FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
____________________________
For the Quarterly Period Ended March 29, 1997
Commission File No. 1-8684
Excel Industries, Inc.
(Exact name of registrant as specified in its charter)
Indiana 35-1551685
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
1120 North Main Street, Elkhart, Indiana 46514
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219)264-2131
Indicate by "X" whether the registrant (a) 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 prior 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 April 17, 1997, there were outstanding 10,727,123 common
shares, no par value.
<PAGE>
<TABLE> EXCEL INDUSTRIES, INC.
Index
<CAPTION>
Page No.
<S> <C> <C>
PART I Financial Information
Consolidated Balance Sheet -
March 29, 1997 and December 28, 1996 1
Consolidated Statement of Income -
Quarter Ended March 29, 1997 and
March 30, 1996 2
Consolidated Statement of Shareholders'
Equity -
Quarter Ended March 29, 1997 and
March 30, 1996 3
Consolidated Statement of Cash Flows -
Quarter Ended March 29, 1997 and
March 30, 1996 4
Notes to Consolidated Financial Statements 5-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II Other Information 12
Signatures 13
Financial Data Schedules Exhibit 27
</TABLE>
<PAGE> EXCEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
March 29, December 28,
1997 1996
ASSETS
<S> <C> <C>
Current assets
Cash and short-term investments $ 6,023 $ 6,580
Marketable securities 35,339 23,981
Accounts receivable 140,660 127,351
Customer tooling to be billed 16,993 17,278
Inventories 43,949 43,960
Prepaid expenses 19,540 19,800
Total current assets 262,504 238,950
Property, plant and equipment,
less accumulated depreciation of
(1997 - $99,478; 1996 - $90,723) 159,161 159,775
Other assets 51,473 44,509
$473,138 $443,234
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 82,950 $ 68,673
Accrued liabilities 57,437 46,583
Current portion of debt 9,480 9,554
Total current liabilities 149,867 124,810
Long-term debt 122,951 123,452
Other long-term liabilities 44,735 44,247
Commitments and contingent liabilities -- --
Shareholders' equity
Preferred shares - no par value,
authorized 1,000 shares,
none issued -- --
Common shares - no par value,
authorized 20,000 shares;
issued and outstanding in 1997, 92,258 92,187
10,723, in 1996, 10,718
Retained earnings 63,614 58,653
Minimum pension liability adjustment (160) (160)
Cumulative translation adjustment (127) 45
Total shareholders' equity 155,585 150,725
$473,138 $443,234
</TABLE>
NOTE: The balance sheet at December 28, 1996 has been derived
from the audited financial statements at that date.
The accompanying notes are an integral part of this statement.
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
March 29, March 30,
1997 1996
<S> <C> <C>
Net sales $251,216 $150,607
Cost of goods sold 220,218 134,704
Gross profit 30,998 15,903
Selling, administrative and
engineering expenses 18,923 7,923
Operating income 12,075 7,980
Interest expense (2,769) (809)
Other income, net 390 400
Income before income taxes 9,696 7,571
Provision for taxes on income 3,394 2,688
Net income $ 6,302 $ 4,883
Net income per share:
Primary $ .59 $ .46
Fully diluted $ .54 $ .41
Cash dividends per share $ .125 $ .11
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE QUARTER ENDED MARCH 29, 1997 AND MARCH 30, 1996
(in thousands)
<TABLE>
<CAPTION>
MINIMUM
PENSION
COMMON RETAINED LIABILITY
SHARES EARNINGS ADJUSTMENT
<S> <C> <C> <C>
Balance at
December 28, 1996 $92,187 $ 58,653 $ (160)
Net income 6,302
Dividends (1,341)
Share options
exercised 5
Shares issued under
employee stock
purchase plan 66
Cumulative
translation
adjustment
Balance at
March 29, 1997 $92,258 $ 63,614 $ (160)
Balance at
December 30, 1995 $95,157 $ 44,412 $ (659)
Net income 4,883
Dividends (1,179)
Shares issued under
employee stock
purchase plan 67
Balance at
March 30, 1996 $95,224 $48,116 $ (659)
The accompanying notes are an integral part of this statement.
