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, 1996
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.
20,610,117 Shares, Common Stock, $.01 Par Value
<PAGE>
REGAL-BELOIT CORPORATION
FORM 10-Q
For Quarter Ended March 31, 1996
INDEX
Page No.
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
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
REGAL-BELOIT CORPORATION
CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
(From Audited
(Unaudited) Statements)
March 31, 1996 Dec. 31, 1995
-------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................... $ 15,821,000 $ 7,458,000
Receivables, less reserves of $1,173,000 in 1996
and $1,140,000 in 1995........................... 42,348,000 41,172,000
Inventories........................................ 48,926,000 49,263,000
Other current assets............................... 4,834,000 4,508,000
Total Current Assets............................ 111,929,000 102,401,000
Plant and Equipment at Cost........................... 132,594,000 130,893,000
Less - accumulated depreciation.................. (60,677,000) (58,201,000)
71,917,000 72,692,000
Other Noncurrent Assets............................... 480,000 387,000
------------- -------------
$184,326,000 $175,480,000
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable................................. $ 10,450,000 $ 10,874,000
Federal and state income taxes................... 6,024,000 1,333,000
Other current liabilities........................ 18,102,000 19,817,000
Total Current Liabilities................... 34,576,000 32,024,000
Long-term Debt........................................ 2,856,000 2,884,000
Deferred Income Taxes................................. 4,605,000 4,699,000
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares
authorized, 20,608,707 issued in 1996 and
20,553,968 issued in 1995..................... 206,000 206,000
Additional paid-in capital....................... 37,424,000 37,133,000
Retained earnings................................ 105,411,000 99,079,000
Cumulative Translation Adjustments............... (752,000) (545,000)
------------- -------------
142,289,000 135,873,000
------------- -------------
$184,326,000 $175,480,000
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
REGAL-BELOIT CORPORATION
STATEMENT OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net Sales................................. $75,119,000 $74,340,000
Cost of Sales............................. 52,780,000 53,180,000
Gross Profit............................ 22,339,000 21,160,000
Operating Expenses........................ 8,203,000 8,803,000
Income from Operations.................. 14,136,000 12,357,000
Interest Expense.......................... 100,000 322,000
Interest Income........................... 100,000 36,000
Income Before Taxes..................... 14,136,000 12,071,000
Provision for Income Taxes................ 5,331,000 4,690,000
Net Income............................ $ 8,805,000 $ 7,381,000
Per Share of Common Stock:
Net Income.............................. $.43 $.36
Cash Dividends Declared................. $.12 $.09
Weighted Average Number of
Shares Outstanding...................... 20,587,238 20,470,837
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
REGAL-BELOIT CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended March 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.............................................. $ 8,805,000 $ 7,381,000
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation, amortization and deferred income taxes.. 2,599,000 2,848,000
Change in assets and liabilities:
Current assets, other than cash...................... (1,197,000) (10,599,000)
Current liabilities, other than notes payable........ 3,079,000 9,159,000
Net cash provided from operating activities....... 13,286,000 8,789,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment, net of retirements.... (2,072,000) (2,165,000)
Other, net.............................................. (527,000) 460,000
Net cash used in investing activities................ (2,599,000) (1,705,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of short-term debt............................ 0 (9,887,000)
Reduction of long-term debt............................. (530,000) (5,826,000)
Dividends to shareholders............................... (2,055,000) (1,636,000)
Other, net.............................................. 291,000 228,000
Net cash used for financing activities............... (2,294,000) (17,121,000)
EFFECT OF EXCHANGE RATE ON CASH............................ (30,000) 23,000
Net increase (decrease) in cash and cash equivalents.... 8,363,000 (10,014,000)
Cash and cash equivalents at beginning of period........ 7,458,000 13,378,000
Cash and cash equivalents at end of period.............. $ 15,821,000 $ 3,364,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for:
Interest............................................. $ 135,000 $ 265,000
Income Taxes......................................... $ 735,000 $ 232,000
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
REGAL-BELOIT CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
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>
3-31 12-31
1996 1995
---- -----
<S> <C> <C>
Raw Material 17% 17%
Work-in-Process 22% 21%
Finished Goods 61% 62%
</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 for approximately $9,192,000.
