<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 28, 1997 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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)
Indiana 35-0550190
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(State or other jurisdiction of (I.R.S. Employer
Identification No.)
incorporation or organization)
One Noblitt Plaza, Box 3000
Columbus, IN 47202-3000
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(Address of principal (Zip Code)
executive offices)
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 November 2, 1997, the Registrant had outstanding 24,553,988 Common
Shares (including employee stock benefit trust shares and excluding
treasury shares), $2.50 par value.
1
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Table of Contents
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Part I. Financial Information Page
No.
Item 1. Financial Statements
Consolidated Statement of Operations for the Three
Months and Nine Months Ended September 28, 1997 and
September 29, 1996 3
Consolidated Statement of Financial Condition at
September 28, 1997 and December 29, 1996 4
Consolidated Statement of Cash Flows for the Nine
Months Ended September 28, 1997 and September 29,
1996 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 13
2
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Part I
Item 1: Financial Statements
<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Operations
(Dollars in millions, except per share amounts)
Unaudited
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 554.0 $ 557.1 $ 1,750.5 $ 1,652.0
Costs and Expenses:
Cost of goods sold 473.7 486.2 1,504.2 1,440.9
Selling, operating general and administrative 42.6 37.2 122.4 112.5
Corporate general and administrative 4.1 3.7 15.0 11.1
Net gain on capital transactions -- -- (2.2) --
Special charges 1.5 6.2 3.0 5.8
Interest expense 10.7 10.1 30.2 30.3
Interest income (1.2) (.4) (3.1) (1.0)
Other expense, net 2.9 4.0 9.8 9.0
--------- --------- ----------- -----------
534.3 547.0 1,679.3 1,608.6
--------- --------- ----------- -----------
Earnings Before Income Taxes 19.7 10.1 71.2 43.4
Income taxes (7.0) (3.7) (24.6) (16.1)
Minority share of income -- (.2) (2.9) (2.1)
Equity income of affiliates .9 2.1 4.0 3.1
--------- --------- ----------- -----------
Earnings from Continuing Operations 13.6 8.3 47.7 28.3
--------- --------- ----------- -----------
Income from disposal of discontinued
operations, net of income taxes of $.0,
$.0, $.0 and $.0, respectively 1.6 -- 1.6 --
--------- --------- ----------- -----------
Net Earnings $ 15.2 $ 8.3 $ 49.3 $ 28.3
========= ========= =========== ===========
Earnings Per Common Share
Primary:
Continuing operations $ .58 $ .37 $ 2.06 $ 1.26
Discontinued operations .07 -- .07 --
--------- --------- ----------- -----------
Total - primary $ .65 $ .37 $ 2.13 $ 1.26
========= ========= =========== ===========
Average Common Shares Outstanding (000's)
Primary 23,601 22,592 23,190 22,458
Dividends per Common Share $ .19 $ .19 $ .57 $ .57
<FN>
See notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Financial Condition
(Dollars in millions, except per share amounts)
Unaudited
<CAPTION>
As of As of
9/28/1997 12/29/1996
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<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 79.7 $ 39.4
Receivables, net of allowances of $7.5 as of
September 28, 1997 and $6.7 as of December 29, 1996 382.1 304.7
Inventories 117.3 115.9
Other current assets 82.9 78.9
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Total current assets 662.0 538.9
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Non-Current Assets:
Property, plant and equipment 1,105.5 1,011.0
Less accumulated depreciation 627.2 547.1
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478.3 463.9
Goodwill, net of amortization of $33.5 as of
September 28, 1997 and $32.3 as of December 29, 1996 173.8 158.0
Investment in affiliates 51.2 85.7
Assets of business transferred under contractual arrangements -- 72.4
Other assets 45.1 61.3
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Total non-current assets 748.4 841.3
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$ 1,410.4 $ 1,380.2
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 2.4 $ 46.1
Current maturities of long-term debt 51.4 6.5
Accounts payable 293.2 257.7
Accrued expenses 147.2 124.8
Income taxes payable 12.2 17.7
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Total current liabilities 506.4 452.8
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Long-term employee benefits 68.1 67.0
