<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-20416
EAGLE INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3384361
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 906-8700
(Registrant's telephone number, including area code)
Not Applicable
(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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
1,860,000 shares of Common Stock as of October 25, 1995
<PAGE>
EAGLE INDUSTRIES, INC.
FORM 10-Q
SEPTEMBER 30, 1995
INDEX
PART I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 32.4 $ 31.1
Accounts receivable, net 28.9 29.4
Inventories, net 150.6 126.5
Other current assets 61.8 76.6
Net assets of discontinued operations 6.1 9.8
Total current assets 279.8 273.4
Property, plant and equipment, net 187.8 184.9
Goodwill 287.0 290.0
Other long-term assets 81.8 119.7
Total assets $836.4 $868.0
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion long-term debt $ 25.4 $ 24.7
Accounts payable 74.5 64.8
Accrued liabilities 73.1 84.2
Total current liabilities 173.0 173.7
Senior subordinated notes 136.0 180.4
Other long-term debt 181.8 186.6
Accrued employee benefit obligations 71.2 73.6
Other long-term liabilities 88.6 90.2
Total liabilities 650.6 704.5
Stockholder's equity:
Common stock -- --
Additional paid-in capital 188.7 188.7
Accumulated deficit (0.5) (21.7)
Cumulative translation adjustments 2.7 1.6
Pension liability adjustment (5.1) (5.1)
Total stockholder's equity 185.8 163.5
Total liabilities and stockholder's equity $836.4 $868.0
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS)
(UNAUDITED)
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
(RESTATED) (RESTATED)
Net sales $267.5 $264.1 $786.1 $743.8
Cost of sales 216.2 212.9 626.5 593.9
Gross earnings 51.3 51.2 159.6 149.9
Selling and administrative
expenses 31.7 36.0 95.8 107.5
Goodwill amortization 2.2 2.2 6.6 6.6
Operating income 17.4 13.0 57.2 35.8
Net interest expense 7.7 8.3 22.6 29.9
Income from continuing operations
before income taxes 9.7 4.7 34.6 5.9
Provision for income taxes from
continuing operations 3.8 2.3 13.4 3.6
Income from continuing operations 5.9 2.4 21.2 2.3
Discontinued Operations:
Loss from discontinued operations,
less income tax benefit
of $1.0 in 1994 -- -- -- (4.1)
Reversal of net loss from
discontinued operations
subsequently retained -- 4.8 -- 9.3
Loss on disposal of businesses, net
of applicable income tax benefit of
$7.9 in 1994 -- -- -- (27.2)
Income (loss) before extraordinary
item 5.9 7.2 21.2 (19.7)
Extraordinary income (loss) from early
retirement of debt, net of income
tax provision (benefit) of $0.2
and $(9.2), respectively, in the
quarter and nine months ended
September 1994 -- 0.3 -- (16.3)
Net income (loss) $ 5.9 $ 7.5 $ 21.2 $(36.0)
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 21.2 $ 2.3
Adjustments to reconcile income from continuing
operations to net cash flow from operations:
Depreciation and amortization 29.9 29.2
Accretion of discount on subordinated debt 12.1 15.7
Proceeds from sales of accounts receivable -- 110.3
Cash effects of changes in other working
capital balances, accrued employee benefit
obligations, and other long-term liabilities
(excluding the effects of acquisitions and
dispositions of businesses) (4.0) 30.5
Net cash flow from continuing operating
activities 59.2 188.0
Net cash flow used in discontinued
operations (4.7) (18.5)
Net cash flow from operations 54.5 169.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses (10.4) --
Proceeds from sale of businesses -- 71.7
Proceeds from sale of notes receivable 39.8 --
Capital expenditures (20.7) (17.6)
Other (2.5) (14.5)
Net cash flow from investing activities 6.2 39.6
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of senior subordinated notes (55.1) (14.1)
Repayment of senior subordinated debt -- (234.1)
Repayment of senior credit facilities -- (221.1)
Capital contribution -- 50.0
Proceeds from new credit facility -- 317.9
Payments on long-term debt (34.3) (33.2)
Net borrowing (payment) on revolving credit
facilities 30.0 (41.4)
Net cash flow used in financing activities (59.4) (176.0)
CHANGE IN CASH AND CASH EQUIVALENTS 1.3 33.1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 31.1 4.8
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32.4 $ 37.9
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements
of Eagle Industries, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for a complete set of financial statements. In the opinion
of management, all adjustments considered necessary, consisting only of
normal recurring adjustments are included for fair presentation.
