SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF
THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 2, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d)
OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 1-302
ARVIN INDUSTRIES, INC.
(Exact name of Registrant as specified in its
charter)
Indiana 35-0550190
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Noblitt Plaza, Box 3000
Columbus, IN 47202-3000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) 379-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Shares par value New York Stock Exchange
$2.50 (voting), together with Chicago Stock Exchange
Preferred Share Purchase Rights
7.5 percent Convertible Subordinated Debentures
due 2014 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark 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 .
The aggregate market value of the voting stock held by non
affiliates of the Registrant was $718,961,880 as of February
6, 1994.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of the
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form
10-K or any amendment to Form 10-K. [ ]
As of February 24, 1994, the Registrant had outstanding
22,134,813 Common Shares (excluding treasury shares), $2.50
par value.
Documents Incorporated By Reference
-----------------------------------
Selected portions of the Definitive Proxy Incorporated into Parts
Statement for the Annual Meeting of III & IV
Shareholders to be held April 14, 1994.
Index to Annual Report
on Form 10-K
Fiscal Year Ended January 2, 1994
Part I
Item 1. -- Business
Item 2. -- Properties
Item 3. -- Legal Proceedings
Item 4. -- Submission of Matters to a Vote of Security Holders
Part II
Item 5. -- Market for Registrant's Common Equity and Related Shareholder
Matters
Item 6. -- Selected Financial Data
Item 7. -- Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 8. -- Financial Statements and Supplementary Data
Item 9. -- Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Part III
Item 10. -- Directors and Executive Officers of the Registrant
Item 11. -- Executive Compensation
Item 12. -- Security Ownership of Certain Beneficial Owners and Management
Item 13. -- Certain Relationships and Related Transactions
Part IV
Item 14. -- Exhibits, Financial Statement Schedules and Reports on Form 8-K
Other
Signatures
PART I
ITEM 1. BUSINESS
As used in this report, the term "Registrant", "Arvin",
"Management" or "Company" means Arvin Industries, Inc. and
its subsidiaries, unless the context otherwise requires.
Arvin is a diversified international manufacturing company
supplying automotive parts and a variety of other products
and services through ten operating entities in the U.S.
and numerous other parts of the world.
Since its founding in 1919 Arvin has grown through internal
development, acquisition and joint venture opportunities. In
recent years, the Company's strategy has been to strengthen
its automotive parts businesses by achieving a balance
between sales to both original equipment manufacturers and
replacement parts suppliers on a global basis. In
September, 1989 the Company purchased 75 percent of
AP Amortiguadores of Spain ("APA"). APA is a leading
European manufacturer of automotive original equipment ride
control products. In 1990 the Company acquired Tubauto's engine
manifold and exhaust tube business located in France, as well as a 40
percent interest in a new joint venture, Arvin-Tubemakers Pty
Ltd., an Australian manufacturer of original equipment
exhaust systems. During the second quarter of 1992, the
Company acquired a 50 percent interest in Schmitz & Brill
GmbH, a German-based automotive parts manufacturer. The
Company completed three strategic alliances during the
third quarter of 1993. First, the Company's Calspan
subsidiary was merged with Space Industries, Inc. The Company
owns approximately 70 percent of the new company, Space
Industries International, Inc. Second, the Company acquired
a 49.9 percent interest in Way Assauto S.r.l. located in
Asti, Italy. Way Assauto manufactures shock absorbers,
MacPherson struts and related parts and stampings for the
original equipment market. Finally, the Company formed a
50/50 replacement market exhaust joint venture with Sogefi
S.p.A. located in Mantova, Italy. The new venture includes
Sogefi's formerly wholly owned subsidiaries Etablissements
Rosi, with manufacturing and distribution facilities in
France, and Ansa Marmitte, with manufacturing and
distribution facilities in Italy, and a portion of the
operating assets of the Company's Timax business unit. These
acquisitions continue the strategic focus of increasing the
Company's presence in global automotive parts markets.
During the second quarter of 1989, the Company adopted a
formal plan to dispose of the ArvinAir division, a
manufacturer of evaporative cooling products, portable
electric heaters and wind turbine home attic ventilators. The
sale of this business was completed during January 1991. The
impact of this divestiture is not material to the Company's
consolidated financial results.
Additional information on the above events is contained
in NOTE 2 located at item 8 herein.
Operations
A. Business Segments
The Company's products and services are classified based
upon four primary market segments served: Automotive Original
Equipment, Automotive Replacement, Technology and Industrial.
Manufacturing facilities for the Automotive Original
Equipment, Automotive Replacement and Industrial segments are
located in the United States, Canada, Mexico, France, Brazil,
South Africa, The Netherlands, Spain, Italy and the United Kingdom, and
incorporate highly mechanized production lines for stamping,
welding, assembling, testing, laminating, coil coating,
rubber molding, and brass forming.
Principal raw materials for these three segments are
stainless, aluminized, galvanized, cold-rolled and vinylclad
steel; aluminum sheets; and paint, brass, rubber, oil and
zinc, all of which are available from a number of primary
suppliers.
Automotive Original Equipment:
Principal products of the Automotive Original Equipment
segment are exhaust systems (mufflers, exhaust and tail
pipes, catalytic converters, tubular manifolds), ride control
products (shock absorbers and MacPherson struts), gas
springs, vacuum actuators, metal tubular parts, coated
coil steel, press-molded thermoplastics, various other vinyl
metal stampings, and both tube and tubeless tire valves.
Arvin is a leading producer of original equipment exhaust
systemssold to Ford, General Motors, Chrysler, Diamond-Star Motors
and Mazda. The Company's Cheswick business unit is a leading producer
of original equipment exhaust systems sold to Ford (Europe), Volvo,
Jaguar, Seat and Nissan. Additionally, the Company's joint
venture with Sango Co., Ltd. of Japan supplies exhaust systems for
Toyota and Nummi Motors (GM/Toyota) vehicles manufactured in the
United States and Canada. The Company's Way Assauto joint
venture supplies shock absorbers to Fiat vehicles manufactured
in Italy. The Company is also a major supplier of catalytic
converters to Chrysler and supplies original equipment shock
absorbers to Ford, Chrysler and Nissan in the United States.
The Company's APA subsidiary also supplies ride control products
to European automotive original equipment market customers Ford,
Renault, Seat and Nissan.
In addition to exhaust systems and ride control products,
Arvin also supplies parts for the Automotive Original
Equipment segment. Arvin's Roll Coater subsidiary is a
leading independent coater of coil steel which is used in fabricating
automobile and truck body parts. Schrader Automotive Inc.
("Schrader") is a leading worldwide producer of valves for
pneumatic tires and inner tubes sold directly to automobile,
truck and tire manufacturers. Arvin also produces a
variety of decorative interior and exterior trim parts,
stampings and vinyl-metal laminates, diesel engine oil pans
and other fabricated metal parts for manufacturers of both
automobiles and heavy-duty trucks and also produces press
molded thermoplastics and other assembled metal components
for original equipment applications.
The majority of the Company's products sold in this segment
are handled by Arvin sales staff located throughout the U.S.
and Europe.
Automotive Replacement:
Principal products of the Automotive Replacement segment
include replacement mufflers, exhaust and tail pipes,
catalytic converters, shock absorbers, MacPherson struts, gas
springs, brake and front-end parts, tire valves and
accessories.
Through Maremont Exhaust, Timax Exhaust Systems (formerly Bainbridge),
Etablissements Rosi and Ansa Marmitte, the Company is a leading worldwide
manufacturer and supplier of replacement exhaust systems and
through Gabriel Ride Control the Company is a leading North
American manufacturer and supplier of replacement shocks and
other ride control products. Products are marketed under both
customers' private labels as well as under the Company's own
brand names: "Maremont", "Cherry Bomb", "TIMAX",
"Truckmaster" and "Romax" for mufflers, "Gabriel" for shock
absorbers and "Strong Arm" for gas springs. Maremont Exhaust
and Gabriel Ride Control distribute their products through
mass merchandisers (e.g. Sears, K-Mart), installers (e.g.
Meineke, Firestone) and wholesale distributors (e.g. Parts
Inc., Carquest). In Europe, significant customers for Timax
Exhaust Systems include KwikFit and Partco.
Schrader is a worldwide leading supplier of tire valves and
related accessories to the replacement parts market. Schrader
products, which enjoy strong brand name recognition, are sold
through a broad range of distribution channels, including
automotive warehouse distributors and mass merchandisers.
All products in this segment are sold by a combination of
the Company's own sales force and independent manufacturer's
representatives.
Technology:
In the Technology segment, the Company's merger of its
Calspan subsidiary with Space Industries, Inc. resulted in
the Company owning approximately 70 percent of the new Space
Industries International, Inc. (SIII). The Calspan business
unit of SIII performs research, development and testing
services on a contract basis for both government (primarily
the Air Force, the National Aeronautics and Space
Administration, the Navy and the Department of
Transportation) and industry. Services include development
and evaluation of aerodynamics, automobile crash testing and
accident research, tire performance, restraint systems,
aircraft systems, electronic systems analysis, surface and
laser chemistry, non-destructive material evaluation, and networked
computer systems. Calspan also manufactures sophisticated
electronic monitoring systems, manages government-owned
research facilities on a fixed-term contract basis, and
operates its own wind tunnel and flight training simulators.
The Space Industries business unit of SIII develops and
designs products and services primarily for aerospace
applications.
Facilities for SIII are located in the U.S. SIII employs primarily
scientists and other research-oriented employees.
Industrial:
In the Industrial segment, Roll Coater supplies pre-coated
coils of steel and aluminum to manufacturers of preengineered
buildings, office furniture, metal shelving and housings for
refrigerators, washers and dryers. Roll Coater also has a
metal embossing line which enables it to offer embossed
designs on prepainted finishes such as metal garage and
refrigerator doors. The Industrial segment also produces
vinylmetal laminate wraps to customer specifications for
use in such products as cabinets for consumer appliances
and electronic components.
Schrader provides the Industrial segment with valves and
valve cores for various commercial applications. In addition,
Gabriel Ride Control supplies customers in this segment with
special application shock absorbers.
The Company's products in this segment are marketed by the Arvin
sales staff and/or independent manufacturers' representative
organizations located throughout the U.S.
Selected information by business segment is contained in
NOTE 13 located at item 8 herein.
B. Number of Employees
Currently the Company has approximately 15,900 employees.
C. Competition and Customer Relationships
Each of the business segments in which the Company engages is highly
competitive. Customer loyalty developed through longstanding
relationships is a primary element of competition. The
Company's longstanding relationships with its principal
customers has been dependent upon the Company's ability to
meet such customers' quantity and quality requirements in a
timely manner.
The loss of a principal customer, or a significant decline
in the requirements for the Company's products (resulting,
for example, from a prolonged strike against the customer)
could have a materially adverse effect on the operating
results or financial condition of the Company. In 1993, the
Company had sales to three customers that equaled or exceeded
10% of its consolidated net sales, Ford Motor Company-15.2 percent,
General Motors-10.2 percent, and the U.S. Government-10.0
percent.
In the OE segment, the Company competes with vehicle
manufacturers and independent suppliers. The Company
believes that it is the leading supplier among four major
competitors in the North American OE exhaust systems market
and one of the leaders among nine major competitors in
Western Europe. For OE ride control products, the Company
believes that it is one of the three largest suppliers in the
North American market and one of seven major suppliers in
Western Europe. The Company believes that it is the leading
worldwide supplier of OE tubeless tire valves.
The Company also competes with vehicle manufacturers and
independent suppliers in the Replacement segment. The
Company believes that it is one of four primary suppliers in
the North American replacement exhaust systems market and the
leader of five major suppliers in western Europe. The
Company is one of two major suppliers in the North American
replacement ride control products market and is one of
several suppliers in western Europe. The Company believes
that it is the leading worldwide supplier of Replacement tire
valves.
The customer base for the Company's products in its
Industrial segment (non-automotive derivatives of products
sold in the OE and Replacement segments; vinyl-metal
laminates; precoated steel coils) is large and the market is
highly fractionalized. As a result, it is not possible for
the Company to estimate its market position in this segment.
In the Technology segment the Company competes with numerous private
contractors for the research, development, testing and
evaluation business of federal government agencies. Business
in this segment is generally obtained through sole sourced
negotiated contracts, competitive bidding on fixed-price or
cost-plus fixed-fee service contracts and research and
development contracts or cost plus award fee contracts for
the management and operation of government-owned research and
testing facilities. Because of the nature of government
contracting, it is not possible for the Company
to estimate its market position in this segment.
