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 March 31, 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.
20,491,586 Shares, Common Stock, $.01 Par Value
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REGAL-BELOIT CORPORATION
FORM 10-Q
For Quarter Ended March 31, 1995
INDEX
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Page No.
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Balance Sheet............................ 3
Statement of Income................................ 4
Condensed Statement of Cash Flows.................. 5
Notes to Financial Statements...................... 6 - 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 7 - 8
PART II - OTHER INFORMATION
Item 6 - Reports on Form 8-K................................... 9
Signatures..................................................... 9
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
REGAL-BELOIT CORPORATION
CONDENSED BALANCE SHEET
ASSETS
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(From Audited
(Unaudited) Statements)
March 31, 1995 Dec. 31, 1994
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Current Assets:
Cash and cash equivalents.......................... $ 3,364,000 $ 13,378,000
Receivables, less reserves of $1,236,000 in 1995
and $1,161,000 in 1994........................... 41,675,000 30,623,000
Inventories........................................ 48,116,000 43,621,000
Other current assets............................... 4,258,000 4,074,000
Total Current Assets............................ 97,413,000 91,696,000
Plant and Equipment at Cost........................... 124,474,000 116,470,000
Less - accumulated depreciation.................. (52,807,000) (50,685,000)
71,667,000 65,785,000
Advance Payment for Acquisition....................... 0 9,853,000
Other Noncurrent Assets............................... 308,000 331,000
$169,388,000 $167,665,000
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-Term Debt.................................. $ 599,000 $ 10,511,000
Accounts payable................................. 12,163,000 8,773,000
Federal and state income taxes................... 5,387,000 1,164,000
Other current liabilities........................ 19,523,000 16,133,000
Total Current Liabilities................... 37,672,000 36,581,000
Long-term Debt........................................ 10,185,000 16,022,000
Deferred Income Taxes................................. 4,769,000 4,517,000
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares
authorized, 20,491,586 issued in 1995 and
20,454,952 issued in 1994..................... 205,000 205,000
Additional paid-in capital....................... 36,822,000 36,595,000
Retained earnings................................ 79,801,000 74,265,000
Cumulative Foreign Currency Translation
Adjustments................................... ( 66,000) ( 520,000)
116,762,000 110,545,000
$169,388,000 $167,665,000
See accompanying notes.
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REGAL-BELOIT CORPORATION
STATEMENT OF INCOME
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(Unaudited)
Three Months Ended
March 31,
1995 1994
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Net Sales................................. $74,340,000 $58,851,000
Cost of Sales............................. 53,180,000 42,414,000
Gross Profit............................ 21,160,000 16,437,000
Operating Expenses........................ 8,767,000 8,448,000
Income from Operations.................. 12,393,000 7,989,000
Interest Expense.......................... 322,000 293,000
Income Before Taxes..................... 12,071,000 7,696,000
Provision for Income Taxes................ 4,690,000 3,065,000
Net Income............................ $ 7,381,000 $ 4,631,000
Per Share of Common Stock:
Net Income.............................. $.36 $.23
Cash Dividends Declared................. $.09 $.07
Weighted Average Number of
Shares Outstanding...................... 20,470,837 20,426,880
See accompanying notes.
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REGAL-BELOIT CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
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(Unaudited)
Three Months Ended March 31,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.............................................. $ 7,381,000 $ 4,631,000
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation, amortization and deferred income taxes.. 2,848,000 2,415,000
Change in assets and liabilities:
Current assets, other than cash...................... (10,599,000) (3,900,000)
Current liabilities, other than notes payable........ 9,159,000 5,719,000
Net cash provided from operating activities....... 8,789,000 8,865,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment, net of retirements.... (2,165,000) (1,706,000)
Other, net.............................................. 460,000 9,000
Net cash used in investing activities................ (1,705,000) (1,697,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of short-term debt............................ ( 9,887,000) -0-
Reduction of long-term debt............................. ( 5,826,000) ( 5,434,000)
Dividends to shareholders............................... ( 1,636,000) ( 1,428,000)
Other, net.............................................. 228,000 93,000
Net cash used for financing activities............... (17,121,000) ( 6,769,000)
EFFECT OF EXCHANGE RATE ON CASH............................ 23,000 3,000
Net (decrease) increase in cash and cash equivalents.... (10,014,000) 402,000
Cash and cash equivalents at beginning of period........ 13,378,000 2,193,000
Cash and cash equivalents at end of period.............. $ 3,364,000 $ 2,595,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for:
Interest............................................. $ 265,000 $ 248,000
Income Taxes......................................... $ 232,000 $ 324,000
See accompanying notes.
