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 June 29, 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 August 3, 1997, the Registrant had outstanding 24,566,444
Common Shares (including employee stock benefit trust shares and
excluding treasury shares), $2.50 par value.
Table of Contents
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Part I. Financial Information Page No.
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Item 1. Financial Statements
Consolidated Statement of Operations for the Three
Months and Six Months Ended June 29, 1997 and 3
June 30, 1996
Consolidated Statement of Financial Condition at
June 29, 1997 and December 29, 1996 4
Consolidated Statement of Cash Flows for the Six
Months Ended June 29, 1997 and June 30, 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
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Item 4. Submission of Matters to a Vote of Security 12
Holders
Item 6. Exhibits and Reports on Form 8K 12
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 Six Months Ended
----------------- -----------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $ 632.5 $ 583.3 $ 1,196.5 $ 1,094.9
Costs and Expenses:
Cost of goods sold 539.2 504.7 1,030.5 954.7
Selling, operating general and administrative 43.2 38.9 79.8 75.3
Corporate general and administrative 5.1 3.9 10.9 7.4
Net gain on capital transactions -- -- (2.2) --
Special charges (credits) 1.5 (.7) 1.5 (.4)
Interest expense 9.9 10.3 19.5 20.2
Interest income (1.0) (.2) (1.9) (.6)
Other expense, net 2.1 1.8 6.9 5.0
------ ------ ------- -------
600.0 558.7 1,145.0 1,061.6
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Earnings Before Income Taxes 32.5 24.6 51.5 33.3
Income taxes (11.9) (9.1) (17.6) (12.3)
Minority share of income (1.2) (1.1) (2.9) (1.9)
Equity income (loss) of affiliates 1.7 (.3) 3.1 .9
------ ------ ------- -------
Net Earnings $ 21.1 $ 14.1 $ 34.1 $ 20.0
====== ====== ======= =======
Earnings Per Common Share
Primary $ .91 $ .63 $ 1.48 $ .89
Fully diluted $ .91 $ .60 $ 1.48 $ .87
Average Common Shares Outstanding (000's)
Primary 23,133 22,449 22,984 22,391
Fully diluted 23,178 24,689 23,007 24,633
Dividends Declared per Common Share $ .19 $ .19 $ .38 $ .38
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Financial Condition
(Dollars in millions, except per share amounts)
Unaudited
<CAPTION>
As of As of
6/29/97 12/29/96
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<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 88.6 $ 39.4
Receivables, net of allowances of $6.7 as of
June 29, 1997 and $6.7 as of December 29, 1996 404.1 304.7
Inventories 118.1 115.9
Other current assets 83.2 78.9
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Total current assets 694.0 538.9
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Non-Current Assets:
Property, plant and equipment 1,092.6 1,011.0
Less accumulated depreciation 613.1 547.1
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479.5 463.9
Goodwill, net of amortization of $33.4 as of
June 29, 1997 and $32.3 as of December 29, 1996 179.4 158.0
Investment in affiliates 51.1 85.7
Assets of business transferred under contractual arrangements 72.4 72.4
Other assets 48.4 61.3
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Total non-current assets 830.8 841.3
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$ 1,524.8 $ 1,380.2
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 7.6 $ 52.6
Accounts payable 322.2 257.7
Accrued expenses 143.0 124.8
Income taxes payable 13.4 17.7
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Total current liabilities 486.2 452.8
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Long-term employee benefits 68.0 67.0
Other long-term liabilities 26.4 22.4
Long-term debt 306.5 294.0
Liabilities and deferred credit of business transferred 72.4 72.4
Minority interest 11.4 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 ($2.50 par value) 65.6 65.4
Capital in excess of par value 248.3 247.3
Retained earnings 251.6 226.2
Cumulative translation adjustment (33.6) (19.9)
Employee stock benefit trust (40.5) (42.2)
Common shares held in treasury (at cost) (36.4) (39.4)
-------- --------
Total shareholders' equity 455.0 437.4
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$ 1,524.8 $ 1,380.2
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Arvin Industries, Inc.
