SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended July 2, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from_____ to _____
Commission File Number 1-302
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ARVIN INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
This amendment to Arvin Industries, Inc.'s (the Company's) Form 10-Q
for the six months ended July 2, 1995 changes the presentation of
its unaudited financial statements and Management's Discussion and
Analysis to reflect, as an unconsolidated subsidiary, a 50 percent
owned subsidiary which had been previously consolidated by the Company
for the period beginning January 2, 1995. This amendment also reflects
the Company's Technology segment, which was sold during the third
quarter of 1995, as a discontinued operation, reclassifies certain
income statement accounts on a basis consistent with third quarter
presentation and reflects other modifications to the Management's
Discussion and Analysis. This filing amends Part I, Items 1 and 2 and
exhibits in Part II, Item 6.
Indiana 35-0550190
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(State or other I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
One Noblitt Plaza, Box 3000
Columbus, IN 47202-3000
- -----------------------------------------------------
(Address of principal executive offices) (Zip Code)
812-379-3000
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(Registrant's telephone number including area code)
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 [ ]
As of August 6, 1995, the Registrant had outstanding
22,334,138 Common Shares (excluding treasury shares), $2.50
par value.
Table of Contents
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Operations for the
Three Months and Six Months Ended July 2, 1995
and July 3, 1994
Consolidated Statement of Financial Condition at
July 2, 1995 and January 1, 1995
Consolidated Statement of Cash Flows for the Six
Months Ended July 2, 1995 and July 3, 1994
Condensed Notes to Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8K
<TABLE>
Part I
Item 1. Financial Statements
Arvin Industries, Inc.
Consolidated Statement of Operations
(Dollars in millions, except per share amounts)
<CAPTION>
Unaudited Unaudited
-------------------- ------------------
Three Months Ended Six Months Ended
-------------------- ------------------
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 509.7 $ 488.7 $1,003.9 $ 915.1
Costs and Expenses:
Cost of goods sold 439.5 410.9 873.2 775.2
Selling, operating general and administrative 38.1 38.6 76.7 75.7
Corporate general and administrative 3.1 3.5 5.2 6.0
Restructuring charges 1.5 -- 3.6 --
Special charges 6.9 -- 6.9 --
Interest expense 11.0 10.9 22.1 20.3
Interest income (.2) (.4) (.5) (.8)
Other expense, net 2.0 1.1 3.9 4.8
-------- -------- -------- --------
501.9 464.6 991.1 881.2
-------- -------- -------- --------
Earnings from Continuing
Operations Before Income Taxes 7.8 24.1 12.8 33.9
Income taxes (2.9) (9.8) (4.8) (13.7)
Minority share of income (.7) (.6) (1.4) (.9)
Equity income of affiliates 1.0 .7 1.1 .5
-------- -------- -------- --------
Earnings from Continuing Operations 5.2 14.4 7.7 19.8
-------- -------- -------- --------
Income (Loss) from discontinued operations, net of
income tax (benefit) of $.1, ($.2), $1.2 and $.0, respectively .4 (.4) 2.2 (.5)
Income from disposal of discontinued operations,
net of income taxes of $.0, $.0, $.2 and $.0, respectively -- -- .7 --
-------- -------- -------- -------
Net Earnings $ 5.6 $ 14.0 $ 10.6 $ 19.3
======== ======== ======== =======
Earnings (Loss) Per Common Share
Primary:
Continuing Operations $ 0.23 $ 0.65 $ 0.35 $ 0.88
Discontinued Operations 0.02 (0.02) .13 (0.02)
-------- -------- -------- ---------
Total - primary $ 0.25 $ 0.63 $ 0.48 $ 0.86
======== ======== ======== =========
Fully Diluted:
Continuing Operations $ 0.23 $ 0.61 $ 0.35 $ 0.86
Discontinued Operations 0.02 (0.02) 0.13 (0.02)
-------- -------- -------- ---------
Total - fully diluted $ 0.25 $ 0.59 $ 0.48 $ 0.84
======== ======== ======== =========
Average Common Shares Outstanding (000's)
Primary 22,387 22,355 22,368 22,434
Fully Diluted 25,265 25,776 25,318 25,855
Dividends Declared per Common Share $ 0.38 $ 0.38 $ 0.57 $ 0.57
