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 June 30, 1995
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission File Number 1-6176
AUGAT INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2022285
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
89 Forbes Boulevard, P.O. Box 448, Mansfield, Massachusetts 02048
----------------------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(508) 543-4300
----------------------------------------------------
(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 June 30, 1995 was 19,650,358.
-1- <PAGE>
AUGAT INC.
INDEX
Page No.
-------
Part I - Financial Information -------------------------- 3
Financial Statements (Unaudited)
Statements of Consolidated Income - For the
Three Months Ended and Six Months Ended
June 30, 1995 and 1994 ---------------------------- 3
Consolidated Balance Sheets - June 30, 1995
and December 31, 1994 ----------------------------- 4 - 5
Statements of Consolidated Cash Flows For the Six
Months Ended June 30, 1995 and 1994 ---------------- 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
-2- <PAGE>
PART I - FINANCIAL INFORMATION
Statements of Consolidated Income
For the Three Months and Six Months Ended June 30, 1995 and 1994
(In thousands, except per share data)
Three Months Ended* Six Months Ended*
1995 1994 1995 1994
------ ------ ------ ------
Net sales $130,550 $134,399 $265,139 $261,802
Cost of products sold 101,404 104,844 208,136 205,825
--------- --------- --------- ---------
Gross margin 29,146 29,555 57,003 55,977
Selling, general and
administrative expenses 17,840 18,034 35,845 34,382
--------- --------- --------- ---------
Income from operations 11,306 11,521 21,158 21,595
Other income (expense):
Interest income, etc. 349 87 473 12
Interest expense (924) (1,078) (1,835) (2,172)
--------- --------- --------- ---------
Net (575) (991) (1,362) (2,160)
--------- --------- --------- ---------
Income before taxes on
income 10,731 10,530 19,796 19,435
Provision for taxes on
income 3,671 3,580 6,936 6,785
--------- --------- --------- ---------
Net income $ 7,060 $ 6,950 $ 12,860 $ 12,650
========= ========= ========= =========
Earnings per share $.36 $.36 $.66 $.66
Average common shares
outstanding 19,691 19,190 19,616 19,154
Dividends paid per share $.04 $.00 $.08 $.00
* Unaudited
See notes to unaudited consolidated financial statements.
- 3 -<PAGE>
Consolidated Balance Sheets, June 30, 1995 and December 31, 1994
(In thousands)
Assets 1995* 1994*
-------- --------
Current Assets:
Cash and cash equivalents . . . . . $ 12,588 $ 20,535
Accounts receivable-net . . . . . . . 87,553 89,521
Inventories:
Finished goods . . . . . . . . . . 36,218 33,359
Work in process . . . . . . . . . 23,813 20,894
Raw materials . . . . . . . . . . 33,401 28,698
--------- ---------
Total inventories . . . . . . 93,432 82,951
Deferred income taxes . . . . . . . . 2,883 2,873
Prepaid expenses . . . . . . . . . . 3,564 2,580
--------- ---------
Total current assets . . . 200,020 198,460
Property, Plant, and Equipment:
Land . . . . . . . . . . . . . . . . 4,039 3,826
Buildings and building improvements . 67,450 63,365
Machinery and equipment . . . . . . 149,708 137,978
Furniture and fixtures . . . . . . . 23,721 22,590
Construction in progress - buildings
and machinery . . . . . . . . . . . 18,517 13,543
--------- ---------
Total . . . . . . . . . . . . 263,435 241,302
Less accumulated depreciation . . . (134,368) (120,463)
--------- ---------
Property, plant, and equipment-net . . 129,067 120,839
Other Assets:
Goodwill-net . . . . . . . . . . . . 32,478 25,454
Property held for sale-net . . . . . 4,409 4,829
Other . . . . . . . . . . . . . . . 6,115 6,392
--------- ---------
Total other assets . . . . . . . . 43,002 36,675
--------- ---------
Total . . . . . . . . . . . . $372,089 $355,974
========= =========
* Unaudited
See notes to unaudited consolidated financial statements.
