income (expense):
Interest expense (2,989) (837)
Other income, net 30 512
Income before income taxes 13,201 6,457
Provision for taxes on income 5,148 2,389
Net income $ 8,053 $ 4,068
Net income per share:
Primary $ 0.75 $ 0.38
Fully diluted $ 0.66 $ 0.35
Cash dividends per share $ 0.11 $ 0.11
Six Months Ended
June 29, July 1,
1996 1995
Net sales $424,755 $320,738
Cost of goods sold 372,865 288,363
Gross profit 51,890 32,375
Selling, administrative and engineering expenses 27,750 16,973
Operating income 24,140 15,402
Other income (expense):
Interest expense (3,798) (1,672)
Disposal of Canadian facility -- 1,582
Other income, net 430 1,075
Income before income taxes 20,772 16,387
Provision for taxes on income 7,836 6,063
Net income $ 12,936 $ 10,324
Net income per share:
Primary $ 1.21 $ 0.97
Fully diluted $ 1.07 $ 0.87
Cash dividends per share $ 0.22 $ 0.22
</TABLE>
<PAGE><TABLE> EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 29, 1996 AND JULY 1, 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 12,936
Dividends (2,356)
Issue warrants for
381,000 shares 1,500
Cumulative translation
adjustment
Shares issued under
employee stock
purchase plan 67
Balance at 6/29/96 $95,224 $1,500 $54,992 $(659)
Balance at 12/31/94 $94,831 $ -- $32,854 $(587)
Net income 10,324
Dividends (2,351)
Purchase of 9,900
treasury shares
Shares issued under
employee stock
purchase plan 136
Balance at 7/1/95 $94,967 $ -- $40,827 $(587)
CUMULATIVE
TRANS. TREASURY
ADJ. SHARES TOTAL
<S> <C> <C> <C>
Balance at 12/30/95 $ -- $(4,593) $134,317
Net income 12,936
Dividends (2,356)
Issue warrants for
381,000 shares 1,500
Cumulative translation
adjustment (88) (88)
Shares issued under
employee stock
purchase plan 67
Balance at 6/29/96 $(88) $(4,593) $146,376
Balance at 12/31/94 $ -- $(4,455) $122,643
Net income 10,324
Dividends (2,351)
Purchase of 9,900
treasury shares (138) (138)
Shares issued under
employee stock
purchase plan 136
Balance at 7/1/95 $ -- $(4,593) $130,614
/TABLE
<PAGE>
<PAGE><TABLE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of dollars)
<CAPTION>
Six Months Ended
June 29, July 1,
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income $ 12,936 $ 10,324
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 11,563 7,227
Deferred income taxes and other 1,688 631
Gain on disposal of Canadian facility -- (1,582)
Changes in current assets and liabilities
Accounts receivable and other (6,417) (1,062)
Inventories and customer tooling 13,380 (5,573)
Accounts payable and accrued
liabilities 7,469 6,546
Total adjustments 27,683 6,187
Net cash provided by operating activities 40,619 16,511
Cash flows from investing activities
Purchase of property, plant and equipment (12,034) (12,245)
Investment in marketable securities 14,941 1,364
Business acquired (58,984) --
Proceeds from disposal of Canadian
facility -- 6,306
Net cash used for investing activities (56,077) (4,575)
Cash flows from financing activities
Issuance of common shares 67 136
New debt 100,000 --
Maturities of long-term debt (70,692) (575)
Dividends (2,356) (2,351)
Purchase of treasury shares -- (138)
Net cash from (for) financing activities 27,019 (2,928)
Net change in cash and short-term investments 11,561 9,008
Cash and short-term investments at beginning
of year 391 175
Cash and short-term investments at end of
second quarter $ 11,952 $ 9,183
</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>
June 29, December 30,
1996 1995
<S> <C> <C>
Raw materials $25,727 $16,911
Work in process and
finished goods 25,047 11,143
LIFO reserve (756) (756)
$50,018 $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 Six Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Primary 10,708 10,684 10,708 10,682
Fully-diluted 12,979 12,955 12,978 12,953
</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 temporary 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.
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. 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.
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 29, 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.
<PAGE>
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, manufactured housing 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 six months ended June 29, 1996 and
July 1, 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>
Six months ended
June 29, July 1,
1996 1995
<S> <C> <C>
Net sales $522,569 $537,619
Net income 14,608 6,102
Net income per share, primary 1.36 0.57
Net income per share, fully diluted 1.20 0.53
</TABLE>
Net income for the six months ended July 1, 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>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Financial Condition:
Cash flow from operations totalled $40.6 million for the six months
ended June 29, 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 six months totalled
$12.0 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. 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 $34.4 million at
June 29, 1996, a decrease of $3.4 million from December 30, 1995.