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Financial Condition
(Dollars in millions, except per share amounts)
<CAPTION>
Unaudited
-----------------------
As of As of
7/2/95 1/1/95
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<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 20.7 $ 11.1
Receivables, net of allowances of $3.0 as of
July 2, 1995 and $3.8 as of January 1, 1995 291.9 262.8
Inventories 106.4 102.1
Other current assets 94.3 76.3
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Total current assets 513.3 452.3
--------- ---------
Non-Current Assets:
Property, plant and equipment:
Land, buildings, machinery & equipment 897.3 857.6
Less: Allowance for depreciation 470.2 439.5
--------- ---------
427.1 418.1
Goodwill, net of amortization of $29.0 as of
July 2, 1995 and $26.6 as of January 1, 1995 148.3 150.4
Investment in affiliates 92.8 91.9
Net assets of discontinued operations 30.8 68.3
Other assets 50.1 50.5
--------- ---------
Total non-current assets 749.1 779.2
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$ 1,262.4 $ 1,231.5
Liabilities and Shareholders' Equity ========= =========
- ------------------------------------
Current Liabilities:
Short-term debt $ 94.4 $ 25.1
Accounts payable 213.6 193.4
Accrued expenses 103.0 100.0
Income taxes payable 3.3 2.9
--------- ---------
Total current liabilities 414.3 321.4
--------- ---------
Long-term employee benefits 52.4 50.2
Deferred income taxes and other liabilities 17.8 15.0
Long-term debt 348.3 416.3
Minority interest 33.1 32.3
Shareholders' Equity:
Common shares ($2.50 par value) 60.5 60.4
Capital in excess of par value 207.1 206.6
Retained earnings 192.0 194.1
Minimum pension liability adjustment (.6) (.6)
Cumulative translation adjustment (19.9) (20.7)
Common shares held in treasury (at cost) (42.6) (43.5)
--------- ---------
Total shareholders' equity 396.5 396.3
--------- ---------
$ 1,262.4 $ 1,231.5
========= =========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Cash Flows
(Dollars in millions)
<CAPTION>
(Unaudited)
-------------------------
Six Months Ended
-------------------------
July 2, July 3,
1995 1994
-------------------------
<S> <C> <C>
Operating Activities:
Net earnings $ 10.6 $ 19.3
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 36.0 35.9
Amortization 3.1 3.4
Long-term employee benefits (1.4) 2.4
Deferred income taxes, long-term 0.7 (1.5)
Minority interest 2.4 0.8
Other (6.1) (3.8)
Changes in operating assets and liabilities:
Receivables (17.5) (83.1)
Inventories and other current assets (18.1) (11.7)
Accounts payable and other accrued expenses 8.7 55.5
Income taxes payable and deferred taxes 1.0 9.4
-------- --------
Net Cash Provided by Operating Activities 19.4 26.6
-------- --------
Investing Activities:
Purchase of property, plant and equipment (40.3) (39.3)
Proceeds from sale of property, plant and equipment 0.8 0.3
Acquisition, net of cash -- (7.5)
Cash proceeds from sale of businesses 36.2 --
Other 1.6 12.6
-------- --------
Net Cash Used For Investing Activities (1.7) (33.9)
-------- --------
Financing Activities:
Change in short-term debt, net 17.0 14.2
Proceeds from long-term borrowings 0.2 75.0
Principal payments on long-term debt (16.1) (83.2)
Dividends paid (8.5) (8.3)
Other 0.6 1.4
-------- --------
Net Cash Used For Financing Activities (6.8) (0.9)
-------- --------
Cash and Cash Equivalents:
Effect of exchange rate changes on cash 0.5 0.2
-------- --------
Net increase/(decrease) 11.4 (8.0)
Beginning of the period 22.4 39.1
-------- --------
End of the Period $ 33.8 $ 31.1
======== ========
See notes to consolidated financial statements.
</TABLE>
ARVIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements and
should be read in conjunction with the financial statements and
notes thereto appearing in the Company's annual report on Form
10-K for the year ended January 1, 1995.
In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations
for the periods reported have been included. Other than the
adjustments described in Note 7 and Note 10, all such adjustments
are of a normal and recurring nature.
The results of operations for the six months ended July 2, 1995
are not necessarily indicative of the results to be expected for
the full year ending December 31, 1995.
