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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE  
    SECURITIES EXCHANGE ACT OF 1934  
       
    For The Quarterly Period Ended September 26, 2003  
       
    OR  
       
  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 1-14182

TB WOOD’S CORPORATION

(Exact Name of registrant as specified in its charter)

DELAWARE     25-1771145  
(State of Incorporation)     (IRS Employer I. D. No)  
         
440 North Fifth Avenue, Chambersburg, PA     17201  
(Address of principal executive offices)     (Zip Code)  

(717) 264-7161
(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      No      

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)      Yes      No

Number of shares outstanding of the issuer’s Common Stock:

Class     Outstanding at September 26, 2003  
         
Common Stock, $.01 par value     5,148,750  

 

 

Table of Contents

Part I. – Financial Information     Page No.  
   
 
         
Item 1. Financial Statements (Unaudited)
        
         
3  
         
4  
         
5  
         
6  
         
9  
         
14  
         
14  
         
Part II. – Other information     15  
         
       
       
       
       
       
15  
         
Signatures        
         
Certifications        

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Part I. – Financial Information
Item 1. Financial Statements

TB Wood's Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

(in thousands of dollars, except share amounts)     September
26, 2003		     December
27, 2002		  
 
ASSETS              
Current Assets:              
Cash and cash equivalents
   $ 503   $ 335  
Accounts receivable, less allowances for doubtful accounts, discounts,
and claims of $627 at September 26, 2003 and $645 at
December 27, 2002
     14,154     14,219  
Inventories
     22,042     19,957  
Other current assets
     3,065     2,801  
   
 
 
Total current assets
     39,764     37,312  
   
 
 
               
Property, plant, and equipment     81,371     80,563  
Less accumulated depreciation
     53,431     50,393  
   
 
 
Net property, plant and equipment
     27,940     30,170  
   
 
 
Other Assets:              
Deferred income taxes
     2,732     3,298  
Goodwill, net of accumulated amortization of $1,558 at
September 26, 2003 and at December 27, 2002
     5,476     5,172  
Other
     1,527     1,624  
   
 
 
Total other assets
     9,735     10,094  
   
 
 
TOTAL ASSETS   $ 77,439   $ 77,576  
   
 
 


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:		              
Current maturities of long-term debt
   $ 117   $ 18,363  
Accounts payable
     6,038     6,277  
Checks outstanding
     2,638     2,142  
Accrued expenses
     7,340     6,937  
Deferred income taxes
     1,276     1,001  
   
 
 
Total current liabilities
     17,409     34,720  
   
 
 
               
Long-term debt, less current maturities     23,411     5,436  
   
 
 
               
Postretirement benefit obligation, less current portion     10,452     11,007  
   
 
 
               
Shareholders’ Equity:              
Preferred stock, $.01 par value; 100 shares authorized,
at September 26, 2003 and December 27, 2002, and no shares
Issued or outstanding
     —     —  
Common stock, $.01 par value; 10,000,000 shares authorized; 5,639,798 issued; and 5,148,750 and 5,240,869 outstanding at September 26, 2003 and December 27, 2002, respectively
     57     57  
Treasury stock, at cost
     (4,749 )   (4,188 )
Additional paid-in capital
     26,859     26,726  
Retained earnings
     5,217     6,029  
Other accumulated comprehensive income
     (1,217 )   (2,211 )
   
 
 
Total shareholders’ equity
     26,167     26,413  
   
 
 
               
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 77,439   $ 77,576  
   
 
 

The accompanying notes are an integral part of these consolidated financial statements.

