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, 2001 | |
Commission File Number: 1-7283 | |
Wisconsin 39-0875718 | |
(State or other jurisdiction of (IRS Employer Identification Number) | |
incorporation or organization) | |
200 State Street, Beloit, Wisconsin 53511-6254 | |
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.
20,863,786 Shares, Common Stock, $.01 Par Value
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REGAL-BELOIT CORPORATION
FORM 10-Q
For Quarter Ended March 31, 2001
PART I - FINANCIAL INFORMATION | |
Item 1 - Financial Statements | |
Condensed Balance Sheets | |
Statements of Income | |
Condensed Statements of Cash Flows | |
Notes to Financial Statements | |
Item 2 - Management's Discussion and Analysis of Financial | |
Condition and Results of Operations | |
PART II - - OTHER INFORMATION | |
Item 6 - Reports on Form 8-K | |
Signature |
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FINANCIAL INFORMATION
REGAL-BELOIT CORPORATION
CONDENSED BALANCE SHEETS
(In Thousands of Dollars)
1. Financial Statements | ||||
ASSETS | ||||
Current Assets: | ||||
Cash and Cash Equivalents | $2,828 | $2,612 | ||
Receivables, less reserves of $1,962 in 2001 | ||||
and $2,031 in 2000 | 103,458 | 97,032 | ||
Inventories | 143,992 | 148,741 | ||
Other Current Assets | 14,492 | 17,253 | ||
Total Current Assets | 264,770 | 265,638 | ||
Property, Plant and Equipment at Cost | 326,490 | 321,686 | ||
Less - Accumulated Depreciation | (136,690 | ) | (132,608 | ) |
Net Property, Plant and Equipment | 189,800 | 189,078 | ||
Goodwill | 313,865 | 316,295 | ||
Other Noncurrent Assets | 14,595 | 18,105 | ||
Total Assets | $783,030 | $789,116 | ||
Current Liabilities: | ||||
Accounts Payable | $ 36,314 | $ 32,298 | ||
Federal and State Income Taxes | 3,591 | 154 | ||
Other Current Liabilities | 40,169 | 47,405 | ||
Total Current Liabilities | 80,074 | 79,857 | ||
Long-Term Debt | 385,987 | 393,510 | ||
Deferred Income Taxes | 41,054 | 41,063 | ||
Other Noncurrent Liabilities | 700 | 797 | ||
Shareholders' Investment: | ||||
Common Stock, $.01 par value, 50,000,000 shares | ||||
authorized, 20,863,786 issued in 2001 and | ||||
20,912,192 issued in 2000 | 210 | 210 | ||
Additional Paid-In Capital | 41,878 | 41,779 | ||
Less - Treasury Stock, at cost, 159,900 Shares in 2001 and | ||||
99,200 Shares in 2000 | (2,727 | ) | (1,685 | ) |
Retained Earnings | 238,330 | 234,992 | ||
Accumulated Other Comprehensive Loss | (2,476 | ) | (1,407 | ) |
Total Shareholders' Investment | 275,215 | 273,889 | ||
Total Liabilities and Shareholders' Investment | $783,030 | $789,116 |
See accompanying notes.
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Net Sales | $177,122 | $144,185 | |
Cost of Sales | 131,971 | 105,863 | |
Gross Profit | 45,151 | 38,322 | |
Operating Expenses | 27,991 | 20,235 | |
Income from Operations | 17,160 | 18,087 | |
Interest Expense | 7,124 | 2,356 | |
Interest Income | 51 | 17 | |
Income Before Taxes | 10,087 | 15,748 | |
Provision for Income Taxes | 4,245 | 6,334 | |
Net Income | $ 5,842 | $ 9,414 | |
Per Share of Common Stock: | |||
Earnings Per Share | |||
Earnings Per Share - Assuming Dilution | |||
Cash Dividends Declared | |||
Average Number of Shares Outstanding | 20,862,631 | 20,986,301 | |
Average Number of Shares - Assuming Dilution | 21,110,000 | 21,033,305 |
See accompanying notes.
