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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: March 31, 1997
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 April 18, 1997, 31,659,683 shares of the registrant's common
stock, par value $.01 per share, were outstanding.
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<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - March 31, 1997
(Unaudited) and June 30, 1996 .............................................1
Consolidated Condensed Statements of Earnings (Unaudited)
Three and nine months ended March 31, 1997 and 1996........................2
Consolidated Condensed Statements of Cash Flows (Unaudited)
Nine months ended March 31, 1997 and 1996 .................................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 ....................................................................7
<PAGE>
<TABLE>
<CAPTION>
Consolidated Condensed Balance Sheets (Unaudited)
March 31, 1997 and June 30, 1996
In thousands
March 31, June 30,
1997 1996
-------- -------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 18,057 $ 95,830
Accounts receivable 227,012 110,656
Inventories 88,437 52,890
Prepaid expenses 7,119 7,247
--------- ---------
Total Current Assets 340,625 266,623
Net property, plant and equipment 359,772 171,653
Intangibles 176,895 45,053
Investments and other assets 20,621 20,473
--------- ---------
Total Assets $897,913 $503,802
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $288,290 $120,688
Accounts payable 119,616 33,940
Accrued expenses 47,946 21,824
--------- ---------
Total Current Liabilities 455,852 176,452
Long-term debt 137,110 42,123
Other long-term liabilities 30,197 10,147
--------- ---------
Total Liabilities 623,159 228,722
--------- ---------
Stockholders' Equity
Common stock 317 316
Additional paid-in capital 77,194 76,652
Retained earnings 207,827 201,981
Other (10,584) (3,869)
---------- --------
Total Stockholders' Equity 274,754 275,080
--------- ---------
Total Liabilities and Stockholders' Equity $897,913 $503,802
========= =========
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Condensed Statements of Earnings (Unaudited) Three and nine months
ended March 31, 1997 and 1996
In thousands, except earnings per share
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ -------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 209,409 $ 103,927 $ 550,646 $ 302,183
Cost of sales 171,454 68,086 433,908 188,635
----------- ---------- ---------- ----------
Gross profit 37,955 35,841 116,738 113,548
----------- ---------- ---------- ----------
Selling, general and administrative 19,089 9,880 51,272 28,877
Research and development expenses 9,498 5,744 27,317 17,338
Amortization of intangibles 2,240 546 4,318 1,362
----------- ---------- ---------- ----------
Total operating expenses 30,827 16,170 82,907 47,577
----------- ---------- ---------- ----------
Operating income 7,128 19,671 33,831 65,971
Interest income (expense), net (6,076) 106 (16,192) 228
Other income (expense), net 1,449 3,815 2,958 6,536
----------- ---------- ---------- ----------
Earnings before income taxes 2,501 23,592 20,597 72,735
Income taxes 1,000 8,700 8,100 27,400
----------- ---------- ---------- ----------
Net earnings $ 1,501 $ 14,892 $ 12,497 $ 45,335
=========== ========== ========== ==========
Earnings per share $ .05 $ .47 $ .40 $ 1.44
=========== ========== ========== ==========
Average shares outstanding 31,661 31,556 31,643 31,533
=========== ========== ========== ==========
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Condensed Statements of Cash Flows (Unaudited)
Nine months ended March 31, 1997 and 1996
In thousands
1997 1996
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<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 12,497 $ 45,335
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 34,063 13,792
Changes in working capital items 14,029 (37,211)
Other (12,818) (254)
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Net cash provided by operating activities 47,771 21,662
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Cash Flows from Investing Activities
Cost of acquisition, net of cash acquired (266,997) ---
Purchases of property, plant and equipment (61,396) (32,400)
Sales of short-term investments, net 117 6,046
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Net cash used in investing activities (328,276) (26,354)
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Cash Flows from Financing Activities
Dividends paid (6,644) (4,729)
Proceeds from (repayments of) debt, net 215,890 (1,386)
Stock options exercised 542 424
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Net cash provided by (used in) financing activities 209,788 (5,691)
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Effect of exchange rate changes on cash (7,056) (1,116)
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Net decrease in cash and cash equivalents (77,773) (11,499)
Cash and cash equivalents at beginning of period 95,830 26,355
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Cash and cash equivalents at end of period $ 18,057 $ 14,856
============= ===========
Cost of Acquisition:
Working capital, net of cash acquired $ (40,738) $ ---
Property, plant and equipment (162,936) ---
Cost in excess of net assets acquired (121,061) ---
Investments and other assets (19,119) ---
Long-term debt 33,910 ---
Other long-term liabilities 42,947 ---
------------- -----------
Net cost of acquisition $ (266,997) $ ---
============= ===========
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<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 March 31, 1997, and all
periods presented have been included in the accompanying consolidated condensed
financial statements. Operating results for the nine months ended March 31,
1997, 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.