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE QUARTER ENDED MARCH 29, 1997 AND MARCH 30, 1996
(in thousands)
<CAPTION>
CUMULATIVE
TRANSLATION TREASURY
ADJUSTMENT SHARES TOTAL
<S> <C> <C> <C>
Balance at
December 28, 1996 $ 45 $ -- $150,725
Net income 6,302
Dividends (1,341)
Share options
exercised 5
Shares issued under
employee stock
purchase plan 66
Cumulative
translation
adjustment (172) (172)
Balance at
March 29, 1997 $ (127) $ -- $155,585
Balance at
December 30, 1995 $ -- $ (4,593) $134,317
Net income 4,883
Dividends (1,179)
Shares issued under
employee stock
purchase plan 67
Balance at
March 30, 1996 $ -- $ (4,593) $138,088
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(in thousands)
<CAPTION>
Quarter Ended
March 29, March 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities
Net income $ 6,302 $ 4,883
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 9,178 4,077
Deferred income taxes and other 1,592 196
Changes in current assets and
liabilities, excluding effect
of acquisition:
Accounts receivable and other (8,707) (5,468)
Inventories and customer tooling 529 9,579
Accounts payable and accrued
liabilities 15,258 7,205
Total adjustments 17,850 15,589
Net cash provided by operating
activities 24,152 20,472
Cash flows from investing activities
Purchase of property, plant and
equipment (8,686) (7,112)
Investment in marketable securities (11,358) (11,814)
Business acquired (2,741) --
Net cash used for investing activities (22,785) (18,926)
Cash flows from financing activities
Issuance of common shares 71 67
Maturities of long-term debt (654) (203)
Dividends (1,341) (1,179)
Net cash used for financing activities (1,924) (1,315)
Net change in cash and short-term investments (557) 231
Cash and short-term investments at
beginning of year 6,580 391
Cash and short-term investments at
end of first quarter $ 6,023 $ 622
Supplemental Schedule of Noncash Activities:
In connection with the restructuring reserve established
for plant closures in March, 1997, goodwill has been increased by
$5,400, which is net of income taxes.
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 of dollars)
<CAPTION>
March 29, December 28,
1997 1996
<S> <C> <C>
Raw materials $24,840 $24,047
Work in process and
finished goods 19,966 20,770
LIFO Reserve (857) (857)
$43,949 $43,960
</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
March 29, March 30,
1997 1996
<S> <C> <C>
Primary 10,722 10,707
Fully diluted 12,387 12,978
</TABLE>
Note 4 - Contingencies
A chemical cleaning compound, trichloroethylene (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. 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 PRPs 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 the EPA Costs and that its cash on hand,
unused lines of credit or cash from operations are sufficient to
fund any required expenditures.
The Company has been named a PRP for costs at seven other
disposal sites. The remedial investigations and feasibility
studies have been completed, and the results of those studies
have been provided to the appropriate agencies. The studies
indicated a range of viable remedial approaches, but agreement
has not yet been reached 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 March 29, 1997 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 - Acquisitions
On April 3, 1996, the Company completed the purchase of all of
the outstanding common shares of Anderson Industries, Inc.
(Anderson).
The accompanying consolidated statement of income for the
quarter ended March 29, 1997 includes the operating results of
Anderson. Pro forma unaudited consolidated operating results of
the Company and Anderson for the three months ended March 30,
1996, assuming the acquisition had been made as of the beginning
of 1996, are summarized below (in thousands except per share
amounts):
<TABLE>
<S> <C>
Net sales $ 248,421
Net income 6,574
Net income per share, primary .61
Net income per share, fully diluted .54
</TABLE>
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.
