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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 19, 1997
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VARLEN CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-5374 13-2651100
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(State or other Jurisdiction (Commission File Number) (I.R.S. employee
of Incorporation) Identification No.)
55 Shuman Boulevard
P.O. Box 3089
Naperville, Illinois 60566-7089
(Address of principal executive offices)
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Registrant's telephone number, including area code: (630) 420-0400
Page 1 of 13
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Exhibit Index appears on Page 4
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ITEM 5. OTHER EVENTS
On August 19, 1997 the Registrant issued a press release with respect
to its second quarter earnings and on August 19, 1997 the Registrant issued a
press release with respect to the redemption of its 6-1/2% Convertible
Subordinated Debentures due 2003.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
20.1 Press Release of the Registrant dated August 19, 1997 with
respect to its second quarter earnings.
20.2 Press Release of the Registrant dated August 19, 1997 with
respect to the redemption of its 6-1/2% Convertible
Subordinated Debentures due 2003.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
VARLEN CORPORATION
(Registrant)
Dated: August 19, 1997 By: /s/ Richard A. Nunemaker
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Name: Richard A. Nunemaker
Title: Vice President, Finance and
Chief Financial Officer
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INDEX TO EXHIBITS
Sequentially
Exhibit Number Exhibit Numbered Page
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20.1 Press Release of the Registrant
dated August 19, 1997 with respect
to its second quarter earnings.
20.2 Press Release of the Registrant
dated August 19. 1997 with respect
to the redemption of its 6-1/2%
Convertible Subordinated Debentures
due 2003.
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EXHIBIT 20.1
VARLEN REPORTS
RECORD SECOND QUARTER SALES, OPERATING PROFIT,
EARNINGS BEFORE 1996 GAIN ON BUSINESS SALE
NAPERVILLE, IL, AUGUST 19 - Varlen Corporation (NASDAQ:VRLN), a leader in
transportation products and petroleum analyzers, today reported it continued
outperforming its industries in the second quarter ended August 2, 1997.
SECOND QUARTER HIGHLIGHTS
- Net sales increased 37.8 percent to a record $125.5 million.
- Operating profit rose to a record 14.7 million, or 52.4 percent above the
1996 amount, excluding a $3.7 million pretax gain on the sale of a
non-strategic business in the 1996 second quarter.
- Net earnings improved 42.5 percent excluding the business sale, to $5.4
million, or 66 cents per fully diluted share.
- Favorable comparisons could occur in the second half, which would lead to
a record year.
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FINANCIAL SUMMARY
(In thousands, except per share and percentages)
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(Unaudited)
Three Months Ended Six Months Ended
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AUGUST 2, AUGUST 3, PERCENT AUGUST 2, AUGUST 3, PERCENT
1997 1996 CHANGE 1997 1996 CHANGE
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<S> <C> <C> <C> <C> <C> <C>
Net Sales $125,471 $91,025 37.8% $249,446 $183,000 36.3%
Operating Profit Including 1996 Sale Gain(1) 14,700 13,377 9.9% 28,713 24,352 17.9%
Net Earnings(2) 5,438 5,900 (7.8%) 10,447 10,722 (2.6%)
Earnings Per Share(2)(3) .66 .73 (9.6%) 1.29 1.33 (3.0%)
Weighted Average Shares(3) 9,206 9,072 1.5% 9,197 9,109 1.0%
</TABLE>
(1) Includes $3.7 Million Gain on Sale of Business in 1996, and Excludes
Corporate and Interest Expenses.
(2) Includes $2.1 Million, or 23 Cents per Share, from 1996 Gain on Sale of a
Business
(3) Fully Diluted
"VARLEN'S GREATER MARKET PENETRATION, EXPANDING INTERNATIONAL SALES, AND THE
ACQUISITIONS WE'VE MADE IN THE LAST YEAR, SUPPORTED BY A STRONG DOMESTIC
ECONOMY, MADE THIS THE BEST SECOND QUARTER IN OUR HISTORY."
--Richard L. Wellek, Chairman and CEO
RECORD SECOND QUARTER RESULTS
For the three months ended August 2, 1997, net sales were up 37.8 percent to
a second quarter record of $125.5 million, compared with $91.0 million a year
ago.
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In July 1996, Varlen sold a non-strategic business, recording a pretax gain
of 3.7 million, or $2.1 million aftertax (23 cents per fully diluted share).
This is included in operating profit on a pretax basis and in net income on
an aftertax basis. Operating profit for the 1997 second quarter reached
record levels, at $14.7 million, up 9.9 percent from the prior-year quarter's
$13.4 million. Excluding the 1996 pretax gain, operating profits improved
52.4 percent in 1997. Net interest expense, at $3.0 million, was more than
twice the level seen a year ago, due to the Brenco and Karl Georg
acquisitions.