Other long-term liabilities 27.2 22.4
Long-term debt 229.8 294.0
Liabilities and deferred credit of business transferred -- 72.4
Minority interest 11.7 34.2
Company-obligated mandatorily redeemable preferred capital securities
of subsidiary trust holding solely subordinated debentures of the Company 98.9 --
Shareholders' Equity:
Common shares ($2.50 par value) 65.5 65.4
Capital in excess of par value 249.0 247.3
Retained earnings 262.6 226.2
Cumulative translation adjustment (40.6) (19.9)
Employee stock benefit trust (31.2) (42.2)
Common shares held in treasury (at cost) (37.0) (39.4)
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Total shareholders' equity 468.3 437.4
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$ 1,410.4 $ 1,380.2
========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
4
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<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Cash Flows
(Dollars in millions)
Unaudited
<CAPTION>
Nine Months Ended
------------------------
September 28, September 29,
1997 1996 (1)
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<S> <C> <C>
Operating Activities:
Net earnings $ 49.3 $ 28.3
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 61.4 54.4
Amortization 4.6 4.5
Long-term employee benefits 2.8 2.0
Deferred income taxes, long-term (3.3) .2
Equity earnings of affiliates (4.0) (3.1)
Minority interest 2.9 2.1
Common stock contributed to employee benefit plan 4.5 3.3
Other (2.8) 5.3
Changes in operating assets and liabilities,
net of reclassifications:
Receivables (60.2) (84.0)
Inventories and other current assets 5.3 12.4
Accounts payable and other accrued expenses 40.7 35.1
Income taxes payable and deferred taxes (4.3) 3.0
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Net Cash Provided By Operating Activities 96.9 63.5
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Investing Activities:
Purchase of property, plant and equipment (53.7) (49.6)
Proceeds from sale of property, plant and equipment 3.8 1.5
Investment in affiliates (7.0) (4.1)
Business acquisitions, net of cash acquired (19.5) (8.0)
Cash proceeds from sale of businesses,
net of cash balances of businesses sold 3.7 2.0
Dividends received 1.2 3.2
Other (2.9) 9.6
--------- ---------
Net Cash Used For Investing Activities (74.4) (45.4)
--------- ---------
Financing Activities:
Change in short-term debt, net (40.8) 22.3
Proceeds from issuance of Company-obligated mandatorily
redeemable preferred capital securities of subsidiary trust
holding solely subordinated debentures of the Company 99.8 --
Principal payments on long-term debt (35.8) (20.8)
Dividends paid (12.9) (9.1)
Net proceeds from stock issuance 9.3 .7
Other (.2) (.4)
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Net Cash Provided By/(Used For) Financing Activities 19.4 (7.3)
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Cash and Cash Equivalents:
Effect of exchange rate changes on cash (1.6) (.3)
--------- ---------
Net increase 40.3 10.5
Beginning of the period 39.4 15.2
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End of the Period $ 79.7 $ 25.7
========= =========
<FN>
(1) Certain amounts have been reclassified to conform with current
period presentation.
<FN>
See notes to consolidated financial statements.
</TABLE>
5
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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
December 29, 1996.
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 and all such adjustments are of a normal recurring
nature.
The results of operations for the three and nine months ended September 28,
1997 are not necessarily indicative of the results to be expected for the
full year ending December 28, 1997.
Note 2. 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.
6
<PAGE>
Note 3. In conjunction with the September 29, 1995 sale of Space
Industries International, Inc. (SIII), the Company guaranteed approximately
$22.9 million of the purchaser's (Calspan SRL Corporation) debt. As a
result of this guarantee, the Company accounted for the SIII transaction
following the treatment set forth in the Securities and Exchange
Commission's Staff Accounting Bulletins - Topic 5E "Accounting for
divestiture of a subsidiary or other business operation." During the
third quarter of 1997 Calspan entered into a business combination and debt
re-financing which released the Company from its guarantee. As a result, a
previously deferred $1.6 million gain on the sale of SIII was recorded as
income from disposal of discontinued operations during the third quarter.