Operating results for the quarter and nine months ended September 30,
1995 are not necessarily indicative of results that may be expected for
the full year. The unaudited Condensed Consolidated Financial
Statements for the quarters and nine months ended September 30, 1995 and
1994 should be read in conjunction with the audited Consolidated
Financial Statements of the Company for the year ended December 31,
1994. The historical statements of the Company have been restated for
companies being reported as discontinued operations.
(2) INVENTORIES
Inventory consists of the following (in millions):
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
Raw materials and supplies $ 50.9 $ 46.4
Work in process 28.0 25.2
Finished goods 71.7 54.9
$150.6 $126.5
(3) LONG-TERM DEBT
Components of other long-term debt are as follows (in millions):
SEPTEMBER 30, DECEMBER 31,
1995 1994
(UNAUDITED)
Eagle Industrial Credit Facility $ 73.5 $ 89.5
Falcon Credit Facility 127.5 112.5
Other 6.2 9.3
207.2 211.3
Less current portion (25.4) (24.7)
Total other long-term debt $181.8 $186.6
On June 30, 1995 Eagle's subsidiary, Falcon Building Products, Inc.
("Falcon") amended and restated its existing senior credit facility,
increasing it to a $250 million credit facility (the "Falcon Credit
Facility") with its existing group of banks. The Falcon Credit Facility
consists of a six-year $100 million term loan, maturing in June 2001,
due in quarterly installments increasing in amount from $2.5 million at
September 30, 1995 to $6.25 million per quarter beginning in September
2000, and a $150 million revolving credit facility (the "Revolver") that
expires in 2001. Borrowings under the Falcon Credit Facility bear
interest, at management's option, at rates equal to London Interbank
Offered Rates ("LIBOR") plus a margin (currently 0.75 percent) or at the
prime rate. The Falcon Credit Facility is secured by substantially all
of the inventory, intangibles, property, plant, equipment and stock of the
Falcon subsidiaries. The Falcon Credit Facility also allows for $25
million to be used in the form of letters of credit. Outstanding
letters of credit reduce the availability of funds under the Revolver.
The Falcon Credit Facility contains various covenants pertaining to the
maintenance of certain cash flow and expense coverage ratios, the
incurrence of additional indebtedness and restrictions on the payment of
dividends.
In May 1995, Falcon entered into a five-year interest rate swap
agreement. This agreement, covering $100 million of the Falcon's
floating rate debt, fixed the interest rate at 6.52 percent per annum,
plus an applicable margin (currently 0.75 percent).
The Company and its subsidiaries complied with all covenants of their
respective debt agreements at September 30, 1995. For a more detailed
description of all of the Company's other credit facilities, please
refer to the Company's December 31, 1994 annual report on Form 10-K.
During the nine months ended September 30, 1995, the Company retired
$78.2 million face value ($56.4 million accreted value) of its senior
subordinated notes. No gain or loss was recorded on these repurchases.
(4) SUBSEQUENT EVENTS
In October 1995, the Company sold its subsidiary Clevaflex, Inc.
("Clevaflex") for total proceeds of $5.5 million, including a note
receivable of $1.7 million. The Company expects to record a pretax loss
of $2.2 million ($3.3 million after taxes) in connection with the sale.
Net sales and operating income of Clevaflex for the nine months ended
September 30, 1995 were $4.0 million and $1.1 million, respectively.
Also in October 1995, the Company sold its remaining 1.8 million stock
appreciation rights in Robbins & Myers, Inc. ("Robbins & Myers") stock
for $17.6 million. The stock appreciation rights were received from
Robbins & Myers in conjunction with the sale of certain businesses in
1994. The Company expects to records a pretax gain of approximately $17
million in connection with this transaction.
In November 1995, the Company entered into an agreement to sell the
Amerace Corporation and its subsidiaries ("Amerace") for approximately
$220 million. The sale is subject to approval under the Hart-Scott
Rodino Act and certain other conditions. Amerace is comprised of all the
entities in the Company's Electrical Products Group except for Lapp
Insulator Company. Sales and operating income of Amerace for the nine
months ended September 30, 1995 were $166.5 million and $23.1 million,
respectively. The Company does not expect the loss resulting from the
sale to be significant.
<PAGE>
EAGLE INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following is a discussion of the results of operations of Eagle
Industries, Inc. (the "Company") and subsidiaries for the quarter and
nine months ended September 30, 1995 as compared to the quarter and nine
months ended September 30, 1994 and should be read in conjunction with
the Condensed Consolidated Financial Statements included herein and the
Company's Annual Report on Form 10-K for the year ended December 31,
1994 and the audited Consolidated Financial Statements of the Company
for the year ended December 31, 1994 included therein.