This acquisition has been renamed the Velvet Drive Transmission Division of
Regal-Beloit Corporation. This Division produces both marine and industrial
transmissions. The acquisition was accounted for as a purchase and the cash
consideration paid approximated the fair market value of the net identifiable
assets acquired. Results of operations of the Velvet Drive Transmission
Division have been consolidated in the Company's statements from the
acquisition date.
<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
- ---------------------
Net sales for the quarter ended March 31, 1996 of $75,119,000 were the second
highest in the history of the Company, and 1.0% higher than sales of
$74,340,000 in the comparable first quarter of 1995 and 1.9% greater than
sales in the recent fourth quarter of 1995.
The first quarter gross profit margin increased to 29.7% of sales compared to
28.5% in the first quarter of 1995 and 29.0% in the recent fourth quarter of
1995.
Operating expenses were up slightly to 10.9% of sales compared to 10.7% of
sales in the recent fourth quarter, but were down from the comparable first
quarter of 1995 when operating expenses were 11.8% of sales.
Income from operations, which was the highest ever recorded, improved in the
first quarter to 18.8% of sales compared to 16.6% in the first quarter of 1995
and 18.3% in the recent fourth quarter. This increase in income from
operations continues to be attributable to ongoing productivity improvement
projects along with effective cost controls.
Interest expense has declined for the fourth consecutive quarter as long-term
debt continues to be reduced while interest rates have remained stable.
Net income was a record for the quarter ending March 31, 1996 at $8,805,000, up
19.3% from the first quarter of 1995 when net income was $7,381,000. Net
income is also up 2.0% from the recent fourth quarter of 1995.
Business levels remained solid but flat during the first quarter as compared
to the fourth quarter of 1995 and were definitely not at the accelerated
pace of a year ago. Most orders received were for shipment within the period.
There were no specific markets which individually stood out from the others in
terms of identifiable trends in either strength or weakness over that of the
fourth quarter of 1995. Further, there appears to be an order pattern whereby
the original equipment manufacturers are not building inventories due to their
improved capacity and delivery capabilities.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Working capital as of March 31, 1996 increased to $77,353,000 from $70,377,000
as of December 31, 1995. This change in working capital is primarily
attributable to the increase in cash and cash equivalents generated from
operations. The current ratio of 3.2:1 remained unchanged from the fourth
quarter of 1995.
A slight reduction of long-term debt along with the increase in shareholders'
investment during the quarter resulted in long-term debt as a percentage of
total capital to be reduced to 2.0% at the end of the first quarter which
allows the Company significant capacity, if needed, for financing acquisitions
before reaching its self-imposed limit of 40%.
The Company feels that additional internally generated growth can be financed
adequately by cash generated from operations and from its short-term credit
facilities.
<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-K, dated March 20, 1996.
SIGNATURE
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)
Robert C. Burress
------------------------------------------------------
Robert C. Burress
Vice President - Chief Financial Officer and Secretary
(Principal Accounting and Financial Officer)
Date: May 7, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 15,821,000
<SECURITIES> 0
<RECEIVABLES> 42,348,000
<ALLOWANCES> 1,173,000
<INVENTORY> 48,926,000
<CURRENT-ASSETS> 111,929,000
<PP&E> 132,594,000
<DEPRECIATION> 60,677,000
<TOTAL-ASSETS> 184,326,000
<CURRENT-LIABILITIES> 34,576,000
<BONDS> 0
0
0
<COMMON> 206,000
<OTHER-SE> 142,083,000
<TOTAL-LIABILITY-AND-EQUITY> 184,326,000
<SALES> 75,119,000
<TOTAL-REVENUES> 75,119,000
<CGS> 52,780,000
<TOTAL-COSTS> 52,780,000
<OTHER-EXPENSES> 8,203,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,000
<INCOME-PRETAX> 14,136,000
<INCOME-TAX> 5,331,000
<INCOME-CONTINUING> 8,805,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,805,000
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.00
</TABLE>