-4-<PAGE>
Consolidated Balance Sheets, June 30, 1995 and December 31, 1994
(In thousands)
Liabilities and Shareholders' Equity
1995* 1994*
--------- ---------
Current Liabilities:
Notes payable . . . . . . . . . . . . . . . . $ 7,500
Current maturities of long-term debt . . . . . 9,413 $ 10,884
Accounts payable . . . . . . . . . . . . . . . 31,669 32,744
Federal, state and foreign taxes payable . . . 3,095 4,963
Accrued compensation and benefits . . . . . . 8,647 11,274
Other accrued expenses . . . . . . . . . . . . 12,706 11,794
--------- ---------
Total current liabilities . . . . . . . . . 73,030 71,659
Long-Term Debt . . . . . . . . . . . . . . . . . 30,200 35,033
Deferred Income Taxes . . . . . . . . . . . . . 12,265 11,761
Shareholders' Equity:
Common stock . . . . . . . . . . . . . . . . . 1,967 1,947
Paid-in capital . . . . . . . . . . . . . . . 78,083 75,730
Retained earnings . . . . . . . . . . . . . . 154,825 143,526
Cumulative translation adjustment . . . . . . . 22,522 17,088
Treasury stock, at cost . . . . . . . . . . . (110) (110)
Unearned compensation-restricted stock awards . (693) (660)
--------- ---------
Shareholders' equity . . . . . . . . . . . . 256,594 237,521
--------- ---------
Total . . . . . . . . . . . . . . . . . $372,089 $355,974
========= =========
* Unaudited
See notes to unaudited consolidated financial statements.
-5-<PAGE>
Statements of Consolidated Cash Flows
For the Six Months Ended June 30, 1995 and 1994
(In thousands)
1995* 1994*
------- -------
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $12,860 $12,650
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . 10,651 9,415
(Gain) loss on the sale of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . . 245 (128)
Deferred federal income taxes . . . . . . . . . . . 537 (321)
Amortization of restricted stock awards . . . . . . 202 117
Increase (decrease) in cash from changes in assets and
liabilities, net of effects from businesses acquired:
Accounts receivable . . . . . . . . . . . . . . . . 2,814 237
Refundable income taxes . . . . . . . . . . . . . . (118)
Inventories . . . . . . . . . . . . . . . . . . . . (9,508) (2,615)
Prepaid expenses . . . . . . . . . . . . . . . . . (963) (440)
Other assets . . . . . . . . . . . . . . . . . . . 104 (156)
Accounts payable . . . . . . . . . . . . . . . . . (1,736) 5,866
Income taxes payable . . . . . . . . . . . . . . . (2,048) 890
Accrued compensation and other expenses . . . . . . (1,881) 1,777
Effect of exchange rate changes on current assets
and liabilities (other than cash) . . . . . . . . . 1,061 (130)
-------- -------
Net cash provided by operating activities . . . . . . 12,338 27,044
-------- --------
Cash Flows From Investing Activities:
Purchase of property, plant, and equipment . . . . . (14,070) (15,711)
Proceeds from the sale of property, plant, and
equipment . . . . . . . . . . . . . . . . . . . . . . 346 237
Payments for businesses acquired, net of cash acquired (7,754)
-------- --------
Net cash used for investing activities . . . . . . . . (21,478) (15,474)
-------- --------
Cash Flows From Financing Activities:
Cash dividends paid . . . . . . . . . . . . . . . . . (1,561)
Net borrowings on credit line . . . . . . . . . . . . 7,500 1,000
Payments for long-term debt . . . . . . . . . . . . . (7,255) (292)
Common stock issued under employee benefit plans . . 2,137 1,860
-------- --------
Net cash provided by financing activities . . . . . . . 821 2,568
Effect of exchange rate changes on cash . . . . . . . . 372 959
-------- --------
Net changes in cash and cash equivalents . . . . . . . . (7,947) 15,097
Cash and cash equivalents at beginning of the period . . 20,535 8,540
-------- --------
Cash and cash equivalents at end of the period . . . . . $12,588 $23,637
======== ========
* Unaudited
See notes to unaudited consolidated financial statements.
