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Echlin Inc. (NYSE: ECH)
Headquarters: 100 Double Beach Road, Branford 06405
(203-481-5751)
1996 annual results
(FY ending 8/31/96):
Revenues: $3,128.7 million
Net income: $142.2 million
Earnings per share: $2.30
Employees: 26,600
Market capitalization:
$1,890 million
CEO & President: Larry McCurdy
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Business New Haven
9/22/1997
By: BNH
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Branford's Echlin Inc., which has been manufacturing auto parts since 1924, has announced major restructuring plans aimed at reducing debt, selling off units and improving return on equity.
On September 4 at an investors' meeting in New York, Echlin President and CEO Larry McCurdy told shareholders the company expected an after-tax one-time charge of $122 million-$135 million for the fourth quarter of 1997 (ending August 31). According to McCurdy, the charge will cover the costs of downsizing or closing 14 facilities while writing off some inventory and assets.
The company had already declared in May that it anticipated a charge of more than $100 million in the fourth quarter. As part of the restructuring, 1,200 employees will be laid off and 14 facilities closed or downsized. The one-time restructuring charge compares to fourth quarter 1996 earnings of $41.6 million on sales of $836 million.
Through this charge and the accompanying restructuring, Echlin expects to increase yearly profits by $12 million to $13 million. In addition, it will generate $250 million to $350 million in cash by selling off inventory and four units, in addition to Sensor Engineering Co. and Preferred Plastic Sheet, sold earlier. Those four businesses, including the Heavy Duty Brake business, have annual sales of $500 million but operating profit margins averaging only 1.8 percent.
The details of this restructuring come in the wake of a downgrade in Echlin's credit rating by Standard & Poor's in recognition of the company's $830 million of outstanding debt. This debt was accumulated as the result of acquisitions that, while building yearly revenues from $1.9 billion in fiscal 1993 to $3.1 billion in 1996, increased debt over the same period from $340.9 million to $766.6 million. The company expects to use sale proceeds and the one-time charge to reduce its debt load.
Echlin also anticipates restructuring its North American distribution network to rationalize and streamline its network of 44 distribution points handling $2 billion in annual sales. Two recent appointments should aid this effort. Robert L. Baunoch filled the newly created position of vice president of information technology. Additionally, Richard E. Dauch, an expert in innovative manufacturing techniques and just-in-time supply, joined Echlin's board of directors.
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