FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1996 Commission File Number 1-7283 REGAL-BELOIT CORPORATION (Exact name of registrant as specified in its charter) Wisconsin 39-0875718 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 200 State Street, Beloit, Wisconsin 53511-6254 (Address of principal executive offices) (608) 364-8800 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) 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 Indicate the number of shares outstanding of each of the issuers' classes of common stock as of the latest practicable date. 20,610,117 Shares, Common Stock, $.01 Par Value
REGAL-BELOIT CORPORATION FORM 10-Q For Quarter Ended March 31, 1996 INDEX Page No. PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Balance Sheet............................ 3 Statement of Income................................ 4 Condensed Statement of Cash Flows.................. 5 Notes to Financial Statements...................... 6 - 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 7 - 8 PART II - OTHER INFORMATION Item 6 - Reports on Form 8-K................................... 9 Signatures..................................................... 9
PART I FINANCIAL INFORMATION Item 1. Financial Statements REGAL-BELOIT CORPORATION CONDENSED BALANCE SHEET ASSETS <TABLE> <CAPTION> (From Audited (Unaudited) Statements) March 31, 1996 Dec. 31, 1995 -------------- ------------- <S> <C> <C> Current Assets: Cash and cash equivalents.......................... $ 15,821,000 $ 7,458,000 Receivables, less reserves of $1,173,000 in 1996 and $1,140,000 in 1995........................... 42,348,000 41,172,000 Inventories........................................ 48,926,000 49,263,000 Other current assets............................... 4,834,000 4,508,000 Total Current Assets............................ 111,929,000 102,401,000 Plant and Equipment at Cost........................... 132,594,000 130,893,000 Less - accumulated depreciation.................. (60,677,000) (58,201,000) 71,917,000 72,692,000 Other Noncurrent Assets............................... 480,000 387,000 ------------- ------------- $184,326,000 $175,480,000 LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Accounts payable................................. $ 10,450,000 $ 10,874,000 Federal and state income taxes................... 6,024,000 1,333,000 Other current liabilities........................ 18,102,000 19,817,000 Total Current Liabilities................... 34,576,000 32,024,000 Long-term Debt........................................ 2,856,000 2,884,000 Deferred Income Taxes................................. 4,605,000 4,699,000 Shareholders' Investment: Common stock, $.01 par value, 25,000,000 shares authorized, 20,608,707 issued in 1996 and 20,553,968 issued in 1995..................... 206,000 206,000 Additional paid-in capital....................... 37,424,000 37,133,000 Retained earnings................................ 105,411,000 99,079,000 Cumulative Translation Adjustments............... (752,000) (545,000) ------------- ------------- 142,289,000 135,873,000 ------------- ------------- $184,326,000 $175,480,000 <FN> See accompanying notes. </FN> </TABLE>
REGAL-BELOIT CORPORATION STATEMENT OF INCOME <TABLE> <CAPTION> (Unaudited) Three Months Ended March 31, -------------------------- 1996 1995 ------------ ------------ <S> <C> <C> Net Sales................................. $75,119,000 $74,340,000 Cost of Sales............................. 52,780,000 53,180,000 Gross Profit............................ 22,339,000 21,160,000 Operating Expenses........................ 8,203,000 8,803,000 Income from Operations.................. 14,136,000 12,357,000 Interest Expense.......................... 100,000 322,000 Interest Income........................... 100,000 36,000 Income Before Taxes..................... 14,136,000 12,071,000 Provision for Income Taxes................ 5,331,000 4,690,000 Net Income............................ $ 8,805,000 $ 7,381,000 Per Share of Common Stock: Net Income.............................. $.43 $.36 Cash Dividends Declared................. $.12 $.09 Weighted Average Number of Shares Outstanding...................... 20,587,238 20,470,837 <FN> See accompanying notes. </FN> </TABLE>
REGAL-BELOIT CORPORATION CONDENSED STATEMENT OF CASH FLOWS <TABLE> <CAPTION> (Unaudited) Three Months Ended March 31, ---------------------------- 1996 1995 ------------- ------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income.............................................. $ 8,805,000 $ 7,381,000 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation, amortization and deferred income taxes.. 2,599,000 2,848,000 Change in assets and liabilities: Current assets, other than cash...................... (1,197,000) (10,599,000) Current liabilities, other than notes payable........ 3,079,000 9,159,000 Net cash provided from operating activities....... 13,286,000 8,789,000 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to plant and equipment, net of retirements.... (2,072,000) (2,165,000) Other, net.............................................. (527,000) 460,000 Net cash used in investing activities................ (2,599,000) (1,705,000) CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of short-term debt............................ 0 (9,887,000) Reduction of long-term debt............................. (530,000) (5,826,000) Dividends to shareholders............................... (2,055,000) (1,636,000) Other, net.............................................. 291,000 228,000 Net cash used for financing activities............... (2,294,000) (17,121,000) EFFECT OF EXCHANGE RATE ON CASH............................ (30,000) 23,000 Net increase (decrease) in cash and cash equivalents.... 8,363,000 (10,014,000) Cash and cash equivalents at beginning of period........ 7,458,000 13,378,000 Cash and cash equivalents at end of period.............. $ 15,821,000 $ 3,364,000 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during year for: Interest............................................. $ 135,000 $ 265,000 Income Taxes......................................... $ 735,000 $ 232,000 <FN> See accompanying notes. </FN> </TABLE>