-6- <PAGE>
AUGAT INC.
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 June 30, 1995, the
results of operations for the three months and six months ended
June 30, 1995 and 1994 and the cash flows for the six month
periods then ended.
2. The results of operations for the six month period ended June
30, 1995 and 1994 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. in 1991 included a
liability of approximately $5.4 million to cover the estimated
costs of site remediation for certain National facilities.
Management estimated the liability using third-party
consultants. Costs incurred as of June 30, 1995 (approximately
$1.1 million) represent amounts expended for preliminary site
evaluation, design, testing and remediation. The Company has
obtained the necessary permits and is in the process of
remediating the site. The Company is keeping the state
informed of its progress. The Company believes the recorded
liability of approximately $4.3 million at June 30, 1995 to be
adequate.
5. During the second quarter of 1995, the Registrant acquired two
businesses, Photon Systems Corp. and Elastomeric Technologies
Inc., for an aggregate amount of cash of approximately $8.4
million. The acquisitions have been accounted for by the
purchase method of accounting. Preliminary goodwill of
approximately $7.7 million has been recorded and is being
amortized on a straight-line basis over 20 years. The
operating results of these acquisitions are included in the
Company's consolidated results of operations from the date of
acquisition. Pro-forma results of these acquisitions, assuming
they had been made at the beginning of each period presented,
would not be materially different from the results reported.
-7- <PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Net Sales: Net sales for the quarter and six months ended June 30,
1995 by product group, compared to the quarter and six months ended
June 30, 1994, are as follows (dollars in thousands):
- -----------------------------------------------------------------------------
Quarter Ended June 30,
1995 1994
---------------- ----------------
Product Group % %
- -----------------------------------------------------------------------------
Interconnection Products Business $ 36,080 27.6% $ 33,462 24.9%
Wiring Systems and Components Business 59,462 45.6% 74,796 55.6%
Communication Products Business 35,008 26.8% 26,141 19.5%
-------- ------ -------- ------
Total $130,550 100.0% $134,399 100.0%
======== ====== ======== ======
- ----------------------------------------------------------------------------
Six Months Ended June 30,
1995 1994
---------------- ----------------
Product Group % %
- -----------------------------------------------------------------------------
Interconnection Products Business $ 69,334 26.1% $ 65,972 25.2%
Wiring Systems and Components Business 125,063 47.2% 148,824 56.8%
Communication Products Business 70,742 26.7% 47,006 18.0%
-------- ------ -------- ------
Total $265,139 100.0% $261,802 100.0%
======== ====== ======== ======
- -----------------------------------------------------------------------------
Net sales for the quarter and six months ended June 30, 1995
increased primarily due to the increased volume in the worldwide
Communication's business, the improvement in the Interconnection
Products Division and the Automotive strength in Europe. Net sales
of the domestic Automotive division decreased during the current
periods due to reduced production demand for the Ford Aerostar.
With the exception of the domestic Automotive division, business
conditions in the second quarter and six months of 1995 continue to
reflect improvement in all other domestic and European markets in
which the Company serves. In the Far East markets, there have been
no significant improvements in the current quarter. Incoming
orders for the second quarter and six months of 1995 were $131
million and $269 million, respectively compared to $143 million and
$277 million for the same periods of the prior year. Incoming
orders for the current quarter increased approximately 13 percent
for the Interconnection Products Business while decreasing 5
percent for the Communication Products Business and 20 percent in
the Wiring Systems and Components Business as compared to the same
period of the prior year. Incoming orders for the six months of
1995 increased approximately 16 percent for the Interconnection
Products Business and 9 percent for the Communication Products
Business while decreasing 17 percent in the Wiring Systems and
Components Business as compared to the same period of the prior
year. The backlog at June 30, 1995 was $124 million compared with
$120 million at June 30, 1994.