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TB Wood's Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

      Third Quarter
Ended		     Nine Months
Ended 		 
(in thousands of dollars, except per share amounts)     Sept. 26,
2003		     Sept 27,
2002		     Sept. 26,
2003		     Sept. 27,
2002		  
 
                           
Net sales   $ 23,101   $ 25,241   $ 70,758   $ 80,099  
                           
Cost of sales     15,967     17,415     48,671     54,696  
   
 
 
 
 
                           
Gross profit
     7,134     7,826     22,087     25,403  
                           
Selling, general and administrative expenses     6,823     7,036     20,326     22,302  
   
 
 
 
 
                           
Operating income, before minority interest
     311     790     1,761     3,101  
                           
Minority interest in loss (income)     1     2     2     (150 )
   
 
 
 
 
                           
Operating income     312     792     1,763     2,951  
   
 
 
 
 
                           
Other (expense) income:                          
Interest expense and other finance charges
     (232 )   (227 )   (680 )   (660 )
Other, net
     (2 )   86     167     101  
   
 
 
 
 
                           
Other expense, net
     (234 )   (141 )   (513 )   (559 )
   
 
 
 
 
                           
Income before provision for income taxes and cumulative effect of change in accounting principle     78     651     1,250     2,392  
                           
Provision for income taxes     22     283     631     1,028  
   
 
 
 
 
                           
Income before cumulative effect of change in accounting principle     56     368     619     1,364  
                           
Cumulative effect of change in accounting principle, net of income tax     —     —     —     (2,846 )
   
 
 
 
 
                           
Net income (loss)   $ 56   $ 368   $ 619   $ (1,482 )
   
 
 
 
 
Per share amounts-Basic and Diluted:                          
                           
Basic and Diluted income before cumulative effect of change in accounting principle per common share   $ 0.01   $ 0.07   $ 0.12   $ 0.26  
                           
Basic and Diluted cumulative effect of change in accounting principle per common share     —     —     —   $ (0.54 )
   
 
 
 
 
Basic and Diluted net income (loss) per common share   $ 0.01   $ 0.07   $ 0.12   $ (0.28 )
   
 
 
 
 
                           
Basic and Diluted weighted average shares of common stock and equivalents outstanding     5,156     5,234     5,156     5,231  
   
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.

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TB Wood's Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

      Nine Months Ended  
(in thousands of dollars)     Sept. 26,
2003		     Sept. 27,
2002		  
 
Cash Flows from Operating Activities:              
Net income (loss)   $ 619   $ (1,482 )
Cumulative effect of change in accounting principle     —     2,846  
   
 
 
Income before cumulative effect of change in accounting principle     619     1,364  
   
 
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
Depreciation and amortization
     4,135     4,219  
Change in deferred income taxes, net
     841     —  
Other
     149     (79 )
Changes in operating assets and liabilities:
              
Accounts receivable
     65     890  
Inventories
     (2,085 )   3,863  
Other current assets
     (264 )   (866 )
Accounts payable
     (239 )   (623 )
Change in checks outstanding
     496     1,025  
Accrued and other liabilities
     (152 )   1,610  
   
 
 
Total adjustments
     2,946     10,039  
   
 
 
Net cash provided by operating activities
     3,565     11,403  
   
 
 
Cash Flows from Investing Activities:              
Capital expenditures     (1,655 )   (2,711 )
Purchase of minority interest     —     (3,034 )
Proceeds from sale of fixed assets     116     506  
Other     (555 )   (861 )
   
 
 
Net cash used in investing activities
     (2,094 )   (6,100 )
   
 
 
Cash Flows from Financing Activities:              
Distribution of earnings to minority partner     —     (28 )
Repayments of other long-term debt, net     (65 )   125  
Proceeds from revolving credit facility     34,494     30,000  
Repayments of revolving credit facility     (34,700 )   (33,660 )
Payment of dividends     (1,407 )   (1,413 )
Treasury Stock     (619 )   54  
   
 
 
Net cash used in financing activities
     (2,297 )   (4,922 )
   
 
 
Effect of changes in foreign exchange rates     994     345  
   
 
 
Net increase in cash and cash equivalents     168     726  
Cash and cash equivalents at beginning of period     335     581  
   
 
 
Cash and cash equivalents at end of period   $ 503   $ 1,307  
   
 
 
               
Income taxes (refunded) paid   $ (282 ) $ 714  
   
 
 
               
Interest paid   $ 710   $ 700  
   
 
 

The accompanying notes are an integral part of these consolidated financial statements.

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TB Wood’s Corporation and Subsidiaries
Notes To Condensed Consolidated Financial Statements
(unaudited; in thousands of dollars, except per share amounts)

1.      Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position of TB Wood’s Corporation and Subsidiaries (the “Company”) and the results of their operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These financial statements should be read together with the audited financial statements and notes included in the Company’s 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year. Certain prior period amounts have been reclassified to conform to the current period presentation.

