<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Mark one
[ X ] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the
Quarterly period ended September 29, 1996 or
[ ] 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 (Zip Code)
offices)
812-379-3000
------------
(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 November 3, 1996, the Registrant had outstanding
22,482,003 Common Shares (excluding treasury shares), $2.50
par value.
<PAGE>
Table of Contents
-----------------
Part I. Financial Information Page
- ------------------------------ No.
Item 1. Financial Statements
Consolidated Statement of Operations for the Three
Months and Nine Months Ended September 29, 1996
and October 1, 1995 3
Consolidated Statement of Financial Condition at
September 29, 1996 and December 31, 1995 4
Consolidated Statement of Cash Flows for the Nine
Months Ended September 29, 1996 and October 1, 1995 5
Condensed Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8K 12
<PAGE>
<TABLE>
Part I
Item 1. Financial Statements
Arvin Industries, Inc.
Consolidated Statement of Operations
(Dollars in millions, except per share amounts)
Unaudited
<CAPTION>
Three Months Ended Nine Months Ended
------------------ ------------------
9/29/96 10/1/95 9/29/96 10/1/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 557.1 $ 462.1 $ 1,652.0 $ 1,465.9
Costs and Expenses:
Cost of goods sold 486.2 403.9 1,440.9 1,277.0
Selling, operating general and administrative 37.2 38.0 112.5 114.6
Corporate general and administrative 3.7 2.7 11.1 7.9
Restructuring charges -- (.7) -- 2.9
Special charges and credits, net 6.2 .1 5.8 7.0
Interest expense 10.1 10.1 30.3 32.2
Interest income (.4) (.2) (1.0) (.7)
Other expense, net 4.0 3.0 9.0 6.9
-------- -------- -------- --------
547.0 456.9 1,608.6 1,447.8
-------- -------- -------- --------
Earnings from Continuing
Operations Before Income Taxes 10.1 5.2 43.4 18.1
Income taxes (3.7) (2.0) (16.1) (6.9)
Minority share of income (.2) (.3) (2.1) (1.6)
Equity income (loss) of affiliates 2.1 (.2) 3.1 .9
-------- -------- -------- --------
Earnings from Continuing Operations 8.3 2.7 28.3 10.5
-------- -------- -------- --------
Income from discontinued operations,
net of income taxes of $.0, $.7, $.0 and
$.5, respectively -- (1.7) -- .4
Income from disposal of discontinued
operations net of income taxes of $.0,
$.0, $.0 and $.2, respectively -- -- -- .7
-------- -------- -------- --------
Net Earnings $ 8.3 $ 1.0 $ 28.3 $ 11.6
======== ======== ======== ========
Earnings Per Common Share
Primary:
Continuing Operations $ .37 $ .12 $ 1.26 $ .47
Discontinued Operations -- (.08) -- .05
-------- -------- -------- --------
Total - primary $ .37 $ .04 $ 1.26 $ .52
======== ======== ======== ========
Fully Diluted:
Continuing Operations $ .36 $ .12 $ 1.23 $ .47
Discontinued Operations -- (.08) -- .05
-------- -------- -------- --------
Total - fully diluted $ .36 $ .04 $ 1.23 $ .52
======== ======== ======== ========
Average Common Shares Outstanding (000's)
Primary 22,592 22,386 22,458 22,374
Fully Diluted 24,879 25,090 24,715 25,242
Dividends per Common Share $ .19 $ .19 $ .57 $ .57
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Financial Condition
(Dollars in millions, except per share amounts)
Unaudited
<CAPTION>
As of As of
9/29/96 12/31/95
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 25.7 $ 15.2
Receivables, net of allowances of $5.7 as of
September 29, 1996 and $4.2 as of December 31, 1995 394.6 276.0
Inventories 116.4 111.8
Other current assets 67.2 80.5
-------- --------
Total current assets 603.9 483.5
-------- --------
Non-Current Assets:
Property, plant and equipment:
Land, buildings, machinery & equipment 984.9 937.0
Less: Accumulated depreciation 530.3 487.6
-------- --------
454.6 449.4
Goodwill, net of amortization of $35.8 as of
September 29, 1996 and $31.3 as of December 31, 1995 162.6 146.0
Investment in affiliates 83.6 92.4
Assets of business transferred under contractual arrangements 72.4 72.4
