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 September 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 September 30, 1995 was 19,767,974.
-1- <PAGE>
AUGAT INC.
INDEX
Page No.
------------
Part I - Financial Information ------------------------------- 3
Financial Statements (Unaudited)
Statements of Consolidated Income - For the
Three Months and Nine Months Ended
September 30, 1995 and 1994 ----------------------------- 3
Consolidated Balance Sheets - September 30, 1995
and December 31, 1994 ------------------------------------ 4 - 5
Statements of Consolidated Cash Flows For the Nine
Months Ended September 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 Nine Months Ended September 30, 1995 and 1994
(In thousands, except per share data)
Three Months Ended* Nine Months Ended*
1995 1994 1995 1994
-------- -------- -------- --------
Net sales $131,860 $127,709 $396,999 $389,511
Cost of products sold 105,417 100,405 313,553 306,230
-------- -------- -------- --------
Gross margin 26,443 27,304 83,446 83,281
Selling, general and
administrative expenses 18,952 16,524 54,797 50,906
-------- -------- -------- --------
Income from operations 7,491 10,780 28,649 32,375
Other income (expense):
Interest income, etc. 32 (52) 505 (40)
Interest expense (1,143) (1,028) (2,978) (3,200)
-------- -------- -------- --------
Net (1,111) (1,080) (2,473) (3,240)
-------- -------- -------- --------
Income before taxes on
income 6,380 9,700 26,176 29,135
Provision for taxes on
income 2,170 3,300 9,106 10,085
-------- -------- -------- --------
Net income $ 4,210 $ 6,400 $ 17,070 $ 19,050
======== ======== ======== ========
Earnings per share $.21 $.33 $.87 $.99
Average common shares
outstanding 19,901 19,366 19,711 19,225
Dividends paid per share $.04 $.04 $.12 $.04
* Unaudited
See notes to unaudited consolidated financial statements.
- 3 - <PAGE>
Consolidated Balance Sheets, September 30, 1995 and December 31, 1994
(In thousands)
Assets 1995* 1994*
-------- --------
Current Assets:
Cash and cash equivalents . . . . . $ 23,962 $ 20,535
Accounts receivable-net . . . . . . . 89,729 89,521
Inventories:
Finished goods . . . . . . . . . . 34,989 33,359
Work in process . . . . . . . . . 27,000 20,894
Raw materials . . . . . . . . . . 35,434 28,698
-------- --------
Total inventories . . . . . . 97,423 82,951
Deferred income taxes . . . . . . . . 3,145 2,873
Prepaid expenses . . . . . . . . . . 3,036 2,580
-------- --------
Total current assets . . . 217,295 198,460
Property, Plant, and Equipment:
Land . . . . . . . . . . . . . . . . 4,593 3,826
Buildings and building improvements . 67,087 63,365
Machinery and equipment . . . . . . 151,280 137,978
Furniture and fixtures . . . . . . . 23,715 22,590
Construction in progress - buildings
and machinery . . . . . . . . . . 22,798 13,543
-------- --------
Total . . . . . . . . . . . . 269,473 241,302
Less accumulated depreciation . . . (137,752) (120,463)
-------- --------
Property, plant, and equipment-net . . 131,721 120,839
Other Assets:
Goodwill-net . . . . . . . . . . . . 32,119 25,454
Property held for sale-net . . . . . 4,404 4,829
Other . . . . . . . . . . . . . . . 6,876 6,392
-------- --------
Total other assets . . . . . . . . 43,399 36,675
-------- --------
Total . . . . . . . . . . . . $392,415 $355,974
======== ========
* Unaudited
See notes to unaudited consolidated financial statements.
-4- <PAGE>
Consolidated Balance Sheets, September 30, 1995 and December 31, 1994
(In thousands)
Liabilities and Shareholders' Equity
1995* 1994*
Current Liabilities: --------- ---------
Notes payable . . . . . . . . . . . . . . . . $ 26,700
Current maturities of long-term debt . . . . . . 9,301 $ 10,884
Accounts payable . . . . . . . . . . . . . . . 37,037 32,744
Federal, state and foreign taxes payable . . . . 2,349 4,963
Accrued compensation and benefits . . . . . . . 7,340 11,274
Other accrued expenses . . . . . . . . . . . . . 12,255 11,794
--------- --------
Total current liabilities . . . . . . . . . . 94,982 71,659
Long-Term Debt . . . . . . . . . . . . . . . . . 25,801 35,033
Deferred Income Taxes . . . . . . . . . . . . . . 12,419 11,761
Shareholders' Equity:
Common stock . . . . . . . . . . . . . . . . . 1,978 1,947
Paid-in capital . . . . . . . . . . . . . . . . 79,823 75,730
Retained earnings . . . . . . . . . . . . . . . 158,245 143,526
Cumulative translation adjustment . . . . . . . 19,827 17,088
Treasury stock, at cost . . . . . . . . . . . . (110) (110)
Unearned compensation-restricted stock awards. . (550) (660)
-------- --------
Shareholders' equity . . . . . . . . . . . . 259,213 237,521
-------- --------
Total . . . . . . . . . . . . . . . . . . $392,415 $355,974
======== ========
* Unaudited
See notes to unaudited consolidated financial statements.