QUARTER ENDED SEPTEMBER 30, 1995 COMPARED TO THE QUARTER ENDED SEPTEMBER
30, 1994
The following table shows net sales and operating income by business
group (in millions):
NET SALES OPERATING INCOME
QUARTER ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
Building Products Group $120.0 $117.9 $ 11.7 $ 15.2
Electrical Products Group 71.8 71.6 7.7 0.5
Automotive Products Group 49.9 48.8 2.5 2.5
Corporate and Other 25.8 25.8 (4.5) (5.2)
Total $267.5 $264.1 $ 17.4 $ 13.0
NET SALES
Net sales of $267.5 million for the third quarter of 1995 were $3.4
million or 1.3% higher than net sales for the third quarter of 1994.
Exluding the effect of acquisitions, net sales were $0.6 million lower
than the 1994 period. This decrease was primarily due to decreased
volume in the Building Products Group, partially offset by increased
volume in other businesses.
Net sales of $120.0 million for the Building Products Group were $2.1
million or 1.8% higher than net sales for the 1994 period. Excluding
the effects of acquisitions, net sales were $1.9 million lower than in
the 1994 period. This decrease was primarily due to decreased volume in
bathroom fixtures and air distribution products, partially offset by new
air compressor products and an improvement in pricing.
Net sales of $71.8 million for the Electrical Products Group were $0.2
million higher than net sales for the 1994 period. This increase was
primarily due to increased volume and, to a lesser extent, improved
pricing at most businesses within the group, as well as new products at
Elastimold. These increases were partially offset by decreased volume
of underground cable at Hendrix and decreased volume at Lapp primarily
due to the sale of its polymer product line in 1994.
Net sales of $49.9 million for the Automotive Products Group were $1.1
million or 2.3% higher than net sales for the 1994 period. This
increase was primarily due to increased volume at the automotive parts
distribution businesses as a result of increased market, partially
offset by decreased volume at Denman.
GROSS EARNINGS
Gross earnings were $51.3 million in 1995 and $51.2 million in 1994.
Gross margin decreased to 19.2% in 1995 from 19.4% in 1994, primarily
due to material cost inflation and higher sales of lower margin products
partially offset by increased prices.
OPERATING INCOME
Operating income of $17.4 million for the third quarter of 1995 was $4.4
million or 32.9% higher than operating income for the comparable period
in 1994. This increase is primarily due to increased sales volume in
each of the business groups, improved pricing and equity earnings from
joint ventures, partially offset by increased operating expenses.
Operating income of $11.7 million for the Building Products Group was
$3.5 million or 23.0% lower than in the 1994 period. This decrease was
primarily due to raw material cost inflation, and to a lesser extent,
higher sales of lower margin products.
Operating income of $7.7 million for the Electrical Products Group was
$7.2 million higher than in the 1994 period. The sale of Lapp's polymer
product line resulted in a $4.9 million charge in the third quarter of
1994. In addition, increased sales volume, improved pricing and equity
earnings from Elastimold's joint ventures also contributed to the
increase.
Corporate and other expenses of $4.5 million were $0.7 million lower
than in the 1994 period. This decrease was primarily due to an
inventory adjustment of $2.6 million recorded in the 1994 period,
partially offset by increased costs at Burns Aerospace and higher
corporate expenses.
INTEREST EXPENSE
Net interest expense was $7.7 million for the quarter ended September
30, 1995 compared to $8.3 million for the comparable 1994 period, a
decrease of $0.6 million or 7.9%. This decrease was primarily due to
the overall decrease in the level of debt.
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
The following table shows net sales and operating income by business
group (in millions):
NET SALES OPERATING INCOME
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
Building Products Group $349.6 $330.5 $ 39.7 $ 39.8
Electrical Products Group 217.9 209.8 24.7 3.9
Automotive Products Group 144.5 136.3 7.2 6.2
Corporate and Other 74.1 67.2 (14.4) (14.1)
Total $786.1 $743.8 $ 57.2 $ 35.8
NET SALES
Net sales of $786.1 million for the nine months ended September 30, 1995
were $42.3 million or 5.7% higher than net sales for the comparable
period in 1994. This increase was primarily due to increased volume.
Net sales of $349.6 million for the Building Products Group were $19.1
million or 5.8% higher for the first nine months of 1995 compared to the
first nine months of 1994. Excluding the effects of acquisitions, net
sales were $11.4 million or 3.4% higher than in 1994. This increase was
primarily due to increased volume and improved pricing.
Net sales of $217.9 million for the Electrical Products Group were $8.1
million or 3.9% higher in the first nine months of 1995 compared to the
first nine months of 1994. This increase was primarily due to increased
volume and improved pricing at most companies within the group, as well
as new products at Elastimold. These increases were partially offset by
decreased volume at Lapp due to the sale of its polymer product line in
1994.