Other assets 52.7 47.3
-------- --------
Total non-current assets 825.9 807.5
-------- --------
$ 1,429.8 $ 1,291.0
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 59.7 $ 41.6
Accounts payable 271.9 216.7
Accrued expenses 121.1 97.3
Income taxes payable 11.6 9.4
-------- --------
Total current liabilities 464.3 365.0
-------- --------
Long-term employee benefits 69.5 52.7
Other long-term liabilities 17.7 13.6
Long-term debt 356.3 360.7
Liabilities and deferred credit of business transferred 72.4 72.4
Minority interest 34.8 31.5
Shareholders' Equity:
Common shares ($2.50 par value) 60.7 60.6
Capital in excess of par value 207.8 207.4
Retained earnings 211.7 196.2
Cumulative translation adjustment (25.0) (24.6)
Common shares held in treasury (at cost) (40.4) (44.5)
-------- --------
Total shareholders' equity 414.8 395.1
-------- --------
$ 1,429.8 $ 1,291.0
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Cash Flows
(Dollars in millions)
Unaudited
<CAPTION>
Nine Months Ended
--------------------
9/29/96 10/1/95 (1)
-------- --------
<S> <C> <C>
Operating Activities:
Net earnings $ 28.3 $ 11.6
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 54.4 52.6
Amortization 4.5 4.3
Change in long-term employee benefits 2.0 (.6)
Equity earnings of affiliates (3.1) (.9)
Minority interest 2.1 1.6
Common stock contributed to employee benefit plan 3.3 1.0
Other 5.8 (3.9)
Change in working capital components excluding
effects of acquisitions and reclassifications:
Receivables (84.0) (11.1)
Inventories and other current assets 12.4 (33.2)
Accounts payable and other accrued expenses 35.1 9.4
Income taxes payable and deferred taxes 2.7 (.6)
-------- --------
Net Cash Provided By Operating Activities 63.5 30.2
-------- --------
Investing Activities:
Purchase of property, plant and equipment (49.6) (62.8)
Proceeds from sale of property, plant and equipment 8.7 1.2
Business acquisition, net of cash acquired (7.9) --
Cash proceeds from sale of business, net of cash balances 2.0 66.8
Other 1.4 (7.8)
-------- --------
Net Cash Used For Investing Activities (45.4) (2.6)
-------- --------
Financing Activities:
Change in short-term debt, net 22.3 38.7
Principal payments on long-term debt (20.8) (22.8)
Dividends paid (9.1) (12.7)
Other .3 2.8
-------- --------
Net Cash Provided By (Used For) Financing Activities (7.3) 6.0
-------- --------
Cash and Cash Equivalents:
Effect of exchange rate changes on cash (.3) .2
-------- --------
Net increase 10.5 33.8
Beginning of the period 15.2 22.4
-------- --------
End of the Period $ 25.7 $ 56.2
======== ========
<FN>
(1) Certain amounts have been reclassified to conform with current year presentation.
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
ARVIN INDUSTRIES, INC.
- ----------------------
CONDENSED 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 December 31, 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.
Except for the restructuring and special charges and credits
described in Management's Discussion and Analysis, all such
adjustments are of a normal recurring nature.
The results of operations for the three and nine months
ended September 29, 1996 are not necessarily indicative of
the results to be expected for the full year ending December
29, 1996.
Note 2. There were options for 2.5 and 2.0 million common
shares outstanding as of September 29, 1996 and October 1,
1995, respectively. Earnings per share calculations include
dilutive options in the determination of the weighted
average common and common equivalent shares outstanding.
Fully diluted earnings per share calculations include
dilutive options and assume conversion of the 7.5 percent
convertible subordinated debentures 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 3. 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 LIFO 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 their finished goods, work in process and raw material
components.