Note 4. On January 28, 1997 Arvin Capital I, a subsidiary of Arvin
Industries, Inc., issued $100 million of 9.5 percent Company-obligated
mandatorily redeemable preferred capital securities of subsidiary trust
holding solely subordinated debentures of the Company maturing on February
1, 2027, callable in 10 years. The sole assets of the subsidiary trust are
$103.1 million principal amount of 9.5 percent Subordinated Debentures of
Arvin. Proceeds from this issue were used for the acquisition of
additional shares in Autocomponents Suspension S.r.l., the purchase of the
remaining shares of Timax Exhaust Systems Holding B.V. (TESH), general
corporate purposes and the pay down of short-term borrowings incurred in
connection with the December 27, 1996 redemption of convertible
subordinated debentures.
On September 25, 1997 the Company redeemed $28.4 million of its 9 1/8
percent sinking fund debentures due 2017 at par value plus a 4.33 percent
call premium. The redemption was funded with cash on hand and short-term
borrowings.
Note 5. On January 29, 1997 the Company exercised its option to purchase an
additional 5 percent of Autocomponents Suspension S.r.l. for a purchase
price of $1.8 million. Autocomponents, which is located in Melfi, Italy,
manufactures ride control products primarily for the original equipment
market. The results of Autocomponents' operations are included in the
Company's consolidated financial results subsequent to the date of
acquisition of this controlling interest.
On May 7, 1997 the Company exercised its option to purchase the remaining
50 percent of the TESH joint venture from Sogefi S.p.A. The total purchase
price of $28.3 million includes the value of previous option payments plus
interest thereon and a cash payment of $20.9 million.
Note 6. In March 1997, the FASB issued Statement No. 128 (SFAS 128),
"Earnings per Share." The Company will adopt SFAS 128 for 1997 year-end
reporting and restate its reporting for all prior periods reported as
required. The adoption of the new SFAS will not have a material impact on
earnings per share amounts.
7
<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 quarter ended September 28, 1997 of $554.0
million were essentially flat when compared to the third quarter of 1996.
A two percent reduction in vehicle production in the U.S. and Canada and
the effect of a strong U.S. dollar were offset by a seven percent increase
in European car registrations, the consolidation of Autocomponents
Suspension S.r.l during the first quarter of 1997, and the purchase of the
remaining 50 percent of Timax Exhaust Systems Holding B.V. (TESH) during
the second quarter of 1997.
Arvin's sales for the nine months ended September 28, 1997 improved six
percent over sales during the same period in 1996. The increase was
primarily a result of the acquisitions mentioned above, which accounted for
62 percent of the nine month increase. The consolidation of Way Assauto
S.r.l. at the end of the second quarter of 1996 contributed $42 million to
sales during the first six months of 1997. New car registrations in
Western Europe increased three percent and vehicle production in the U.S.
and Canada increased one percent during the period.
Operating income increased $7.6 million, or 26 percent, during the third
quarter of 1997. Improved operating profit margins, largely a result of
the ongoing implementation of Arvin Total Quality Production System and
other programs designed to reduce costs throughout the Company's global
operations, were the primary reason for the increase. The consolidation of
Autocomponents and TESH accounted for 23 percent of the increase.
For the nine months ended September 28, 1997, operating income increased 33
percent, to $124.0 million. Improved margins, due to cost reduction
programs, were the principal contributor to the increase. The effect of the
previously mentioned acquisitions and the gain on the sale of capital lease
assets contributed 29 percent of the increase.
8
<PAGE>
Results of Operations
Third Quarter First Nine Months
Net Sales by Segment 1997 1996 1997 1996
- -------------------- ------ ------ -------- --------
Automotive
Original Equipment $357.6 $376.8 $1,192.3 $1,143.8
Automotive Replacement 196.4 180.3 558.2 508.2
------ ------ -------- --------
Total $554.0 $557.1 $1,750.5 $1,652.0
====== ====== ======== ========
Operating Income by Third Quarter First Nine Months
Segment (1) 1997 1996 1997 1996
- -------------------- ------ ------ -------- --------
Automotive
Original Equipment $14.7 $13.9 $ 64.9 $49.0
Automotive Replacement 22.4 15.6 59.1 44.4
------ ------ -------- --------
Total $37.1 $29.5 $124.0 $93.4
====== ====== ======== ========
(1) Reflects income from continuing operations prior to Corporate allocated
expenses.
