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, 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.
20,631,993 Shares, Common Stock, $.01 Par Value
<PAGE>
REGAL-BELOIT CORPORATION
FORM 10-Q
For Quarter Ended September 30, 1996
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
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<CAPTION>
REGAL-BELOIT CORPORATION
CONDENSED BALANCE SHEET
ASSETS
<C> <C> <C>
(From Audited
(Unaudited) Statements)
Sep. 30, 1996 Dec. 31, 1995
------------- -------------
Current Assets:
Cash and cash equivalents.......................... $ 28,180,000 $ 7,458,000
Receivables, less reserves of $1,151,000 in 1996
and $1,140,000 in 1995........................... 37,212,000 41,172,000
Inventories........................................ 47,060,000 49,263,000
Other current assets............................... 4,654,000 4,508,000
Total Current Assets............................ 117,106,000 102,401,000
Plant and Equipment at Cost........................... 138,239,000 130,893,000
Less - accumulated depreciation.................. (65,781,000) (58,201,000)
72,458,000 72,692,000
Other Noncurrent Assets............................... 359,000 387,000
$189,923,000 $175,480,000
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable................................. $ 9,437,000 $ 10,874,000
Federal and state income taxes................... 772,000 1,333,000
Other current liabilities........................ 18,561,000 19,817,000
Total Current Liabilities.................... 28,770,000 32,024,000
Long-term Debt........................................ 2,669,000 2,884,000
Deferred Income Taxes................................. 4,614,000 4,699,000
Shareholders' Investment:
Common stock, $.01 par value, 50,000,000 shares
authorized, 20,631,993 issued in 1996 and
20,553,968 issued in 1995..................... 206,000 206,000
Additional paid-in capital....................... 37,591,000 37,133,000
Retained earnings................................ 116,541,000 99,079,000
Cumulative Translation Adjustment................ (468,000) (545,000)
153,870,000 135,873,000
$189,923,000 $175,480,000
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGAL-BELOIT CORPORATION
STATEMENT OF INCOME
(Unaudited)
------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales.......................... $ 68,149,000 $ 71,551,000 $215,085,000 $222,156,000
Cost of Sales...................... 48,391,000 49,859,000 151,135,000 157,087,000
Gross Profit..................... 19,758,000 21,692,000 63,950,000 65,069,000
Operating Expenses................. 8,010,000 7,853,000 24,295,000 24,993,000
Income from Operations........... 11,748,000 13,839,000 39,655,000 40,076,000
Interest Expense................... 109,000 133,000 300,000 672,000
Interest Income.................... 316,000 93,000 628,000 172,000
Income Before Taxes.............. 11,955,000 13,799,000 39,983,000 39,576,000
Provision for Income Taxes......... 4,543,000 5,366,000 15,097,000 15,387,000
Net Income..................... $ 7,412,000 $ 8,433,000 $ 24,886,000 $ 24,189,000
Per Share of Common Stock:
Net Income....................... $.36 $.41 $1.21 $1.18
Cash Dividends Declared.......... $.12 $.10 $.36 $.29
Weighted Average Number of
Shares Outstanding............... 20,631,363 20,522,194 20,610,961 20,499,380
<FN>
See accompanying notes.
</FN>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
REGAL-BELOIT CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended Sept. 30,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.............................................. $ 24,886,000 $ 24,189,000
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation, amortization and deferred income taxes.. 8,188,000 8,268,000
Change in assets and liabilities:
Current assets, other than cash...................... 6,188,000 (9,333,000)
Current liabilities, other than notes payable........ ( 1,802,000) 7,508,000
Net cash provided from operating activities....... 37,460,000 30,632,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment, net of retirements.... ( 8,044,000) (6,100,000)
Other, net.............................................. ( 434,000) 244,000
Net cash used in investing activities................ ( 8,478,000) (5,856,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of short-term debt............................ 0 (10,209,000)
Reduction of long-term debt............................. ( 1,720,000) (12,136,000)
Dividends to shareholders............................... ( 7,004,000) ( 5,532,000)
Other, net.............................................. 458,000 395,000
Net cash used in financing activities................ ( 8,266,000) (27,482,000)
EFFECT OF EXCHANGE RATE ON CASH............................ 6,000 12,000
Net increase (decrease) in cash and cash equivalents.... 20,722,000 ( 2,694,000)
Cash and cash equivalents at beginning of period........ 7,458,000 13,378,000
Cash and cash equivalents at end of period.............. $ 28,180,000 $10,684,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for:
Interest............................................. $ 236,000 $ 662,000
Income Taxes......................................... $ 15,428,000 $14,940,000
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
REGAL-BELOIT CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTMEBER 30, 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:
9-30 12-31
1996 1995
---- -----
Raw Material 15% 17%
Work-in-Process 22% 21%
Finished Goods 63% 62%
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 September 30, 1996 were $68,149,000, or 4.8%
lower than sales of $71,551,000 reported in the comparable third quarter of
1995 and 5.1% lower than in the recent second quarter of 1996. Net sales for
the nine months of 1996 were $215,085,000, or 3.2% lower than sales of
$222,156,000 for the same period in 1995.