Consolidated Statement of Cash Flows
(Dollars in millions)
Unaudited
<CAPTION>
Six Months Ended
----------------
June 29, June 30,
1997 1996 (1)
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<S> <C> <C>
Operating Activities:
Net earnings $ 34.1 $ 20.0
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 42.5 37.0
Amortization 3.3 2.8
Long-term employee benefits 2.5 0.4
Deferred income taxes, long-term (3.2) (0.1)
Equity earnings of affiliates (3.1) (0.9)
Minority interest 2.9 1.9
Common stock contributed to employee benefit plan 3.9 3.3
Other (3.9) 4.7
Changes in operating assets and liabilities,
net of reclassifications:
Receivables (78.6) (51.7)
Inventories and other current assets 5.6 5.3
Accounts payable and other accrued expenses 60.9 26.7
Income taxes payable and deferred taxes (3.4) 3.2
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Net Cash Provided By Operating Activities 63.5 52.6
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Investing Activities:
Purchase of property, plant and equipment (34.3) (36.2)
Proceeds from sale of property, plant and equipment 5.2 1.3
Investment in affiliates (7.0) (3.9)
Business acquisitions, net of cash acquired (19.5) ---
Cash proceeds from sale of businesses,
net of cash balances of businesses sold 3.7 2.0
Other (1.5) 5.1
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Net Cash Used For Investing Activities (53.4) (31.7)
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Financing Activities:
Change in short-term debt, net (43.2) (11.2)
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 (4.9) (3.4)
Dividends paid (8.8) (8.5)
Other (4.4) 0.2
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Net Cash Provided By/(Used For) Financing Activities 38.5 (22.9)
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Cash and Cash Equivalents:
Effect of exchange rate changes on cash 0.6 (0.4)
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Net increase/(decrease) 49.2 (2.4)
Beginning of the period 39.4 15.2
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End of the Period $ 88.6 $ 12.8
======= =======
<FN>
(1) Certain amounts have been reclassified to conform with current period presentation.
<FN>
See notes to consolidated financial statements.
</TABLE>
ARVIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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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 six months ended June 29,
1997 are not necessarily indicative of the results to be expected for
the full year ending December 28, 1997.
Note 2. There were options for 2.4 and 2.2 million common shares
outstanding as of June 29, 1997 and June 30, 1996, respectively.
Earnings per share calculations include dilutive options in the
determination of the weighted average common and common equivalent
shares outstanding.
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 the 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.
Note 5. 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. At June 29, 1997, the guaranteed amount had
declined to $15.4 million. As a result of this guarantee, the
Company has 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." Accordingly, the assets of
SIII at the sale date have been recorded under the caption "Assets of
business transferred under contractual arrangements" with a
corresponding amount recorded as "Liabilities and deferred credit of
business transferred." A $1.6 million gain on sale of SIII was
separately deferred. Calspan SRL has informed the Company that it
anticipates entering into a business combination and debt re-
financing during the third quarter of 1997. The effect of these
transactions, if consummated, on the Company's consolidated financial
statements will be recorded at that time.
Note 6. 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.
Note 7. 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 8. Changes in Shareholders' Equity
(Dollars in millions)
For the Six Months Ended
6/29/97 6/30/96
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Beginning balance $ 437.4 $ 395.1
Exercise of stock options .9 .5
Purchase of treasury stock (.4) --
Cash dividends declared (8.7) (8.5)
Net earnings 34.1 20.0
Translation adjustments during
the period (13.7) (6.8)
Other 5.4 3.7
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Total shareholders' equity $ 455.0 $ 404.0
======= =======
Note 9. During the first quarter of 1997, the Company recognized $2.2
million as a non-recurring net gain on the sale of capital assets.
Of this amount, $3.3 million relates to the sale of capital assets
and $.5 million relates to the 1996 sale of an Argentinean affiliate.