Note 2. General restructuring reserves were reduced by $5.6
million during the first six months of 1995 ($1.8 million for
cash expenditures made by continuing operations, $2.8 million for
transfers to pension and retiree medical liabilities for early
retirees and $1.0 million for cash expenditures made by
discontinued operations). $3.6 million of restructuring costs
was expensed during the first six months of 1995 ($.8 million for
cash expenditures made by continuing operations and $2.8 million
for transfers to pension and retiree medical liabilities for
early retirees). The remaining workforce reductions and
consolidation of manufacturing facilities and product lines
announced as a part of the 1994 restructuring will be
substantially complete by December 31, 1995. A total
of 279 employees were separated from
employment through the end of the second quarter
as a part of the 1994 restructuring plan. The total number of
employees to be separated under the 1994 restructuring plan was
estimated to be 352 at August 16, 1995.
Note 3. On September 29, 1995, the Company completed the sale of
its 70 percent ownership interest in Space Industries
International, Inc. ("SIII") to a new company formed by the
senior management of SIII for approximately $30.6 million in
cash. The Company has guaranteed approximately $22.9 million of
the purchaser's (Calspan SRL Corporation) debt. This guarantee
is scheduled to decline quarterly over a four year period before
expiring. Proceeds from the sale will be used for debt reduction
and new investment in the Company's core business.
The results of operations of SIII have been previously reported
by the Company as the Technology segment. In the current
quarter, the results of SIII for the current and prior year
periods have been reclassified to "Income (loss) from
discontinued operations." Similarly, the current and prior year
statement of financial condition has been restated to present
SIII's assets and liabilities as "Net assets of discontinued
operations." SIII's revenues for the first six months of 1995
and 1994 were $65.7 million and $103.6 million, respectively.
Effective April 14, 1994, the Company adopted a plan to sell its
Schrader Automotive unit (Schrader). Accordingly, Schrader is
reported as a discontinued operation at January 1, 1995.
Schrader's revenues through the February 16, 1995 sale date were
$13.1 million.
In February 1995, the Company entered into a contract for the
sale of Schrader. The transaction was completed on February 16,
1995. An initial payment for the estimated selling price of
$43.0 million, consisting of $36.2 million in cash and $6.8
million in preferred stock and the cash value of warrants, was
received and the estimated gain recorded in the first quarter
1995 was $.7 million, net of tax.
Note 4. There were options for 2.0 and 1.9 million common shares
outstanding as of July 2, 1995 and July 3, 1994, respectively.
Earnings per share calculations include dilutive options in the
determination of the weighted average common and common
equivalent shares outstanding. Interest paid, net of tax, on the
7.5 percent convertible subordinated debentures is added to net
earnings in calculating fully diluted earnings per share.
Note 5. The Company uses the method of pooling, by individual
natural inventory components (e.g., steel, substrate, labor and
overhead), in computing an overall weighted average index. The
index is applied to the total dollar value of the ending
inventory. This method of pooling makes it impractical to
classify LIFO inventories into finished goods, work in process
and raw material components.
Note 6. The Company repurchased, at approximately book value,
$7.8 million of its outstanding 7.5 percent convertible
subordinated debentures during the first quarter 1995 and $2.0
million during the second quarter 1995. Subsequent to the end of
the second quarter 1995, the Company has purchased an additional
$6.9 million of the 7.5 percent convertible subordinated
debentures. The remaining 7.5 percent convertible subordinated
debentures, due in 2014, are convertible into common shares at a
rate of approximately 35.09 shares for each $1,000 debenture
held.
Note 7. During the second quarter of 1995, a judgment for $8.0
million was entered for breach of contract against Maremont
Corporation, an Arvin subsidiary, in favor of Chamberlain
Manufacturing Corporation. The previously disclosed case grew
out of the May 1987 sale of a Maremont unit, Saco Defense, Inc.,
to Chamberlain and relates to certain worker compensation cases
which were pending at the time of the sale. Chamberlain has
petitioned the court for pre-judgment interest and for attorney
fees, costs and expenses. These petitions are being contested
and have not been ruled upon. As a result of the judgment and
potential additional costs related to that judgment, Arvin
recorded a special charge of $6.9 million in the second quarter
to add to previously established litigation reserves. The
Company has filed a motion to set aside the judgment and, if
necessary, intends to appeal the judgment.
Another previously disclosed suit, filed by Chamberlain, is based
on assertions that at the May 1987 stock sale there were known
non-conforming 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, however,
Maremont still remains a defendant. Formal discovery has been
completed in the non-conforming product lawsuit. No trial date
has been set.