In the first quarter of 1997 the Company recorded an $8.7
million pre-tax restructuring reserve for closing manufacturing
facilities in 1997 at Rockford, Illinois and Battle Creek,
Michigan which had been acquired as part of the acquisition of
Anderson. The reserve consists of personnel related costs
(mainly severance pay and fringe benefits) and costs related to
the disposals of buildings and equipment. The reserve increased
the associated goodwill by $5.4 million (which is net of income
taxes) and was not a charge to earnings. In addition, the
Company expects that additional expenses including relocation,
start-up and other related costs not covered by the reserve will
be approximately $4.2 million pretax or about 24 cents per share
after tax.
In January, 1997, the Company completed the purchase of the
assets of the Compliance Group located in Greendale, Wisconsin
for approximately $2.7 million in cash. The excess of the
purchase price over the estimated fair value of assets acquired
has been acccounted for as goodwill.
Note 6 - Segment Information and Major Customers
The Company operates in two primary business segments. They
consist of sales to original equipment manufacturers of light
vehicles and sales to the recreational vehicle, mass transit and
heavy truck industries (RV/MT/HT). The following information
summarizes segment information for the Company's primary business
segment.
<TABLE>
<CAPTION>
Light Vehicle RV/MT/HT
Products Products Corporate Total
(000 Omitted)
<S> <C> <C> <C> <C>
Quarter Ended
March 29, 1997
Sales $196,686 $ 54,530 $ -- $251,216
Operating income
(expense) 9,991 4,440 (2,356) 12,075
Depreciation and
amortization expense 6,724 2,139 315 9,178
Quarter Ended
March 30, 1996
Sales $137,078 $ 13,529 $ -- $150,607
Operating income
(expense) 8,664 747 (1,431) 7,980
Depreciation and
amortization expense 3,696 110 271 4,077
March 29, 1997
Assets 306,694 113,656 52,788 473,138
Capital expenditures 6,414 1,907 365 8,686
December 28, 1996
Assets 297,042 106,915 39,277 443,234
Capital expenditures 23,582 4,002 1,625 29,209
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
In 1996, the Company acquired all of the outstanding common
shares of Anderson Industries, Inc., (Anderson) located in
Rockford, Illinois. With this acquisition, the Company
established lines of business to distinguish activities for the
light vehicle segment separate from the recreational vehicles,
mass transit and heavy truck segment (RV/MT/HT). The light
vehicle products segment normally experiences reduced sales
volumes in the months of July, August and December as vacation
periods, model changeover and start-up and holidays affect the
number of production days. The RV/MT/HT products segment is
seasonal in that sales in the quarter October through December
are normally at reduced levels.
Material Changes in Results of Operations:
Quarter Ended March 29, 1997 Compared to
Quarter Ended March 30, 1996
Sales in the first quarter of 1997 increased 67% or $100.6
million to $251.2 million from the $150.6 million in 1996. The
acquisition of Anderson added $98.2 million in 1997. The
remainder of the increase was due to a slight increase in overall
automotive volumes as selling prices remained stable. Increases
in production of our products for light trucks and sport utility
vehicles were offset by decreases in production for passenger
cars. Sales for the light vehicle products segment were $196.7
million in the first quarter of 1997 compared to $137.1 million
in the 1996 period. For the RV/MT/HT products segment sales
increased to $54.5 million in 1997 from $13.5 in 1996. Increases
in both segments were due to the Anderson acquisition.
Gross profit was $31.0 million in the current quarter or 12.3% of
sales, up from $15.9 million or 10.6% of sales in the first
quarter of 1996. The higher gross margin from Anderson had the
effect of increasing overall gross margin by .5 percentage point.
The remaining improvement in margin results from continued
emphasis on cost reductions.
Selling, administrative and engineering expenses totaled $18.9
million in the first quarter of 1997, up from $7.9 million in the
1996 first quarter. The increase was primarily due to the
additional costs associated with the Anderson operations.