-5- <PAGE>
Statements of Consolidated Cash Flows
For the Nine Months Ended September 30, 1995 and 1994
(In thousands)
1995* 1994*
Cash Flows From Operating Activities: ------- -------
Net income . . . . . . . . . . . . . . . . . . . . . .$17,070 $19,050
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . 16,863 14,281
(Gain) loss on the sale of property,
plant and equipment . . . . . . . . . . . . . . . . 227 (122)
Deferred federal income taxes . . . . . . . . . . . 429 403
Amortization of restricted stock awards . . . . . . 328 205
Increase (decrease) in cash from changes in assets and
liabilities, net of effects from businesses acquired:
Accounts receivable . . . . . . . . . . . . . . . . 638 (12,798)
Refundable income taxes . . . . . . . . . . . . . . - 138
Inventories . . . . . . . . . . . . . . . . . . . .(13,499) (5,173)
Prepaid expenses . . . . . . . . . . . . . . . . . (434) 99
Other assets . . . . . . . . . . . . . . . . . . . (550) (1,131)
Accounts payable . . . . . . . . . . . . . . . . . . 3,631 6,696
Income taxes payable . . . . . . . . . . . . . . . .(2,794) 738
Accrued compensation and other expenses . . . . . . .(4,086) (3,833)
Effect of exchange rate changes on current assets
and liabilities (other than cash) . . . . . . . . . . 375 552
------- -------
Net cash provided by operating activities . . . . . . 18,198 19,105
------- -------
Cash Flows From Investing Activities:
Purchase of property, plant, and equipment . . . . .(23,463) (22,349)
Proceeds from the sale of property, plant, and
equipment . . . . . . . . . . . . . . . . . . . . . 493 285
Payments for businesses acquired, net of
cash acquired . . . . . . . . . . . . . . . . . . . (7,917)
------- -------
Net cash used for investing activities . . . . . . . .(30,887) (22,064)
------- -------
Cash Flows From Financing Activities:
Cash dividends paid . . . . . . . . . . . . . . . . (2,351) (774)
Net borrowings on credit line . . . . . . . . . . . 26,700 1,000
Payments for long-term debt . . . . . . . . . . . .(11,765) (492)
Common stock issued under employee benefit plans . . 3,906 4,605
------- -------
Net cash provided by financing activities . . . . . . . 16,490 4,339
Effect of exchange rate changes on cash . . . . . . . . (374) 1,374
------- -------
Net changes in cash and cash equivalents . . . . . . . . 3,427 2,754
Cash and cash equivalents at beginning of the period . . 20,535 8,540
------- -------
Cash and cash equivalents at end of the period . . . . .$23,962 $11,294
======= =======
* 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 September 30, 1995,
the results of operations for the three months and nine months
ended September 30, 1995 and 1994 and the cash flows for the
nine month periods then ended.
2. The results of operations for the nine month period ended
September 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 September 30, 1995
(approximately $1.2 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 $4.2 million at September
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 $7.9 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 nine months ended
---------
September 30, 1995 by product group, compared to the quarter and
nine months ended September 30, 1994, are as follows (dollars in
thousands):
------------------------------------------------------------------
<TABLE> Quarters Ended September 30,
1995 1994
--------------- ---------------
Product Group % %
---------------------------------------------------------------------
<C> <C> <C> <C>
Interconnection Products Business $ 35,293 26.8% $ 31,618 24.8%
Wiring Systems and Components Business 61,471 46.6% 67,333 52.7%
Communication Products Business 35,096 26.6% 28,758 22.5%
-------- ------ -------- ------
Total $131,860 100.0% $127,709 100.0%
======== ====== ======== ======
---------------------------------------------------------------------
Nine Months Ended September 30,
1995 1994
---------------- --------------
Product Group % %
---------------------------------------------------------------------
Interconnection Products Business $104,627 26.3% $ 97,590 25.0%
Wiring Systems and Components Business 186,534 47.0% 216,157 55.5%
Communication Products Business 105,838 26.7% 75,764 19.5%
-------- ------ -------- ------
Total $396,999 100.0% $389,511 100.0%
======== ====== ======== ======
---------------------------------------------------------------------
</TABLE>
Net sales for the quarter and nine months ended September 30, 1995
increased primarily due to the increased volume in the worldwide
Communication's business, the improvement in the Interconnection
Products Division (IPD) 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 and Mustang platforms. This reduction in production
demand for these two vehicle platforms is expected to continue into
the fourth quarter of 1995.