Net earnings for the latest quarter were $5.4 million, or 66 cents per fully
diluted share, compared with $5.9 million, or 73 cents per share for the
prior-year's quarter, which included the 23-cent per share sale gain.
Excluding the gain, retained businesses resulted in an earnings improvement
of 42.5 percent.
STRONG FIRST HALF
Net sales for the latest six months were $249.4 million, up 36.3 percent from
$183.0 million in the first half of last year, setting a Varlen record.
Operating profit also hit a new high, at $28.7 million, a 17.9 percent
increase from the $24.4 million seen in the 1996 six months. Excluding the
sale gain, operating profits increased 39.2 percent in 1997. Net interest
expense for the year-to-date was $6.2 million compared with $2.5 million a
year ago, a 148.7 percent increase as a result of acquisitions. Net earnings
reached $10.4 million, or $1.29 per fully diluted share, for the 1997 first
half. This compared with last year's $10.7 million, or $1.33 per fully
diluted share, which included the $2.1 million, or 23 cents per share gain.
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CONTINUED POSITIVE FINANCIAL CONDITION
Cash flow (earnings before interest, taxes, depreciation and amortization
- --EBITDA) for the first half of 1997 increased 28.5 percent from last year's
six months to a record $37.3 million. As a result, EBITDA coverage of net
interest expense remained a healthy 6.1X. Stockholders' equity increased 6.9
percent since January 31, 1997, to $117.5 million.
STRONG PERFORMANCE BY ALL BUSINESSES
Chairman and Chief Executive Officer Richard L. Wellek said, "Varlen
continued to outperform its industries during the second quarter.
"Sales for our Railroad Products Business nearly doubled between the two
second quarters," he continued. "We saw improvements at existing and acquired
businesses as orders for new U.S. freightcars increased 32 percent over last
year's levels. Aftermarket sales improved and European railroad orders also
increased.
"The Heavy-Duty Truck/Trailer Business did more than benefit from the
recovering industry's increase in North American production. Our operation
saw a 27 percent sales increase as a result of greater product content per
vehicle, and increased production as Freightliner ramped up its Century Class
truck build rates. Our recently opened Bryson City, North Carolina facility
became increasingly profitable during the period," Wellek explained.
4
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"Our Automotive Products Business increased its sales 8 percent despite labor
disruptions at General Motors and Chrysler," he added. "We accomplished this
through several new programs. During the latter part of the quarter, we began
shipments to Ford of our Mechanical Diode-Registered Trademark- one-way
clutch, although start-up and development expenses for the clutch resulted in
a $400,000 loss for this product during the quarter. Excluding this expense,
our automotive operation would have had a record operating profit.
"Our Analytical Instruments Business sales were up 22 percent during the
quarter, excluding sales from a non-strategic laboratory appliance business
sold in 1996. Sales improvements came from strong international orders and
higher revenues from recently introduced products. Operating profit also
increased in this business after excluding the last year's $3.7 million sale
gain," said Wellek.
OPTIMISTIC OUTLOOK FOR SECOND HALF
"We have a number of reasons for believing Varlen should post positive
quarter-to-quarter comparisons for the rest of 1997," Wellek explained. "All
four of our operations are seeing positive industry trends. Experts believe
the second-half railcar build rate could exceed the first, and freightcar
backlogs are at their highest level in nine months. Orders for Class 8 trucks
have exceeded production for the last 10 months, and most manufacturers are
increasing their production rates. Sales of light trucks, where Varlen's
automotive operation has its highest content per vehicle, continue to grow.
Petroleum analyzer sales should benefit from seasonal factors, rising oil
company profits, and new products.
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"Varlen's market leadership, combined with strong internal controls and new
products, could lead the company to outperform its industries and post record
results for this year," Wellek concluded.
Varlen is a leading manufacturer of precision engineered transportation
products for the railroad, heavy-duty truck/trailer and automotive
industries, and petroleum analyzers. The company, headquartered in a Chicago
suburb, manufacturers its products in 24 facilities in the United States and
Europe and sells them to customers around the world. Varlen's common stock is
traded on Nasdaq's National Market under the symbol VRLN. Its 6-1/2 percent
convertible debentures are traded on Nasdaq's SmallCap Market under the
symbol VRLNG.
THIS NEWS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS BASED UPON ASSUMPTIONS
ABOUT A NUMBER OF IMPORTANT FACTORS AND INVOLVE RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM WHAT IS STATED HERE.
THESE RISK FACTORS INCLUDE REVERSAL OF MARKET TRENDS, DECREASED DEMAND FOR
PRODUCTS, LOSS OF KEY CUSTOMERS, AND SUCH OTHER FACTORS AS MAY BE DETAILED
FROM TIME TO TIME IN VARLEN'S SECURITIES AND EXCHANGE COMMISSION FILINGS.
