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 June 30, 1995
Commission File Number 1-7283
REGAL-BELOIT CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0875718
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
200 State Street, Beloit, Wisconsin 53511-6254
(Address of principal executive offices)
(608) 364-8800
(Registrant's telephone number, including area code)
(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
Indicate the number of shares outstanding of each of the issuers' classes of
common stock as of the latest practicable date.
20,518,326 Shares, Common Stock, $.01 Par Value
<PAGE>
REGAL-BELOIT CORPORATION
FORM 10-Q
For Quarter Ended June 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 4 - Submission of Matters To A Vote of Security Holders
Item 6 - Reports on Form 8-K
Signatures
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
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<CAPTION>
REGAL-BELOIT CORPORATION
CONDENSED BALANCE SHEET
ASSETS
(From Audited
(Unaudited) Statements)
------------- -------------
June 30, 1995 Dec. 31, 1994
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<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................... $ 5,002,000 $ 13,378,000
Receivables, less reserves of $1,263,000 in 1995
and $1,161,000 in 1994........................... 39,951,000 30,623,000
Inventories........................................ 48,358,000 43,621,000
Other current assets............................... 4,292,000 4,074,000
Total Current Assets............................ 97,603,000 91,696,000
Plant and Equipment at Cost........................... 126,858,000 116,470,000
Less - accumulated depreciation.................. (54,879,000) (50,685,000)
71,979,000 65,785,000
Advance Payment for Acquisition....................... 0 9,853,000
Other Noncurrent Assets............................... 354,000 331,000
$169,936,000 $167,665,000
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-Term Debt.................................. $ 466,000 $ 10,511,000
Accounts payable................................. 14,049,000 8,773,000
Federal and state income taxes................... 1,230,000 1,164,000
Other current liabilities........................ 21,883,000 16,133,000
Total Current Liabilities................... 37,628,000 36,581,000
Long-term Debt........................................ 4,419,000 16,022,000
Deferred Income Taxes................................. 4,844,000 4,517,000
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares
authorized, 20,518,326 issued in 1995 and
20,454,952 issued in 1994..................... 205,000 205,000
Additional paid-in capital....................... 36,952,000 36,595,000
Retained earnings................................ 86,124,000 74,265,000
Cumulative Foreign Currency Translation
Adjustments................................... (236,000) (520,000)
123,045,000 110,545,000
$169,936,000 $167,665,000
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGAL-BELOIT CORPORATION
STATEMENT OF INCOME
(Unaudited)
------------------------------------------------------
Three Months Ended Six Months Ended
-------------------------- --------------------------
June 30, June 30,
-------------------------- --------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales.......................... $ 76,265,000 $ 60,044,000 $150,605,000 $118,895,000
Cost of Sales...................... 54,048,000 42,673,000 107,228,000 85,087,000
Gross Profit..................... 22,217,000 17,371,000 43,377,000 33,808,000
Operating Expenses................. 8,337,000 8,029,000 17,140,000 16,490,000
Income from Operations........... 13,880,000 9,342,000 26,237,000 17,318,000
Interest Expense................... 217,000 266,000 539,000 559,000
Interest Income.................... 43,000 19,000 79,000 32,000
Income Before Taxes.............. 13,706,000 9,095,000 25,777,000 16,791,000
Provision for Income Taxes......... 5,331,000 3,574,000 10,021,000 6,639,000
Net Income..................... $ 8,375,000 $ 5,521,000 $ 15,756,000 $ 10,152,000
Per Share of Common Stock:
Net Income....................... $.41 $.27 $.77 $.50
Cash Dividends Declared.......... $.10 $.075 $.19 $.145
Weighted Average Number of
Shares Outstanding............... 20,504,543 20,435,652 20,487,783 20,431,290
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGAL-BELOIT CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
---------------------------
Six Months Ended June 30,
---------------------------
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.............................................. $ 15,756,000 $ 10,152,000
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation, amortization and deferred income taxes.. 5,359,000 4,400,000
Change in assets and liabilities:
Current assets, other than cash...................... ( 9,188,000) (5,572,000)
Current liabilities, other than notes payable........ 9,348,000 6,033,000
Net cash provided from operating activities....... 21,275,000 15,013,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment, net of retirements.... ( 5,116,000) (4,322,000)
Other, net.............................................. 215,000 20,000
Net cash used in investing activities................ (4,901,000) (4,302,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of short-term debt............................ (10,042,000) 0
Reduction of long-term debt............................. (11,602,000) ( 7,518,000)
Dividends to shareholders............................... ( 3,481,000) ( 2,859,000)
Other, net.............................................. 357,000 138,000
Net cash used for financing activities............... (24,768,000) (10,239,000)
EFFECT OF EXCHANGE RATE ON CASH............................ 18,000 20,000
Net (decrease) increase in cash and cash equivalents.... ( 8,376,000) 492,000
Cash and cash equivalents at beginning of period........ 13,378,000 2,193,000
Cash and cash equivalents at end of period.............. $ 5,002,000 $ 2,685,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for:
Interest............................................. $ 548,000 $ 563,000
Income Taxes......................................... $ 9,764,000 $ 6,766,000
<FN>
See accompanying notes.
