UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the quarterly period ended March 31, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-6176
AUGAT INC.
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2022285
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
89 Forbes Boulevard, P.O. Box 448, Mansfield, Massachusetts 02048
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(Address of principal executive offices) (Zip Code)
(508) 543-4300
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(Registrant's telephone number, including area code)
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
The number of shares of the Registrant's common stock outstanding on
March 31, 1994 was 19,179,659.
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AUGAT INC.
INDEX
Financial Statements: Page No.
Consolidated Balance Sheets - March 31, 1994 3-4
and December 31, 1993
Statements of Consolidated Income - For the
Three Months Ended March 31, 1994 and 1993 5
Statements of Consolidated Cash Flows For
the Three Months Ended
March 31, 1994 and 1993 6
Notes to Unaudited Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Part II - Other Information 10
Signatures 10
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PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets, March 31, 1994 and December 31, 1993
(In thousands)
Assets 1994 1993
(Unaudited)
----------- ---------
Current Assets:
Cash and cash equivalents ---------- $ 19,274 $ 8,540
Accounts receivable-net ------------ 79,843 73,633
Refundable income taxes ------------ 256 138
Inventories:
Finished goods ------------------- 35,243 33,493
Work in process ------------------ 23,953 26,415
Raw materials -------------------- 29,073 26,654
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Total inventories -------------- 88,269 86,562
Deferred income taxes -------------- 3,806 4,556
Prepaid expenses ------------------- 3,429 3,079
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Total current assets ---- 194,877 176,508
Property, Plant, and Equipment:
Land ------------------------------ 3,648 3,528
Buildings and building
improvements -------------------- 57,356 54,674
Machinery and equipment ----------- 121,203 115,155
Furniture and fixtures ------------ 20,939 20,603
Construction in progress - buildings
and machinery ------------------- 12,253 10,010
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Total ----------------------- 215,399 203,970
Less accumulated depreciation ----- (110,003) (103,971)
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Property, plant, and equipment-net -- 105,396 99,999
Other Assets:
Goodwill-net ---------------------- 26,433 26,759
Property held for sale-net -------- 8,330 9,179
Other ----------------------------- 5,261 5,415
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Total other assets -------------- 40,024 41,353
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Total ----------------------- $340,297 $317,860
========= =========
See notes to unaudited consolidated financial statements.
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Consolidated Balance Sheets, March 31, 1994 and December 31, 1993
(In thousands)
Liabilities and Shareholders' Equity
(Unaudited)
1994 1993
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Current Liabilities:
Notes payable ------------------------ $ 6,000 $ 1,000
Current maturities of long-term debt - 6,589 2,130
Accounts payable --------------------- 35,361 28,353
Federal, state and foreign taxes
payable ---------------------------- 6,025 3,352
Accrued restructuring costs ---------- 1,718 1,751
Accrued compensation and benefits ---- 9,768 10,193
Other accrued expenses --------------- 10,047 10,801
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Total current liabilities ---------- 75,508 57,580
Long-Term Debt ------------------------- 41,233 45,797
Deferred Income Taxes ------------------ 12,786 12,872
Shareholders' Equity:
Common stock ------------------------- 1,920 1,903
Paid-in capital ---------------------- 71,282 69,262
Retained earnings -------------------- 124,578 118,878
Cumulative translation adjustment ---- 13,670 11,923
Treasury stock, at cost -------------- (110) (110)
Unearned compensation-restricted
stock awards ----------------------- (570) (245)
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Shareholders' equity --------------- 210,770 201,611
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Total ---------------------------- $340,297 $317,860
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See notes to unaudited consolidated financial statements.