Gallino has annual revenues of approximately $250 million.
On October 25, 1996, the Company completed the acquisition of certain assets and
the assumption of certain liabilities of the "North American Steering Wheels
Operation" of United Technologies and 100% of the outstanding shares of United
Technologies Automotive Clifford Limited. The purchase price cash consideration
of approximately $153.5 million included payment of $17.4 million of Clifford
intercompany financing. The funds used by the Company for the acquisition were
obtained from borrowings under the Company's Revolving Credit Agreements. The
acquired operations which will be called United Steering Systems, Inc. (USS)
produces steering wheels, airbag covers, horn pads and related molded products.
USS is located in Grabill, Indiana; Monterrey, Mexico; and Birmingham, England.
USS has annual revenues of approximately $150 million.
On February 25, 1997, the Company completed the acquisition of the stock of BTI
Investments, Inc. ("BTI") a holding company which owns the Custom Trim group of
companies. The purchase price was $70 million in cash, subject to any post
closing audit adjustments. Additionally, up to $5,000,000 may be paid on
September 1, 2002, contingent upon BTI attaining certain operating profit
targets for each of the years subsequent to the acquisition date. The funds used
by the Company to acquire BTI were obtained from borrowings under the Company's
Revolving Credit Agreements. The acquired operations which will be called Custom
Trim Ltd. produces leather-wrapped steering wheels, shift knobs and shift boots,
injection molded levers and leather/vinyl cloth sewing of armrests, headrests
and seating. Custom Trim has annual revenues of approximately $100 million and
has manufacturing locations in Canada and Mexico.
For all acquisitions the purchase price adjustments have not been finalized. The
purchase price allocations are preliminary and subject to further adjustments.
Note 3 - Inventories
The components of inventory (in thousands) consist of the following:
March 31, June 30,
1997 1996
Finished Goods $30,602 $19,439
Work-in-process 22,188 14,417
Raw Materials 35,647 19,034
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Total $88,437 $52,890
============= ===========
Note 4 - Borrowings
On April 29, 1997, the Company closed on a $450 million Revolving Credit
Facility consisting of a $250 million 364-Day Credit Agreement and a $200
million Five-Year Credit Agreement. A portion of the proceeds from the facility
was used to retire the Company's former line of credit, which amounted to $345
million at March 31, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements that
involve a number of risks and uncertainties. When used in this Quarterly Report
on Form 10-Q the words "believes," "anticipated" and similar expressions are
intended to identify forward-looking statements. There are a number of factors
that could cause the Company's actual results to differ materially from those
forecasted or projected in such forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements which
speak only as of the date hereof. The Company undertakes no obligations to
publicly release the result of any revisions to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
Results of Operations (Third Quarter FY97) Three Months Ended March 31,
1997 (FY97)
Compared to Three Months Ended March 31, 1996 (FY96) Net sales increased
approximately $105 million due principally to the results of the Gallino, MOMO,
United Steering Systems and Custom Trim acquisitions. Sales for these operations
amounted to approximately $125 million and were comprised of steering wheels,
alloy wheels, instrument panels, bumpers and other plastic and leather-wrapped
trim components. Electromechanical sensor sales decreased approximately $14
million due primarily to a loss of volume as a major customer shifts to
"in-house" electronic sensors.