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REGAL-BELOIT CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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:
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3-31 12-31
1995 1994
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Raw Material 19% 16%
Work-in-Process 24% 23%
Finished Goods 57% 61%
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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.
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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 March 31, 1995 were a record $74,340,000, or
26.3% higher than sales of $58,851,000 in the comparable first quarter of 1994,
and 18.8% greater than sales in the recent fourth quarter of 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 13.5% of the sales increase compared to the first
quarter of 1994. The remaining 12.8% sales increase can be attributed to
increased order levels at all divisions in both the Power Transmission and
Cutting Tool Groups. In addition, selective selling price increases have been
made in response to price increases being received from several suppliers of raw
materials and component parts.
While the Velvet Drive Transmission Division added approximately $7,000,000 to
first quarter sales, this level of shipments is considered to be stronger than
normal as a sizeable backlog of overdue orders prior to acquisition has been
cleaned up.
The Company's European operations are experiencing increased sales and order
levels as the economic recovery in Europe has become more evident.
The first quarter gross profit percentage of 28.5% was higher than the 27.9%
recorded in the comparable period of 1994, but was down from 31.7% in the recent
fourth quarter of 1994 due to a higher percentage of total shipments being in
slightly lower margin products.
Operating expenses increased in the quarter primarily as a result of recent
acquisitions. However, these expenses continued to decline as a percentage of
sales. In the first quarter of 1995, operating expenses were 11.8% of sales
compared to 14.4% in the comparable period of 1994 and 13.2% in the recent
fourth quarter of 1994. These percentages continue to drop as sales volumes
rise since these expenses are typically fixed in nature.
Interest expense increased this quarter due to the additional debt incurred with
the recent Velvet Drive Transmission acquisition. As of March 31, 1995, over
$4,600,000 of the additional $9,853,000 debt has already been retired while the
Company's variable interest rate has remained virtually unchanged during the
quarter.
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LIQUIDITY AND CAPITAL RESOURCES
The majority of the changes to the first quarter balance sheet can be attributed
to the Velvet Drive acquisition. Receivables and inventory levels at existing
facilities have increased as a result of higher sales volumes.
Working capital as of March 31, 1995 increased to $59,741,000 from $55,115,000
as of December 31, 1994. The current ratio is 2.6:1 as compared to 2.5:1 as of
year end.
The reduction of long-term debt and increase in shareholders' investment during
the quarter resulted in long-term debt as a percentage of total capital to be
reduced to 8.0% as of March 31, 1995 from 12.7% as of December 31, 1994.
The Company feels that additional internally generated growth can be financed
adequately by cash generated from operations and from its short-term credit
facilities.
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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-K, dated March 15, 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.
REGAL-BELOIT CORPORATION
(Registrant)
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 and Financial Officer)
DATE: May 1, 1995
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<NAME> REGAL-BELOIT CORPORATION
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,364,000
<SECURITIES> 0
<RECEIVABLES> 41,675,000
<ALLOWANCES> (1,236,000)
<INVENTORY> 48,116,000
<CURRENT-ASSETS> 97,413,000
<PP&E> 124,474,000
<DEPRECIATION> (52,807,000)
<TOTAL-ASSETS> 169,388,000
<CURRENT-LIABILITIES> 37,672,000
<BONDS> 0
<COMMON> 205,000
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<OTHER-SE> 116,762,000
<TOTAL-LIABILITY-AND-EQUITY> 169,388,000
<SALES> 74,340,000
<TOTAL-REVENUES> 74,340,000
<CGS> 53,180,000
<TOTAL-COSTS> 53,180,000
<OTHER-EXPENSES> 8,767,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 322,000
<INCOME-PRETAX> 12,071,000
<INCOME-TAX> 4,690,000
<INCOME-CONTINUING> 7,381,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 7,381,000
<EPS-PRIMARY> .36
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