Note 4. 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, neither the remediation
method, amount of remediation costs nor the allocation among
potentially responsible parties has 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.
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 Recovery Act. The Company has
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.
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.
<PAGE>
Two previously disclosed suits filed by Chamberlain
Manufacturing Corporation were settled during the second
quarter. Both suits grew out of the May 1987 sale of a
Maremont unit, Saco Defense, Inc., to Chamberlain and
related to (i) certain worker compensation cases pending at
the time of the sale and (ii) assertions of nonconforming
products being shipped to the U.S. government prior to the
sale. The settlement, which included dismissal of all
litigation, was within amounts previously reserved for this
litigation and did not have a significant impact on the
Company's 1996 results of operations.
Note 5. In conjunction with the September 29, 1995 sale of
Space Industries International, Inc., the Company guaranteed
approximately $22.9 million of the purchaser's (Calspan SRL
Corporation) debt. The guarantee amount, which was $18.0
million at September 29, 1996, is scheduled to decline
quarterly over a four year period before expiring on
September 30, 1999. It is not practicable to estimate the
fair value of the guarantee; however, the Company does not
anticipate that it will incur losses as a result of this
guarantee.
During the third quarter of 1995, the Company instituted a
review of an underperforming 50 percent owned joint venture
serving the European Original Equipment market. The
Company's previously disclosed negotiations have been
satisfactorily concluded and approved by regulatory
agencies. An agreement has been reached with the Company's
joint venture partner and lending institutions for the
restructuring of the joint venture's debt. The agreement
did not have a material impact on the Company's financial
statements.
Note 6. On June 26, 1996, the Company increased its
ownership in Way Assauto S.r.l. from 49.9 percent to 54.9
percent. Non-cash assets acquired, liabilities assumed and
minority interest arising from the transaction were $72.8,
$65.2 and $3.4 million, respectively. The results of Way
Assauto's operations are included in the Consolidated
Statement of Operations for the third quarter, 1996.
Goodwill resulting from this transaction of $7.7 million
will be amortized using the straight-line method over a
forty year period.
Note 7. Changes in Shareholders' Equity
(Dollars in millions)
For the Nine Months Ended
------------------------
9/29/96 10/1/95
------- -------
Beginning balance $ 395.1 $ 396.3
Common stock dividends declared (12.8) (12.7)
Net earnings 28.3 11.6
Common stock contributed to employee
benefit plan 3.3 1.0
Other .9 (.9)
------- -------
Total shareholders' equity $ 414.8 $ 395.3
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Review
(Dollar amounts in tables in millions)
Overview
The Company's sales for the nine months ended September 29,
1996 increased 13 percent, to $1,652.0 million. The Company
recorded sales of $557.1 million for the third quarter 1996,
which represents a 21 percent increase over the third
quarter 1995 sales of $462.1 million. Significant volume
increases in both the European and North American original
equipment exhaust businesses contributed to these increases.
Volume increases, which included substantial new business,
exceeded the overall market growth, resulting in improved
market share in both Europe and North America. A trend
toward more complex, higher quality products in the
Company's original equipment businesses also had a
significant positive impact on the Company's sales.
Operating income increased 34 percent to $93.4 million for
the nine months ended September 29, 1996. Operating income
increased 48 percent to $29.5 million in the third quarter
1996. Steady production schedules in the OE segment, as
well as reduced new business costs in the Replacement
segment, significantly improved earnings.
Results of Operations
Third Quarter First Nine Months
Net Sales by Segment 1996 1995 1996 1995
- -------------------- ---------------- -------------------
Automotive Original $376.8 $296.0 $1,143.8 $ 979.4
Equipment
Automotive Replacement 180.3 166.1 508.2 486.5
------ ------ -------- --------
Total $557.1 $462.1 $1,652.0 $1,465.9
====== ====== ======== ========
Operating Income by Third Quarter First Nine Months
Segment (1) 1996 1995 1996 1995
- -------------------- ---------------- -------------------
Automotive Original $13.9 $ 9.8 $49.0 $44.3
Equipment
Automotive Replacement 15.6 10.1 44.4 25.5
------ ------ -------- --------
Total $29.5 $19.9 $93.4 $69.8
====== ====== ======== ========
(1) Reflects income from continuing operations prior to
Corporate allocated expenses.