The Company is a participant with the EPA and the current owner
of a site previously owned by the Company's Maremont subsidiary
in a corrective action proceeding under the Resource Conservation
and Environmental Recovery Act. In the fourth quarter of 1994,
based on the results of an environmental study, the Company
accrued for its share of the reasonably estimable minimum
remediation costs at this site, which include costs incurred in
connection with further studies and design of a remediation plan,
remedial costs, including cleanup activities, and administrative,
legal and consulting fees.
The Company is defending various environmental claims and legal
actions that arise in the normal course of its 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.
At a majority of these sites, the information currently available
leads the Company to believe it has very limited or even de
minimis responsibility. At other sites, the remediation method,
amount of remediation costs, or the allocation among potentially
responsible parties have not been determined. Where reasonable
estimates are possible, the Company has provided for the costs of
study, cleanup, remediation, and certain other costs, 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. Given the
inherent uncertainties in evaluating legal and environmental
exposures, actual costs to be incurred in future periods may vary
from the currently recorded estimates. The Company expects that
any sum it may be required to pay in connection with legal and
environmental matters in excess of the amounts recorded will not
have a material adverse effect on its financial condition.
Note 8. Arvin's Board of Directors has approved a one million
share Common Share Repurchase Program. The objective of the
program is to meet benefit plan obligations, including employee
stock options. Repurchases under the program may take place from
time to time in the market.
Note 9. Changes in Shareholders' Equity
(Dollars in millions)
For the Six Months Ended
7/2/95 7/3/94
-------- --------
Beginning balance $396.3 $420.6
Exercise of stock options .7 1.3
Purchase of treasury stock (.2) 0
Cash dividends declared (12.7) (8.3)
Net earnings 10.6 19.3
Translation adjustments
during the period .8 4.6
Shares contributed to
employee benefit plan 1.0 1.0
-------- --------
Total shareholders' equity $396.5 $438.5
======== ========
Note 10. During the first quarter of 1995, a one time special
credit of $3.9 million was recorded in the Technology segment to
reduce prior years' accruals of employee benefits. This item is
included in "Income (Loss) from Discontinued Operations."
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Review
(Dollar amounts in tables in millions)
Overview
Arvin's sales for the six months ended July 2, 1995 increased 10
percent, to $1,003.9 million from $915.1 million for the six
months ended July 3, 1994. Arvin recorded sales of $509.7
million for the second quarter 1995, which represents a 4 percent
increase over the second quarter 1994 sales of $488.7 million.
Earnings from continuing operations decreased to $7.7 million for
the six months ended July 2, 1995 from $19.8 million for the six
months ended July 3, 1994. Earnings from continuing operations
decreased to $5.2 million in the second quarter 1995 from $14.4
million in the second quarter 1994. Earnings from continuing
operations include a non-recurring charge of $6.9 million ($4.2
million net of tax) in the second quarter related to an eight
million dollar judgment against an Arvin subsidiary for breach of
contract in connection with a 1987 divestiture.
Currency fluctuations had a positive impact on the comparative
balances of sales and operating profit for both the quarter and
year to date periods. After eliminating the effects of the
weaker dollar, sales increased 2 percent for the quarter and 7
percent for the six month period. Operating income fell 33
percent and 28 percent for the quarter and six months,
respectively, on a constant exchange rate basis.
Results of Operations
1995 1994 1995 1994
Net Sales Second Second First Six First Six
by Segment Quarter Quarter Months Months
------- ------- --------- ---------
Automotive
Original Equipment $338.1 $310.8 $ 683.5 $ 594.9
Automotive
Replacement 171.6 177.9 320.4 320.2
------- ------- --------- ---------
Total $509.7 $488.7 $1,003.9 $915.1
======= ======= ========= =========
1995 1994 1995 1994
Operating Income Second Second First Six First Six
by Segment (1) Quarter Quarter Months Months
------- ------- --------- ---------
Automotive
Original Equipment $16.3 $19.7 $34.5 $35.0
Automotive
Replacement 13.6 21.2 15.4 28.9
------- ------- --------- ---------
Total $29.9 $40.9 $49.9 $63.9
======= ======= ========= =========
(1) Reflects income from continuing operations prior to Corporate
allocated expenses.
