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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended: September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Commission File No. 1-11474
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BREED TECHNOLOGIES, INC.
(Exact name of registrant as specified in charter)
Delaware 22-2767118
(State of Incorporation) (I.R.S. Employer Identification No.)
5300 Old Tampa Highway
Lakeland, Florida 33811
(Address of principal executive offices) (Zip Code)
(941) 668-6000
(Registrant's telephone number, including area code)
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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 __.
As of November 1, 1996, 31,627,965 shares of the registrant's common
stock, par value $.01 per share, were outstanding.
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<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets (Unaudited)-
September 30, 1996 and June 30, 1996........................1
Consolidated Condensed Statements of Earnings (Unaudited)-
Three months ended September 30, 1996 and 1995 .............2
Consolidated Condensed Statements of Cash Flows (Unaudited)-
Three months ended September 30, 1996 and 1995..............3
Notes to Consolidated Condensed Financial Statements
(Unaudited) ................................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................6
Signatures ..........................................................6
<PAGE>
Consolidated Condensed Balance Sheets (Unaudited)
September 30, 1996 and June 30, 1996
In thousands
September 30,1996 June 30, 1996
ASSETS
Current Assets
Cash and cash equivalents $ 11,636 $ 95,830
Accounts receivable 171,097 110,656
Inventories 83,831 52,890
Prepaid expenses 22,424 7,247
----------- ------------
Total Current Assets 288,988 266,623
Net property, plant and equipment 303,577 171,653
Intangibles 44,739 45,053
Investments and other assets 13,964 20,473
----------- ------------
Total Assets $ 651,268 $ 503,802
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 112,121 $ 120,688
Accounts payable 107,631 33,940
Accrued expenses 36,811 21,824
----------- ------------
Total Current Liabilities 256,563 176,452
Long-term debt 82,318 42,123
Other long-term liabilities 31,524 10,147
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Total Liabilities 370,405 228,722
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Stockholders' Equity
Common stock 316 316
Additional paid-in capital 76,668 76,652
Retained earnings 207,613 201,981
Other (3,734) (3,869)
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Total Stockholders' Equity 280,863 275,080
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Total Liabilities and Stockholders' Equity $ 651,268 $ 503,802
=========== ============
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Condensed Statements of Earnings (Unaudited)
Three months ended September 30, 1996 and 1995
In thousands, except earnings per share
1996 1995
----- -----
Net sales $ 158,671 $ 92,601
Cost of sales 117,023 57,737
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Gross profit 41,648 34,864
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Selling, general and administrative expenses 15,465 9,360
Research and development expenses 7,973 5,651
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Total Operating Expenses 23,438 15,011
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Operating income 18,210 19,853
Other income (expense), net (5,064) 748
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Earnings before income taxes 13,146 20,601
Income taxes 5,300 8,000
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Net earnings $ 7,846 $ 12,601
============ ===========
Earnings per share $ .25 $ .40
============ ===========
Average shares outstanding 31,628 31,514
============ ===========
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
Consolidated Condensed Statements of Cash Flows (Unaudited)
Three months ended September 30, 1996 and 1995
In thousands
1996 1995
<S>
<C> <C>
----------- ----------
Cash Flows from Operating Activities
Net earnings
$ 7,846 $ 12,601
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization
10,283 3,958
Changes in working capital items
11,707 (9,659)
Change in other assets and other long-term liabilities
1,158 337
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Net cash provided by operating activities
30,994 7,237
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Cash Flows from Investing Activities
Cost of acquisition, net of cash acquired
(77,142) ---
Purchases of property, plant and equipment
(22,480) (12,965)
Sales of short-term investments, net
--- 1,269
----------- ----------
Net cash used in investing activities
(99,622) (11,696)
----------- ----------
Cash Flows from Financing Activities
Dividends paid
(2,214) (1,576)
(Repayments) proceeds of debt, net
(13,382) 303
Stock options exercised
16 75
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Net cash used in financing activities
(15,580) (1,198)
----------- ----------
Effect of exchange rate changes on cash
14 (824)
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Net decrease in cash and cash equivalents
(84,194) (6,481)
Cash and cash equivalents at beginning of period
95,830 26,355
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Cash and cash equivalents at end of period
$ 11,636 $ 19,874
=========== ==========
Cost of Acquisition:
Working capital, net of cash acquired
$ (18,085) $ ---
Property, plant and equipment
(117,230) ---
Other assets
(930) ---
Long-term debt
33,910 ---
Other long-term liabilities
25,193 ---
----------- ----------
Net cost of acquisition
$ (77,142) $ ---
=========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Notes to Consolidated Condensed Financial Statements
Note 1 - Presentation
In the opinion of management, all adjustments, which include normal recurring
accruals, considered necessary for a fair presentation of the financial
position, results of operations and cash flows at September 30, 1996, and all
periods presented have been included in the accompanying consolidated financial
statements. Operating results for the three months ended September 30, 1996, are
not necessarily indicative of the results that may be expected for the year
ending June 30, 1997. Certain amounts in the prior year's Consolidated Condensed
Financial Statements have been reclassified to conform to the current year's
presentation.
Note 2 - Acquisition
On July 1, 1996, the Company completed the acquisition of Gallino Plasturgia,
S.r.l. and affiliates ("Gallino") from IAO Industrie Riunite S.p.A. The
aggregate purchase price for all shares and assets acquired was approximately
$131 million, comprised of cash of $79 million and liabilities assumed of $52
million. The acquisition, which was financed through borrowings on the Company's
revolving credit agreements, will be accounted for as a purchase. Gallino
manufactures steering wheels, instrument panels, bumpers and other plastic trim
components used in automotive original equipment and aftermarket applications.