Net sales of $144.5 million for the Automotive Products Group were $8.2
million or 6.0% higher in the first nine months of 1995 compared to the
first nine months of 1994. This increase was primarily due to increased
sales volume at Denman and the automotive parts distribution businesses
as a result of market penetration.
Other net sales increased $6.9 million or 10.3% compared to 1994. This
increase was primarily due to shipments under a major order from a
customer of Burns Aerospace.
GROSS EARNINGS
Gross earnings of $159.6 million were $9.7 million or 6.5% higher than
gross earnings for the first nine months of 1994. This increase was
primarily due to the increased volume in the 1995 period. Gross margin
increased to 20.3% in the first nine months of 1995 compared to 20.2% in
the comparable 1994 period due to the increased volume and increased
prices, paritally offset by increased raw material costs principally in
the Building Products Group.
OPERATING INCOME
Operating income of $57.2 million for the nine months ended September
30, 1995 was $21.4 million or 59.8% higher than operating income for the
comparable period in 1994. Excluding charges to establish self-
insurance reserves recorded in 1994 of $8.7 million, operating income
increased $12.7 million or 28.5%. This increase was due to increased
volume at each of the Company's business groups, improved pricing and
equity earnings from joint ventures.
Operating income of $39.7 million for the Building Products Group was
$0.1 million lower than in the 1994 period. Excluding the effects of
acquisitions in 1995 and charges recorded to establish self-insurance
reserves in 1994, operating income decreased $4.6 million. This
decrease was primarily due to increased raw material costs, partially
offset by improved pricing and increased volume.
Operating income of $24.7 million for the Electrical Products Group was
$20.8 million higher than in the 1994 period. Excluding charges to
establish self-insurance reserves of $2.7 million recorded in 1994,
operating income increased $18.1 million. The increase was primarily
due to the restructuring of Lapp's porcelain operations and the sale of
its polymer product line which resulted in a $4.9 million charge in the
third quarter of 1994. In addition, increased sales volume, improved
pricing, and equity earnings from Elastimold's joint ventures
contributed to the increase.
Operating income of $7.2 million for the Automotive Products Group was
$1.0 million or 16.1% higher than in the 1994 period. Excluding charges
to establish self-insurance reserves of $0.5 million, operating income
increased $0.5 million primarily due to increased volume.
Corporate and other expenses of $14.4 million were $0.3 million higher
than in the 1994 period. Excluding charges to establish self-insurance
reserves of $1.6 million, other expenses increased $1.9 million. This
was primarily due to an increase in expense associated with the
Company's asset securitization program and increased administrative
expense, as well as increased costs at Burns Aerospace.
INTEREST EXPENSE
Net interest expense was $22.6 million for the nine months ended
September 30, 1995 compared to $29.9 million for the comparable 1994
period. This decrease was primarily due to the overall decrease in the
level of debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its debt service, capital expenditure
requirements and operating needs through a combination of operating cash
flow and external financing. Excluding the effects of the initial
proceeds from the asset securitization program in the 1994 period, cash
flow from continuing operations activities was $59.2 million for the
nine months ended September 30, 1995 and $77.7 million in the comparable
1994 period. The decrease in 1995 was primarily due to an increase in
working capital requirements, partially offset by the increased income.
In addition, during the quarter ended June 30, 1995, the Company sold
the note receivable and 200,000 stock appreciation rights received from
Robbins & Myers, Inc. in conjunction with the sale of certain businesses
in 1994. Total cash proceeds received for the note and the stock
appreciation rights were $39.8 million. During the nine months ended
September 30, 1995, the Company retired $78.2 million face value ($56.4
million accreted value) of its senior subordinated notes using available
cash.
On June 30, 1995, Falcon amended and restated its senior credit facility,
increasing it to a $250 million credit facility. See Note 3 to the
Company's Condensed Consolidated Financial Statements for a further
description of the agreement.
Management believes that cash flow from continuing operations along with
availability under the credit facilities will be sufficient to pay
interest on outstanding debt, meet current maturities, pay income taxes,
fund capital expenditures and meet other operating needs.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
None.
b) Reports on Form 8-K
None.
<PAGE>
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.
EAGLE INDUSTRIES, INC.
By: /s/ Sam A. Cottone
-------------------
Sam A. Cottone
Senior Vice President and
Chief Financial Officer
Dated: November 6, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1995 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANICAL INFORMATION FOR THE PERIOD
ENDED SEPTEMBER 30, 1994.
</LEGEND>
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