The negative impact of a strong U.S. dollar on the translation of non-U.S.
sales reduced the level of consolidated sales by $17.4 million during the
third quarter and $38.8 million for the nine months ended September 28,
1997. On a constant dollar basis, sales increased three percent in the
third quarter and eight percent for the nine months. The strong U.S.
dollar's impact on translation also reduced consolidated operating income
by $.8 million and $3.1 million during the third quarter and the first nine
months of 1997, respectively.
Automotive Original Equipment ("OE"): Third quarter OE sales were $357.6
million, a decrease of five percent, or $19.2 million, when compared to
sales for the same quarter of 1996. Volume declines of $17.9 million were
partially offset by sales from the consolidation of Autocomponents, which
contributed $7.9 million to the third quarter. Market forces in the
Company's primary markets of Europe and North America were mixed. In the
U.S. and Canada, car and light truck production decreased two percent when
compared to the third quarter of 1996. New car registrations in Western
Europe improved by almost seven percent, when compared to the third quarter
of 1996, largely as a result of sales incentives offered in Italy.
Selective price concessions averaged one percent of OE sales. A strong
U.S. dollar had an $11.0 million negative effect on the translation of OE
sales during the quarter. On a constant dollar basis, OE sales were down
two percent compared with third quarter of 1996 sales.
Sales in the OE segment for the first nine months of 1997 increased $48.5
million, or four percent, over the prior year sales of $1,143.8 million.
The effect of the consolidation of Way Assauto in the second quarter of
9
<PAGE>
1996 and Autocomponents in the first quarter of 1997 was $59.4 million.
Market forces were favorable, with West European new car registrations up
three percent and U.S. and Canada light vehicle production reporting a one
percent increase. Market related sales volume increases accounted for
approximately $22 million of the year-to-date increase. A strong U.S.
dollar had a $28.5 million negative effect on the translation of OE sales
during the first nine months. On a constant dollar basis, OE sales grew
seven percent when compared with the first nine months of 1996. Selective
price concessions averaged one percent of OE sales during the period.
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.
Operating income in the OE segment increased $.8 million for the quarter.
Previously mentioned selective price concessions negatively affected
operating profits by $3.6 million. Negotiated improvements in raw material
prices improved operating profit by $3.2 million while productivity
improvements outpaced labor inflation by an estimated $.9 million. The
consolidation of Autocomponents contributed $.6 million to the third
quarter increase. Other factors affecting the third quarter operating
income include the impact of a strong U.S. dollar and a change in sales
mix.
OE operating income increased $15.9 million for the first nine months.
Previously mentioned selective price concessions reduced operating profits
$12.0 million. These price concessions were again offset by negotiated
improvements in raw material pricing of $16.3 million, including the $3.9
million impact of prior year steel surcharges which were not a factor in
the current year. Improved volume related factors increased the period's
operating profit an estimated $9.8 million. The effect of the second
quarter of 1996 consolidation of Way Assauto and the first quarter of 1997
consolidation of Autocomponents contributed $4.2 million to the period. A
gain on the sale of capital assets in the first quarter of 1997 had a $3.3
million positive impact. Other factors affecting operating income include
the impact of a strong U.S. dollar and a change in sales mix.
Automotive Replacement ("Replacement"): Sales in the replacement segment of
$196.4 million for the quarter ended September 28, 1997 increased nine
percent over the third quarter of 1996 sales of $180.3 million. The second
quarter consolidation of TESH contributed $20.2 million of additional sales
during the third quarter. Market related volume declines during the
quarter were somewhat offset by sales price increases.
10
<PAGE>
Replacement sales of $558.2 million for the nine months ended September 28,
1997 increased ten percent, or $50.0 million, over sales of $508.2 million
during the same period in 1996. The consolidation of Way Assauto, S.r.l.
at the end of the second quarter of 1996 and the second quarter
consolidation of TESH accounted for 87 percent of the year-to-date sales
increase. Price increases contributed $9.8 million to the year-to-date
sales increase. Volume declines in the U.S. were offset by increases in
Western Europe.
