FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995
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Commission File Number 1-7283
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REGAL-BELOIT CORPORATION
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0875718
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
200 State Street, Beloit, Wisconsin 53511-6254
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(Address of principal executive offices)
(608) 364-8800
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
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
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Indicate the number of shares outstanding of each of the issuers' classes of
common stock as of the latest practicable date.
20,535,267 Shares, Common Stock, $.01 Par Value
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<PAGE>
REGAL-BELOIT CORPORATION
FORM 10-Q
For Quarter Ended September 30, 1995
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Balance Sheet
Statement of Income
Condensed Statement of Cash Flows
Notes to Financial Statements
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Reports on Form 8-K
Signatures
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
REGAL-BELOIT CORPORATION
CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
(From Audited
(Unaudited) Statements)
Sep. 30, 1995 Dec. 31, 1994
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<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................... $ 10,684,000 $ 13,378,000
Receivables, less reserves of $1,249,000 in 1995
and $1,161,000 in 1994........................... 39,117,000 30,623,000
Inventories........................................ 49,024,000 43,621,000
Other current assets............................... 4,118,000 4,074,000
Total Current Assets............................ 102,943,000 91,696,000
Plant and Equipment at Cost........................... 126,563,000 116,470,000
Less - accumulated depreciation.................. (56,192,000) (50,685,000)
70,371,000 65,785,000
Advance Payment for Acquisition....................... 0 9,853,000
Other Non-current Assets.............................. 321,000 331,000
$173,635,000 $167,665,000
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-Term Debt.................................. $ 304,000 $ 10,511,000
Accounts payable................................. 12,337,000 8,773,000
Federal and state income taxes................... 989,000 1,164,000
Other current liabilities........................ 21,907,000 16,133,000
Total Current Liabilities................... 35,537,000 36,581,000
Long-term Debt........................................ 3,887,000 16,022,000
Deferred Income Taxes................................. 4,842,000 4,517,000
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares
authorized, 20,523,767 issued in 1995 and
20,454,952 issued in 1994..................... 205,000 205,000
Additional paid-in capital....................... 36,989,000 36,595,000
Retained earnings................................ 92,506,000 74,265,000
Cumulative Foreign Currency Translation
Adjustments...................................... (331,000) (520,000)
129,369,000 110,545,000
$173,635,000 $167,665,000
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
REGAL-BELOIT CORPORATION
STATEMENT OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
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Three Months Ended Nine Months Ended
September 30, September 30,
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1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Net Sales...................... $71,551,000 $61,185,000 $222,156,000 $180,080,000
Cost of Sales.................. 49,859,000 43,213,000 157,087,000 128,300,000
Gross Profit................. 21,692,000 17,972,000 65,069,000 51,780,000
Operating Expenses............. 7,853,000 7,767,000 24,993,000 24,257,000
Income from Operations....... 13,839,000 10,205,000 40,076,000 27,523,000
Interest Expense............... 133,000 213,000 672,000 772,000
Interest Income................ 93,000 41,000 172,000 73,000
Income Before Taxes.......... 13,799,000 10,033,000 39,576,000 26,824,000
Provision for Income Taxes..... 5,366,000 3,901,000 15,387,000 10,540,000
Net Income................. $ 8,433,000 $ 6,132,000 $ 24,189,000 $ 16,284,000
Per Share of Common Stock:
Net Income................... $.41 $.30 $1.18 $.80
Cash Dividends Declared...... $.10 $.08 $.29 $.225
Weighted Average Number of
Shares Outstanding........... 20,522,194 20,438,800 20,499,380 20,433,821
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
REGAL-BELOIT CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
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Nine Months Ended Sept. 30,
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1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.............................................. $ 24,189,000 $ 16,284,000
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation, amortization and deferred income taxes.. 8,268,000 6,715,000
