UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1994
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 0-6839
BRENCO, INCORPORATED
(Exact name of registrant as specified in its charter)
Virginia #54-0493835
(State of incorporation) (IRS Employer Identification No.)
One Park West Circle, Midlothian, VA 23113
(Address of principal executive offices) (Zip Code)
(804) 794-1436
(Telephone number)
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.
YESX. NO_.
Common stock, par value $1.00 per share: 10,052,072 shares
outstanding as of June 30, 1994
BRENCO, INCORPORATED AND SUBSIDIARIES
FORM 10-Q__June 30, 1994
INDEX
Part I Financial Information: Page No.
Item 1. Financial Statements.
Consolidated Statements of Income (Unaudited)
-Three Months and Six Months Ended
June 30, 1994 and 1993........................... 2
Consolidated Balance Sheets
-June 30, 1994 (Unaudited) and December 31, 1993.... 3 & 4
Consolidated Statements of Cash Flows (Unaudited)
-Three Months and Six Months Ended
June 30, 1994 and 1993........................... 5
Notes to Consolidated Financial Statements.......... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 7
Part II Other Information:
Item 1. Legal Proceedings................................... 8
Item 4. Submission of Matters to a Vote of Security Holders. 8 & 9
Item 6. Exhibits and Reports on Form 8-K.................... 10
1
<TABLE>
BRENCO, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . $ 29,741 $ 27,427 $ 57,865 $ 53,040
Costs and expenses:
Cost of goods sold. . . . . . . . . . 22,341 21,360 43,834 41,250
Administrative and selling expenses . 3,259 3,042 6,474 5,955
25,600 24,402 50,308 47,205
Operating income. . . . . . . . . . . 4,141 3,025 7,557 5,835
Other income (expense). . . . . . . . 8 ( 153) ( 135) ( 239)
4,149 2,872 7,422 5,596
Gain on sale of assets. . . . . . . . 1,056
Special charge for environmental
expenditures. . . . . . . . . . . . ( 190) ( 1,490)
Income before income taxes. . . . . . 3,959 2,872 6,988 5,596
Income taxes. . . . . . . . . . . . . 1,602 1,105 2,767 2,154
NET INCOME. . . . . . . . . . . . . . . $ 2,357 $ 1,767 $ 4,221 $ 3,442
======== ======== ======== ========
Net income per share. . . . . . . . . . $ .23 $ .18 $ .42 $ .35
Dividends declared per share. . . . . . $ .05 $ .05 $ .10 $ .10
Average number of shares
outstanding . . . . . . . . . . . . . 10,043 9,910 10,033 9,894
<FN>
See accompanying notes to Consolidated Financial Statements.
2
</TABLE>
<TABLE>
BRENCO, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30 December 31
1994 1993
(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents. . . . . . . . . . . . . . $ 7,419 $ 3,582
Accounts receivable. . . . . . . . . . . . . . . . . 15,029 14,565
Inventories:
Finished goods . . . . . . . . . . . . . . . . . . 4,214 4,814
Work in process. . . . . . . . . . . . . . . . . . 8,784 9,437
Raw material . . . . . . . . . . . . . . . . . . . 3,462 1,878
16,460 16,129
Less: Lifo reserve. . . . . . . . . . . . . . . . 1,586 1,225
14,874 14,904
Prepaid expenses . . . . . . . . . . . . . . . . . . 1,776 1,452
Deferred income taxes. . . . . . . . . . . . . . . . 1,627 1,902
Income taxes recoverable . . . . . . . . . . . . . . 434 668
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . 41,159 37,073
Other Assets - Investments at Cost . . . . . . . . . . 51 51
Property and Equipment:
Land and improvements. . . . . . . . . . . . . . . . 2,803 2,770
Buildings. . . . . . . . . . . . . . . . . . . . . . 11,397 11,387
Machinery and equipment. . . . . . . . . . . . . . . 83,507 83,466
97,707 97,623
Less: Accumulated depreciation. . . . . . . . . . . 64,942 64,945
TOTAL PROPERTY AND
EQUIPMENT. . . . . . . . . . . . . . . . . . . . . 32,765 32,678
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . $ 73,975 $ 69,802
======== ========
<FN>
See accompanying notes to Consolidated Financial Statements.