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Statements of Consolidated Income
For the Three Months Ended March 31, 1994 and 1993
(In thousands, except per share data)
(Unaudited) (Unaudited)
1994 1993
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Net sales ---------------- $127,403 $101,155
Cost of products sold ---- 100,981 79,610
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Gross margin ------------- 26,422 21,545
Selling, general and admini-
strative expenses ------ 16,348 15,994
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Income from operations --- 10,074 5,551
Other income (expense):
Interest income, etc. -- 90 211
Interest expense (1,094) (1,232)
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Net ---------------------- (1,169) (1,021)
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Income before taxes on
income ----------------- 8,905 4,530
Provision for taxes on
income ----------------- 3,205 1,630
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Net income --------------- $ 5,700 $ 2,900
========== ==========
Earnings per share ------- $.30 $.16
Average common shares
outstanding ------------ 19,118 18,442
Dividends paid per share - $.00 $.00
See notes to unaudited consolidated financial statements.
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Statements of Consolidated Cash Flows
For the Three Months Ended March 31, 1994 and 1993
(In thousands)
(Unaudited) (Unaudited)
1994 1993
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Cash Flows From Operating Activities:
Net income ----------------------- $ 5,700 $ 2,900
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization -- 4,652 3,919
(Gain) loss on the sale of
property, plant and equipment -- (2) 10
Deferred federal income taxes
- net -------------------------- 664 (221)
Amortization of restricted
stock awards ------------------- 47 43
Increase (decrease) in cash from
changes in assets and
liabilities:
Accounts receivable ------------ (6,210) (8,216)
Refundable income taxes -------- (118) 113
Inventories -------------------- (1,707) (1,576)
Prepaid expenses --------------- (350) (434)
Other assets ------------------- 102 (24)
Accounts payable --------------- 7,008 3,369
Income taxes payable ----------- 2,673 1,261
Accrued restructuring, com-
pensation and other expenses --- (1,212) 148
Effect of exchange rate
changes on current assets
and liabilities (other than
cash) -------------------------- 123 (94)
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Net cash provided by operating
activities --------------------- 11,370 1,198
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Cash Flows From Investing Activities:
Purchase of property, plant, and
equipment ---------------------- (7,665) (3,852)
Proceeds from the sale of
property, plant and equipment -- 31 60
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Net cash used for investing
activities --------------------- (7,634) (3,792)
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Cash Flows From Financing Activities:
Proceeds from short term
borrowings --------------------- 5,000
Payments for long-term debt ---- (105) (102)
Common stock issued under
employee benefit plans -------- 1,665 386
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Net cash provided by financing
activities -------------------- 6,560 284
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Effect of exchange rate changes
on cash ----------------------- 438 (445)
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Net changes in cash and time
deposits ---------------------- 10,734 (2,755)
Cash and cash equivalents at
beginning of the period ------- 8,540 28,323
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Cash and cash equivalents at end
of the period ----------------- $19,274 $25,568
========= =========
See notes to unaudited consolidated financial statements.
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Notes to Unaudited Consolidated Financial Statements
1. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position as of March 31, 1994, the results of operations for the
three months ended March 31, 1994 and 1993 and the cash flows for the
three month period then ended.
2. The results of operations for the three month period ended March 31,
1994 and 1993 are not necessarily indicative of the results to be
expected for the full year.
3. Earnings Per Share - Earnings per share are based on the weighted
average number of shares outstanding during each period. The exercise
of all presently issued outstanding stock options and the issuance of
shares under the "Employee Stock Purchase Plan" would have no material
dilutive effect on earnings per share.
4. The acquisition of National Industries Inc. included a liability of
approximately $5.4 million to cover the estimated costs of site
remediation for certain National facilities. The Company informed the
State of Alabama about the possible contamination and its desire to
voluntarily proceed with further study and, if necessary, remediation
of the possible contamination. The Company has completed its
investigation and provided this information to the State. The State
has informed the Company that it believes further investigation is
necessary. The Company, however, has considered and disagreed with
the State's comments and is voluntarily proceeding to design and
implement an appropriate remedy. The Company has included in its
financial statements an allowance of $4.7 million for estimated
environmental cleanup costs as of March 31, 1994.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Net Sales: Net sales for the quarter ended March 31, 1994 by product
group, compared to the quarter ended March 31, 1993, are as follows
(dollars in thousands):
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Quarters Ended March 31,
1994 1993
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Product Group % %
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Interconnection Products
Business $ 32,510 25.5% $ 31,405 31.0%
Wiring Systems and Components
Business 74,028 58.1% 52,706 52.1%
Communications Products Business 20,865 16.4% 17,044 16.9%
-------- ------ -------- ------
Total $127,403 100.0% $101,155 100.0%
======== ====== ======== ======
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Net sales for the quarter ended March 31, 1994 increased 26% over the
first quarter of 1993 primarily due to the increased demand for the
Company's products in the U.S. Automotive and cable television markets.