Operating income for the replacement market increased $6.8 million during
the quarter to $22.4 million. The increase was primarily the result of
improved pricing which contributed $3.6 million. One time special charges
negatively affected 1996 results by $2.6 million. The second quarter of
1997 consolidation of TESH accounted for an increase of $1.2 million.
Volume declines in the U.S., partially offset by increased volume in
Western Europe, accounted for the remaining change in operating income for
the quarter.
Operating income for the replacement segment improved $14.7 million, or
33 percent, during the first nine months of 1997. Improved pricing
contributed $9.8 million to the improved operating income. One time
special charges negatively affected 1996 results by $2.6 million. The
effect of the second quarter of 1996 consolidation of Way Assauto and the
second quarter of 1997 acquisition of TESH contributed $2.5 million. While
higher material prices cost the Company $2.2 million, productivity
improvements, in excess of wage increases, contributed $1.4 million. The
impact of volume and mix variances accounted for the remaining change in
operating income for the period.
Operating units in the Replacement segment sell their product through a
variety of different customer "channels" including merchandisers,
installers, and wholesale distributors. As a result of period to period
variations in this "channel mix," in addition to normal variations in
"product mix," the average price of units sold may not correspond to price
changes. There is also a certain degree of imprecision and subjectivity in
estimating the impact of period to period volume changes, principally
because of questions as to 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.
Corporate General and Administrative expenses increased $3.9 million during
the first nine months and increased $.4 million during the third quarter of
1997. The year-to-date increase was primarily attributable to expenditures
for employee costs.
Net Gain on Capital Transactions includes $3.7 million of gain on the sale
of capital assets and a downward adjustment of $1.5 million in the carrying
value of a non-controlled venture in the South American exhaust market.
11
<PAGE>
Special Charges: Special charges in 1997 reflect second quarter legal and
environmental costs of $1.5 million for operations previously owned by the
Company's Maremont subsidiary and $1.5 million in the third quarter for
costs related to the redemption of the Company's 9 1/8 percent debentures.
Special charges in the third quarter of 1996 include a $2.6 million reserve
for future lease commitments at abandoned or under-utilized properties,
$2.4 million of legal and environmental reserves, primarily for operations
previously owned by the Company's Maremont subsidiary and $1.2 million for
contract termination costs.
Interest Expense increased six percent during the third quarter, but was
flat for the first nine months of 1997, when compared to the same periods
in 1996. The third quarter increase was a result of higher average
borrowing rates on slightly lower average outstanding interest-bearing
liabilities.
Income from Disposal of Discontinued Operations represents a previously
deferred $1.6 million gain on the sale of Space Industries International,
Inc.
Financial Condition
Liquidity Working capital improved by $69.5 million during the first nine
months of 1997, which caused the current ratio to improve from 1.2 at the
end of 1996 to 1.3 at September 28, 1997. During the first nine months of
1997, accounts receivable and accounts payable increased 25 percent and 14
percent, respectively, primarily as a result of the consolidation of TESH
and Autocomponents Suspension S.r.l. and the seasonal increase in sales.
(See the Consolidated Statement of Cash Flows for a detailed analysis of
changes in cash.)
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.
During the quarter the Company re-negotiated its domestic revolving credit
facility and its multicurrency revolving credit facility to consolidate
and extend the maturity date to August 2002.
The Company exercised its option to purchase the remaining 50 percent of
the TESH joint venture from Sogefi S.p.A. on May 7, 1997. The total
purchase price of $28.3 million includes the value of previous option
payments plus interest thereon and a cash payment of $20.9 million.
Proceeds from the Company-obligated mandatorily redeemable preferred
capital securities of subsidiary trust holding solely subordinated
debentures of the Company were used to complete this transaction.
Planned capital expenditures 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.
12
<PAGE>
Hedging The Company uses derivative financial instruments from time-to-
time to manage interest rate exposures and to hedge certain financial and
operating transactions denominated in currencies other than functional
currencies. 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.