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REGAL-BELOIT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars) | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net Income | $ 5,842 | $ 9,414 | ||
Adjustments to reconcile net income to net cash provided | ||||
from operating activities: | ||||
Depreciation, amortization and deferred income taxes | 8,035 | 5,831 | ||
Change in assets and liabilities: | ||||
Current assets, other than cash | 111 | (10,389 | ) | |
Current liabilities, other than notes payable | 467 | 7,766 | ||
Net cash provided from operating activities Net cash provided from operating activities | $ 14,455 | $ 12,622 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Additions to property, plant and equipment, | (3,781 | ) | (3,908 | ) |
Business acquisitions | (2,979 | ) | --- | |
Sale of property, plant and equipment | 55 | 2,581 | ||
Other, net | 3,486 | (340 | ) | |
Net cash used in investing activities | (3,219 | ) | (1,667 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Repayment of long-term debt | (7,522 | ) | (6,024 | ) |
Repurchase of common stock | (1,042 | ) | --- | |
Dividends paid to shareholders | (2,509 | ) | (2,518 | ) |
Other, net | 98 | 11 | ||
Net cash used in financing activities | (10,975 | ) | (8,531 | ) |
EFFECT OF EXCHANGE RATE ON CASH | (45 | ) | (9 | ) |
Net increase in cash and cash equivalents | 216 | 2,415 | ||
Cash and cash equivalents at beginning of period | 2,612 | 1,729 | ||
Cash and cash equivalents at end of period | $ 2,828 | $ 4,144 | ||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||
Cash paid during year for: | ||||
Interest | $ 7,356 | $ 2,404 | ||
Income taxes | $ 505 | $ 424 |
See accompanying notes.
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REGAL-BELOIT CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
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. All adjustments which management believes are necessary to a fair statement of the results for the interim periods presented have been reflected and are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States 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 89% 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:
Raw Material | ||
Work-in Process | ||
Finished Goods |
3. ACQUISITIONS
On January 16, 2001, the Company acquired, for cash, selected assets of Philadelphia Gear Company, which now comprises the Company's spiral bevel gear product line. The purchased assets included inventory and selected machinery, equipment and tooling. The operating results and assets purchased are not material to the performance or financial position of the Company.
On September 29, 2000, the Company acquired 100% of the stock of Leeson Electric Corporation ("Leeson"), a private company, for approximately $260,000,000 in cash. The results of operations and the assets and liabilities of Leeson are included in the performance and financial position of the Company on and after September 29, 2000.
The consolidated financial statements also incorporate the results of operations and the assets and liabilities of Thomson Technology Inc. ("TTI") after June 29, 2000, the date TTI was acquired by the Company.
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4. COMPREHENSIVE INCOME
The Company's comprehensive income is impacted by the amount of the cumulative translation adjustment recorded to shareholders' equity. For the quarter ended March 31, 2001, the impact was $1,069,000 of expense resulting in net comprehensive income of $4,773,000 for the quarter. The impact in the first quarter of 2000 was $247,000 of expense resulting in net comprehensive income of $9,167,000.
5. BUSINESS SEGMENTS
The Company operates two strategic businesses that are reportable segments: the Mechanical Group and the Electrical Group.
Net Sales | $55,130 | $64,131 | $121,992 | $80,054 | |||
Income from Operations | 6,009 | $8,812 | $11,151 | $9,275 | |||
Income from Operations as a % of Net Sales | 10.9% | 13.7% | 9.1% | 11.6% | |||
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Net sales for the first quarter of 2001 were $177,122,000, 22.8% higher than net sales of $144,185,000 in the first quarter of 2000. The increased sales were due to the added sales from the Leeson Electric and Thomson Technology acquisitions made in September 2000 and June 2000, respectively. Excluding sales attributable to these acquisitions, first quarter 2001 net sales were 10.1% below comparable 2000 sales. Mechanical Group first quarter net sales were 14.0% below last year's first quarter. While Electrical Group net sales were up 52.4% year over year, they were 6.9% lower excluding 2000 acquisitions. The decreased sales were a result of broad-based demand weakness in the markets served by both of the Company's operating segments. (See Note 5 to the accompanying financial statements for business segment data.)