</TABLE>
<PAGE>
REGAL-BELOIT CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 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 64% 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:
6-30 12-31
1995 1994
Raw Material 20% 16%
Work-in-Process 24% 23%
Finished Goods 56% 61%
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. 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
---------------------
Net sales for the quarter ended June 30, 1995 were a record $76,265,000 or 27.0%
higher than sales of $60,044,000 in the comparable second quarter of 1994 and
2.6% greater than sales in the recent first quarter of 1995. Net sales for the
first six months of 1995 were $150,605,000, or 26.7% greater than sales of
$118,895,000 for the same period in 1994.
The recent 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 10.0% of the sales increase compared to the first
half of 1994. The remaining 16.7% sales increase can be attributed to increased
order levels in both the Power Transmission Group and the Cutting Tool Group.
In addition, selective product price increases have been made in response to
increased costs being received from suppliers of raw material and component
parts.
Gross profit margins increased to 29.1% of sales as compared to 28.9% in the
comparable second quarter of 1994 and 28.5% in the recent first quarter of 1995.
For the first six months of 1995, gross profit margins were 28.8% of sales as
compared to 28.4% for the same period last year.
Despite higher sales, operating expenses were reduced in the second quarter from
the prior first quarter's levels and were 10.9% of sales as compared to 13.4% in
the second quarter of 1994 and 11.8% in the previous first quarter of 1995.
Year-to-date operating expenses are 3.9% higher than 1994 expenses primarily due
to recent acquisitions, but on higher sales volumes, have declined to 11.4% of
sales in 1995 as compared to 13.9% in 1994 as these expenses are typically
fixed.
Income from operations improved in the second quarter to 18.2% of sales compared
to 15.6% in the second quarter of 1994 and 16.6% in the first quarter of 1995.
For the first half of 1995, income from operations increased almost three
percentage points to 17.4% of sales compared to 14.6% for the same period in
1994.
Interest expense declined during the second quarter compared to the recent first
quarter of 1995 due to the continued retirement of debt under the Company's Bank
Credit Agreement. As of May 1995, the entire $9,853,000 debt used for the
Velvet Drive Transmission acquisition on January 1, 1995 was retired.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital increased to $59,975,000 as of June 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. The current ratio was
2.6:1 in the second quarter, the same as it was in the first quarter of 1995.
This compares to 2.5:1 as of last year end. Available cash generated from the
business was used to retire $11,603,000 in long-term debt in the first half of
1995.
The reduction of long-term debt and corresponding increase in shareholders'
investment during the quarter resulted in long-term debt, as a percentage of
total capitalization, to be reduced to 3.5% as of June 30, 1995, down from 12.7%
as of December 31, 1994. This provides the Company significant additional long-
term debt capacity which is typically required only for the purchase of
acquisitions.
The Company feels that additional internally generated growth can be financed
adequately by cash generated from operations and from its short-term credit
facilities.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to A Vote of Security Holders
(a) The Annual Meeting of stockholders of Regal-Beloit Corporation was held
on April 18, 1995.
(c) Matters voted on at the Annual Meeting and the results of each vote were
as follows:
(1) Elect three Class B Directors for a term of three years.
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<CAPTION>
Broker
For Withheld Abstain Non-Votes
--------- -------- ------- ---------
<S> <C> <C> <C> <C>
John M. Eldred 18,655,023 340,052 0 0
John A. McKay 18,768,623 226,452 0 0
Frederick Kasten, Jr. 18,768,623 226,452 0 0
</TABLE>
(2) Ratify the appointment of Arthur Andersen LLP as independent public
accountants for the Company for the year ending December 31, 1995.
<TABLE>
<CAPTION>
Broker
For Withheld Abstain Non-Votes
---------- -------- ------- ---------
<S> <C> <C> <C> <C>
18,829,581 17,676 147,818 0
</TABLE>
<PAGE>
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 May 1, 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.
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<CAPTION>
REGAL-BELOIT CORPORATION
(Registrant)
<S> <C>
Gerald J. Berres
----------------------------------------------
Gerald J. Berres
Vice President - Secretary
General Counsel
Robert C. Burress
----------------------------------------------
Robert C. Burress
Vice President - Chief Financial Officer
(Principal Accounting and Financial Officer)
</TABLE>
DATE: August 10, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,002,000
<SECURITIES> 0
<RECEIVABLES> 39,951,000
<ALLOWANCES> 1,263,000
<INVENTORY> 48,358,000
<CURRENT-ASSETS> 97,603,000
<PP&E> 126,858,000
<DEPRECIATION> 54,879,000
<TOTAL-ASSETS> 169,936,000
<CURRENT-LIABILITIES> 37,628,000
<BONDS> 0
<COMMON> 205,000
0
0
<OTHER-SE> 122,840,000
<TOTAL-LIABILITY-AND-EQUITY> 169,936,000
<SALES> 150,605,000
<TOTAL-REVENUES> 150,605,000
<CGS> 107,228,000
<TOTAL-COSTS> 107,228,000
<OTHER-EXPENSES> 17,140,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 539,000
<INCOME-PRETAX> 25,777,000
<INCOME-TAX> 10,021,000
<INCOME-CONTINUING> 15,756,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,756,000
<EPS-PRIMARY> .77
<EPS-DILUTED> 0
</TABLE>