Automotive Original Equipment ("OE"): Sales in the OE segment
of $683.5 million for the six months ended July 2, 1995 were 15
percent higher than OE sales for the same period in 1994. Second
quarter 1995 OE sales of $338.1 million were 9 percent higher
than sales of $310.8 million in the second quarter 1994. The
increase in sales was primarily attributable to significant new
business in North American exhaust products and new business in
Europe for both exhaust and ride control products. Offsetting
these positive movements in sales were a four percent decrease in
North American vehicle production during the second quarter when
compared with second quarter 1994, pricing pressures in the U.S.
and Europe, and the sluggish economic conditions surrounding the
Company's Mexican operations.
Operating profit in the OE segment decreased slightly during the
first six months of 1995, when compared to the first six months
of 1994. Operating profit decreased $3.4 million or 17 percent
during the second quarter of 1995, when compared to the second
quarter of 1994. Gains in revenues and production were somewhat
offset by continued recognition of start up costs on new strut
production, inflationary pressures, price concessions, and early
retirement expenses. The second quarter decrease is primarily a
result of lower margins due to customer reductions in build
schedules, continued recognition of start up costs on new strut
production, and increased material costs. The amount of the
second quarter 1995 decrease was affected by the absence of
operating costs incurred in the second quarter 1994 as a result
of the labor dispute at one of the Company's major North American
steel suppliers.
Automotive Replacement ("Replacement"): Sales in the
Replacement segment of $320.4 million for the six months ended
July 2, 1995 reflected virtually no change over Replacement sales
for the same period in 1994. Second quarter 1995 Replacement
sales of $171.6 million were 4 percent lower than sales of
$177.9 million in the second quarter 1994. The
second quarter decrease was a result of depressed
exhaust sales in the U.S. and in Europe, offset somewhat by a
second quarter improvement in ride control sales in both the U.S.
and Europe.
Operating profit in the Replacement segment decreased $13.5
million or 47 percent during the first six months of 1995, when
compared to the first six months of 1994. Operating profit
decreased $7.6 million or 36 percent during the second quarter of
1995, when compared to the second quarter of 1994. The operating
profit for the replacement market was down significantly in the
U.S. exhaust market as a result of lower sales volume,
competitive pricing, restructuring expenses, increased material
costs and increased costs associated with obtaining new business.
Corporate General and Administrative expenses decreased 13
percent or $.8 million in the first six months of 1995 and 11
percent in the second quarter. The decrease was primarily the
result of reduced expenditures for employee costs and
professional services.
Interest expense increased by nine percent or $1.8 million for
the first six months of 1995 versus the comparable period of
1994. The increase was a result of higher average borrowing
rates on slightly lower average outstanding debt. For the
quarter, interest expense increased one percent or $.1 million on
higher average borrowing rates and lower outstanding debt.
Other Expenses, net decreased $.9 million in the first six months
of 1995 and increased $.9 million in the quarter. The second
quarter increase was offset by a first quarter gain on the sale
of a property held for sale.
Restructuring Charges related to the 1994 restructuring plan of
$3.6 million are included in results of operations in the first
six months of 1995. Of that amount, $1.5 million is included in
the second quarter of 1995. These charges represent $2.8 million
of costs for work force reductions for the first six months
including $.8 million charged in the second quarter. There were
$.8 million of other costs of consolidation included in the first
six months of 1995. Of that amount, $.7 million is included in
the second quarter. The workforce reductions and consolidation
of manufacturing facilities and product lines will be
substantially complete by December 31, 1995 and are an effort to
concentrate resources allowing the Company to achieve its long-
term strategic growth objectives. The Company expects total 1995
restructuring expenses for workforce reduction and relocation to
approximate $4.0 million for its continuing operations.
Restructuring costs for 1995 facility consolidations for
continuing operations are expected to approximate $2.1 million.
Special Charges of $6.9 million represents a second quarter
charge as a result of the judgment against an Arvin subsidiary
for breach of contract in connection with a 1987 divestiture.
Minority Share of Income increased $.5 million for the first six
months of 1995 and $.1 million for the second quarter. The
increases are primarily a result of improved profitability of the
Company's European replacement exhaust subsidiary.
Income from Discontinued Operations of $2.2 million represents
six months income from the Company's Space Industries
International unit which was sold September 29, 1995. Results
from discontinued operations include a one-time special credit of
$3.9 million ($2.4 million net of tax) to reduce prior years'
accruals of employee benefits in the Technology segment.