An adjustment to reduce the carrying value of a non-controlled
venture in the South American exhaust market partially offset these
gains.
Note 10. 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.
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 June 29, 1997 increased
eight percent to $632.5 million when compared to the second quarter
1996. The increase is primarily a result of the Company's recent
actions to enhance the Company's global market presence. The
consolidation of Way Assauto S.r.l at the end of the second quarter
1996, Autocomponents Suspension S.r.l during the first quarter 1997,
and the purchase of the remaining 50 percent of Timax Exhaust Systems
Holding B.V. (TESH) during the current quarter contributed over $46
million of the second quarter sales increase.
Arvin's sales for the six months ended June 29, 1997 improved nine
percent over sales during the same period in 1996. The increase was
primarily a result of the acquisitions mentioned above, which
accounted for 74 percent of the increase. New car registrations in
Western Europe increased 1.7 percent and vehicle production in the
U.S. and Canada increased 2.4 percent during the period.
Operating income increased 27 percent during the second quarter, or
$10.9 million. The consolidation of Way Assauto, Autocomponents and
TESH accounted for $3.1 million of the increase. Additionally, most
operating units realized increases in operating profit margins.
These improved margins are 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.
For the six months ended June 29, 1997, operating income increased 36
percent, to $86.8 million. Improved margins, due to cost reduction
programs, were the principal contributor to the increase. The three
acquisitions and the gain on the sale of capital lease assets
contributed $8.3 million of the increase.
Results of Operations
- ---------------------
Second Quarter First Six Months
---------------- -----------------
Net Sales by Segment 1997 1996 1997 1996
- -------------------- ------ ------ -------- --------
Automotive Original
Equipment $428.6 $399.6 $ 834.7 $ 767.0
Automotive Replacement 203.9 183.7 361.8 327.9
------ ------ -------- --------
Total $632.5 $583.3 $1,196.5 $1,094.9
====== ====== ======== ========
Operating Income by Segment (1)
- -------------------------------
Second Quarter First Six Months
----------------- -------------------
1997 1996 1997 1996
------ ------ -------- --------
Automotive Original
Equipment $27.1 $18.8 $50.1 $35.2
Automotive Replacement 23.5 20.9 36.7 28.8
------ ------ -------- --------
Total $50.6 $39.7 $86.8 $64.0
====== ====== ======== ========
(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 $11.0 million
during the second quarter and $21.6 million for the six months ended
June 29, 1997. On a constant dollar basis, sales increased 10
percent in the second quarter and 11 percent for the six months. The
strong U.S. dollar's impact on translation also reduced consolidated
operating income by $1.2 million and $2.3 million during the second
quarter and the first six months of 1997, respectively
Automotive Original Equipment ("OE"): Second quarter OE sales were
$428.6 million, an increase of 7 percent, or $29.0 million over sales
for the same quarter of 1996 despite mixed market influences and the
effect of a stronger U.S. dollar on the translation of non-U.S.
sales. The consolidation of Way Assauto and Autocomponents
contributed $27.0 million in sales to the second 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 3 percent when compared to the second quarter of 1996. New
car registrations in Western Europe improved by almost 6 percent,
when compared to the second quarter of 1996, largely as a result of
sales incentives offered in Italy. Price concessions, which averaged
less than one percent of OE sales, were offset by volume gains during
the quarter. A strong U.S. dollar had a $11.5 million negative
effect on the translation of OE sales during the quarter. On a
constant dollar basis, OE sales grew 10 percent when compared with
second quarter 1996 sales.