Material Changes in Results of Operations:
Quarter Ended June 29, 1996 Compared to
Quarter Ended July 1, 1995
Sales in the second quarter of 1996 increased 73% or $115.4 million to
$274.1 million from the $158.7 million in 1995. The acquisition of
Atwood added $109.3 million in 1996.
Gross profit was $36.0 million in the current quarter or 13.1% of
sales, a large improvement over the $15.4 million or 9.7% of sales in
the second quarter of 1995. Part of the increase was due to product
mix as a result of the Atwood operations having gross profits of
$16.7 million or 15.2% of sales. Also, costs were eliminated as a
result of better capacity utilization in our Lawrenceburg, Tennessee,
Pikeville, Tennessee and Toledo, Ohio automotive divisions. In
addition, the second quarter of 1995 had launch costs for new
products.
Selling, administrative and engineering expenses totalled
$19.8 million or 7.2% of sales in the second quarter, up from
$8.6 million or 5.4% of sales in the 1995 second quarter. The
increase was due to the addition of the Atwood expenses
($9.9 million), implementing management information systems in the
Atwood facilities and increasing accruals for management incentive
programs.
<PAGE>
Interest expense totalled $2,989,000 in 1996 up from $837,000 in the
year ago second quarter due to the increased long-term debt
outstanding including new Senior Notes issued in connection with the
Anderson acquisition.
Other income of $30,000 is primarily interest income on marketable
debt securities offset by the recognition of our equity in losses of
our Brazilian joint venture. This was lower than the $512,000 for the
1995 second quarter which included gains on miscellaneous sales of
assets as well as earnings from marketable securities.
Provision for taxes on income was at an effective rate of 39% for the
1996 second quarter compared to 37% 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.
Material Changes in Results of Operations:
Six Months Ended June 29, 1996 Compared to
Six Months Ended July 1, 1995
Sales in the first half of 1996 increased 32.5% or $104.1 million to
$424.8 million from the $320.7 million in 1995. The increased sales
reflect the addition of Atwood less the reduced sales experienced in
the first quarter due to lower passenger car production.
Gross profit was $51.9 million in the current half or 12.2% of sales
up from gross profit of $32.4 million or 10.1% of sales in the first
half of 1995. The increase in gross profit in the half was due to
product mix as a result of the Atwood operations having gross profits
of $16.7 million or 15.2% of sales and continued cost reduction
efforts.
Selling, administrative and engineering expenses totalled
$27.8 million in the first half up from $17.0 million in the 1995
first half. The increase was due to the addition of the Atwood
expense ($9.9 million), implementing management information systems at
the Atwood facilities and increasing accruals for management incentive
programs.
Interest expense totalled $3,798,000 in 1996 up from $1,672,000 in the
year ago first half 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.
Other income of $430,000 consists primarily of interest income on
marketable debt securities offset by the recognition of our equity in
<PAGE>
losses of our Brazilian joint venture. Other income in 1995 of
$1,075,000 was higher due to having more earnings from investments in
marketable securities.
Provision for taxes on income was at an effective rate of 37.7% for
1996, up slightly from 37% 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 in the
second quarter.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is being filed herewith:
(27) Financial Data Schedule
(b) The Registrant filed its Current Report on Form 8-K,
reporting the acquisition of all of the common shares
of Anderson Industries, Inc. on April 3, 1996. On
May 13, 1996, the Registrant filed Amendment No. 1 to
such Form 8-K, reporting the financial information with
respect to such acquisition required under Rules 3-05
and 11 of Regulation S-X.
<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.
EXCEL INDUSTRIES, INC.
(Registrant)
Date: August 12, 1996 s/ James O. Futterknecht
James O. Futterknecht
Chairman, President and
Chief Executive Officer
Date: August 12, 1996 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-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 11,952
<SECURITIES> 22,475
<RECEIVABLES> 157,798
<ALLOWANCES> 1,423
<INVENTORY> 50,018
<CURRENT-ASSETS> 273,623
<PP&E> 238,094
<DEPRECIATION> 79,368
<TOTAL-ASSETS> 476,086
<CURRENT-LIABILITIES> 155,096
<BONDS> 0
0
0
<COMMON> 95,224
<OTHER-SE> 51,152
<TOTAL-LIABILITY-AND-EQUITY> 476,086
<SALES> 424,755
<TOTAL-REVENUES> 424,755
<CGS> 372,865
<TOTAL-COSTS> 400,615
<OTHER-EXPENSES> (430)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,798
<INCOME-PRETAX> 20,772
<INCOME-TAX> 7,836
<INCOME-CONTINUING> 12,936
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,936
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.07
</TABLE>