With the exception of the domestic Automotive division, business
conditions in the third quarter and nine months of 1995 continue to
reflect improvement in all other domestic and European markets in
which the Company serves. In the Far East markets, the
Communications Division sales have significantly improved in the
third quarter of 1995 while there has been no significant change in
IPD third quarter 1995 sales versus 1994. Incoming orders for the
third quarter and nine months of 1995 were $134 million and $403
million, respectively, compared with $128 million and $405 million
for the same periods of the prior year. Incoming orders for the
third quarter of 1995 increased approximately 9 percent and 15
percent for IPD, and Communication Products Business, respectively,
while decreasing 2 percent in the Wiring Systems and Components
Business as compared with the same period of the prior year.
Incoming orders for the nine months of 1995 increased approximately
14 percent for the IPD Business and 11 percent for the
Communication Products Business while decreasing 12 percent in the
Wiring Systems and Components Business as compared with the same
period of the prior year. The backlog at September 30, 1995 was
$126 million compared with $121 million at September 30, 1994.
-8- <PAGE>
Gross Margin: Gross margin was 20 and 21 percent of sales in the
------------
third quarter and nine months ended September 30, 1995,
respectively, compared to 21 percent of sales in the third quarter
and nine months of 1994. The significant increase in Communication
Products Business sales generated higher gross margin dollars in
1995. However, gross margin in 1995 was negatively impacted by
selected selling price decreases in this business and in the IPD
business and increases in material costs, wages and overhead in all
three businesses. In addition, the Automotive division was also
affected by an unfavorable mix within product lines, pricing
pressures and an inability to pass through raw material cost
increases. Also, this division was affected by the slow ramp up of
Chrysler's new mini-van whose production run-rate for the third
quarter of 1995 was 15 to 20 percent lower than expected. These
increased expenses were partially offset by improved manufacturing
methods and on-going cost cutting programs.
Selling, General and Administrative Expenses: These expenses were
--------------------------------------------
14.4 percent of sales in the third quarter of 1995 compared to 12.9
percent in the comparable quarter of the prior year. For the nine
months ended September 30, 1995, these expenses were 13.8 percent
of sales compared to 13.1 percent of sales in the comparable period
of the prior year. These expenses varied from period to period
based on various factors, none of which, individually were
significant. 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.
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 increased in the third quarter of 1995
over the comparable quarter of the prior year due to the increased
borrowings under the credit line. Interest expense for the nine
months ended September 30, 1995 decreased over the same periods in
1994 due to the decrease in long-term debt in 1995 when compared to
1994.
Income Taxes: The effective income tax rate for the Company was 34
------------
percent for the third quarter of 1995 and 1994 and was 35 percent
for the nine months ended September 30, 1995 and September 30,
1994. The tax rate for the third 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 $4.2 million and $17.1 million for the
----------
three months and nine months ended September 30, 1995 respectively,
compared to net income of $6.4 million and $19.0 million in the
same periods of the prior year. The decrease in net income for the
third quarter and nine months ended September 30, 1995 resulted
principally from decreased sales volume in our domestic automotive
business.
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.
-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
Third Quarter of 1995:
1) The Registrants News Release dated September 11, 1995
(b) The following reports on Form 8-K were filed during the
Third Quarter of 1995:
1) Form 8-K filed September 15, 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: November 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 SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 23,962
<SECURITIES> 0
<RECEIVABLES> 91,105
<ALLOWANCES> (1,376)
<INVENTORY> 97,423
<CURRENT-ASSETS> 217,295
<PP&E> 269,473
<DEPRECIATION> (137,752)
<TOTAL-ASSETS> 392,415
<CURRENT-LIABILITIES> 94,982
<BONDS> 25,801
<COMMON> 1,978
0
0
<OTHER-SE> 257,235
<TOTAL-LIABILITY-AND-EQUITY> 392,415
<SALES> 396,999
<TOTAL-REVENUES> 396,999
<CGS> 313,553
<TOTAL-COSTS> 313,553
<OTHER-EXPENSES> 54,292
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,978
<INCOME-PRETAX> 26,176
<INCOME-TAX> 9,106
<INCOME-CONTINUING> 17,070
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,070
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
</TABLE>