D. Regulations
United States air pollutant emissions as well as acoustical
emissions are controlled by government regulations that,
coupled with mandated fuel economy improvements, continue to
affect Arvin. Over the near term the Company does not
anticipate any regulatory changes that will materially impact
the use of catalytic converters in the United States.
European air pollutant emissions regulations continue to
become more stringent and are currently on a country by
country basis. The Company anticipates that the European Community will
continue to phase in emission control standards in the future. Such
emission control regulations will mandate the use of
catalytic converters and/or other emissions control devices,
and should have a positive impact on the results of
operations for the Company.
Arvin believes its facilities either comply with applicable
environmental control regulations or remedial action is being
taken to bring such facilities into compliance. While Arvin
does not believe that continuing compliance will have a
material effect on its competitive condition, some additional
capital expenditures and other expenses will be required to
maintain compliance with such regulations.
E. Patents
The Company owns a considerable number of patents and
patent applications which are, in its judgment, adequate for,
but not essential to, the conduct of its businesses.
ITEM 2. PROPERTIES
The Company has manufacturing facilities, distribution
outlets, sales offices and research centers located throughout the world.
Automotive Original Equipment:
The Company utilizes approximately 4,391,000 square feet to
conduct its business activities related to the OE segment.
Principal manufacturing facilities in the United States are
located in Columbus, Indiana, Franklin, Indiana, Greenwood,
Indiana, Dexter, Missouri, Fayette, Alabama and Pulaski,
Tennessee. The facilities in Columbus, Indiana and Franklin,
Indiana are owned while the other principal manufacturing
facilities are leased (capital leases financed by industrial
revenue bonds). Principal sales offices for this segment are
leased in Rochester Hills, Michigan.
Although productive capacity in the United States
automotive industry exceeds demand, the Company's original
equipment facilities are currently nearly fully utilized. Due
to the cyclical nature of the automotive industry,
anticipated growth in the Company's volume should utilize any
excess capacity.
Principal manufacturing facilities outside of the United
States are located in the United Kingdom, Spain, The
Netherlands, Italy and Canada. Additional manufacturing
activities are conducted in South Africa, France, Brazil and
Mexico. The Company's facilities in these countries are
adequate for its current level of business. While most
facilities are nearly fully utilized, some European
facilities have excess capacity. In order to meet increased
catalytic converter demand in Europe, the Company has
constructed a second European converter plant in The
Netherlands.
Automotive Replacement Parts:
The Company utilizes approximately 3,634,000 square feet of
space to conduct its Replacement parts business.
Principal manufacturing facilities located within the
United States are in Loudon, Tennessee, Chickasha, Oklahoma
and Pulaski, Tennessee. These facilities are nearly fully
utilized and provide the Company adequate productive
capacity. Also, the United States Replacement operations
lease a warehouse in Utah from which its products are
distributed. The Company no longer utilizes warehouses that
charge a volume based fee. Warehouses previously utilized
currently purchase inventory outright as independent customers.
Principal Manufacturing facilities located outside the U.S.
are in the United Kingdom and Canada. Other manufacturing
activities are conducted in Italy, South Africa, France and
Brazil. The major distribution center, in Blackpool,
England, is leased as are many other smaller distribution
centers in the United Kingdom and The Netherlands. The
Company considers these facilities adequate to conduct its
business.
Technology:
The Company utilizes approximately 1,639,000 square feet
to conduct its research and testing activities. Approximately
51% of the square footage used is provided by the U. S.
government while about 30% is owned and the remainder is
leased. Research Centers are located in New York, Virginia,
Massachusetts, California, Texas, Florida, Pennsylvania,
Ohio, Alabama and Tennessee. The Company's research centers
are nearly fully utilized and are considered adequate and
suitable for conducting its research activities.
Industrial:
The Company utilizes 766,000 square feet to conduct
business activities related to this segment. Principal
manufacturing facilities are located in Kingsbury, Indiana,
Greenfield, Indiana and Columbus, Indiana. Additional
manufacturing activities are conducted in Monroe, North
Carolina and France. These facilities are nearly
fully utilized and adequate for conducting the current level
of business.
ITEM 3. LEGAL PROCEEDINGS
As previously reported, the Company is defending legal
actions arising from the May 1987 sale of Saco Defense Inc.
("Saco"), a former Maremont subsidiary, to Chamberlain Mfg.
Corporation ("Chamberlain"), a subsidiary of Duchossois
Industries, Inc.
One suit, filed by Chamberlain, is based on assertions that
there were at the time of the stock sale known defects in products
manufactured by Saco under contracts with the Air Force. On
December 15, 1993, an order was entered dismissing the Company
as a defendant in this case, but Maremont still remains a defendant.
Chamberlain also made a so-called "Voluntary Disclosure" to the
United States Government regarding the alleged product defects, as
a result of which a jury investigation was conducted in Portland, Maine.
It is the Company's understanding that the grand jury has expired
and that no indictments were returned against any present or former
Maremont or Saco employees.
Chamberlain filed a further suit against the Company and Maremont
in January, 1992, also in the United District Court for the Northern
District of Illinois, alleging that the Company failed to disclose
Saco's liability for certain workers' compensation claims outstanding
at the date of sale. Formal discovery is in the final stages in this
case and has been completed in the product defects lawsuit. No trial
date has been set in either case.
In December, 1991 the United States Government filed a
civil suit against Maremont in the United States District
Court for the District of Maine asserting claims under the
False Claims Act based upon Saco's alleged knowing shipment
of defective products under the aforesaid Air Force contracts,
asking $9 million in damages. This lawsuit was settled in 1992.
The Company is also defending various environmental claims
and legal actions that arise in the normal course of
business, including matters in which the Company has been
designated a potentially responsible party at certain waste
disposal sites or has been notified that it may be a
potentially responsible party at other sites as to which no
proceedings have been initiated. Neither the remediation
method, amount of remediation costs nor the allocation among
potentially responsible parties has been determined at the
majority of these sites. At some of these sites the
information currently available leads the Company to believe
it has very limited or even de minimis responsibility.
At the Company's former Platt Saco Lowell operations, the
Company is a participant with the EPA and the current owner
in a corrective action proceeding under the Resource
Conservation and Environmental Recovery Act. Ground water
and surface treatment facilities have been installed as
interim measures. A final phase remediation feasibility
study is expected to commence in 1994 to identify potential
remediation alternatives and related cost estimates. Pending
completion of such study the Company does not possess sufficient
information to reasonably estimate its remediation costs at
Platt Saco Lowell beyond provisions already recorded.
The Company has provided for reasonably estimable costs of study,
cleanup, remediation and certain other environmental matters,
taking into account, as applicable, available information
regarding site conditions, potential cleanup methods
and the extent to which other parties can be expected to
bear those costs. The Company does not expect that
resulting liabilities beyond provisions already recorded will
have a materially adverse effect on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Security Holders
during the fourth quarter for the 1993 fiscal year.
<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT:
<CAPTION>
Date First
Elected to
Name Age Offices Held Exec. Office
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
James K. Baker 62 Chairman of the Board of Directors 1965
Byron O. Pond 57 Chief Executive Officer and President
(& Director) 1990
V. William Hunt 49 Executive Vice President
(& Director) 1980
Joe T. Atkins 65 Senior Vice President-
Supplier Development 1993
Raymond P. Mack 53 Vice President-Human Resources 1993
W. Frederick Meyer 60 Vice President-Public Affairs 1974
Richard A. Smith 48 Vice President-Finance & Chief
Financial Officer (& Director) 1990
Ronald R. Snyder 49 Vice President-General Counsel &
Secretary 1992
</TABLE>
All terms of all officers of the Registrant run until their
respective successors are elected and qualified.
All listed executive officers except Mr. Smith and Mr.
Snyder have been employed by the Registrant or one of its
subsidiaries for the past five years. Mr. Smith joined Arvin
as Treasurer of the Company in November, 1989 and became Vice
President-Finance in early 1990. Previously he was Vice
President and Treasurer of the May Department Store Co. and
also served as Vice President and Controller of its Volume
Shoe Corporation subsidiary. Mr. Snyder joined Arvin in his
current capacity in December, 1992. Previously he was a
partner in the Indianapolis law firm Barnes & Thornburg.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Arvin's Common Shares are listed on the New York Stock
Exchange and the Chicago Stock Exchange. Set forth below
are the dividends declared on and the high and low sales
prices of the Common Shares for each quarter during the
last two fiscal years.
<TABLE>
Market Price Ranges and Quarterly Dividends Paid
<CAPTION>
Common Shares
--------------------------------------
Market Price
-----------------------
Dividend High Low
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
FISCAL 1993
First Quarter $.19 $ 37 $ 29 3/4
Second Quarter .19 37 3/4 30 3/4
Third Quarter .19 33 3/4 26 3/4
Fourth Quarter .19 32 25 1/4
FISCAL 1992
First Quarter $.17 $ 26 1/2 $ 19 3/4
Second Quarter .17 27 3/8 23 5/8
Third Quarter .17 29 7/8 24 3/4
Fourth Quarter .19 32 1/4 22 3/8
</TABLE>
As of March 7, 1994, Arvin had 6,399 holders of record of
its Common Shares.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
Five-Year Consolidated Financial Summary;
(Dollars in thousands except per share amounts)
- -----------------------------------------------
<CAPTION>
1993 1992 1991 1990 1989 *
Operating Results (1) ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 1,939,370 $ 1,890,184 $ 1,676,365 $ 1,687,068 $ 1,540,523
Interest expense 38,525 40,823 44,334 45,154 42,231
Earnings 40,341 39,896 21,632 30,519 19,667
Earnings per common share 1.81 1.70 0.73 1.21 0.70
Dividends declared:
Preferred shares 0 5,822 7,762 7,762 6,460
Common shares 16,678 13,808 12,833 12,780 12,748
Per common share 0.76 0.70 0.68 0.68 0.68
Average number of common
shares outstanding 22,311 20,054 19,094 18,822 18,866
Financial Position:
Total assets $ 1,246,225 $ 1,163,600 $ 1,140,129 $ 1,188,258 $ 1,118,612
Long-term debt 433,574 390,183 334,983 317,736 332,055
Total debt 442,537 411,020 373,756 425,241 426,981
Redeemable preferred shares - - 100,455 100,455 100,455
Shareholders' equity 420,620 398,427 374,064 374,194 358,252
Book value per common share 19.04 18.45 19.59 19.75 18.91
<FN>
* SFAS 109 was adopted by the Company in 1992 by retroactively restating 1991 and 1990
reported results.
(1) From continuing operations.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ACQUISITIONS During the third quarter of 1993, Arvin
Industries, Inc. (the Company) entered into three strategic
alliances. The Company's Calspan subsidiary was merged with
Space Industries, Inc. The Company owns approximately 70
percent of the new company, Space Industries International,
Inc. (SIII). Additionally, the Company acquired a 49.9
percent interest in Way Assauto S.r.I., an original
equipment ride control manufacturer located in Asti, Italy.
The Company also formed a 50/50 replacement market exhaust
joint venture with Sogefi S.p.A. located in Mantova, Italy.
The new venture includes Sogefi's formerly wholly owned
subsidiaries Etablissements Rosi and Ansa Marmitte and a
portion of the operating assets of the Company's Timax
business unit.
During 1992 the Company acquired a 50 percent interest in
Schmitz & Brill GmbH, a German-based automotive parts
manufacturer. The 1993 and 1992 transactions are consistent
with the Company's strategy of increasing its presence in
the worldwide automotive parts market.
DISCONTINUED OPERATIONS In 1991 the Company completed the
sale of its ArvinAir subsidiary. The impact of the ArvinAir
divestiture was not material to the Company's consolidated
financial results.
RESULTS OF OPERATIONS 1993 sales of $1.94 billion represent
a new record for the Company, exceeding 1992 sales of $1.89
billion by three percent and 1991 sales of $1.68 billion by
16 percent.