Interest expense totaled $2,769,000 in 1997 up from $809,000 in
the year ago first quarter. The increase was due to the
increased long-term debt outstanding including new senior notes
issued in connection with the Anderson acquisition.
Other income of $390,000, which is primarily interest income on
marketable debt securities, was comparable to the $400,000 in the
1996 first quarter.
Provision for taxes on income was at an effective rate of 35% for
1997, down slightly from 35.5% in 1996.
Material Changes in Financial Condition:
For the quarter ended March 29, 1997 cash flow from operations
totaled $24.2 million of which $8.7 million was used for capital
expenditures, $2.7 million for the acquisition of The Compliance
Group and an additional $1.3 million for dividends. Capital
expenditures for the year are estimated to be $50.5 million.
The Company recorded an $8.7 million pre-tax restructuring
reserve in the first quarter of 1997 for closing manufacturing
facilities in 1997 at Rockford Illinois and Battle Creek,
Michigan which had been acquired in 1996 as part of the
acquisition of Anderson. The reserve increased the associated
goodwill by $5.4 million (which is net of income taxes) and was
not a charge to earnings. In addition, the Company expects that
additional expenses including relocation, start-up and other
related costs not covered by the reserve will be approximately
$4.2 million pretax or about 24 cents per share after tax. The
Company estimates that annual savings from the plant closures
will be approximately $7 million to $8 million or 40 cents to 45
cents per share.
In January, 1997, the Company completed the purchase of the
assets of the Compliance Group located in Greendale, Wisconsin
for approximately $2.7 million in cash. The excess of the
purchase price over the estimated fair value of assets acquired
has been accounted for as goodwill.
Cash and short-term marketable securities amounted to $41.4
million at March 29, 1997, an increase of $10.8 million from
December 28, 1996. At March 29, 1997, the Company had available
unused lines of credit of approximately $60 million. For the
remainder of 1997 the Company expects its current cash balances,
operating cash flow and available credit lines to be sufficient
to finance operating cash needs, capital expenditures and any
environmental clean-up requirements.
Forward-Looking Statements
This report contains certain forward-looking statements which
involve certain risks and uncertainties. Such statements are
subject to certain risks and uncertainties which could cause
actual results to differ materially from those anticipated.
Potential risks and uncertainties include economic factors,
concentration of a substantial percentage of sales in a few major
OEM customers, and other business factors. Readers are cautioned
not to place undue reliance on those forward-looking statements
which speak only as of the date of this report.
PART II. OTHER INFORMATION
All items in Part II are either not applicable or answerable in
the negative.
<PAGE>
SIGNATURES
Pursuant to the requirement 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: May 12, 1997 s/ James O. Futterknecht
James O. Futterknecht
Chairman, President and
Chief Executive Officer
Date: May 12, 1997 s/ Joseph A. Robinson
Joseph A. Robinson
Senior Vice President,
Secretary and
Chief Financial Officer
Date: May 12, 1997 s/ Ike K Eikelberner
Ike K. Eikelberner
Vice President,
Corporate Controller
and Chief Accounting
Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 6023
<SECURITIES> 35339
<RECEIVABLES> 143053
<ALLOWANCES> 2393
<INVENTORY> 43949
<CURRENT-ASSETS> 262504
<PP&E> 258639
<DEPRECIATION> 99478
<TOTAL-ASSETS> 473138
<CURRENT-LIABILITIES> 149867
<BONDS> 0
0
0
<COMMON> 92258
<OTHER-SE> 63327
<TOTAL-LIABILITY-AND-EQUITY> 473138
<SALES> 251216
<TOTAL-REVENUES> 251216
<CGS> 220218
<TOTAL-COSTS> 239141
<OTHER-EXPENSES> (390)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2769
<INCOME-PRETAX> 9696
<INCOME-TAX> 3394
<INCOME-CONTINUING> 6302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6302
<EPS-PRIMARY> .59
<EPS-DILUTED> .54
</TABLE>