Automotive Original Equipment ("OE"): Sales in the OE
segment of $1,143.8 million for the nine months ended
September 29, 1996 were 17 percent higher than OE sales for
the nine months ended October 1, 1995. Market forces in the
Company's primary markets of Europe and North America were
mixed. European car registrations increased 4.8 percent,
while North American car and light truck production declined
1.1 percent. Despite mixed market influences, the Company
experienced strong increases in sales volumes. Increased
volume in ongoing operations accounted for 60 percent of the
overall increase, while volume increases as a result of the
consolidation of Way Assauto S.r.l. contributed 10 percent
of the increase. In addition to the increased volume, the
Company's OE markets continue a trend toward higher quality,
higher priced original equipment parts. Offsetting these
strong positive trends were selective price concessions,
which averaged less than one percent of OE sales. The
Company continues to seek methods of lowering its cost
structure in line with customer requests for reduced selling
prices so that net operating margin is not adversely
affected.
Comparison of the effect of changes in volume from period to
period is subject to a number of limitations, principally
centered around what constitutes a "unit" for volume
measurement. The appropriate measure of a "unit" varies
over time as products develop, varies among the different
countries in which the Company operates, and varies within
each operating unit of the Company. As a result, there is a
certain degree of imprecision and subjectivity in estimating
the impact of volume changes.
Third quarter OE sales increased 27 percent to $376.8
million. Increased volume in ongoing operations accounted
for 60 percent of the overall increase, while volume
increases as a result of the consolidation of Way Assauto
S.r.l. contributed 18 percent of the increase. In addition,
the Company's OE markets continue a trend toward more
complex, higher quality and higher priced original equipment
parts, which has had a strong positive impact on sales.
Offsetting these strong positive trends were minor price
concessions, which averaged less than one percent of OE
sales.
OE operating income increased $4.7 million for the first
nine months of 1996, despite the first quarter effect of the
General Motor's strike, estimated at $2.5 million. Volume
increases and the positive effect on product mix as a result
of a more complex product line were the primary drivers of
the increase.
OE operating income increased $4.1 million for the third
quarter of 1996, as compared to the same period of 1995.
Increased volume was the primary driver of this increase.
Automotive Replacement ("Replacement"): Sales in the
replacement segment of $508.2 million for the nine months
ended September 29, 1996 increased 5 percent. Improved
pricing contributed approximately 65 percent of the overall
increase. The Company's recent acquisition of a controlling
interest in Way Assauto S.r.l. accounted for 22 percent of
the increase. The remaining increase in sales was primarily
a result of favorable channel and product mix.
Third quarter Replacement sales of $180.3 million were $14.2
million higher than sales in the comparable quarter of 1995.
Approximately 35 percent of the increase resulted from
improved pricing, while 33 percent resulted from the
consolidation of Way Assauto S.r.l. Volume increases,
particularly in the European exhaust market, contributed
more than 20 percent of the overall increase. Favorable
channel and product mix accounted for the remainder of the
increase.
Replacement operating income increased $18.9 million for the
first three quarters of 1996 as compared to the same period
of 1995. Improved pricing contributed almost 75 percent of
the overall increase. Operating income also improved as a
result of reduced expenditures to obtain new business, which
decreased $6.7 million in the current period, from the
unusually high level reported in the prior year.
Operating income for the replacement market increased $5.5
million during the third quarter to $15.6 million. The
increase was primarily the result of improved pricing.
Productivity improvements also contributed to the current
quarter's increase.
Corporate General and Administrative expenses increased $3.2
million during the first nine months and $1.0 million during
the third quarter of 1996. The increases related primarily
to employee costs.
Restructuring Charges: The 1995 restructuring charge
resulted from workforce reductions and consolidation of
manufacturing facilities and product lines related to the
1994 restructuring plan.