Net sales of Interconnection Products Business were flat reflecting the
continuing economic recession in the markets which it serves.
Business conditions in the first quarter of 1994 continue to reflect
improvement in the domestic markets in which the Company serves. In the
European and Far East markets, there have been no significant economic
improvement in the current quarter. Incoming orders for the first
quarter of 1994 were $134 million, compared to $103 million for the same
period of the prior year. The backlog at March 31, 1994 was $111 million
compared with $92 million at March 31, 1993.
Cost of Products Sold: Cost of products sold increased by .6% as a
percentage of sales in the first quarter of 1994 compared to the first
quarter of 1993. The margin decline in 1994 can be attributed to the
significant sales increase of 40% in the Wiring Systems and Components
Business which has much higher labor and material costs compared to other
business units. In addition the dollars expended to manufacture the
Company's products have increased due to increases in material costs,
wage increases and overheads. These expenses have been partially offset
by improved manufacturing methods and on going cost-cutting programs.
Selling, General and Administrative Expenses: These expenses were 12.8%
of sales in the first quarter of 1994 compared to 15.8% in the comparable
quarter of the prior year. While the dollars spent in this area have
only increased slightly, the leveraging of such expenses due to increased
volume have lowered the SG&A percent of sales. These expenses may vary
from period to period based on various factors, none of which,
individually are significant.
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Other Income (Expense): Interest income, etc. decreased in 1994 due to
the significant decrease in cash available to invest over the comparable
period.
Interest expense decreased in the 1994 period compared to the same period
in 1993 due to the decrease in total outstanding debt in 1994 when
compared to 1993.
Income Taxes: The effective income tax rate for the Company was 36% for
the first quarter of 1994 and 1993. The tax rate in both periods is
higher than the statutory rate due to income earned in jurisdictions with
higher effective tax rates.
Net Income: Net income was $5.7 million for the three months ended March
31, 1994, compared to net income of $2.9 million in the same period of
the prior year.
The increase in net income for the first quarter ended March 31, 1994
compared to the previous period of the prior year resulted principally
from increased sales volume in our domestic automotive and communications
business and on going productivity programs.
Liquidity and Capital Resources: The Registrant continues to maintain
sufficient liquidity and has adequate resources to fund its operations
under current business conditions. The income generated from operations
along with the cash on hand and established bank credit facilities are
sufficient to cover expected sales growth and planned capital expenditure
programs.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
On April 13, 1994, the Registrant announced that the State Supreme
Judicial Court of the Commonwealth of Massachusetts vacated a 1992
Superior Court judgement which had awarded Augat Inc. compensatory
damages of $14,140,000 in lost profits as the result of unfair trade
practices. Although the court let stand its earlier decision that the
conduct of defendants Aegis, Inc. and Jeremy Scherer was a knowing
violation of the state unfair trade practices statute, the court held
that the profits of Isotronics, Inc., Augat's former subsidiary was
limited to six months, not twenty-seven, following the departure of three
employees. The Supreme Court remanded the case to the Superior Court
and included in its opinion instructions about how to recalculate the
damage award. The award was not recorded in the company's previously
reported earnings.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on 8-K - None
SIGNATURES
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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 thereto duly authorized.
AUGAT INC.
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(Registrant)
/s/ Ellen B. Richstone
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Ellen B. Richstone
Vice President and
Chief Financial Officer
Date: April 29, 1994
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