<TABLE>
NET SALES BY BUSINESS SEGMENT
(Dollars in Millions)
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Automotive
Original
Equipment $ 985 51% $ 886 47% $ 745 44%
Automotive
Replacement 627 32 680 36 612 37
Technology 211 11 211 11 214 13
Industrial 116 6 113 6 105 6
------ ---- ------ ---- ------ ----
Total $1,939 100% $1,890 100% $1,676 100%
------ ---- ------ ---- ------ ----
</TABLE>
AUTOMOTIVE ORIGINAL EQUIPMENT SEGMENT SALES 1993 VS 1992
Original Equipment ("OE") segment sales increased 11 percent
in 1993 over 1992. The increase in OE sales was attributable
to higher North American light vehicle production, new
exhaust business in North America, and increased demand for
catalyst assemblies in Europe. This increase was partially
offset by the unfavorable exchange rate impact of a stronger
U.S. dollar, estimated at $45 million.
1992 VS 1991 OE sales increased 19 percent in 1992 over
1991. The increase in sales was attributable to increased
exhaust and ride control volume, which was in part due to
the nine percent increase in North American light vehicle
production, new exhaust business in both North America and
Europe and continued growth in catalyst sales in Europe.
AUTOMOTIVE REPLACEMENT SEGMENT SALES 1993 VS 1992 Automotive
Replacement ("Replacement") segment sales decreased eight
percent in 1993 from 1992. The decrease was primarily due
to an unfavorable distribution channel shift and lower
demand for ride control products in North America, combined
with an estimated $30 million effect of a stronger U.S.
dollar during the year.
1992 VS 1991 Replacement segment sales increased 11 percent
in 1992 over 1991. This increase was principally the result
of new ride control business and increased exhaust product
demand in both North America and Europe.
TECHNOLOGY SEGMENT SALES 1993 VS 1992 Technology segment
sales were flat for 1993 compared to 1992. Segment sales
declined two percent during the last six months before the
inclusion of post-merger Space Industries sales. Contracts
awarded declined during the second half of 1993, resulting
in lower realization of fourth quarter revenue.
1992 VS 1991 Technology segment sales decreased one percent
in 1992 when compared to 1991. The modest decrease was
primarily the result of a decline in available government
contracts and the completion of several significant
contracts during the year. Decreases were partially offset
by increased revenues which were the result of expanded
demand for technical and testing support.
INDUSTRIAL SEGMENT SALES 1993 VS 1992 Industrial segment
sales increased three percent in 1993. This was primarily
the result of increased coatings of metal garage doors and
greater market penetration for industrial gas springs.
1992 VS 1991 Industrial segment sales increased seven percent
in 1992 over 1991. Increased sales were primarily the result
of new business in coated metal applications.
<TABLE>
INCOME FROM OPERATIONS BY BUSINESS SEGMENT
(Dollars in Millions)
<CAPTION>
1993 1992 1991
---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Automotive
Original
Equipment $ 53 42% $ 43 33% $ 27 28%
Automotive
Replacement 54 44 66 52 52 55
Technology 1 1 8 7 10 11
Industrial 16 13 10 8 6 6
----------- ---------- ----------
Total $124 100 % $127 100% $ 95 100%
----------- ---------- ----------
</TABLE>
AUTOMOTIVE ORIGINAL EQUIPMENT SEGMENT INCOME 1993 VS 1992
OE segment income from operations increased 25 percent in
1993 over 1992. Productivity improvements and higher exhaust
volumes in North America offset lower earnings from
unconsolidated affiliates (see Note 15) and the unfavorable
impact of a stronger U.S. dollar.
1992 VS 1991 OE segment income from operations for 1992
improved by 58 percent over 1991. Income from unconsolidated
affiliates represented four percent of the increase in 1992.
However, the primary reasons for the increase in operating
profit during the period were improved exhaust product
volume in both North America and Europe, the favorable mix
of exhaust products sold during the year, and improved
operating efficiencies.
AUTOMOTIVE REPLACEMENT SEGMENT INCOME 1993 VS 1992
Replacement segment income decreased 19 percent in 1993 from
1992. Lower volumes, an unfavorable North American ride
control product mix, higher operating costs associated with
reorganizing the European exhaust business, and the effect
of a stronger U.S. dollar all negatively impacted income
from operations.
1992 VS 1991 Replacement segment income increased 27
percent in 1992 when compared to 1991. Income from
unconsolidated affiliates represented 15 percent of the
increase in 1992; however, increased profits were primarily
the result of higher volumes of exhaust and ride control
products, principally in North America. Increased volumes
were attributable to both new customers and increased
demand. Other factors favorably affecting operating profit
in 1992 included favorable product mix and continued efforts
to reduce operating costs worldwide.
TECHNOLOGY SEGMENT INCOME 1993 VS 1992 Technology segment
income decreased 82 percent from 1992 to 1993. Lower
operating profits were attributed to higher bid and proposal
costs resulting from the increased competition in securing
contracts, expenses associated with the merger of the
Company's Calspan subsidiary with Space Industries, Inc.
(see Note 2), and the expensing of actual overhead rates in
excess of provisional rates billed on government contracts.
1992 VS 1991 Technology segment income declined 19 percent
during 1992. The decline in operating profit reflects the
completion of several significant contracts during 1992 and
the changing environment in securing government contracts,
in which increased competition for fewer contracts has
resulted in higher proposal costs and lower margins.
INDUSTRIAL SEGMENT INCOME 1993 VS 1992 Industrial segment
income for 1993 improved by 59 percent over 1992. Higher
volumes in metal coatings and industrial gas springs, and
improved cost containment efforts resulted in increased
income from operations in 1993.
1992 VS 1991 Industrial segment income increased 82 percent
in 1992 over 1991. Operating profits increased at a greater
rate than did sales as a result of the effect of increased
volume on fixed costs and improved operating efficiencies.
Net Income in 1993 increased one percent and 77 percent,
respectively, when compared to 1992 and 1991 prior to the
cumulative effect of changes in accounting principles. Lower
selling, general and administrative expenses, decreased
interest expense and a lower effective tax rate offset lower
earnings from unconsolidated affiliates.
The Company elected the early adoption of three new
accounting standards in 1992. Statements of Financial
Accounting Standards (SFAS) No. 106 and 112 were adopted
effective December 30, 1991 (see NOTE 8 at item 8 herein).
SFAS 109 was adopted retroactively by restating reported
financial information for 1991 (see NOTE 4 at item 8 herein).
These changes are reflected in the accompanying financial
information.
In conjunction with the changes in accounting principles
under SFAS 106 and SFAS 109 the Company has recognized a
deferred tax asset in the Statement of Financial Condition
related to the deferred tax charges taken in accruing for
postretirement benefits. The ability to recognize a deferred
tax asset under SFAS 109 is a function of anticipated future
taxable income. The Company considers the realization of the
tax benefit to be likely and has therefore recognized the
deferred tax asset in accordance with SFAS 109 (see NOTE 4
at item 8 herein).
Interest Expense in 1993 decreased $2 million from 1992 and
$6 million from 1991, principally because of lower interest
rates, cash flow from operations and proceeds from the sale
of two million shares of common stock in the third quarter
of 1992.
Other expense, net decreased $9 million in 1993 from 1992
and increased $1 million from 1991. In 1993, the decrease
was primarily due to the favorable effect of lower business
consolidation costs, relocation expenses and the absence of
legal and environmental charges mentioned below. The primary
reason for the increase in 1992 over 1991 was additional
provisions for claims, litigation charges, and settlement
costs related to various product and liability cases and
environmental matters which the Company is defending.
EQUITY EARNINGS IN AFFILIATES The continued recession in Europe
during 1993 and acquisition start up costs negatively
affected earnings of the Company's European affiliates in
1993 compared to 1992. 1992 equity earnings were higher than
1991 due to increased domestic affiliates' income.
FINANCIAL CONDITION
LIQUIDITY During 1993 cash provided by operations was $104
million, compared to $136 million in 1992 and $97 million in
1991. Cash provided by operating activities in 1993
decreased 23 percent as a result of year-end fluctuations
in other assets, other current assets, payables, other
accrued expenses and the 1992 accrual of accrued employee
benefits, due to the adoption of SFAS 106 and SFAS 112.
The current ratio increased to 1.9 at year-end 1993 from 1.7 at
year-end 1992 primarily due to the pay-down of short-term
debt and the elimination of current income taxes payable.
The Company's total debt to capital decreased to 48.0
percent at year-end 1993 from 50.4 percent at year-end 1992
primarily as a result of the increase in minority interest
during 1993. The Company currently has in place credit
facilities considered adequate to support ongoing cash
requirements.
CAPITAL RESOURCES In the fourth quarter of 1993, the
Company issued notes that resulted in proceeds of $48
million. The proceeds were used to reduce short-term debt.
In January and February, 1994 the Company called for
redemption at par all of its 8 3/8 percent Notes due 1997 and
completed the issue of $75 million 6 7/8 percent Notes due
2001 to fund the redemption on March 1, 1994.
OTHER CURRENT ASSETS The increase in other current assets
was the result of prepaid customer tooling related to North
American O.E. business, the recognition of an income tax
benefit related to the SIII merger, and the estimated
payment of federal income taxes.
NON-CURRENT ASSETS Capital expenditures totaled $93 million
in 1993, $101 million in 1992 and $75 million in 1991.
Expenditures related to ongoing production improvements,
product enhancements, manufacturing efficiencies as well as
normal replacement. Planned capital expenditures for 1994
are adequate for normal replacement and consistent with
projections for future sales and earnings. Near-term
expenditures are expected to be funded from internally
generated funds.
INVESTMENTS IN AFFILIATES The $43 million increase in
investment in affiliates was primarily due to the formation
of the Timax Exhaust Systems 50/50 joint venture with Sogefi
S.p.A. and the acquisition of a 49.9 percent interest in Way
Assauto S.r.l. (see Note 2).
Other Assets include $18.2 million related to an Industrial
Space Facility (ISF). The ISF is the result of SIIIdeveloped
technology necessary to design, integrate and operate a man
tended orbital space facility. Until the U.S. Government
makes decisions regarding the scope, schedule and cost of
the anticipated International Space Station, the future
economic potential of the ISF is uncertain. The ISF does not
require any substantial additional engineering support at
this time. The recovery of the capitalized costs is
dependent on SIII's future success in selling technology,
related services, or engineering designs of the ISF at
profitable terms .
MINORITY INTEREST The Company completed two transactions in
1993 that resulted in an increase in minority interest. In
July 1993, as a result of the merger of the Company's
Calspan subsidiary with Space Industries, Inc., an
approximately 30 percent minority interest was created in
the resulting SIII. Also in July 1993, the Company recorded
a minority interest in Timax as a result of the Company's
contribution of a portion of its Timax business unit to the
50/50 joint venture formed with Sogefi S.p.A. (see Note 2).
CUMULATIVE TRANSLATION ADJUSTMENT The change in the
cumulative translation account during 1993 was the result of
the U.S. dollar's increased strength against foreign
currencies.
LEGAL/ENVIRONMENTAL MATTERS The Company is defending
various environmental claims and legal actions that arise in
the normal course of business, including matters in which
the Company has been designated a potentially responsible
party at certain waste disposal sites or has been notified
that it may be a potentially responsible party at other
sites as to which no proceedings have been initiated.
Neither the remediation method, amount of remediation costs
nor the allocation among potentially responsible parties has
been determined at the majority of these sites. At some of
these sites the information currently available leads the
Company to believe it has very limited or even de minimis
responsibility. At the Company's former Platt Saco Lowell
operations, the Company is a participant with the EPA and
the current owner in a corrective action proceeding under
the Resource Conservation and Environmental Recovery Act.