Change in assets and liabilities:
Current assets, other than cash...................... (9,333,000) (5,988,000)
Current liabilities, other than notes payable........ 7,508,000 6,725,000
Net cash provided from operating activities....... 30,632,000 23,736,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment, net of retirements.... (6,100,000) (5,481,000)
Other, net.............................................. 244,000 52,000
Net cash used in investing activities................ (5,856,000) (5,429,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of short-term debt............................ (10,209,000) 0
Reduction of long-term debt............................. (12,136,000) (12,652,000)
Dividends to shareholders............................... (5,532,000) (4,392,000)
Other, net.............................................. 395,000 173,000
Net cash used for financing activities............... (27,482,000) (16,871,000)
EFFECT OF EXCHANGE RATE ON CASH............................ 12,000 29,000
Net increase (decrease) in cash and cash equivalents.... (2,694,000) 1,465,000
Cash and cash equivalents at beginning of period........ 13,378,000 2,193,000
Cash and cash equivalents at end of period.............. $ 10,684,000 $ 3,658,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for:
Interest............................................. $ 662,000 $ 747,000
Income Taxes......................................... $ 14,940,000 $10,180,000
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
REGAL-BELOIT CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
1. BASIS OF PRESENTATION
The condensed financial statements include the accounts of Regal-Beloit
Corporation and its wholly owned subsidiaries and have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested these statements
be read in conjunction with the financial statements and the notes thereto
included in the Company's latest Annual Report on Form 10-K.
2. INVENTORIES
Cost for approximately 70% of the Company's inventory is determined using the
last-in, first-out (LIFO) inventory valuation method. The approximate
percentage distribution between major classes of inventories is as follows:
<TABLE>
<CAPTION>
9-30 12-31
1995 1994
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<S> <C> <C>
Raw Material 16% 16%
Work-in-Process 21% 23%
Finished Goods 63% 61%
</TABLE>
3. ACQUISITION
Effective January 1, 1995, the Company acquired selected net assets of the
Marine and Industrial Transmission Division of Borg-Warner Automotive
Transmission and Engine Components Corporation. Late in 1994, the Company
made an advance payment of $9,853,000 to cover the purchase of these net
assets. The final purchase price settlement for this acquisition is expected
to be slightly lower than the advance payment.
This acquisition has been renamed the Velvet Drive Transmission Division of
Regal-Beloit Corporation. This Division produces both marine and industrial
transmissions. The marine transmissions are used in boats with a horsepower
range up to 500 horsepower for gasoline engines and up to 250 horsepower for
diesel engines. The industrial transmissions are used in applications such as
heavy-duty, all-terrain forklifts and specialty vehicles which include airport
towmotors for baggage handling and mining personnel carriers.
<PAGE>
4. DISCLOSURES
In the opinion of Management, all adjustments which were necessary for a fair
statement of the results of the interim periods have been included in the
preceding financial statements. These adjustments were considered to be
recurring in nature and there were no adjustments other than normal recurring
adjustments made to these statements for the periods reported. However, the
results of operations for the quarter are not necessarily indicative of results
to be expected for the year. Certain items, such as income taxes, LIFO
charges, profit sharing expenses and various other accruals, are included in
these statements based on estimates for the entire year.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
Results of Operations
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Net sales for the quarter ended September 30, 1995 were $71,551,000, or 16.9%
higher than sales of $61,185,000 in the comparable third quarter of 1994, but
6.2% lower than sales in the recent second quarter of 1995. Net sales for the
first nine months of 1995 were $222,156,000 representing a 23.4% increase over
sales of $180,080,000 for the same period in 1994.
The Velvet Drive Transmission acquisition on January 1, 1995 and the
acquisition of Costruzioni Meccaniche Legnanesi, S.r.L. of Legnano, Italy in
December 1994 accounted for 12.6% of the sales increase compared to the first
nine months of 1994. The remaining 10.8% sales increase can be attributed to
increased order levels in both the Power Transmission Group and the Cutting
Tool Group along with selective price increases being in effect for the entire
quarter.