Note 3 - Inventories
The components of inventory (in thousands) consist of the following:
September 30, June 30,
1996 1996
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Finished Goods $ 32,049 $ 19,439
Work-in-process 19,997 14,417
Raw Materials 31,785 19,034
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Total $ 83,831 $ 52,890
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 1996 (FY97) Compared to Three Months Ended
September 30, 1995(FY96)
The increase in sales was due to the results of the recently acquired
operations in Italy, specifically Gallino Plasturgia S.r.l. and affiliates, a
manufacturer of steering wheels, instrument panels, bumpers and other plastic
trim components; MOMO S.p.A., a manufacturer of luxury steering wheels and alloy
wheels; and Italtest S.r.l., a manufacturer of printed circuit boards.
Additionally, the increase in sales of complete airbag systems was offset by a
decrease in sales of sensors.
The increase in gross profit was due to the increased sales. However, as
a percent of sales gross profit decreased from 37.6% to 26.2%. The decrease was
due principally to lower margins realized by the acquired companies, the start
up of new manufacturing facilities, costs associated with consolidation efforts
and to a lesser extent by the lower margins realized on complete airbag systems
compared to sensor products.
Operating expenses increased primarily as a result of the acquisitions
and to increased R&D spending. The Company's significant R&D activities include
non-azide/reduced sized inflator development, electronic sensing (including
occupant, weight and horn) and side impact technology.
Other income (expense), net decreased primarily as a result of
acquisition related interest and amortization costs. Interest from borrowings
used to fund acquisitions and goodwill amortization related to the new
acquisitions amounted to $2,500,000. Additionally, royalty income decreased by
$1,300,000. The effective income tax rate increased from 38.8% to 40.3%
primarily due to the higher tax rates in foreign operations.
Liquidity and Capital Resources
The Company's financial position continues to be solid. Growth has been
financed through a combination of cash provided from operations and debt
financing. Cash provided from operating activities is the primary source of
liquidity and amounted to $31 million for the three months ended September 30,
1996.
The Company has relationships with domestic commercial banks that have
provided $200 million under a credit agreement, expiring through December 1998,
to finance fluctuations in working capital and acquisitions. As of September 30,
1996, $85 million was available for borrowing under the facilities. The Company
intends to restructure its worldwide credit facilities prior to December 31,
1996. Such restructuring will most likely result in the refinancing of domestic
and international debt with a combination of short-term revolving credit lines
and longer-term debt agreements. Internally generated funds have been used
primarily to finance capital expenditures, provide working capital, support
research and development activities, and pay dividends. Bank debt has been used
to finance acquisitions since April 1996.
On October 25, 1996 the Company acquired the steering wheel systems
operations of United Technologies Automotive, Inc. for approximately $140
million in cash. In order to finance the acquisition the Company obtained an
increase in its line of credit from $200 million to $260 million.
In 1997, the Company plans to invest $85 million in property, plant and
equipment to expand capacity and tool new products. Investments continue to be
made in new equipment throughout the Company to support productivity
improvements, cost reduction programs, and to add capacity for existing and new
products.
Management is not aware of any adverse trends that would materially
affect the Company's financial position. Should suitable investment
opportunities or working capital needs arise that would require additional
financing, management believes that the Company's strong balance sheet and
history of exceptional earnings provide a solid base for obtaining additional
financial resources.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K -The Company filed Form 8-K on July 16, 1996, to
report that on July 1, 1996, the Company consummated the acquisition
of certain assets and the assumption of certain liabilities from
Gallino Componenti Plastici S.p.A., a stock company organized under
the laws of Italy; 100% of the outstanding shares of capital stock
of FAS, S.p.A. and Iron Sud S.p.A., stock companies organized under
the laws of Italy; 51% of the capital shares of ARAS S.r.l., and
100% of the capital shares of AG International S.r.l., AutoAvio
S.r.l, and Advanced Plastic Company S.r.l., limited liability
companies organized under the laws of Italy, and certain real
property (collectively, "GCP") pursuant to a Master Agreement dated
July 1, 1996, between IAO Industrie Riunite S.p.A., Gallino
Componenti Plastici S.p.A., Carifin S.p.A., Macchi Arturo S.r.l.,
Gruppo Plastico Industriale S.r.l., Emilio Cazzaniga, and the
Company. The aggregate purchase price for all shares and assets
acquired in the purchase was approximately $131,000,000, comprised
of cash of $79,000,000 and liabilities assumed of $52,000,000.
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.
Breed Technologies, Inc.
(Registrant)
November 10, 1996
By: /s/ Edward H. McFadden
Edward H. McFadden
Executive Vice President and
Chief Financial Officer
By: /s/ Thomas F. Dugan
Thomas F. Dugan
Corporate Controller and
Chief Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 11,636
<SECURITIES> 0
<RECEIVABLES> 171,097
<ALLOWANCES> 0
<INVENTORY> 83,831
<CURRENT-ASSETS> 288,988
<PP&E> 303,577
<DEPRECIATION> 8,962
<TOTAL-ASSETS> 651,268
<CURRENT-LIABILITIES> 256,563
<BONDS> 0
0
0
<COMMON> 316
<OTHER-SE> 280,547
<TOTAL-LIABILITY-AND-EQUITY> 651,268
<SALES> 158,671
<TOTAL-REVENUES> 158,671
<CGS> 117,023
<TOTAL-COSTS> 117,023
<OTHER-EXPENSES> 23,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,447
<INCOME-PRETAX> 13,146
<INCOME-TAX> 5,300
<INCOME-CONTINUING> 7,846
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,846
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0
</TABLE>