2.      Inventories

The major classes of inventories (valued principally using the “last in first out” method) at September 26, 2003 and December 27, 2002 consisted of the following:

(in thousands of dollars)     Sept. 26,
2003		     December 27,
2002		  
 
Raw materials and supplies   $ 8,562   $ 8,146  
Work in process     4,198     4,519  
Finished goods     14,559     12,446  
   
 
 
Total at FIFO value     27,319     25,111  
Adjustment to LIFO basis     (5,277 )   (5,154 )
   
 
 
Inventory value at LIFO   $ 22,042   $ 19,957  
   
 
 

3.      Shareholders’ Equity

Dividends

On April 2, July 2, and October 6, 2003, the Board of Directors declared quarterly cash dividends of $0.09 per share payable on April 30, July 31, and October 31, 2003 to stockholders of record on April 15, July 17, and October 15, 2003.

Treasury Stock

During the nine months ended September 26, 2003, the Company purchased 106,449 shares and as of that date, 491,048 shares were held in treasury at cost. Year to date, the number of treasury shares sold to employees under the stock purchase plan was 9,024 and issued to the 401(K) retirement plan was 5,306.

Stock Options


On January 31, 2003, the Company granted options for the purchase of 145,050 shares of its common stock to employees at exercise prices equal to or in excess of the market price on the date of the grant. These options vest over three years with options for 96,700 shares expiring on January 31, 2008 and the remaining options expiring on January 31, 2013.

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4.       Other Comprehensive Income

Total comprehensive income (loss) for the nine months ended September 26, 2003 and September 27, 2002 was as follows:

(in thousands of dollars)     Sept. 26, 2003     Sept. 27, 2002  
 
               
Net Income (Loss)   $ 619   $ (1,482 )
Other comprehensive income              
Foreign currency translation adjustments
     994     345  
   
 
 
Total Comprehensive Income (Loss)   $ 1,613   $ (1,137 )
   
 
 

The components of accumulated other comprehensive income, net of related tax at September 26, 2003 and December 27, 2002 are as follows:

    2003     2002  
   
 
 
Aggregate foreign currency translation adjustment   $ (1,217 ) $ (2,211 )
   
 
 

5.       Earnings Per Share     

Basic earnings per share is computed by dividing net income (loss) by the weighted average shares outstanding. Diluted earnings per share is computed by dividing net income (loss) by the weighted average shares and common equivalent shares if dilutive.

Outstanding options to purchase 707,660 and 787,000 shares of common stock as of September 26, 2003 and September 27, 2002, respectively, are not included in the calculation as their effect would be antidilutive.

6.       Stock Based Compensation

The Company adopted Financial Accounting Standards Board (FASB) Statement of Accounting Financial Standard (SFAS) No. 123, as amended by SFAS No. 148, as of December 28, 2002 (beginning of Fiscal 2003) to account for stock-based compensation cost using the fair value method. The Company selected the modified prospective method of accounting for this cost. For Fiscal 2002 the Company used the intrinsic value method as defined by Accounting Principles Board Opinion No. 25 to account for the cost of stock options.

The following table illustrates the effect on net income (loss) and net income (loss) per share had compensation costs for the stock based compensation plan been determined based on the grant date fair values of awards under the provisions of Statement of Financial Accounting Standards No. 123 for both fiscal periods presented.

    Third Quarter
Ended		     Nine Months
Ended		  
(in thousands of dollars except per share amounts)     Sept. 26,
2003		     Sept. 27,
2002		     Sept. 26,
2003		     Sept. 27,
2002		  
 
Net Income (loss) as reported   $ 56   $ 368   $ 619   $ (1,482 )
Add:                          
Stock-based employee compensation costs, net of income tax, included in net income (loss)     27     —     81     —  
Less:                          
Stock-based employee compensation costs, net of tax, as if fair value method had been applied     (27 )   (39 )   (81 )   (117 )
   
 
 
 
 
Pro forma net income (loss)   $ 56   $