As a percent of sales, gross profit decreased from 34% to 18%. Gross profit on
sales of products related to the new acquisitions are lower as a percent of
sales compared to margins on the Company's sensor products. Additionally, plant
consolidation costs contributed to the decrease in gross profit.
Operating expenses increased primarily as a result of the acquisitions and to
increased R&D spending related to new product development for non-azide/reduced
sized inflators, electronic sensing (including occupant, weight and horn) and
side impact technology.
Net interest expense increased approximately $6 million primarily as a result of
borrowings used to purchase the new acquisitions and to the existing debt of the
new acquisitions. The decrease in other income (expense), net was due primarily
to the decrease in royalty income.
Nine Months Ended March 31, 1997 (FY97) Compared to Nine Months Ended March
31, 1996 (FY96)
Net sales increased approximately $248 million due principally to the
results of the Gallino, MOMO, United Steering Systems and Custom Trim
acquisitions. Sales for these operations amounted to approximately $285 million
and were comprised of steering wheels, alloy wheels, instrument panels, bumpers
and other plastic and leather-wrapped trim components. Electro-mechanical sensor
sales decreased approximately $40 million due primarily to a loss of volume as a
major customer shifts to "in-house" electronic sensors.
As a percent of sales, gross profit decreased from 38% to 21%. Gross profit on
sales of products related to the new acquisitions are lower as a percent of
sales compared to margins on the Company's sensor sales. Additionally, plant
consolidation costs contributed to the decrease in gross profit.
Operating expenses increased primarily as a result of the acquisitions and to
increased R&D spending related to new product development for non-azide/reduced
sized inflators, electronic sensing (including occupant, weight and horn) and
side impact technology.
Net interest expense increased approximately $16 million primarily as a result
of borrowings used to purchase the new acquisitions and to the existing debt of
the new acquisitions. The decrease in other income (expense), net was due
primarily to the decrease in royalty income.
Liquidity and Capital Resources
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 $48 million for the nine months ended March
31, 1997.
On April 29, 1997, the Company closed on a $450 million Revolving Credit
Facility consisting of a $250 million 364-Day Credit Agreement and a $200
million Five-Year Credit Agreement. A portion of the proceeds were used to
retire the amount outstanding under the Company's former Revolving Credit
Facility which amounted to $345 million at March 31, 1997. The Company's
Revolving Credit Facility currently has approximately $100 million of unused
borrowing capacity. Management believes that the Company's current Revolving
Credit Facility combined with cash expected to be generated from operations will
be adequate to cover the Company's normal capital and operational needs.
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.
In 1997, the Company plans to invest $75 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.
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 March 5, 1997
to report that on February 25, 1997, the Company consummated the
acquisition of the stock of BTI Investments, Inc., a holding
company which owns the Custom Trim group of companies.
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)
May 15, 1997
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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 18,057
<SECURITIES> 0
<RECEIVABLES> 227,012
<ALLOWANCES> 0
<INVENTORY> 88,437
<CURRENT-ASSETS> 340,625
<PP&E> 452,394
<DEPRECIATION> 92,622
<TOTAL-ASSETS> 897,913
<CURRENT-LIABILITIES> 455,852
<BONDS> 0
0
0
<COMMON> 317
<OTHER-SE> 274,437
<TOTAL-LIABILITY-AND-EQUITY> 897,913
<SALES> 550,646
<TOTAL-REVENUES> 550,646
<CGS> 433,908
<TOTAL-COSTS> 516,815
<OTHER-EXPENSES> 13,234
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,832
<INCOME-PRETAX> 20,597
<INCOME-TAX> 8,100
<INCOME-CONTINUING> 12,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,497
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0
</TABLE>