Special Charges (Credits): Included in special charges for
the third quarter of 1996 is $2.6 million to reserve for
future lease commitments at abandoned or under utilized
properties, which resulted from a decision to consolidate
some of the Company's European distribution locations.
Special charges also include $1.2 million for contract
termination costs and $2.4 million for additions to legal
and environmental reserves for operations previously owned
by the Company's Maremont subsidiary. Year-to-date special
charges (credits) include the positive impact of a second
quarter insurance settlement and additions to legal and
environmental reserves. A 1995 special charge of $6.9
million, related to a judgment against an Arvin subsidiary
for breach of contract in connection with the 1987 sale of
Saco Defense, Inc., is included in the 1995 year-to-date
amount. This litigation was settled in the second quarter
of 1996.
Interest Expense decreased six percent during the first nine
months, when compared to the same period in 1995. The
decrease was primarily a result of lower average
outstanding long-term debt, which decreased by eight percent
for the nine months. Third quarter 1996 interest expense
was essentially unchanged from the comparable 1995 expense.
Slightly higher overall rates were offset by lower average
outstanding long-term debt during the period.
Other Expense, net increased $2.1 million in the first nine
months and $1.0 million for the third quarter of 1996. The
third quarter increase resulted from increased contributions
as well as increases resulting from asset write-offs. These
factors, as well as the write-off of certain deferred
expenses in the first quarter of 1996, accounted for the
year to date increase.
Equity Income (Loss) of Affiliates increased $2.2 million
for the nine month period. Of the total increase, $1.2
million reflects stronger OE sales and profits in the United
States and $1.0 million reflects improved profitability
stemming from an Italian OE joint venture completing its
second year of production. For the quarter, equity income
increased $2.3 million. This increase reflects the
consolidation of Way Assauto S.r.l., strong performance in
the quarter by the previously mentioned Italian OE joint
venture, and widespread improvement in the Company's North
and South American equity subsidiaries.
Financial Condition
Liquidity: During the first nine months of 1996, accounts
receivable and accounts payable increased 43 percent and 26
percent, respectively, primarily as a result of the
consolidation of Way Assauto and the seasonal increase in
September over December sales. Days sales outstanding at
the end of the first nine months were 64.9 days compared to
50.7 days at the end of 1995. The current ratio was 1.3 at
September 29, 1996 and at year-end 1995. The Company's debt
to capital ratio was 48.5 percent at the end of 1995 and
decreased to 48.0 percent at September 29, 1996. For a
detailed analysis of changes in cash, see the Consolidated
Statement of Cash Flows.
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 for the foreseeable future. The Company has
the option to increase its ownership of two jointly-owned
entities operating in the European component market to 100
percent in early 1997. If the Company exercises its option,
the transaction would be funded by currently available
credit facilities or by the issuance of new securities .
The terms and conditions of such new securities have not
been finalized.
Planned capital expenditures for 1996 are adequate for
normal growth and replacement and are consistent with
internal projections for future sales and earnings. Near-
term expenditures for current operations are expected to be
funded from internally generated funds.
Hedging The Company uses derivative financial instruments
from time-to-time to hedge certain financial and operating
transactions denominated in currencies other than functional
currencies and to hedge interest rate exposures. The
Company believes that adequate controls are in place to
monitor these activities which are not financially material.
Legal/Environmental Matters 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, neither the
remediation method, amount of remediation costs nor the
allocation among potentially responsible parties has 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.
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 Recovery Act. The Company has
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.
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.
Two previously disclosed suits filed by Chamberlain
Manufacturing Corporation were settled during the second
quarter. Both claims grew out of the May 1987 sale of a
Maremont unit, Saco Defense, Inc., to Chamberlain and
related to (i) certain worker compensation cases pending at
the time of the sale and (ii) assertions of nonconforming
products being shipped to the U.S. government prior to the
sale. The settlement, which included dismissal of all
litigation, was within amounts previously reserved for this
litigation and did not have a significant impact on the
Company's 1996 results of operations.