The Company is currently performing a remedial feasibility
investigation at this site to identify the types and extent
of contamination. Thereafter, a corrective measures study
will be conducted to identify potential remediation
alternatives and related cost estimates. Pending completion
of the feasibility investigation and corrective measures
study, the Company does not possess sufficient information
to reasonably estimate its remediation costs at Platt Saco
Lowell. The Company does not expect that resulting
liabilities beyond provisions already recorded will have a
materially adverse effect on the Company's financial
position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Financial Statements:
Consolidated Statement of Operations for each of the three years
in the period ended January 2, 1994
Consolidated Statement of Financial Condition at January 2, 1994
and January 3, 1993
Consolidated Statement of Shareholders' Equity for each of the
three years in the period ended January 2, 1994
Consolidated Statement of Cash Flows for each of the three years
in the period ended January 2, 1994
Notes to Consolidated Financial Statements
Report of Independent Accountants and Independent Auditors' Report
Financial Statement Schedules:
For each of the three years in the period ended January 2, 1994
V - Property, Plant and Equipment
VI - Accumulated Depreciation
VIII - Valuation and Qualifying Accounts
IX - Short-Term Borrowings
X - Supplementary Income Statement Information
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
Financial statements of unconsolidated affiliates have been omitted because
the registrant's proportionate share of the income from continuing operations
before income taxes, and total assets of each such company is less than 20%
of the respective consolidated amounts, and the investment in and advances
to each company is less than 20% of consolidated total assets.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions except per share amounts)
<CAPTION>
1993 1992 1991
------------ ------------ ----------
<S> <C> <C> <C>
NET SALES $1,939.4 $1,890.2 $1,676.4
COST AND EXPENSES:
Cost of goods sold 1,619.2 1,547.6 1,376.4
Selling, operating general
and administrative 200.5 216.5 204.4
Corporate general and
administrative 16.0 14.2 14.1
Interest expense 38.5 40.8 44.3
Interest income (2.4) (2.9) (3.2)
Other expense, net 6.7 15.9 6.2
-------- -------- ---------
1,878.5 1,832.1 1,642.2
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 60.9 58.1 34.2
Income taxes (25.2) (26.6) (17.2)
Minority interest share of
(income)/loss 0.6 0.5 (0.5)
Equity earnings of affiliates 4.0 7.9 5.1
-------- -------- ---------
EARNINGS FROM CONTINUING OPERATIONS 40.3 39.9 21.6
Income from disposal of
discontinued operations,
net of income taxes of $0.8 - - 1.2
-------- -------- ---------
EARNINGS BEFORE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 40.3 39.9 22.8
Effect of change in accounting
for postretirement
benefits other than pensions - (27.6) -
Effect of change in accounting
for postemployment benefits - (5.9) -
-------- -------- ---------
NET EARNINGS $ 40.3 $ 6.4 $ 22.8
-------- -------- ---------
Dividends on preferred shares - (5.8) (7.7)
-------- -------- ---------
NET EARNINGS APPLICABLE TO
COMMON SHARES $ 40.3 $ 0.6 $ 15.1
-------- -------- ---------
EARNINGS/(CHARGES) PER COMMON SHARE:
From continuing operations:
Primary $ 1.81 $ 1.70 $ 0.73
Fully Diluted $ 1.74 $ 1.70 $ 0.73
From discontinued operations - - 0.06
Effect of change in accounting
for postretirement benefits
other than pensions - (1.38) -
Effect of change in accounting
for postemployment benefits - (0.29) -
-------- -------- --------
Net:
Primary $ 1.81 $ 0.03 $ 0.79
Fully Diluted $ 1.74 $ 0.03 $ 0.79
AVERAGE COMMON SHARES OUTSTANDING:
Primary 22,311 20,054 19,094
Fully Diluted 25,793 23,658 22,753
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<CAPTION>
(Dollars in millions) As of As of
1/2/94 1/3/93
------ ------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 39.1 $ 14.6
Receivables, net of allowances
of $5.3 in 1993 and $4.2 in 1992 255.3 282.7
Inventories (at the lower of cost
or market) 117.9 128.3
Other current assets 78.5 54.1
--------- ---------
Total current assets 490.8 479.7
--------- ---------
NON-CURRENT ASSETS:
Property, plant and equipment
(at cost):
Land 18.0 20.9
Buildings and leasehold
improvements 153.8 156.4
Machinery and equipment 613.6 571.1
Construction in progress 53.6 47.6
------- -------
839.0 796.0
Less: Allowance for
depreciation 428.4 388.1
------- -------
410.6 407.9
Excess of cost over acquired net
assets-net of amortization of
$26.9 in 1993 and $21.5 in 1992 185.3 183.6
Investment in affiliates 88.0 45.5
Other assets 71.5 46.9
---------- ---------
Total non-current assets 755.4 683.9
---------- ---------
$ 1,246.2 $ 1,163.6
---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Short-term debt $ 9.0 $ 20.8
Accounts payable 160.2 163.2
Accrued employee compensation costs 46.3 49.6
Accrued expenses 39.5 42.2
Income taxes payable and
deferred taxes - 10.5
---------- ---------
Total current liabilities 255.0 286.3
---------- ---------
Accrued employee benefits 53.0 53.6
Deferred income taxes and other 24.7 29.6
Long-term debt 433.6 390.2
Minority interest 59.3 5.5
-------- -------
Total non-current liabilities 570.6 478.9
-------- -------
SHAREHOLDERS' EQUITY:
Capital stock:
Preferred shares (no par value,
authorized 6,678,058 in 1993
and 1992; none issued and
outstanding) - -
Common shares ($2.50 par value,
authorized 50,000,000; issued
24,076,912 in 1993 and
23,691,462 in 1992) 60.2 59.2
Capital in excess of par value 204.7 194.4
Retained earnings 227.3 203.7
Cumulative translation adjustment (26.7) (12.5)
Common shares held in treasury (at cost) (44.9) (46.4)
--------- ---------
Total shareholders' equity 420.6 398.4
--------- ---------
$ 1,246.2 $ 1,163.6
---------- ----------
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in millions)
<CAPTION>
Year Ended
---------------------------------------------------------------
1/2/94 1/3/93 12/29/91
---------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
COMMON SHARES:
Beginning Balance 23,691,462 $ 59.2 21,148,646 $ 52.9 21,020,541 $ 52.6
Common share offering - - 2,000,000 5.0 - -
Exercise of stock options 385,450 1.0 333,572 0.8 128,105 0.3
Conversion of preferred shares
to common - - 209,244 0.5 - -
---------- ------ ---------- ------- ---------- ------
Ending Balance 24,076,912 $ 60.2 23,691,462 $ 59.2 21,148,646 $ 52.9
---------- ------ ---------- ------- ---------- ------
CAPITAL IN EXCESS OF PAR VALUE:
Beginning Balance $194.4 $133.8 $131.6
Common share offering - $ 46.9 -
Exercise of stock options 8.2 6.0 2.0
Conversion of preferred shares
to common - 5.4 -
Shares contributed to employee
benefit plan 2.1 2.3 0.2
------ ------ ------
Ending Balance $204.7 $194.4 $133.8
------ ------ ------
RETAINED EARNINGS:
Beginning Balance $203.7 $219.9 $217.6
Net earnings 40.3 6.4 22.8
Preferred share redemption premium - (3.0) -
Cash dividends per share on:
Preferred shares-redeemable - (5.8) (7.7)
Common shares-($.76 per year
for 1993, $.70 per year for 1992,
$.68 per year for 1991) (16.7) (13.8) (12.8)
------- ------- ---------
Ending Balance $227.3 $203.7 $219.9
------- ------- ---------
CUMULATIVE TRANSLATION ADJUSTMENTS:
Beginning Balance $(12.5) $ 14.4 $ 19.4
Translation adjustments during the year (14.2) (26.9) (5.0)
------- ------- --------
Ending Balance $(26.7) $(12.5) $ 14.4
------- ------- --------
COMMON SHARES IN TREASURY:
Beginning Balance (2,093,121) $(46.4) (2,205,541) $(47.0) (2,224,559) $(47.0)
Stock exchanged for stock options
exercised (7,572) (0.2) (41,098) (1.1) (12,781) (0.3)
Shares contributed to employee
benefit plan 133,231 2.1 153,518 1.7 31,799 0.3
Purchase of oddlot shares (14,447) (0.4) - - - -
----------- ------- ----------- ------- ----------- -------
Ending Balance (1,981,909) $(44.9) (2,093,121) $(46.4) (2,205,541) $(47.0)
----------- ------- ----------- ------- ----------- -------
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 40.3 $ 6.4 $ 22.8
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Depreciation 63.5 62.7 57.6
Amortization of intangibles 6.5 6.2 6.2
Accrued employee benefits (1) (0.6) 53.6 -
Deferred income taxes,
long-term (5.4) (7.0) (1.8)
Other 5.5 (16.3) (5.3)
Changes in operating assets
and liabilities:
Receivables 27.4 (10.8) (5.1)
Inventories and other
current assets (14.0) 12.3 27.9
Accounts payable and
other accrued expenses (9.0) 43.0 (4.6)
Income taxes payable and
deferred taxes (10.5) (14.6) (0.5)
-------- -------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 103.7 135.5 97.2
-------- -------- -------
INVESTING ACTIVITIES: (2)
Purchase of property, plant
and equipment (92.9) (101.2) (74.6)
Proceeds from sale of property,
plant and equipment 10.2 2.6 2.0
Investments in affiliates (12.4) (9.4) -
Disposition of idle facilities - - 10.6
Divestiture of ArvinAir - - 22.9
Other (5.4) 7.7 (4.8)
------- ------- -------
NET CASH USED FOR INVESTING
ACTIVITIES (100.5) (100.3) (43.9)
------- ------- -------
FINANCING ACTIVITIES:
Change in short-term debt, net (11.7) (17.9) (67.5)
Proceeds from long-term
borrowings (3) 48.3 3.8 94.1
Principal payments on
long-term debt (4.8) (46.1) (73.9)
Purchase of treasury shares (0.6) (1.1) -
Exercise of stock options 9.2 6.8 2.4
Proceeds from common shares
issued, net of expenses - 51.8 -
Dividends paid (16.7) (19.6) (20.6)
Other 0.1 (3.4) 2.1
------- ------- ------
NET CASH PROVIDED BY/(USED FOR)
FINANCING ACTIVITIES 23.8 (25.7) (63.4)
------- ------- ------
CASH AND CASH EQUIVALENTS:
Effect of exchange rate
changes on cash (2.5) (2.5) 0.5
------- ------- -------
Net increase/(decrease) 24.5 7.0 (9.6)
Beginning of the year 14.6 7.6 17.2
------- -------- --------
End of the year $ 39.1 $ 14.6 $ 7.6
------- -------- --------
INTEREST PAID $ 38.6 $ 41.0 $ 43.7
------- -------- --------
INCOME TAXES PAID $ 59.2 $ 39.6 $ 20.7
------- -------- --------
<FN>
(1) See Note 8.
(2) See Note 2 for non-cash investing activities.
(3) See Note 11.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in tables in thousands unless noted otherwise)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation: The consolidated financial
statements include the accounts of the parent company and
all majority-owned subsidiaries. Affiliates that are 20
percent to 50 percent owned are accounted for using the
equity method. Affiliates that are less than 20 percent
owned are carried at cost.
Cash Equivalents: The Company considers all highly liquid
debt instruments purchased with a maturity of three months
or less to be cash equivalents.
Inventories: Substantially all inventories located in the
U.S. are stated under the last-in, first-out (LIFO) cost
method. The remaining inventories are stated primarily on a
first-in, first-out (FIFO) basis.
Property, Plant, and Equipment: Property, plant and equipment
includes capital leases and significant additions or improvements
extending asset lives. Maintenance and repair costs are expensed
as incurred. Depreciation is recorded using the straight-line
method over the estimated useful lives of the assets for financial
reporting purposes and accelerated methods for income tax purposes.
Excess of Cost Over Acquired Net Assets: The excess of cost
over the fair market value of net assets acquired is
amortized over periods ranging from 15 to 40 years using the
straight line method.
Contract Revenue Recognition: Revenues on short and longterm
service contracts for both government and industry are
recorded on the percentage of completion method. Provisions
for anticipated losses are made in the period in which they
first become determinable. Unbilled receivables at year-end
1993 and 1992 were $21 and $27 million, respectively.
Foreign Currency: The functional currency of the
consolidated operating subsidiaries, except for those
operating in hyperinflationary economies, is the local
currency of the country in which the subsidiary is located.
The Company reclassifies gains and losses arising from the
remeasurement of hyperinflationary currencies against the
related operating statement line items. These
reclassifications have no effect on net earnings.
Foreign exchange gains and (losses) included in the
consolidated statement of operations for 1993, 1992 and 1991
were not material.
The Company occasionally uses forward exchange contracts and
options to protect the U.S. dollar value of certain foreign
currency positions and future foreign currency transactions.
At January 2, 1994 the amount of options and forward
exchange contracts outstanding was not material.