The Company continued to experience a broad based slowdown in most of its
industrial markets throughout the third quarter of 1996. This follows the
general decline in these markets which began in the second quarter of this
year. Distributors have continued to work down their inventories and are
very cautious about ordering only what is needed to meet their customer
needs. Sales to original equipment manufacturers are also down as these
customers have shortened their lead time requirements based upon receipt of
only firm quantities from their customers. In addition, our traditional
industrial distributor customers created some modest slowness for the Company
as these customers frequently close for vacation in the third quarter.
Gross profit margins declined very modestly from 30.4% in the second quarter of
1996 to 29.0% in the third quarter of 1996, driven by the lower sales volumes.
The comparable percentage a year ago was 30.3%. Ongoing productivity projects
along with good control over costs have minimized this decline.
Operating expenses, on an absolute basis, were $8,010,000 for the quarter, or
11.8% of sales. This compares to $7,853,000, or 11.0% of sales for the same
period a year ago. Operating expenses have continued to decline in 1996
despite the basically fixed nature of these expenses, reflecting good control
exercised over these costs.
The resulting income from operations of 17.2% in the third quarter of 1996 was
correspondingly down from the 19.3% in the same quarter in 1995 and 19.2%
recorded in the second quarter of 1996.
Interest expense of $109,000 in the third quarter of 1996 was minimal based
upon the continued scheduled retirement of the Company's very low debt.
Interest income of $316,000 in the third quarter of 1996 continued to increase
as cash balances increased, driven by very strong cash flows from operations.
<PAGE>
Net income for the third quarter of 1996 was $7,412,000, or 12.1% lower than
the net income of $8,433,000 reported in the third quarter of 1995. It is
important to point out, however, that net income as a percentage of net sales
was 10.9% for the third quarter of 1996. Net income for the first nine months
of 1996 was $24,886,000, up 2.9% over 1995 net income of $24,189,000, and was
11.6% of net sales in 1996 versus 10.9% in the first nine months of 1995.
Liquidity and Capital Resources
- -------------------------------
Working capital continued to increase to $88,336,000 as of September 30, 1996
compared to $70,377,000 as of December 31, 1995. The current ratio has
increased to 4.1:1 at September 30, 1996 compared to 3.2:1 at December 31,
1995. Cash and cash equivalents were $28,180,000 at September 30, 1996, up
$5,023,000 from the June 30, 1996 balance of $23,157,000.
The overall financial position of the Company is excellent as evidenced by the
sizable cash and cash equivalents, the strong current ratio, and low long-term
debt of $2,669,000 at the end of the third quarter. Through September 30,
1996, expenditures of $8,044,000 were made on needed capital equipment upgrades
and replacements.
The Company feels that additional internally generated growth can be adequately
financed 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-Q dated August 12, 1996.
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)
Kenneth F. Kaplan
--------------------------------------
Kenneth F. Kaplan
Vice President, Chief Financial Officer
DATE: November 1, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 28,180,000
<SECURITIES> 0
<RECEIVABLES> 37,212,000
<ALLOWANCES> 1,151,000
<INVENTORY> 47,060,000
<CURRENT-ASSETS> 117,106,000
<PP&E> 138,239,000
<DEPRECIATION> 65,781,000
<TOTAL-ASSETS> 189,923,000
<CURRENT-LIABILITIES> 28,770,000
<BONDS> 0
0
0
<COMMON> 206,000
<OTHER-SE> 153,664,000
<TOTAL-LIABILITY-AND-EQUITY> 189,923,000
<SALES> 215,085,000
<TOTAL-REVENUES> 215,085,000
<CGS> 151,135,000
<TOTAL-COSTS> 151,135,000
<OTHER-EXPENSES> 24,295,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 300,000
<INCOME-PRETAX> 39,983,000
<INCOME-TAX> 15,097,000
<INCOME-CONTINUING> 24,886,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,886,000
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 0
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