REGAL-BELOIT CORPORATION NOTES TO FINANCIAL STATEMENTS MARCH 31, 1996 1. BASIS OF PRESENTATION The condensed financial statements include the accounts of Regal-Beloit Corporation and its wholly owned subsidiaries and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested these statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. 2. INVENTORIES Cost for approximately 70% of the Company's inventory is determined using the last-in, first-out (LIFO) inventory valuation method. The approximate percentage distribution between major classes of inventories is as follows: <TABLE> <CAPTION> 3-31 12-31 1996 1995 ---- ----- <S> <C> <C> Raw Material 17% 17% Work-in-Process 22% 21% Finished Goods 61% 62% </TABLE> 3. ACQUISITION Effective January 1, 1995, the Company acquired selected net assets of the Marine and Industrial Transmission Division of Borg-Warner Automotive Transmission and Engine Components Corporation for approximately $9,192,000. This acquisition has been renamed the Velvet Drive Transmission Division of Regal-Beloit Corporation. This Division produces both marine and industrial transmissions. The acquisition was accounted for as a purchase and the cash consideration paid approximated the fair market value of the net identifiable assets acquired. Results of operations of the Velvet Drive Transmission Division have been consolidated in the Company's statements from the acquisition date.
4. DISCLOSURES In the opinion of Management, all adjustments which were necessary for a fair statement of the results of the interim periods have been included in the preceding financial statements. These adjustments were considered to be recurring in nature and there were no adjustments other than normal recurring adjustments made to these statements for the periods reported. However, the results of operations for the quarter are not necessarily indicative of results to be expected for the year. Certain items, such as income taxes, LIFO charges, profit sharing expenses and various other accruals, are included in these statements based on estimates for the entire year. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation Results of Operations - --------------------- Net sales for the quarter ended March 31, 1996 of $75,119,000 were the second highest in the history of the Company, and 1.0% higher than sales of $74,340,000 in the comparable first quarter of 1995 and 1.9% greater than sales in the recent fourth quarter of 1995. The first quarter gross profit margin increased to 29.7% of sales compared to 28.5% in the first quarter of 1995 and 29.0% in the recent fourth quarter of 1995. Operating expenses were up slightly to 10.9% of sales compared to 10.7% of sales in the recent fourth quarter, but were down from the comparable first quarter of 1995 when operating expenses were 11.8% of sales. Income from operations, which was the highest ever recorded, improved in the first quarter to 18.8% of sales compared to 16.6% in the first quarter of 1995 and 18.3% in the recent fourth quarter. This increase in income from operations continues to be attributable to ongoing productivity improvement projects along with effective cost controls. Interest expense has declined for the fourth consecutive quarter as long-term debt continues to be reduced while interest rates have remained stable. Net income was a record for the quarter ending March 31, 1996 at $8,805,000, up 19.3% from the first quarter of 1995 when net income was $7,381,000. Net income is also up 2.0% from the recent fourth quarter of 1995. Business levels remained solid but flat during the first quarter as compared to the fourth quarter of 1995 and were definitely not at the accelerated pace of a year ago. Most orders received were for shipment within the period. There were no specific markets which individually stood out from the others in terms of identifiable trends in either strength or weakness over that of the fourth quarter of 1995. Further, there appears to be an order pattern whereby the original equipment manufacturers are not building inventories due to their improved capacity and delivery capabilities.
Liquidity and Capital Resources - ------------------------------- Working capital as of March 31, 1996 increased to $77,353,000 from $70,377,000 as of December 31, 1995. This change in working capital is primarily attributable to the increase in cash and cash equivalents generated from operations. The current ratio of 3.2:1 remained unchanged from the fourth quarter of 1995. A slight reduction of long-term debt along with the increase in shareholders' investment during the quarter resulted in long-term debt as a percentage of total capital to be reduced to 2.0% at the end of the first quarter which allows the Company significant capacity, if needed, for financing acquisitions before reaching its self-imposed limit of 40%. The Company feels that additional internally generated growth can be financed adequately by cash generated from operations and from its short-term credit facilities.
PART II OTHER INFORMATION Item 6. Reports on Form 8-K There were no reports on Form 8-K filed since the Company's last report on Form 10-K, dated March 20, 1996. SIGNATURE 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. REGAL-BELOIT CORPORATION (Registrant) Robert C. Burress ------------------------------------------------------ Robert C. Burress Vice President - Chief Financial Officer and Secretary (Principal Accounting and Financial Officer) Date: May 7, 1996