Pension Plans: Substantially all domestic employees of the
Company are covered by non-contributory trusteed pension
plans. Employees of the Company's United Kingdom operations
are covered by contributory trusteed pension plans. Benefits
are based on, in the case of certain plans, final average
salary and years of service and, in the case of other plans,
a fixed amount for each year of service. Net periodic
pension costs for 1993, 1992 and 1991 were determined using
the Projected Unit Credit Cost Method. The Company's funding
policy provides that annual contributions to the pension
trusts will be at least equal to the minimum amounts
required by ERISA in the United States and actuarial
recommendations in the United Kingdom.
Income Taxes: Deferred income taxes are provided for the
temporary differences between the financial reporting basis
and the tax basis of assets and liabilities.
Earnings Per Share: Earnings per share are based on the
weighted average number of common and common equivalent
shares outstanding during the year. Dividends on the
Company's convertible exchangeable preferred shares, which
were issued in the third quarter of 1989, are deducted from
net earnings prior to calculating earnings per share for
1992 and 1991. The convertible exchangeable preferred shares
were exchanged in 1992 for the convertible subordinated
debentures due 2014.
Reclassifications: The Company has reclassified certain
prior year financial information to conform with the current
year's presentation.
Fiscal Year: The Company's fiscal year ends on the Sunday
nearest to December 31.
NOTE 2 - ACQUISITIONS AND DISCONTINUED OPERATIONS:
During 1989 the Company adopted a formal plan to dispose of
its ArvinAir subsidiary. The sale of this business took
place during January, 1991. The ArvinAir division was
reported as a discontinued operation (in the Consolidated
Statement of Operations) during 1991.
In 1992, the Company acquired a 50 percent interest in
Schmitz & Brill GmbH, a German-based automotive parts
manufacturer. Schmitz & Brill is accounted for under the
equity method.
During the third quarter of 1993, the Company completed the
combination of the assets of its Calspan subsidiary with the
assets of Space Industries, Inc. This transaction was
accounted for as a purchase. The Company owns approximately
70 percent of the new company, Space Industries
International, Inc. (SIII).
Space Industries, Inc. had capitalized $18.2 million related
to an Industrial Space Facility (ISF). The ISF is the result
of SIII-developed technology necessary to design, integrate
and operate a man-tended orbital space facility. Until the
U.S. Government makes decisions regarding the scope,
schedule and cost of the anticipated International Space
Station, the future economic potential of the ISF is
uncertain. The ISF does not require any substantial
additional engineering support at this time. The recovery of
the capitalized costs is dependent on SIII's future success
in selling technology, related services, or engineering
designs of the ISF at profitable terms.
In the third quarter of 1993, the Company formed a 50/50
joint venture with Sogefi S.p.A. located in Mantova, Italy.
The new venture includes Sogefi's formerly wholly owned
subsidiaries Etablissements Rosi and Ansa Marmitte and a
portion of the operating assets of the Company's Timax
business unit.
Non-cash assets acquired, liabilities assumed and minority
interest arising from these transactions were $59.3, $3.6
and $55.7 in millions, respectively.
Also during the third quarter of 1993, the Company purchased
49.9 percent of European ride control manufacturer Way
Assauto S.r.l., located in Asti, Italy. Way Assauto
manufactures principally for the original equipment market
and is accounted for under the equity method.
NOTE 3 - INVENTORIES:
The Company uses the dollar-value link chain method for
calculating its LIFO inventories. Since the Company uses the
method of pooling by individual inventory components, e.g.,
steel, substrate, labor and overhead, to determine the
overall index, it is impractical to classify LIFO
inventories into the finished goods, work in process and raw
material components. The reduction in LIFO inventories
increased pre-tax earnings in the amount of $1 million in
1993 and $3 million in both 1992 and 1991.
Approximately $58 million and $61 million of total
inventories at year-end 1993 and 1992 were stated on the
LIFO method. The excess replacement costs of these
inventories over the stated LIFO value were approximately $6
million and $7 million, respectively.
NOTE 4 - INCOME TAXES:
<TABLE>
Earnings from continuing operations before income taxes were
as follows:
<CAPTION>
1993 1992 1991
------------ ------------ ----------
<S> <C> <C> <C>
United States $43,199 $23,126 $ 8,376
International 17,660 34,968 25,821
------------ ------------ ----------
$60,859 $58,094 $34,197
------------ ------------ ----------
</TABLE>
<TABLE>
The provision for income taxes was as follows:
<CAPTION>
1993 1992 1991
------------ ----------- ----------
<S> <C> <C> <C>
Current tax expense:
Federal $13,420 $13,812 $ 6,688
State 2,218 1,762 1,631
International 8,978 13,543 9,725
Deferred tax expense:
Federal 26 (3,111) (784)
State 0 (156) (166)
International 577 736 109
-------- -------- --------
Continuing operations provision $25,219 $26,586 $17,203
-------- -------- --------
Discontinued operations provision $ - $ - $ 755
-------- -------- --------
</TABLE>
<TABLE>
The provision for income taxes was different than the U.S.
federal statutory rate applied to earnings from continuing
operations before income taxes, and is reconciled as
follows:
<CAPTION>
Percent of Pretax Income
----------------------------------------
1993 1992 1991
--------- ---------- ----------
<S> <C> <C> <C>
Statutory rate 35.0% 34.0% 34.0%
State and local income taxes, net 2.4 1.7 2.7
International tax rate difference 6.2 4.5 3.1
Amortization of excess purchase
price 3.0 3.0 5.0
Foreign tax credit utilization, net (4.3) (0.3) (1.3)
Other items, net (0.9) 2.9 6.8
--------- ---------- ----------
Effective tax rate 41.4% 45.8% 50.3%
--------- ---------- ----------
</TABLE>
<TABLE>
Deferred tax assets (liabilities) are comprised of the
following at fiscal year end:
<CAPTION>
1993 1992
--------- ----------
<S> <C> <C>
Current deferred tax assets:
Accrued employee benefits $21,911 $18,765
Inventory and receivables 2,193 3,393
Vacation 2,881 2,739
Medical 1,277 1,597
Early retirement 1,162 1,061
Other 0 709
Net operating losses and tax
credit carryforward 13,862 8,235
Valuation allowance for
deferred tax assets (9,858) (7,777)
---------- ----------
Net deferred tax asset 33,428 28,722
---------- ----------
Gross deferred tax liabilities
Depreciation (31,912) (36,122)
Pension (3,587) (3,129)
Other (111) 0
--------- ---------
Gross deferred tax liability (35,610) (39,251)
--------- ---------
Net deferred tax liabilities $ (2,182) $(10,529)
--------- ---------
</TABLE>
During 1993, no significant changes occurred in the
conclusions regarding the need for a valuation allowance in
any tax jurisdiction. Deferred tax assets relating to net
operating loss (NOL) carryforwards and tax credit
carryforwards, respectively, were available in various tax
jurisdictions at January 2, 1994 expiring in the following
years:
<TABLE>
<CAPTION>
Tax
NOL Credit
--------- --------
<S> <C> <C>
1994 $ 1,044 $ 4
1995 1,016 0
1996 1,899 0
1997 2,024 14
1998 3,616 350
1999 and forward 3,892 3
--------- --------
$13,491 $371
--------- --------
</TABLE>
At year-end 1993 consolidated retained earnings included
undistributed earnings of non-U.S. subsidiaries of
approximately $112 million. These earnings are indefinitely
reinvested in non-U.S. operations or will be remitted
substantially free of additional U.S. income taxes.
Accordingly, no provision has been made for income taxes
that may be payable upon remittance of such earnings.
NOTE 5 - BORROWINGS:
<TABLE>
At fiscal year-end, long-term debt consisted of:
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Capital lease obligations
(see Note 7) $ 1,704 $ 2,858
9 5/8%-10% medium-term
notes due 1996 15,000 15,000
10% Euro-Notes due 1996 50,000 50,000
8 3/8% notes due 1997 74,886 74,857
9.8%-9.9% medium-term
notes due 1998 45,000 45,000
10% medium-term notes
due 2000 49,670 49,635
7 1/2% convertible subordinated
debentures due 2014 97,526 97,526
9 1/8% sinking fund
debentures due 2017 46,571 46,567
10 3/8% Euro-Sterling Notes
due 2018 47,967 -
Other 7,793 11,344
Less: Current maturities (2,543) (2,604)
--------- ---------
$433,574 $390,183
--------- ---------
</TABLE>
Maturities of long-term debt for the years ended 1994
through 1998 are $2,543, $4,980, $65,698, $75,137, and
$45,183, respectively. The 9 1/8 percent sinking fund
debentures require annual payments of $4 million from 2005
to 2016.
The Company has two revolving credit facilities totaling
$100 million with termination dates of June 30 and September
30, 1995. At January 2, 1994 there were no borrowings under
either facility. In addition, the Company has uncommitted
credit facilities totaling $192 million. At January 2, 1994
borrowings under these facilities totaled $6.5 million.
In October, 1993 one of the Company's foreign subsidiaries
issued 10 3/8 percent Notes due 2018 under a financing
agreement, guaranteed by the Company, which resulted in net
proceeds of $48.0 million.
In January and February, 1994 the Company called for
redemption at par all of its 8 3/8 percent Notes due 1997 and
completed the issue of $75 million 6 7/8 percent Notes due
2001 to fund the redemption on March 1, 1994.
The Company uses interest rate swaps and options to manage
its interest rate exposure. At January 2, 1994 the Company
had swap and option agreements of $50 million and $75
million notional principal, respectively. The $50 million
swap agreement effectively changes long-term debt from a
fixed rate of interest to a floating rate of interest for a
two year period. The $75 million option agreement, over a
three year period, results in the Company paying a fixed
rate of interest while receiving a floating rate of
interest.
At January 2, 1994, the fair value of long-term debt,
including that due within one year, was approximately $491
million. Fair value was estimated using market prices and
discounted cash flow analyses, based on current borrowing
rates for similar types of debt.
NOTE 6 - STOCK OPTIONS:
Two stock option plans for key employees have been
authorized by the Company's shareholders. Options are
granted at the fair market value on the date of grant and
generally expire ten years later. On February 11, 1993 the
Board of Directors adopted an amendment to the Company's
1988 Stock Benefit Plan, which was approved by the
Shareholders during the April 1993 annual meeting,
increasing the number of Common Shares that may be made
subject to awards under the Plan from 1,800,000 to
2,760,000.
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Options outstanding at beginning
of year 1,897,022 1,794,337 1,566,690
Options granted 467,050 461,000 438,450
Options exercised (385,450) (333,572) (128,105)
Options expired (42,027) (24,743) (82,698)
--------- --------- -----------
Options outstanding at year-end 1,936,595 1,897,022 1,794,337
--------- --------- ----------
Options available for grant at
year-end 573,545 67,345 514,495
Weighted average option prices
per share:
Granted $30.78 $23.88 $25.03
Exercised 21.34 17.47 16.33
Expired 28.89 25.29 21.67
Outstanding 25.47 23.40 22.20
</TABLE>
NOTE 7 - LEASES:
All non-cancelable leases with an initial term greater than
one year have been classified as either capital or operating
leases.
Future minimum payments under capital and operating leases
and related subleases having non-cancelable terms of more
than one year are as follows:
<TABLE>
<CAPTION>
Capital Operating Leases
Leases Rents Subleases
--------- ----------------------------
<S> <C> <C> <C>
Fiscal year:
1994 $ 867 $ 13,577 $ 2,538
1995 449 12,087 2,147
1996 131 10,677 1,702
1997 85 8,940 1,169
1998 85 7,052 810
Later years 851 36,557 3,825
--------- --------- ---------
Total minimum lease
payments 2,468 $ 88,890 $ 12,191
--------- ---------
Less: Amount
representing interest 764
---------
Present value of minimum
lease payments 1,704
Included in short-term debt 605
---------
Included in long-term debt $ 1,099
---------
</TABLE>
<TABLE>
Rent expense under operating leases was as follows:
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Annual rent $ 18,498 $ 21,596 $ 21,397
Less: sublease rent (2,474) (2,276) (2,011)
--------- --------- ---------
Net rent expense $ 16,024 $ 19,320 $ 19,386
--------- --------- ---------
</TABLE>
<TABLE>
Capital lease assets have been included in property, plant
and equipment as follows:
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Land $ 630 $ 437
Buildings 8,042 6,755
Machinery and equipment 13,434 13,877
--------- ---------
22,106 21,069
Less: Accumulated
depreciation 14,851 13,196
--------- ---------
$ 7,255 $ 7,873
--------- ---------
</TABLE>
NOTE 8 - OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
A. Other Postretirement Benefits
The Company provides certain retiree health care benefits
for a majority of its U.S. salaried employees. Employees are
generally eligible for benefits upon retirement and
completion of a specified number of years of credited
service. The plans are contributory based on years of
service, with contributions adjusted annually. Plan design
changes to limit future cost increases to the Company were
made to the plans effective January 1, 1992. The Company
does not pre-fund these benefits and has the right to modify
or terminate certain of these plans in the future.