Income from Disposal of Discontinued Operations of $.7 million
represents the estimated gain on the sale of Schrader. No income
from the operations of Schrader prior to first quarter 1994
measurement date was recorded as "Income from discontinued
operations." In February 1995, the Company entered into a
contract for the sale of Schrader. The transaction was completed
on February 16, 1995.
Financial Condition
Liquidity During the first six months of 1995, working capital
decreased $31.9 million or 24 percent. The primary reason for
the decrease is the reclassification of $50.0 million of the
Company's 9.97 percent notes maturing in the first quarter of
1996 to current portion of long term debt. The Company has plans
to replace the $50 million of 9.97 percent debt due in 1996 with
a comparable amount of new debt. Other changes that affected the
working capital include increased accounts receivable and
accounts payable balances, and an increase in cash and cash
equivalents (see Consolidated Statement of Cash Flows). The
current ratio decreased from 1.4 at the end of 1994 to 1.2 at
July 2, 1995.
Accounts Receivable and Accounts Payable both increased
substantially (11 percent and 10 percent) primarily as a result
of sales increases over the comparable quarter end levels. Days
sales outstanding at the end of the second quarter was 52.9 days
compared to 50.5 days at the end of 1994.
Other Current Assets increased $18.0 million primarily as a
result of increased customer tooling.
Capital Resources Based on the Company's projected cash flow
from operations and existing financing credit facility
arrangements, management believes that sufficient liquidity is
available to meet anticipated capital and dividend requirements
over the foreseeable future as well as the cash outlays resulting
from the 1994 restructuring program.
Planned capital expenditures for 1995 are adequate for normal
growth and replacement and are consistent with projections for
future sales and earnings. Near-term expenditures are expected
to be funded from internally generated funds.
Funds generated from the February 16, 1995 sale of Schrader (See
Note 3) were used to reduce the Company's debt and for other
corporate purposes.
Legal/Environmental Matters During the second quarter of 1995, a
judgment for $8.0 million was entered for breach of contract
against Maremont Corporation, an Arvin subsidiary, in favor of
Chamberlain Manufacturing Corporation. The previously disclosed
case grew out of the May 1987 sale of a Maremont unit, Saco
Defense, Inc., to Chamberlain and relates to certain worker
compensation cases which were pending at the time of the sale.
Chamberlain has petitioned the court for pre-judgment interest
and for attorney fees, costs and expenses. These petitions are
being contested and have not been ruled upon. As a result of the
judgment and potential additional costs related to that judgment,
Arvin added $6.9 million in the second quarter to previously
established litigation reserves. The Company has filed a motion
to set aside the judgment and, if necessary, intends to appeal
the judgment.
Another previously disclosed suit, filed by Chamberlain, is based
on assertions that at the May 1987 stock sale there were known
non-conforming 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, however,
Maremont still remains a defendant. Formal discovery has been
completed in the non-conforming product lawsuit. No trial date
has been set.
The Company is a participant with the EPA and the current owner
of a site previously owned by the Company's Maremont subsidiary
in a corrective action proceeding under the Resource Conservation
and Environmental Recovery Act. In the fourth quarter of 1994,
based on the results of an environmental study, the Company
accrued for its share of the reasonably estimable minimum
remediation costs at this site, which include costs incurred in
connection with further studies and design of a remediation plan,
remedial costs, including cleanup activities, and administrative,
legal and consulting fees.
The Company is defending various environmental claims and legal
actions that arise in the normal course of its 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.
At a majority of these sites, the information currently available
leads the Company to believe it has very limited or even de
minimis responsibility. At other sites, the remediation method,
amount of remediation costs, or the allocation among potentially
responsible parties have not been determined. Where reasonable
estimates are possible, the Company has provided for the costs of
study, cleanup, remediation, and certain other costs, 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. Given the
inherent uncertainties in evaluating legal and environmental
exposures, actual costs to be incurred in future periods may vary
from the currently recorded estimates. The Company expects that
any sum it may be required to pay in connection with legal and
environmental matters in excess of the amounts recorded will not
have a material adverse effect on its financial condition.
Other Matters In March, 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121
which establishes new accounting standards for evaluating and
recording impairments of long-lived assets. The statement is
effective for fiscal years beginning after December 15, 1995.
The impact of adoption of the new statement has not been
quantified.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
11 Computation of Earnings Per Share filed herewith as Exhibit 11
27 Financial Data Schedule filed herewith as Exhibit 27
b. Reports Filed on Form 8-K None
Signatures
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.