Sales in the OE segment for the first six months of 1997 increased
$67.7 million or 9 percent over the prior year sales of $767.0
million. The consolidation of Way Assauto and Autocomponents
accounted for $51.6 million of the increase. Market forces were
favorable, with both West European new car registrations and U.S. and
Canada light vehicle production posting 2 percent gains. Sales
volume increased approximately $32 million, with approximately $20
million of the gain attributed to market growth. A strong U.S.
dollar had a $22.1 million negative effect on the translation of OE
sales during the first six months. On a constant dollar basis, OE
sales grew 12 percent when compared with the first six months of
1996. Selective price concessions averaged less than 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 $8.3 million for the
quarter. Recent acquisitions had a $1.8 million positive impact on
the quarter. The negative impact of a strong U.S. dollar on the
translation of foreign earnings was $1.3 million. Previously
mentioned selective price concessions negatively impacted operating
profits $2.8 million. Negotiated improvements in raw material prices
improved operating profit $7.6 million, including a $2.4 million
dollar favorable impact which resulted from prior year steel
surcharges which were not a factor in the current year. Improved mix
and volume related factors increased the quarter's operating profit
an estimated $7.5 million. Labor inflation outpaced productivity
improvements by an estimated $1.8 million.
OE operating income increased $14.9 million for the first six months.
Recent acquisitions had a $3.6 million positive impact. The
translation of foreign earnings to a stronger U.S. dollar had a $2.4
million negative impact. Previously mentioned selective price
concessions reduced operating profits $6.7 million. Price
concessions were again offset by negotiated improvements in raw
material pricing of $13.1 million, including the $4.0 million impact
of prior year steel surcharges. Improved mix and volume related
factors increased the period's operating profit an estimated $15.4
million. Labor inflation outpaced productivity improvements by an
estimated $3.0 million.
Automotive Replacement ("Replacement"): Sales in the replacement
segment of $203.9 million for the quarter ended June 29, 1997
increased 11 percent or $20.2 million. The consolidation of Way
Assauto S.r.l. at the end of the second quarter 1996 and the second
quarter consolidation of TESH accounted for $19.7 million or 98
percent of the second quarter sales increase. Sales price increases
offset market related volume declines during the quarter.
Replacement sales of $361.8 million for the six months ended June 29,
1997 increased 10 percent or $33.9 million over sales of $327.9
million during the same period in 1996. The consolidation of Way
Assauto S.r.l. at the end of the second quarter 1996 and the second
quarter consolidation of TESH accounted for 69 percent of the year-to-
date sales increase. Price increases contributed $9.9 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 $2.6 million
during the quarter to $23.5 million. The increase was primarily the
result of improved pricing which contributed $4.6 million. Improved
product mix contributed $1.1 million, while productivity
improvements, in excess of wage increases, contributed $.8 million.
The consolidation of Way Assauto S.r.l. at the end of the second
quarter 1996 and the second quarter 1997 consolidation of TESH
accounted for an increase of $1.3 million. Market related 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 $7.8 million or
27 percent during the first six months of 1997. Improved pricing
contributed $9.9 million and the recent consolidation of Way Assauto
and TESH accounted for $1.4 million of the increase. The impact of
volume 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 $3.5 million
during the first six months and $1.2 million during the second
quarter of 1996. The increases were 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.
Special Charges (Credits): Special charges in 1997 reflect legal and
environmental costs for operations previously owned by the Company's
Maremont subsidiary. Special credits in 1996 are primarily the
result of a second quarter insurance settlement, which on a year-to-
date basis is partially offset by first quarter 1996 legal and
environmental accruals pertaining to operations previously owned by
the Company's Maremont subsidiary.
Interest Expense decreased 3 percent during the first six months and
4 percent in the second quarter of 1997, when compared to the same
periods in 1996. The decreases in both the quarter and year-to-date
amounts were primarily as a result of lower average borrowing rates
on slightly higher average outstanding interest-bearing liabilities.