In the fourth quarter of 1992, the Company adopted SFAS No.
106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," changing to the accrual method of
accounting for these benefits effective December 30, 1991.
Prior to 1992, postretirement benefit expense was recognized
when claims were paid. A pre-tax charge of $45 million ($28
million after taxes or $1.38 per share) was recorded as the
cumulative effect of the accounting change at the beginning
of 1992. This change also resulted in 1992 postretirement
benefit expense of $5 million which was $3 million higher
($2 million after taxes or $.11 per share) than the previous
pay-as-you-go cost.
Prior to 1992, outlays for health care benefits to retirees
were not totally separable from those for active employees.
Domestic expenditures for these benefits during 1991 totaled
$15 million for 3,601 active and 765 retired employees.
The components of nonpension postretirement benefit expense
in 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
--------- ----------
<S> <C> <C>
Service cost-benefits earned
during the period $ 1,742 $ 1,658
Interest cost on accumulated
postretirement benefit
obligation 3,913 3,631
--------- ----------
Net periodic postretirement
benefit cost $ 5,655 $ 5,289
--------- ----------
</TABLE>
The accumulated postretirement benefit obligation in the
accompanying balance sheet at year-end 1993 and 1992, is
comprised of the following components:
<TABLE>
<CAPTION>
1993 1992
--------- ----------
<S> <C> <C>
Retirees $ 21,270 $ 22,590
Fully eligible active plan
participants 2,483 2,831
Other active plan participants 26,183 22,968
--------- ----------
Total accumulated
postretirement benefit obligation 49,936 48,389
Unrecognized net actuarial
gains (losses) 2,256 -
--------- ----------
Accrued postretirement
benefit obligation $ 52,192 $ 48,389
--------- ----------
</TABLE>
Future benefit costs were estimated assuming medical costs
would increase at a 15 percent annual rate for 1992 and
1993, decreasing to 7 percent annual growth rate ratably
over the next 8 years and then remaining at a 7 percent
growth rate thereafter. A 1 percent increase in this annual
trend rate would have increased the accumulated
postretirement benefit obligation at January 2, 1994 by 16.7
percent. The effect of this change on the aggregate of
service and interest cost for 1993 would be an increase of
20.6 percent. The weighted average discount rate used to
estimate the accumulated postretirement benefit obligation
was 7.5 percent and 8.25 percent at year end 1993 and 1992,
respectively.
Certain of the Company's non-U.S. subsidiaries provide
limited non-pension benefits to retirees. Most retirees
outside the United States are covered by government
sponsored and administered programs, and the cost of these
programs is not significant to the Company.
B. Other Postemployment Benefits
In the fourth quarter of 1992, the Company adopted SFAS No.
112, "Employers' Accounting for Postemployment Benefits"
effective December 30, 1991. Postemployment benefits include
disability benefits, supplemental unemployment benefits,
workers' compensation benefits, and continuation of health
care benefits and life insurance coverage. Prior to 1992,
the Company accounted for certain types of these benefits on
a pay-as-you-go basis. SFAS 112 requires the use of the
accrual method of accounting for postemployment benefits.
Expenses are recognized as employee service is rendered. The
effect of adopting SFAS 112 in 1992 resulted in an $8
million pre-tax charge ($6 million after tax or $0.29 per
share).
NOTE 9 - CONTINGENCIES:
The Company is defending various environmental claims and
legal actions that arise in the normal course of business,
including matters in which the Company has been designated a
potentially responsible party at certain waste disposal
sites or has been notified that it may be a potentially
responsible party at other sites as to which no proceedings
have been initiated. Neither the remediation method, amount
of remediation costs nor the allocation among potentially
responsible parties has been determined at the majority of
these sites. At some of these sites the information
currently available leads the Company to believe it has very
limited or even de minimis responsibility. At the Company's
former Platt Saco Lowell operations, the Company is a
participant with the EPA and the current owner in a
corrective action proceeding under the Resource Conservation
and Environmental Recovery Act. The Company is currently
performing a remedial feasibility investigation at this site
to identify the types and extent of contamination.
Thereafter, a corrective measures study will be conducted to
identify potential remediation alternatives and related cost
estimates. Pending completion of the feasibility
investigation and corrective measures study, the Company
does not possess sufficient information to reasonably
estimate its remediation costs at Platt Saco Lowell. The
Company does not expect that resulting liabilities beyond
provisions already recorded will have a materially adverse
effect on the Company's financial position.
NOTE 10 - PENSION PLANS:
Net pension expense of $3 million in 1993, 1992, and 1991 is
summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Service cost $ 7,085 $ 9,181 $ 8,668
Interest cost 16,601 17,536 16,219
Actual return on assets (32,030) (31,653) (50,330)
Net amortization and deferral 11,801 8,324 28,373
--------- --------- ---------
Net periodic pension cost $ 3,457 $ 3,388 $ 2,930
--------- --------- ---------
</TABLE>
The funded status of the Company's pension plans at both
year-end 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Actuarial present value of
benefit obligation:
Vested- Pension Plans $(191,266) $(176,035)
Savings Plan (17,081) (17,291)
---------- ----------
(208,347) (193,326)
Nonvested-Pension Plans (13,604) (10,265)
---------- ----------
Accumulated benefit obligation (221,951) (203,591)
Projected impact of future
salary increases (19,888) (24,386)
---------- ----------
Projected benefit obligation (241,839) (227,977)
---------- ----------
Plan assets at market value
Pension trusts 247,277 259,831
Savings trust 17,081 17,292
---------- ----------
264,358 277,123
---------- ----------
Excess of assets over
benefit obligation 22,519 49,146
Unamortized initial assets (12,444) (16,703)
Unrecognized gain on assets (10,328) (29,756)
Unrecognized prior service cost 8,906 8,011
---------- ----------
Prepaid expense $ 8,653 $ 10,698
---------- ----------
</TABLE>
The Company's domestic pension obligations were projected
to, and the assets were valued as of the end of, 1993 and
1992. The assets, comprised almost entirely of high grade
stocks and bonds, included 1.3 million shares of the
Company's common stock at both year-end 1993 and 1992.
Assumptions used in determining the projected benefit
obligation for the domestic plans included a discount rate
of 7.5 percent, 8.25 percent, and 8.5 percent in 1993, 1992,
and 1991, an expected return on plan assets of 9 percent for
1993, 1992, and 1991 and average salary increases of 5
percent for 1993, 1992, and 1991.
The Company's principal foreign-based defined benefit plans
are in the United Kingdom (see Note 1). Actuarial estimates
for these plans included net pension expense of $2 million
in 1993 and $1 million for both 1992 and 1991, a projected
benefit obligation of $42 million and $28 million and net
plan assets of $50 million and $35 million in 1993 and 1992,
respectively. The estimates for plan obligations and assets
were projected to and valued as of the end of 1993 and 1992.
Assumptions used in the determination of these estimates
included a discount rate of 7.5 percent, 10 percent, and 10
percent, a return on plan assets of 9 percent, 10 percent,
and 10 percent, and average salary increases of 5.5 percent,
7.5 percent, and 7.5 percent for 1993, 1992, and 1991,
respectively.
NOTE 11 - REDEEMABLE PREFERRED SHARES:
On September 30, 1992 the Company exercised its option to
exchange $100,455,000 of outstanding $3.75 convertible
exchangeable preferred shares for 7.5 percent convertible
subordinated debentures due 2014. As a result of the
exercise, the Company issued 209,244 Arvin common shares to
holders of exchangeable preferred shares exercising their
right to convert such shares to common stock. All remaining
convertible exchangeable shares were exchanged for
$97,526,000 of 7.5 percent convertible subordinated
debentures.
NOTE 12 - SHAREHOLDERS' EQUITY:
Preferred Stock Purchase Rights: During 1986 the Company
distributed one Preferred Stock Purchase Right ("Right") to
shareholders of record for each share of the Company's
common stock held. The Rights entitle qualifying
shareholders to purchase one-hundredth of a share of the
Company's Series C Junior Participating Preferred Stock, of
which 500,000 shares are authorized. The exercise price is
$90 per share, subject to certain anti-dilution provisions.
The Rights have no voting power. The Rights are currently
not exercisable, certificates representing the Rights have
not been issued, and the Rights automatically trade with
the Company's common shares. The Rights become exercisable
in the event of an attempt by a person or group to
acquire the Company on terms not approved by the Company's
Board of Directors. The Rights, if exercised, will result in
substantial dilution. The Rights are redeemable by the Board
of Directors for $.10 per Right until a person or group
acquires beneficial ownership of 20 percent or more of the
Company's common shares, at which time they become non-redeemable.
The Rights expire on June 13, 1996.
In February, 1989, the Company's Board approved an amendment
to these purchase rights which entitles current shareholders
to buy the Company's common shares at a reduced price should
a third party acquire a 20 percent or more ownership.
Average common shares outstanding for 1993, 1992 and 1991
were 22,311, 20,054, and 19,094, respectively.
NOTE 13 - BUSINESS SEGMENTS:
The Company is engaged in the manufacture and sale of a
broad range of products and services. Representative
products and services by major category are described
in item 1, above.
<TABLE>
<CAPTION>
1993 1992 1991
Net sales: ----------- ----------- -----------
<S> <C> <C> <C>
Automotive Original Equipment $ 984,809 $ 885,763 $ 744,819
Automotive Replacement 626,829 680,148 612,152
Technology 211,374 210,811 213,816
Industrial 116,358 113,462 105,578
----------- ----------- -----------
Total net sales $1,939,370 $1,890,184 $1,676,365
----------- ----------- -----------
Income from operations:
Automotive Original Equipment $ 52,769 $ 42,382 $ 26,907
Automotive Replacement 53,910 66,348 52,161
Technology 1,538 8,376 10,329
Industrial 16,132 10,157 5,592
----------- ----------- -----------
Total income from
operations (1) $ 124,349 $ 127,263 $ 94,989
Less:
Minority interest share of
(income)/loss 675 539 (431)
Equity earnings of affiliates 4,026 7,849 5,069
Expenses unrelated to segments 22,678 22,892 15,039
Net interest (income) and expense 36,111 37,889 41,115
----------- ----------- -----------
Total earnings before
income taxes1 $ 60,859 $ 58,094 $ 34,197
----------- ----------- -----------
Identifiable assets:
Automotive Original Equipment $ 555,785 $ 542,454 $ 516,758
Automotive Replacement 405,017 396,221 407,633
Technology 121,739 98,993 101,293
Industrial 52,156 54,378 56,979
----------- ----------- -----------
Total identifiable assets $1,134,697 $1,092,046 $1,082,663
General corporate (2) 111,528 71,554 57,466
----------- ----------- -----------
Total assets $1,246,225 $1,163,600 $1,140,129
----------- ----------- -----------
Depreciation and amortization:
Automotive Original Equipment $ 39,149 $ 37,708 $ 33,398
Automotive Replacement 22,648 23,414 22,809
Technology 3,112 2,665 2,925
Industrial 4,479 4,637 4,109
General corporate 589 518 514
----------- ----------- -----------
Total depreciation
and amortization $ 69,977 $ 68,942 $ 63,755
----------- ----------- -----------
Additions to property, plant
and equipment:
Automotive Original Equipment $ 56,415 $ 61,766 $ 43,687
Automotive Replacement 27,879 30,677 22,177
Technology 2,364 2,095 3,365
Industrial 5,807 6,548 5,156
General corporate 408 136 178
----------- ----------- -----------
Total capital additions $ 92,873 $ 101,222 $ 74,563
----------- ----------- -----------
<FN>
(1) From continuing operations.
(2) Consists primarily of cash and cash equivalents, prepaid
expenses, and non-current assets.