Other Matters: In October 1995, the FASB issued Statement
No. 123, "Accounting for Stock-Based Compensation." This
statement is effective for fiscal years beginning after
December 15, 1995. The Company will continue to follow
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock
options. Under APB 25, because the exercise price of the
Company's employee stock options is not less than the market
price of the underlying stock on the date of grant, no
compensation expense is recognized. The Company will adopt
the additional disclosure requirements of Statement No. 123
for its year-end 1996 reporting.
<PAGE>
Part II
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
<PAGE>
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: November 08, 1996
<TABLE>
Exhibit 11
Arvin Industries, Inc.
Computation of Earnings Per Share of Common Stock
(Amounts in millions, except per share amounts)
<CAPTION>
Unaudited Unaudited
---------------------- ----------------------
Three Months Ended Nine Months Ended
---------------------- ----------------------
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Earnings Per Share
Income from continuing operations $ 8.3 $ 2.7 $ 28.3 $ 10.5
Income from discontinued operation, net of tax .0 (1.7) .0 1.1
------- ------- ------- -------
Net income to common stock $ 8.3 $ 1.0 $ 28.3 $ 11.6
======= ======= ======= =======
Average shares of common stock outstanding 22.5 22.3 22.4 22.3
Incremental common shares applicable to common
stock options based on the common stock daily
average market price during the period .1 .1 .1 .1
------- ------- ------- -------
Average common shares, as adjusted 22.6 22.4 22.5 22.4
======= ======= ======= =======
Earnings per average share of common stock
(including common stock equivalents):
Continuing operations $ .37 $ .12 $ 1.26 $ .47
Discontinued operations .00 (.08) .00 .05
------- ------- ------- -------
$ .37 $ .04 $ 1.26 $ .52
======= ======= ======= =======
Fully Diluted Earnings Per Share: (1)
Income from continuing operations $ 8.3 $ 2.7 $ 28.3 $ 10.5
Income from discontinued operation, net of tax .0 (1.7) .0 1.1
------- ------- ------- -------
Net income 8.3 1.0 28.3 11.6
Add back 7.5% convertible debentures' after tax
interest expense. .7 .9 2.2 2.8
------- ------- ------- -------
Net income to common stock assuming full dilution $ 9.0 $ 1.9 $ 30.5 $ 14.4
======= ======= ======= =======
Average shares of common stock outstanding 22.5 22.3 22.4 22.3
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 .2 .1 .1 .1
Average common shares issuable assuming conversion
of 7.5% convertible subordinated debentures 2.2 2.7 2.2 2.8
------- ------- ------- -------
Average common shares assuming full dilution 24.9 25.1 24.7 25.2
======= ======= ======= =======
Fully diluted earnings per average share assuming
conversion of all applicable securities:
Continuing operations $ .36 $ .14 $ 1.23 $ .53
Discontinued operations .00 (.07) .00 .04
------- ------- ------- -------
$ .36 $ .07 $ 1.23 $ .57
======= ======= ======= =======
<FN>
1) Fully diluted earnings per share amounts are shown for the third quarter and nine 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.
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information
extracted from Form 10-Q for the period ended
September 29, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<FISCAL-YEAR-END> Dec-29-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-29-1996
<PERIOD-TYPE> 9-MOS
<CASH> 25,700
<SECURITIES> 0
<RECEIVABLES> 400,300
<ALLOWANCES> (5,700)
<INVENTORY> 116,400
<CURRENT-ASSETS> 603,900
<PP&E> 984,900
<DEPRECIATION> 530,300
<TOTAL-ASSETS> 1,429,800
<CURRENT-LIABILITIES> 464,300
<BONDS> 356,300
0
0
<COMMON> 60,700
<OTHER-SE> 354,100
<TOTAL-LIABILITY-AND-EQUITY> 1,429,800
<SALES> 1,652,000
<TOTAL-REVENUES> 1,652,000
<CGS> 1,440,900
<TOTAL-COSTS> 1,553,400
<OTHER-EXPENSES> 14,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,300
<INCOME-PRETAX> 43,400
<INCOME-TAX> 16,100
<INCOME-CONTINUING> 28,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,300
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.23
</TABLE>