-8- <PAGE>
Gross Margin: Gross margin remained constant at 21-22 percent of
------------
sales in the second quarter and six months ended June 30, 1995
compared to the second quarter and six months of 1994. The
significant increase in Communication Products Business sales in
1995 generated higher gross margins. However, gross margin was
negatively impacted by selected selling price decreases in the
other two businesses and increases in material costs, wage
increases and overhead. These increased expenses were partially
offset by improved manufacturing methods and on-going cost cutting
programs.
Selling, General and Administrative Expenses: These expenses were
--------------------------------------------
13.7 percent of sales in the second quarter of 1995 compared to
13.4 percent in the comparable quarter of the prior year. For the
six months ended June 30, 1995, these expenses were 13.5 percent of
sales compared to 13.1 percent of sales in the comparable period of
the prior year. While the dollars spent in this area have
increased, the Company intends to maintain these expenses in the 13
percent to 15 percent range of sales. These expenses may vary from
period to period based on various factors, none of which,
individually are significant.
Other Income (Expense): Interest income, etc. increased in 1995
----------------------
versus 1994 due to the increase in cash availability to invest in
the current periods over the comparable periods and the increased
rate of return on short-term investments over the comparable
periods. Interest expense decreased in the 1995 periods compared
to the same periods in 1994 due to the decrease in total
outstanding debt in 1995 when compared to 1994.
Income Taxes: The effective income tax rate for the Company was 34
------------
percent for the second quarter of 1995 and 1994 and was 35 percent
for the six months ended June 30, 1995 and June 30, 1994. The tax
rate for the second quarter in both periods is lower than the U.S.
statutory rate primarily due to income earned in jurisdictions with
lower effective tax rates.
Net Income: Net income was $7.1 million and $12.9 million for the
----------
three months and six months ended June 30, 1995 respectively,
compared to net income of $6.9 million and $12.6 million in the
same periods of the prior year. The increase in net income for the
second quarter and six months ended June 30, 1995 resulted
principally from increased sales volume in our European automotive
and North American communications business and ongoing productivity
and cost control programs.
Liquidity and Capital Resources: The Registrant continues to
-------------------------------
maintain sufficient liquidity and has adequate resources to fund
its operations under current business conditions. During the
second quarter, the Company acquired two companies for
approximately $8 million in cash: Elastomeric Technologies Inc. and
Photon Systems Corp. Elastomeric is a manufacturer of customized
interconnection technology used in communications and portable
electronics. Photon Systems designs and manufactures systems that
enable telecommunications and cable television companies to
distribute signals over fiber optic networks. 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.
-9- <PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) The following exhibits on Form 8-K were filed during the
Second Quarter of 1995:
1) The Registrants News Release dated May 17, 1995.
2) The Registrants News Release dated June 27, 1995.
(b) The following reports on Form 8-K were filed during the
Second Quarter of 1995:
1) Form 8-K filed May 22, 1995 for Item 5, Other Events.
2) Form 8-K filed June 30, 1995 for Item 5, Other
Events.
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 thereto duly authorized.
AUGAT INC.
-----------------------------
(Registrant)
Ellen B. Richstone
-----------------------------
Ellen B. Richstone
Vice President and
Chief Financial Officer
Date: August 2, 1995
-10- <PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AUGAT INC. FOR THE QUARTER ENDED JUNE 30, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000008462
<NAME> AUGAT INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 12,588
<SECURITIES> 0
<RECEIVABLES> 88,789
<ALLOWANCES> (1,236)
<INVENTORY> 93,432
<CURRENT-ASSETS> 200,020
<PP&E> 263,435
<DEPRECIATION> (134,368)
<TOTAL-ASSETS> 372,089
<CURRENT-LIABILITIES> 73,030
<BONDS> 30,200
<COMMON> 1,967
0
0
<OTHER-SE> 254,627
<TOTAL-LIABILITY-AND-EQUITY> 372,089
<SALES> 265,139
<TOTAL-REVENUES> 265,139
<CGS> 208,136
<TOTAL-COSTS> 208,136
<OTHER-EXPENSES> 35,372
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,835
<INCOME-PRETAX> 19,796
<INCOME-TAX> 6,936
<INCOME-CONTINUING> 12,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,860
<EPS-PRIMARY> 0.66
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</TABLE>