Financial Condition
Liquidity Working capital improved by $121.8 million during the
first six months of 1997, which caused the current ratio to improve
from 1.2 at the end of 1996 to 1.4 at June 29, 1997. During the
first six months of 1997, accounts receivable and accounts payable
increased 33 percent and 25 percent, respectively, primarily as a
result of the consolidation of TESH and Autocomponents Suspension
S.r.l. and the seasonal increase in sales. Short-term debt
decreased 86 percent during the first six months, primarily as a
result of the proceeds from the issuance of the Company-obligated
mandatorily redeemable preferred capital securities of subsidiary
trust holding solely subordinated debentures of the Company.
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 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. (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.
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 for 1997 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.
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. 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 4. Submission of Matters to a Vote of Security Holders
The Company held the Annual Meeting of Shareholders on April 17, 1997
at which security holders elected four directors nominated for three-
year terms expiring in 2000, elected one director (Mr. Baker)
nominated for a one-year term expiring in 1998 and ratified the Board
of Directors' appointment of Price Waterhouse LLP as the Company's
independent certified public accountants.
The results of the voting in connection with the above items were as
follows:
Voting on Directors For Withheld
- -------------------- ---------- --------
Ivan W. Gorr 22,046,636 166,727
Richard W. Hanselman 22,040,626 172,737
Don J. Kacek 22,038,083 175,280
Richard A Smith 22,047,559 165,804
James K. Baker 22,027,442 185,921
Ratify appointment Broker
of auditors For Against Abstain Non-Vote
- -------------------- ---------- ------- ------- ---------
Price Waterhouse LLP 22,146,997 28,576 37,790 0
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: August 12, 1997
<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 Six Months Ended
---------------- ----------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Primary Earnings Per Share
- ------------------------------
Net income $ 21.1 $ 14.1 $ 34.1 $ 20.0
====== ====== ====== ======
Average shares of common stock outstanding 22.8 22.4 22.8 22.3
Incremental common shares applicable to common
stock options based on the common stock daily
average market price during the period .3 .1 .2 .1
------ ------ ------ ------
Average common shares, as adjusted 23.1 22.5 23.0 22.4
====== ====== ====== ======
Earnings per average share of common stock
(including common stock equivalents): $ .91 $ .63 $ 1.48 $ .89
Fully Diluted Earnings Per Share: (1)
- -----------------------------------
Net income $ 21.1 $ 14.1 $ 34.1 $ 20.0
Add back 7.5% convertible debentures' after tax
interest expense. .0 .7 .0 1.5
------ ------ ------ ------
Net income to common stock assuming full dilution $ 21.1 $ 14.8 $ 34.1 $ 21.5
====== ====== ====== ======
Average shares of common stock outstanding 22.8 22.4 22.8 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 .4 .1 .2 .1
Average common shares issuable assuming conversion
of 7.5% convertible subordinated debentures .0 2.2 .0 2.2
------ ------ ------ ------
Average common shares assuming full dilution 23.2 24.7 23.0 24.6
====== ====== ====== ======
Fully diluted earnings per average share assuming
conversion of all applicable securities: $ .91 $ .60 $ 1.48 $ .87
====== ====== ====== ======
<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 June 29, 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> Jun-29-1997
<PERIOD-TYPE> 6-MOS
<CASH> 88,600
<SECURITIES> 0
<RECEIVABLES> 410,800
<ALLOWANCES> 6,700
<INVENTORY> 118,100
<CURRENT-ASSETS> 694,000
<PP&E> 1,092,600
<DEPRECIATION> 613,100
<TOTAL-ASSETS> 1,524,800
<CURRENT-LIABILITIES> 486,200
<BONDS> 306,500
98,900
0
<COMMON> 65,600
<OTHER-SE> 389,400
<TOTAL-LIABILITY-AND-EQUITY> 1,524,800
<SALES> 1,196,500
<TOTAL-REVENUES> 1,196,500
<CGS> 1,030,500
<TOTAL-COSTS> 1,110,300
<OTHER-EXPENSES> 6,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,500
<INCOME-PRETAX> 51,500
<INCOME-TAX> 17,600
<INCOME-CONTINUING> 34,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,100
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.48
</TABLE>