</TABLE>
Sales to three customers exceeded 10 percent of total net
sales in 1993. In 1992 and 1991, sales to two customers
exceeded 10 percent of total net sales. Sales to all three
customers are included in the business segments as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------------------------------------
Percent Percent Percent
of of of
Business Segment Amount Sales Amount Sales Amount Sales
- ---------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Automotive Original
Equipment customer one $294,146 15.2% $325,678 17.2% $308,117 18.4%
Automotive Original
Equipment customer two 197,580 10.2 148,244 7.8 141,604 8.4
Technology 193,991 10.0 199,647 10.6 203,943 12.2
------------------------------------------------------------
$685,717 35.4% $673,569 35.6% $653,664 39.0%
------------------------------------------------------------
</TABLE>
Sales exported out of the United States and sales between
business segments (affiliated customers) were not
significant and are thus not separately reported.
Information on the Company's geographic areas is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Net sales:
United States $1,280,466 $1,177,797 $1,064,032
Europe 473,230 520,112 446,923
Other foreign 185,674 192,275 165,410
----------- ----------- -----------
Total net sales $1,939,370 $1,890,184 $1,676,365
----------- ----------- -----------
Income from operations:
United States $ 90,735 $ 77,804 $ 50,510
Europe 14,070 32,087 26,226
Other foreign 19,544 17,372 18,253
----------- ----------- -----------
Total income from
operations (1) $ 124,349 $ 127,263 $ 94,989
----------- ----------- -----------
Identifiable assets:
United States $ 642,831 $ 534,017 $ 521,605
Europe 404,838 454,629 461,313
Other foreign 87,028 103,400 99,745
----------- ----------- -----------
Total identifiable assets $1,134,697 $1,092,046 $1,082,663
----------- ----------- -----------
<FN>
(1) From continuing operations.
</TABLE>
NOTE 14 - CONCENTRATIONS OF CREDIT RISK:
Financial instruments which potentially expose the Company
to concentrations of credit risk consist primarily of trade
accounts receivable.
The Company's customer base includes virtually every
significant automotive manufacturer and a large number of
well known jobbers, distributors, and installers of
automotive replacement parts in North America and Europe.
The Company generally does not require collateral and the
majority of its trade receivables are unsecured. Although
the Company is directly affected by the financial well-being
of the automotive industry, management does not believe
significant credit risk exists at January 2, 1994.
NOTE 15 - INVESTMENTS IN AFFILIATES:
Included in Arvin's continuing operations at January 2, 1994
are equity interests of 50 percent or less in companies
engaged in producing and providing automotive exhaust and
ride control products, consisting primarily of a 50 percent
interest in Timax Exhaust Systems' subsidiaries
Etablissements Rosi and Ansa Marmitte, 50 percent interest
in Arvin Sango, 49.9 percent interest in Way Assauto S.r.l.,
and a 50 percent interest in Schmitz & Brill.
The difference between the carrying amounts of the
investments in affiliates, and the underlying equity in net
assets, $35.0 million in 1993 and $0 in 1992, represents the
excess of cost over acquired net assets which is being
amortized over forty years using the straight line method.
In 1993, 1992, and 1991 the Company received dividends from
affiliates of $1.3, $2.4 and $0.4 million respectively.
Summarized financial information of the affiliates is as
follows:
<TABLE>
<CAPTION>
Condensed Statement
of Operations 1993 1992 1991
------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net Sales $375,593 $283,539 $202,005
Gross Profit 74,586 51,302 33,674
Operating Earnings 29,826 31,168 21,692
Net Earnings 14,384 18,974 12,875
Condensed Statement
of Financial Condition
----------------------
Current assets $181,377 $108,799 $ 86,489
Non-current assets 219,364 111,048 53,982
-------- -------- --------
$400,741 $219,847 $140,471
-------- -------- --------
Current liabilities $101,598 $ 85,478 $ 40,840
Non-current liabilities 135,627 41,782 36,031
Shareholders' equity 163,516 92,587 63,600
-------- -------- --------
$400,741 $219,847 $140,471
-------- -------- --------
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS:
To the Shareholders and Board of Directors
Arvin Industries, Inc.
In our opinion, based upon our audits and the report of
other auditors, the consolidated financial statements
listed in the accompanying index present fairly, in all
material respects, the financial position of Arvin Industries,
Inc. and its subsidiaries at January 2, 1994 and January 3,
1993, and the results of their operations and their cash flows
for each of the three years in the period ended January 2, 1994,
in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on
these financial statements based on our audits. We did not
audit the financial statements of Space Industries
International, Inc., an approximately 70% owned subsidiary,
which statements reflect total assets of $126,590 at January
2, 1994 and net sales of $211,374 for the period ended
January 2, 1994. Those statements were audited by other
auditors whose report thereon has been furnished to us, and
our opinion herein, insofar as it relates to the amounts
included for Space Industries International, Inc., is based
solely on the report of other auditors. We conducted our
audits of these statements in accordance with generally
accepted accounting standards which require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits and the report of other auditors
provide a reasonable basis for the opinion expressed above.
As discussed in Note 8 to the consolidated financial
statements, in 1992 the Company adopted Statement of
Financial Accounting Standards (SFAS) 106 "Employers'
Accounting for Postretirement Benefits Other than Pensions,"
and SFAS 112 "Employers' Accounting for Postemployment
Benefits."
Price Waterhouse
Indianapolis, Indiana
February 1, 1994 except as to Note 5
which is as of February 16, 1994
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Space Industries International, Inc.:
We have audited the accompanying consolidated balance sheet of
Space Industries International, Inc. and subsidiaries (formerly
Calspan Holding Corporation) as of January 2, 1994 and the related
statements of operations, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements
based on our audit. The financial statements of Space Industries
International, Inc. and subsidiaries (formerly Calspan Holding
Corporation) as of January 3, 1993 and December 29, 1991 were audited
by other auditors whose report dated April 16, 1993 expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Space
Industries International, Inc. and subsidiaries (formerly Calspan Holding
Corporation) as of January 2, 1994, and the results of their operations and
their cash flows for the year then ended in conformity with generally
accepted accounting principles.
The consolidated balance sheet as of January 2, 1994 includes $18,154,619
of capitalized costs related to the Space Facility Technology. As described
in Note 4, the recovery of these costs is dependent on the future success
in selling the Space Facility Technology or the Industrial Space Facility
or the related service, at profitable terms or the sale of the engineering
designs of the Industrial Space Facility.
KPMG Peat Marwick
Houston, Texas
January 25, 1994
<PAGE>
<TABLE>
Schedule V
Arvin Industries, Inc.
Property, Plant and Equipment
(Dollars in thousands)
<CAPTION>
Balance Balance
Beginning Additions Retirements Other End of
Classification of Year at Cost or Sales Changes Year
- -------------- ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended January 2, 1994
Land $ 20,930 $ 0 $ 975 $ (1,966) $ 17,989
Buildings and leasehold
improvements 156,432 9,868 5,808 (6,696) 153,796
Machinery and equipment 571,058 68,257 7,949 (17,757) 613,609
Construction in progress 47,598 14,748 (1) 0 (8,741) 53,605
---------- ---------- ----------- ---------- -----------
Totals $796,018 $ 92,873 $ 16,133 $(33,759) (2) $838,999
---------- ---------- ----------- ---------- -----------
Year ended January 3, 1993
Land $ 22,587 $ 2 $ 1 $ (1,658) $ 20,930
Buildings and leasehold
improvements 155,103 7,768 689 (5,750) 156,432
Machinery and equipment 531,268 66,347 9,545 (17,012) 571,058
Construction in progress 26,762 27,105 (1) 0 (6,269) 47,598
---------- ---------- ----------- ---------- -----------
Totals $735,720 $ 101,222 $ 10,235 $(30,689) (3) $796,018
---------- ---------- ----------- ---------- -----------
Year ended December 29, 1991
Land $ 22,290 $ 355 $ 2 $ (56) $ 22,587
Buildings and leasehold
improvements 155,881 11,618 808 (11,588) 155,103
Machinery and equipment 506,397 57,375 9,202 (23,302) 531,268
Construction in progress 28,841 5,215 (1) 44 (7,250) 26,762
--------- ---------- ---------- ---------- ----------
Totals $713,409 $ 74,563 $ 10,056 $(42,196) (4) $735,720
--------- ---------- ---------- ---------- ----------
<FN>
(1) Net of transfer to other fixed asset accounts.
(2) Includes a divestiture of $9,444 and translation adjustments.
(3) Includes translation adjustments.
(4) Includes a divestiture of $41,916 and translation adjustments.
</TABLE>
<PAGE>
<TABLE>
Schedule VI
Arvin Industries, Inc.
Accumulated Depreciation
(Dollars in thousands)
<CAPTION>
Reserves for Classification Balance Balance
of Property Beginning Retirements Other End of
as listed in Schedule V of Year Depreciation or Sales Changes Year
----------------------- --------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Year ended January 2, 1994
Buildings and leasehold
improvements $ 55,328 $ 6,147 $ 2,539 $ (1,771) $ 57,165
Machinery and equipment 332,736 57,358 6,161 (12,680) 371,253
--------- ------------ ----------- ----------- -------------
Totals $388,064 $63,505 $ 8,700 $(14,451) $428,418
--------- ------------ ----------- ----------- -------------
Year ended January 3, 1993
Buildings and leasehold
improvements $ 49,553 $ 6,934 $ 250 $ (909) $ 55,328
Machinery and equipment 292,808 55,762 7,439 (8,395) 332,736
--------- ---------- --------- ----------- ----------
Totals $342,361 $62,696 $ 7,689 $ (9,304) 388,064
--------- ---------- --------- ----------- ----------
Year ended December 29, 1991
Buildings and leasehold
improvements $ 46,952 $ 6,294 (1) $ 898 $ (2,795) $ 49,553
Machinery and equipment 270,399 51,242 (1) 7,029 (21,804) 292,808
--------- -------- -------- --------- ----------
Totals $317,351 $57,536 $ 7,927 $(24,599) (2) $342,361
--------- -------- -------- --------- ----------
<FN>
(1) Includes SFAS 109 adjustments of $129 for buildings and leasehold improvements
and $1,047 for machinery and equipment.
(2) Includes a divesture of $24,773.
</TABLE>
<PAGE>
<TABLE>
Schedule VIII
Arvin Industries, Inc.
Valuation and Qualifying Accounts
(Dollars in thousands)
<CAPTION>
ADDITIONS
------------------------
Balance at Charged to Charged to Deductions Balance at
Beginning Costs and Other from End of
Description of Year Expenses Accounts Reserves Year
- --------------------------------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year ended January 2, 1994
Allowance for doubtful accounts $ 4,151 $ 1,193 $ (105) (1) $ (39) (2) $ 5,278 (2)
Accumulated amortization of excess
of cost over acquired net assets $21,545 $ 5,356 $ - - $26,901
Valuation allowance for deferred
tax assets $ 7,777 $ 5,302 $ - $ 3,221 $ 9,858
Year ended January 3, 1993
Allowance for doubtful accounts $ 6,935 $ 1,670 $ (246) (1) $ 4,208 (2) $ 4,151
Accumulated amortization of excess
of cost over acquired net assets $16,383 $ 5,127 $ 35 - $21,545
Valuation allowance for deferred
tax assets $ 7,433 $ 3,217 $ - $ 2,873 $ 7,777
Year ended December 29, 1991
Allowance for doubtful accounts $ 6,834 $ 2,474 $ 39 (1) $ 2,412 (3) $ 6,935
Accumulated amortization of excess
of cost over acquired net assets $11,257 $ 5,126 $ - $ - $16,383
Valuation allowance for deferred
tax assets $ 8,040 $ 686 - $ 1,293 $ 7,433
<FN>
(1) Includes translation adjustment.
(2) Includes accounts charged off, net of recoveries and reclassification of reserves.
(3) Includes accounts charged off, net of recoveries.
</TABLE>
<PAGE>
<TABLE>
Schedule IX
Arvin Industries, Inc.
Short-Term Borrowings
(Dollars in thousands)
<CAPTION>
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balance Average Outstanding Outstanding Interest Rate
Short-Term at End of Interest During the During the During the
Borrowings Period Rate (1) Period Period (2) Period (3)
- ---------- ---------- ---------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Year ended January 2, 1994:
Notes payable to banks $ 6,420 13.6% $63,793 $32,677 10.3%
Year Ended January 3, 1993:
Notes payable to banks $18,233 11.1% $45,378 $29,745 12.1%
Year Ended December 29, 1991:
Notes payable to banks $34,442 11.6% $123,120 $93,465 10.4%
<FN>
(1) Equals the average interest rate for amounts outstanding at the end of the period.