Other Matters: In March 1997, the FASB issued Statement No. 128 (SFAS
128), "Earnings per Share." The Company will adopt SFAS 128 for 1997 year-
end reporting and restate its reporting for all prior periods reported as
required. The adoption of the new SFAS will not have a material impact on
earnings per share amounts.
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
13
<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 4, 1997
14
<PAGE>
<TABLE>
Exhibit 11
Arvin Industries, Inc.
Computation of Earnings Per Share of Common Stock
(Amounts in millions, except per share amounts)
Unaudited
<CAPTION>
Three Months Ended Nine Months Ended
----------------- -----------------
Sept. 28, Sept. 29, Sept. 28,Sept. 29,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Primary Earnings Per Share
- --------------------------
Income from continuing operations $ 13.6 $ 8.3 $ 47.7 $ 28.3
Income from discontinued operation, net of tax 1.6 -- 1.6 --
------ ------ ------ ------
Net income $ 15.2 $ 8.3 $ 49.3 $ 28.3
====== ====== ====== ======
Average shares of common stock outstanding 23.0 22.5 22.8 22.4
Incremental common shares applicable to common
stock options based on the common stock daily
average market price during the period .6 .1 .4 .1
------ ------ ------ ------
Average common shares, as adjusted 23.6 22.6 23.2 22.5
====== ====== ====== ======
Earnings per average share of common stock
(including common stock equivalents):
Continuing operations $ .58 $ .37 $ 2.06 $ 1.26
Discontinued operations .07 -- .07 --
------ ------ ------ ------
$ .65 $ .37 $ 2.13 $ 1.26
====== ====== ====== ======
Fully Diluted Earnings Per Share:
- --------------------------------
Income from continuing operations $ 13.6 $ 8.3 $ 47.7 $ 28.3
Income from discontinued operation, net of tax 1.6 -- 1.6 --
------ ------ ------ ------
Net income 15.2 8.3 49.3 28.3
Add back 7.5% convertible debentures' after tax
interest expense. -- .7 -- 2.2
------ ------ ------ ------
Net income to common stock assuming full dilution $ 15.2 $ 9.0 $ 49.3 $ 30.5
====== ====== ====== ======
Average shares of common stock outstanding 23.0 22.5 22.8 22.4
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 .7 .2 .4 .1
Average common shares issuable assuming conversion
of 7.5% convertible subordinated debentures -- 2.2 -- 2.2
------ ------ ------ ------
Average common shares assuming full dilution 23.7 24.9 23.2 24.7
====== ====== ====== ======
Fully diluted earnings per average share assuming
conversion of all applicable securities:
Continuing operations $ .57 $ .36 $ 2.05 $ 1.23
Discontinued operations .07 -- .07 --
------ ------ ------ ------
$ .64 $ .36 $ 2.12 $ 1.23
====== ====== ====== ======
<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 28, 1997 and is
qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<FISCAL-YEAR-END> Dec-28-1997
<PERIOD-START> Dec-30-1996
<PERIOD-END> Sep-28-1997
<PERIOD-TYPE> 9-MOS
<CASH> 79,700
<SECURITIES> 0
<RECEIVABLES> 389,600
<ALLOWANCES> 7,500
<INVENTORY> 117,300
<CURRENT-ASSETS> 662,000
<PP&E> 1,105,500
<DEPRECIATION> 627,200
<TOTAL-ASSETS> 1,410,400
<CURRENT-LIABILITIES> 506,400
<BONDS> 229,800
98,900
0
<COMMON> 65,500
<OTHER-SE> 402,800
<TOTAL-LIABILITY-AND-EQUITY> 1,410,400
<SALES> 1,750,500
<TOTAL-REVENUES> 1,750,500
<CGS> 1,504,200
<TOTAL-COSTS> 1,626,600
<OTHER-EXPENSES> 10,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,200
<INCOME-PRETAX> 71,200
<INCOME-TAX> 24,600
<INCOME-CONTINUING> 47,700
<DISCONTINUED> 1,600
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,300
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 0
</TABLE>