VARLEN ASSUMES NO OBLIGATION TO UPDATE ITS FORWARD-LOOKING INFORMATION.
FINANCIAL TABLES FOLLOW
FOR FURTHER INFORMATION ON VARLEN BY FAX, DIAL 1-800-PRO-INFO, EXT. VRLN
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VARLEN CORPORATION
ADD
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VARLEN CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS For the Second Quarter For the Six Months
(Unaudited) Ended Ended
(In Thousands, Except Per Share Amounts) 8/2/97 8/3/96 8/2/97 8/3/96
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<S> <C> <C> <C> <C>
Net sales $125,471 $91,025 $249,446 $183,000
Gross profit 30,397 22,479 59,802 46,276
Selling, general and administrative expenses 17,616 14,093 34,814 28,347
Gain on sale of business 0 3,730 0 3,730
Interest expenses, net 2,983 1,426 6,165 2,479
Income taxes 4,360 4,790 8,376 8,458
Net earnings $ 5,438 $ 5,900 $ 10,447 $ 10,722
Primary earnings per share $ 0.89 $ 0.98 $ 1.72 $ 1.77
Fully diluted earnings per share $ 0.66 $ 0.73 $ 1.29 $ 1.33
Weighted average number of shares outstanding:
Primary 6,111 6,016 6,061 6,054
Fully diluted 9,206 9,070 9,197 9,109
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BUSINESS SEGMENTS For the Second Quarter For the Six Months
(Unaudited) Ended Ended
(In Thousands) 8/2/97 8/3/96 8/2/97 8/3/96
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NET SALES:
Transportation products $116,363 $79,604 $232,365 $157,193
Analytical instruments 9,108 11,421 17,081 25,807
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$125,471 $91,015 $249,446 $183,000
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OPERATING PROFITS(1)
Transportation products $ 13,452 $ 8,566 $ 26,453 $ 17,507
Analytical instruments(2) 1,248 4,811 2,260 6,845
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$ 14,700 $13,377 $ 28,713 $ 24,352
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(1) Before interest and general corporate expenses
(2) 1996 amounts include a $3,370,000 gain on the sale of a business
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7
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[LETTERHEAD]
For Further Information
Richard L. Wellek,
NEWS RELEASE President and CEO, or
Richard A. Nunemaker,
Vice President, Finance, and CFO
(630) 420-0400
FOR IMMEDIATE RELEASE
TUESDAY, AUGUST 19, 1997
VARLEN CALLS 6-1/2 PERCENT
CONVERTIBLE SUBORDINATED DEBENTURES
NAPERVILLE, IL, August 19, 1997 - Varlen Corporation (NASDAQ:VRLN) today
announced its intention to redeem for cash all of the company's 6-1/2 percent
convertible subordinated debentures due in 2003 (the "Debentures"), which
currently trade on the Nasdaq SmallCap Market (VRLNG).
As of August 18, 1997, the principal amount of the Debentures outstanding
totaled $54,695,000. The Debentures will be redeemed on September 4, 1997 (the
"Redemption Date"), at a redemption price of $1,039.00 per $1,000.00 principle
amount of Debenture plus accrued and unpaid interest of $16.79 to, but not
including the Redemption Date, for an aggregate cash redemption price of
$1,055.79 per $1,000.00 principal amount of Debentures.
Notice of redemption will be mailed to all holders of the Debentures as of
August 12, 1997, on August 20, 1997.
In lieu of redemption, Debenture holders may elect to convert Debentures into
Varlen common stock prior to the close of business at 5:00 p.m. New York City
time on September 3, 1997. The holders may convert the Debentures into
Varlen common stock at the conversion price of $22.5893 per share, which
equals approximately 44.2688 shares of common stock per $1,000.00 principal
amount of Debentures. Varlen common stock closed at $32.375 per share on
August 18, 1997.
MORE...
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VARLEN CORPORATION
ADD ONE
The company said it entered into a standby purchase agreement under which the
firms Donaldson, Lufkin & Jenrette Securities Corporation, Piper Jaffray Inc.,
and Robert W. Baird & Co. Incorporated have agreed to purchase, at a
predetermined price, the number of shares of common stock sufficient to fund
cash redemptions, if any. The number of shares the firms purchase will be
determined by the aggregate redemption price of Debentures that are not
converted into Varlen common stock.
If all of the Debentures are converted into common stock, about 2.42 million
additional common shares will be issued by the company. Varlen currently has
approximately 6.43 million shares outstanding. Since the issuance of the
Debentures in 1993, the company has reported its earnings on a fully-diluted
basis.
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