Gross profit of the Company increased in the first quarter of 2001 to $45,151,000, a 17.8% increase from $38,322,000 in 2000's first quarter. Gross profit margin, however, decreased to 25.5% this year from 26.6% in comparable 2000. The decrease was primarily due to lower sales volume and reduced production levels of the Company's products other than those acquired in 2000.
Operating expenses were also higher in the first quarter of 2001, due primarily to the impact of acquisitions. As a percent of net sales, operating expenses increased to 15.8% this year from 14.0% in comparable 2000, due primarily to a combination of reduced 2001 sales volume and to Leeson's selling expenses being a higher percentage of net sales than those historically incurred by the Company.
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Income from operations of the Company decreased 5.1% to $17,160,000 in the first quarter of 2001 from $18,087,000 in comparable 2000. The decrease was due to operating income margin declining from 12.5% a year ago to 9.7% in 2001. This decrease resulted from the combination of the Company's lower gross profit margin and the increase in operating expenses as a percentage of net sales.
Interest expense rose in the first quarter of 2001 to $7,124,000 from $2,356,000 a year previously. The increase resulted primarily from interest on the increased debt required to purchase Leeson in September 2000 and, to a lesser degree, the increases in interest rates during 2000. The Company's effective tax rate in 2001's first quarter of 42.1%, up from 40.2% in comparable 2000, resulted from the lower 2001 earnings and the relative impact on effective tax rate of non-deductible goodwill expense.
Net income earned in the first quarter of 2001 was $5,842,000, 37.9% below $9,414,000 earned in comparable 2000. Earnings per share (diluted) were $.28 in 2001 as compared to $.45 in the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 2001 was $184,696,000, slightly below $185,781,000 at December 31, 2000. Current ratio of 3.3:1 at March 31, 2001 was unchanged from year-end 2000.
The Company's cash flow from operations was $14,455,000 in the first quarter of 2001, up from $12,622,000 in comparable 2000. Capital expenditures were $3,726,000 in the first quarter. Outstanding commitments for future capital expenditures at March 31, 2001 were $1,644,000. After paying $2,509,000 in dividends and $1,042,000 to repurchase 60,700 shares of Regal-Beloit stock, the Company was able to reduce its outstanding long-term debt at March 31, 2001 to $385,987,000, a decrease of $7,522,000 from $393,510,000 at December 31, 2000.
The Company maintains a $450,000,000 unsecured long-term revolving credit facility (the "Facility") under which $385,000,000 of debt was outstanding at March 31, 2001. Including approximately $2,500,000 of standby letters of credit, the Company had $62,500,000 of available borrowing capacity under the facility at March 31, 2001. The Company paid an annualized interest rate of approximately 6.3% on its outstanding debt at the end of the first quarter of 2001. Management believes the credit facility it has in place provides sufficient borrowing capacity for the Company to finance its existing operations for the foreseeable future.
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CAUTIONARY STATEMENT
The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in Item 2. of this Form 10-Q may be forward looking statements. Actual results may differ materially from those contemplated. Forward looking statements involve risks and uncertainties, including but not limited to, the following risks: 1) cyclical downturns affecting the markets for capital goods, 2) substantial increases in interest rates that impact the cost of the Company's outstanding debt, 3) the success of Management in increasing sales and maintaining or improving the operating margins of its businesses, 4) the availability of or material increases in the costs of select raw materials or parts, and 5) actions taken by competitors. Investors are directed to the Company's documents, such as its Annual Report on Form 10-K and Form 10-Q's filed with the Securities and Exchange Commission.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
There were no exhibits or reports on Form 8-K filed during the quarter ended March 31, 2001.
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)
/S/ Kenneth F. Kaplan
Kenneth F. Kaplan
Vice President - Chief Financial Officer and Secretary
(Principal Accounting and Financial Officer)
DATE: May 9, 2001
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