Arvin Industries, Inc.
by: /s/ Richard A. Smith
_______________________
Richard A. Smith
Vice President-Finance & Chief
Financial Officer
by: /s/ William M. Lowe, Jr.
____________________________
William M. Lowe, Jr.
Controller & Chief Accounting Officer
Date: December 4, 1995
Exhibit 11
<TABLE>
Arvin Industries, Inc.
Computation of Earnings Per Share of Common Stock
(Amounts in millions, except per share amounts)
<CAPTION>
Unaudited Unaudited
------------------ ------------------
Three Months Ended Six Months Ended
------------------ ------------------
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Primary Earnings Per Share
- --------------------------
Income from continuing operations $ 5.2 $ 14.4 $ 7.7 $ 19.8
Income(Loss) from discontinued operations, net of tax 0.4 (0.4) 2.9 (0.5)
-------- -------- -------- --------
Net income to common stock $ 5.6 $ 14.0 $ 10.6 $ 19.3
======== ======== ======== ========
Average shares of common stock outstanding 22.3 22.2 22.3 22.1
Incremental common shares applicable to common
stock options based on the common stock daily
average market price during the period 0.1 0.2 0.1 0.3
-------- -------- -------- -------
Average common shares, as adjusted 22.4 22.4 22.4 22.4
======== ======== ======== =======
Earnings(Loss) per average share of common stock
(including common stock equivalents):
Continuing operations $ 0.23 $ 0.65 $ 0.35 $ 0.88
Discontinued operations 0.02 (0.02) 0.13 (0.02)
-------- -------- -------- --------
$ 0.25 $ 0.63 $ 0.48 $ 0.86
======== ======== ======== ========
Fully Diluted Earnings Per Share: (1)
- -------------------------------------
Income from continuing operations $ 5.2 $ 14.4 $ 7.7 $ 19.8
Income(Loss) from discontinued operations, net of tax 0.4 (0.4) 2.9 (0.5)
-------- -------- -------- --------
Net income 5.6 14.0 10.6 19.3
Add back 7.5% convertible debentures' after tax
interest expense 0.9 1.1 1.9 2.2
-------- -------- -------- --------
Net income to common stock assuming full dilution $ 6.5 $ 15.1 $ 12.5 $ 21.5
======== ======== ======== ========
Average shares of common stock outstanding 22.3 22.2 22.3 22.1
Incremental common shares applicable to common stock
options based on the more dilutive ending or average
market price of the common stock during the period 0.1 0.2 0.1 0.4
Average common shares issuable assuming conversion
of 7.5% convertible subordinated debentures 2.9 3.4 2.9 3.4
-------- -------- -------- --------
Average common shares assuming full dilution 25.3 25.8 25.3 25.9
======== ======== ======== ========
Fully diluted earnings(loss) per average share assuming
conversion of all applicable securities:
Continuing operations $ 0.25 $ 0.61 $ 0.38 $ 0.86
Discontinued operations 0.01 (0.02) 0.12 (0.02)
-------- -------- -------- --------
$ 0.26 $ 0.59 $ 0.50 $ 0.84
======== ======== ======== ========
1) Fully diluted earnings per share amounts are shown for the second quarter and six months of 1995 in accordance
with Securities and Exchange Commission requirements although not in accordance with A.P.B. 15 because they
result in anti-dilution.
See notes to consolidated financial statements.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted
from Form 10-Q/A for the period ended July 2, 1995 and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-02-1995
<PERIOD-END> Jul-2-1995
<PERIOD-TYPE> 6-MOS
<CASH> 20,700
<SECURITIES> 0
<RECEIVABLES> 294,900
<ALLOWANCES> (3,000)
<INVENTORY> 106,400
<CURRENT-ASSETS> 513,300
<PP&E> 897,300
<DEPRECIATION> 470,200
<TOTAL-ASSETS> 1,262,400
<CURRENT-LIABILITIES> 414,300
<BONDS> 348,300
0
0
<COMMON> 60,500
<OTHER-SE> 336,000
<TOTAL-LIABILITY-AND-EQUITY> 1,262,400
<SALES> 1,003,900
<TOTAL-REVENUES> 1,003,900
<CGS> 873,200
<TOTAL-COSTS> 949,900
<OTHER-EXPENSES> 14,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,100
<INCOME-PRETAX> 12,800
<INCOME-TAX> 4,800
<INCOME-CONTINUING> 7,700
<DISCONTINUED> 2,900
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,600
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