Net sales in the third quarter were lower than those of the second quarter
primarily due to our customers' traditional vacation shutdowns and our own
employees taking vacations when additional help was virtually unavailable due
to a nation-wide skilled labor shortage. In addition, adverse weather
conditions in the Midwest created several power outages, hampered our equipment
performance and reduced our productivity.
The third quarter gross profit margin increased to 30.3% of sales as compared
to 29.4% in the third quarter of 1994 and 29.1% in the recent second quarter
of 1995. Despite the drop in sales from second quarter levels, the gross
profit margin percentage improved due to selling price increases being in
effect for a full quarter and from the favorable results of physical
inventories which increased the gross profit percentage by 0.4% in the
quarter. For the first nine months of 1995, gross profit margins were 29.3%
of sales compared to 28.8% for the same period last year.
Third quarter operating expenses were 6.2% lower than the prior second quarter
levels. These reduced operating expenses have occurred throughout the Company
and were not significantly attributable to any single cause. With the lower
sales volume during the third quarter, operating expenses were 11.0% of net
sales as compared to 10.9% in the recent second quarter of 1995 and 12.7% in
the comparable third quarter of 1994. Year-to-date operating expenses are 3.0%
higher than 1994 expenses primarily due to recent acquisitions, but on higher
sales volumes, have declined to 11.3% of sales in 1995 as compared to 13.5% in
1994.
<PAGE>
Income from operations improved in the third quarter to 19.3% of sales compared
to 16.7% in the third quarter of 1994 and 18.2% in the second quarter of 1995.
For the first nine months of the year, income from operations was 18.0% of
sales compared to 15.3% in the same period of 1994.
Interest expense continued to decline during the quarter due to a lower debt
balance throughout the quarter. The entire $9,853,000 of debt used for the
Velvet Drive Transmission acquisition on January 1, 1995 had already been
retired during the second quarter of 1995.
Liquidity and Capital Resources
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Working capital increased to $67,406,000 as of September 30, 1995 as compared to
$55,115,000 as of December 31, 1994. The majority of this increase can be
attributed to the Velvet Drive Transmission acquisition. Accordingly, the
current ratio has increased from 2.5:1 at December 31, 1994 to 2.9:1 as of
September 30, 1995.
Long-term debt as a percentage of total capital was reduced to 2.9% as of
September 30, 1995, from 12.7% as of December 31, 1994, and allows the Company
the potential for significant long-term indebtedness if needed.
It is believed that the Company's existing credit facilities combined with
working capital generated from operations will continue to be sufficient to
meet operating and growth needs in the foreseeable future.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Reports on Form 8-K
There were no reports on Form 8-K filed since the Company's last report on Form
10-Q, dated August 10, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
REGAL-BELOIT CORPORATION
(Registrant)
<S> <C>
Gerald J. Berres
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Gerald J. Berres
Vice President - Secretary
General Counsel
Robert C. Burress
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Robert C. Burress
Vice President - Chief Financial Officer
(Principal Accounting Officer)
DATE: November 10, 1995
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,684,000
<SECURITIES> 0
<RECEIVABLES> 39,117,000
<ALLOWANCES> 1,249,000
<INVENTORY> 49,024,000
<CURRENT-ASSETS> 102,943,000
<PP&E> 126,563,000
<DEPRECIATION> 56,192,000
<TOTAL-ASSETS> 173,635,000
<CURRENT-LIABILITIES> 35,537,000
<BONDS> 0
<COMMON> 205,000
0
0
<OTHER-SE> 129,164,000
<TOTAL-LIABILITY-AND-EQUITY> 173,635,000
<SALES> 222,156,000
<TOTAL-REVENUES> 222,156,000
<CGS> 157,087,000
<TOTAL-COSTS> 157,087,000
<OTHER-EXPENSES> 24,993,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 672,000
<INCOME-PRETAX> 39,576,000
<INCOME-TAX> 15,387,000
<INCOME-CONTINUING> 24,189,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,189,000
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 0
</TABLE>