(2) The annual average borrowings outstanding are calculated using the average of the
month-end balances.
(3) The weighted average interest rate during the period was determined by dividing
short-term interest expense for the period by the average balance outstanding.
</TABLE>
<PAGE>
<TABLE>
Schedule X
Arvin Industries, Inc.
Supplementary Income Statement Information
(Dollars in thousands)
<CAPTION>
Year Ended
-----------------------------------------------
January 2, January 3, December 29,
1994 1993 1991
------------- ------------- --------------
<S> <C> <C> <C>
Maintenance and Repairs $44,523 $41,470 $39,137
</TABLE>
<PAGE>
<TABLE>
Quarterly Financial Data (Unaudited):
(Dollars in millions except per share amounts)
Summarized quarterly financial data for 1993 and 1992 are as follows:
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales:
1993 $476.0 $520.5 $474.2 $468.7
1992 459.4 500.2 475.5 455.1
Gross profit:
1993 75.7 90.3 78.5 75.7
1992 77.5 97.5 88.4 79.2
Earnings:
Continuing operations:
1993 6.1 16.5 7.4 10.3
1992 3.6 14.9 12.0 9.4
Net:
1993 6.1 16.5 7.4 10.3
1992 (29.9) 14.9 12.0 9.4
Earnings per common share:(1)
1993-Primary $0.28 $0.74 $0.33 $0.46
1992-Primary 0.09 0.67 0.51 0.43
1993-Fully Diluted 0.28 0.68 0.33 0.44
1992-Fully Diluted 0.09 0.64 0.51 0.41
Net:1
1993-Primary 0.28 0.74 0.33 0.46
1992-Primary (1.65) 0.67 0.51 0.43
1993-Fully Diluted 0.28 0.68 0.33 0.44
1992-Fully Diluted (1.65) 0.64 0.51 0.41
<FN>
(1) The quarterly earnings per share amounts have been
computed on the basis of weighted average number of shares
outstanding during the quarter. The sum of the quarterly
earnings per share information presented above differs from
the annual earnings per share amount primarily as a result
of the effect on the weighted average of the sale of two million
common shares during the third quarter of 1992.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Directors of the Registrant is
contained in the definitive proxy statement of the Registrant
for the Annual Meeting of Shareholders to be held April 14,
1994, under the caption "Election of Directors", and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
This information is contained in the definitive proxy
statement of Registrant for the Annual Meeting of
Shareholders to be held April 14, 1994 under the caption
"Executive Compensation" (exclusive of the portion under the
subcaption "Report of the Compensation Committee of the Board
of Directors on Executive Compensation") and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
This information is contained in the definitive proxy
statement of the Registrant for the Annual Meeting of
Shareholders to be held April 14, 1994 under the captions
"Certain Beneficial Owners" and "Election of Directors" and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is contained in the definitive proxy
statement of the Registrant for the Annual Meeting of
Shareholders to be held April 14, 1994 under the caption
"Compensation Committee Interlocks and Insider Participation"
and is incorporated herein by reference.
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) Financial Statements
Consolidated Statement of Operations for each of the three years
in the period ended January 2, 1994
Consolidated Statement of Financial Condition at January 2, 1994
and January 3, 1993
Consolidated Statement of Shareholders' Equity for each of the
three years in the period ended January 2, 1994
Consolidated Statement of Cash Flows for each of the three years
in the period ended January 2, 1994
Notes to Consolidated Financial Statements
Report of Independent Accountants and Independent Auditors' Report
(a) (2) Financial Statement Schedules
For each of the three years in the period ended January 2, 1994
V - Property, Plant and Equipment
VI - Accumulated Depreciation
VIII - Valuation and Qualifying Accounts
IX - Short-Term Borrowings
X - Supplementary Income Statement Information
The registrant's financial statement schedules are included in
item 8 herein.
(a) (3) Exhibits
The exhibits filed as a part of this Annual Report on Form 10K
are:
<TABLE>
<CAPTION>
Exhibit Incorporated Herein By
Number Exhibit Reference as Filed With
- ------- -------------------------------------- -----------------------
<S> <C> <C>
3(A) Amended and Restated Articles of
Incorporation and Amendments Thereto 1990 Form 10-K as Exhibit 3(A)
3(B) Amended and Restated By-Laws Form 10-Q/A for the second quarter
ended 7-4-93 as exhibit 3(ii)
Instruments defining the Rights of Security-Holders, including Indentures:
Pursuant to Item 601 (b)(4)(iii) (A) of Regulation S-K, the registrant
is not filing certain documents because the total amount of debt securities
authorized under each such document does not exceed 10% of the total assets
of the registrant and its subsidiaries on a consolidated basis. The
registrant agrees to furnish a copy of each such document to the Commission
upon request.
4(G) Rights Agreement, as amended Form 8-K dated June 16, 1986
Form 8-K dated February 23, 1989
10(A) * 1978 Stock Option Plan for Officers and Key Employees 1980 Form 10-K as Exhibit 10(A)
-Amendments 1982 Form 10-K as Exhibit 10(A)
10(B) * Management Incentive Plans
10(C) * Employment Agreement with Byron O. Pond dated Form 10-Q for the third quarter
October 31, 1993 ended 10-4-93 as Exhibit 10(F)
10(D) * Unfunded Deferred Compensation Plan for Directors 1982 Form 10-K as Exhibit 10(D)
10(E) * 1988 Arvin Industries, Inc. Stock Benefit Plan 1991 Form 10-K as Exhibit 10(E)
-Amendments Form 10-Q/A for the second quarter
11 Computation of Earnings Per Share of Common Stock
21 Subsidiaries of the Registrant
23(A) Consent of Independent Accountants
23(B) Consent of Independent Accountants
<FN>
* This exhibit is a management contract or
compensatory plan or arrangement.
</TABLE>
(b) Reports on Form 8-K
- ------------------------
No reports on Form 8-K were filed by the Company during the fourth
quarter of 1993.
SIGNATURES
Arvin Industries, Inc.
by: ____________________
R.A. Smith
Vice President-Finance &
Chief Financial Officer
by: ____________________
R.L. Emshwiller Controller
& Chief Accounting Officer
Date: March 31, 1994
The signatures that follow constitute a majority of the
Board of Directors of the Registrant.
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the Registrant
has duly caused the report to be signed on its behalf
by the undersigned, thereunto duly authorized.
J.K. Baker March 31, 1994
Chairman of the Board of Directors
B.O. Pond March 31, 1994
Chief Executive Officer and President
V.W. Hunt March 31, 1994
Executive Vice President and Director
J.P. Allen March 31, 1994
Director
R.E. Fowler March 31, 1994
Director
J.P. Flannery March 31, 1994
Director
R.W. Hanselman March 31, 1994
Director
D.J. Kacek March 31, 1994
Director
<PAGE>
Exhibit 10 (B)
Arvin Industries, Inc.
Management Incentive Plans
For many years the Company has established annual incentive plans
for its executive officers and other key employees. These plans
provide for the payment to the eligible employees of additional
cash compensation based on Comapny, divisional or individual
performance as measured against criteria established at the
beginning of the year. The executive officers of the Company
were eligible for incentive compensation payments under the
"1993 Executive Incentive Plan" which was approved by the
Compensation Committee of the Board of Directors or Arvin Industries,
Inc. The "1993 Executive Incentive Plan" provided for payments
based on earnings per share and the acheivement of certain financial
and other business-related objectives at the beginning of the year.
<TABLE>
Exhibit 11
Arvin Industries, Inc.
Computation of Earnings Per Share of Common Stock
(amounts in thousands except share amounts)
<CAPTION>
Primary Earnings Per Share 1993 1992 1991
(average shares outstanding) ------------------ ----------------- -----------------
<S> <C> <C> <C>
Income from continuing operations $ 40,341 $ 39,896 $ 21,632
Income from discontinued operation,
net of tax - - 1,207
Cumulative effect of changes in
accounting principles, net of tax - (33,514) -
Preferred stock dividends - (5,822) (7,762)
-------- -------- --------
Net income to common stock $ 40,341 $ 560 $ 15,077
-------- -------- --------
Average shares of common stock
outstanding 21,911,985 19,732,568 18,867,267
Incremental common shares applicable
to common stock options based on the
common stock daily average market
price during the period 399,477 321,286 226,815
---------- ---------- ----------
Average common shares, as adjusted 22,311,462 20,053,854 19,094,082
---------- ---------- ----------
Earnings (charge) per average share
of common stock:
Continuing operations $ 1.81 $ 1.70 $ 0.73
Discontinued operations 0.00 0.00 0.06
Cumulative effect of changes in
accounting principles 0.00 (1.67) 0.00
---------- ----------- ----------
$ 1.81 $ 0.03 $ 0.79
---------- ----------- ----------
Fully Diluted Earnings Per Share: (1)
Net income to common stock 40,341 560 15,077
Preferred stock dividends - 5,822 7,762
Interest expense for 7.5% convertible
debentures, net of tax 4,500 1,125 -
---------- ----------- -----------
Net income to common stock, assuming
full dilution $ 44,841 $ 7,507 $ 22,839
---------- ----------- -----------
Average shares of common stock
outstanding 21,911,985 19,732,568 18,867,267
Incremental common shares applicable
to common stock based on the more
dilutive of the common stock ending
or average market price during the
period 459,917 360,605 254,989
Average common shares issuable assuming
conversion of 7.5% convertible
debentures and preferred stock 3,421,212 3,565,290 3,630,780
---------- ----------- ----------
Average common shares assuming
full dilution 25,793,114 23,658,463 22,753,036
---------- ----------- ----------
Fully diluted earnings per average share,
assuming conversion of all applicable
securities:
Continuing operations $ 1.74 $ 1.73 $ 0.95
Discontinued operations 0.00 0.00 0.05
Cumulative effect of changes in
accounting principles 0.00 (1.42) 0.00
---------- ----------- ----------
$ 1.74 $ 0.32 $ 1.00
---------- ----------- ----------
<FN>
(1) Fully diluted earnings per share amounts are shown for 1992 and 1991 in
accordance with Securities and Exchange Commission requirements although
not in accordance with Accounting Principles Board Opinion No. 15 because
they result in anti-dilution.
</TABLE>
<PAGE>
Exhibit 21
Arvin Industries, Inc.
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
<S> <C>
Subsidiary Name Jurisdiction of
Organization
- ---------------- ------------------
Maremont Corporation Delaware
Schrader Automotive, Inc. Delaware
Valvulas Schrader Do Brazil, S.A. Brazil
Schrader Automotive, Inc. Canada
Schrader Holdings, South Africa Pty South Africa
Gabriel Europe, Inc. Delaware
Arvin Ride Control Products, Inc. Canada
Gabriel Ride Control Delaware
Maremont Exhaust Products Delaware
AVM, Inc. South Carolina
Gabriel South Africa South Africa
Arvin Automotive of Canada Canada
Q International, Inc. Delaware
Arvin Mexico Mexico
Space Industries International, Inc. Delaware
Arvin International Holding, Inc. Indiana
Roll Coater, Inc. Indiana
Arvin Cheswick International B.V. The Netherlands
Arvin Cheswick B.V. The Netherlands
Arvin Cheswick S.A Spain
Arvin International U.K., PLC United Kingdom
Arvin Ride Control Products, Inc. Canada
Arvin Cheswick UK Ltd United Kingdom
</TABLE>
<PAGE>
Exhibit 23(A)
Arvin Industries, Inc.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-50371, No. 33-50381, No. 33-21717,
No. 33-19049, No. 33-04407, No. 2-97395, No. 2-78417, and No. 33-40438)
of Arvin Industries, Inc. of our report dated February 1, 1994 except
as to Note 5 which is as of February 16, 1994, appearing in this Form 10-K.
Price Waterhouse
Indianapolis, Indiana
March 29, 1994
Exhibit 23(B)
Arvin Industries, Inc.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (No. 33-34818
and No. 33-41242) of Arvin Industries, Inc. of our report dated February 1,
1994 except as to Note 5 which is as of February 16, 1994, appearing in this
Form 10-K.
Price Waterhouse
Indianapolis, Indiana
March 29, 1994