3
</TABLE>
<TABLE>
BRENCO, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30 December 31
1994 1993
(Unaudited)
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . $ 3,338 $ 3,414
Dividends payable . . . . . . . . . . . . . . . . . . 502 500
Pension . . . . . . . . . . . . . . . . . . . . . . . 667 455
Compensated absences. . . . . . . . . . . . . . . . . 631 616
Accrued liabilities . . . . . . . . . . . . . . . . . 2,654 747
Income taxes payable. . . . . . . . . . . . . . . . . 24 151
Environmental expenditures. . . . . . . . . . . . . . 303 2,884
TOTAL CURRENT
LIABILITIES. . . . . . . . . . . . . . . . . . 8,119 8,767
Deferred Income Taxes . . . . . . . . . . . . . . . . . 3,027 2,746
Long-Term Debt. . . . . . . . . . . . . . . . . . . . . 10,974 10,000
Shareholders' Equity:
Preferred stock, par value $1 per share,
authorized 1,000,000 shares; none issued
Common stock, par value $1 per share,
authorized 15,000,000 shares; issued
10,052,072 shares (1993 - 10,005,345
shares) . . . . . . . . . . . . . . . . . . . . . . 10,052 10,005
Additional paid in capital. . . . . . . . . . . . . . 1,484 1,182
Retained earnings . . . . . . . . . . . . . . . . . . 40,319 37,102
TOTAL SHAREHOLDERS'
EQUITY . . . . . . . . . . . . . . . . . . . . 51,855 48,289
TOTAL LIABILITIES AND
EQUITY . . . . . . . . . . . . . . . . . . . . $ 73,975 $ 69,802
======== ========
<FN>
See accompanying notes to Consolidated Financial Statements.
4
</TABLE>
<TABLE> BRENCO, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION> Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operations:
Net Income. . . . . . . . . . . . . . . $ 2,357 $ 1,767 $ 4,221 $ 3,442
Adjustments to Reconcile Net Income to
Net Cash Provided by Operations:
Depreciation . . . . . . . . . . . 976 701 1,885 1,395
Gain on sale of assets . . . . . . ( 1,056)
Deferred income taxes. . . . . . . 422 556
Other. . . . . . . . . . . . . . . ( 51) ( 60)
Changes in the following:
Current assets . . . . . . . . . . 331 3,167 ( 355) ( 1,909)
Current liabilities. . . . . . . . ( 1,381) ( 1,223) ( 649) 2,113
Net cash provided by operations . . . . 2,705 4,361 4,602 4,981
Cash Flows from Investing Activities:
Acquisition of property and
equipment. . . . . . . . . . . . . ( 996) ( 2,819) ( 2,014) ( 5,393)
Proceeds from sale of property and
equipment. . . . . . . . . . . . . 3 1,098 3
Other Investments . . . . . . . . . . . ( 51) ( 51)
Net cash provided by (used in) investing
activities . . . . . . . . . . . . ( 996) ( 2,867) ( 916) ( 5,441)
Cash Flows from Financing Activities:
Cash dividends paid. . . . . . . . ( 502) ( 494) ( 1,002) ( 987)
Employee stock purchases . . . . . 93 280 179 392
Long-term debt . . . . . . . . . . 824 974
Net cash provided by (used in) financing
activities . . . . . . . . . . . . 415 ( 214) 151 ( 595)
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . 2,124 1,280 3,837 ( 1,055)
Cash and cash equivalents at
beginning of quarter - year. . . . 5,295 3,883 3,582 6,218
Cash and cash equivalents at
end of quarter . . . . . . . . . . $ 7,419 $ 5,163 $ 7,419 $ 5,163
========== ========= ========= =========
<FN>
See accompanying notes to Consolidated Financial Statements.
5
</TABLE>
BRENCO, INCORPORATED AND SUBSIDIARIES
FORM 10-Q June 30, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1994, the consolidated
statements of income, and the consolidated statements of cash flows
for the three months and six months ended June 30, 1994 and June 30,
1993 have been prepared by the Company, without audit. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position at
June 30, 1994 and the results of operations and cash flows for all
periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included
in the Company's December 31, 1993 annual report to shareholders. The
results of operations for the periods ended June 30, 1994 are not
necessarily indicative of the operating results for the full year.
6
BRENCO, INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
RESULTS OF OPERATIONS:
Net sales were $57,865,000 for the first six months of 1994,
compared to $53,040,000 for the same period last year, an increase of
9.1%. For the quarter just ended, sales were $29,741,000, compared to
$27,427,000 for the same quarter in 1993, an increase of 8.4%. These
were the highest sales for a quarter and six months in the Company's
history. Bearing reconditioning services were up 43.4% while export
shipments were below last year's record setting pace established through
strong sales early in the year.
Net income was $4,221,000 or $.42 per share for the first six
months, compared to $3,442,000 or $.35 per share for the comparable
period in 1993, an increase of 22.6%. For the second quarter, net
income was $2,357,000 or $.23 per share, compared to $1,767,000 or $.18
per share for the same quarter of 1993, an increase of 33.4%. Most
lines of business are enjoying record volumes as well as improved
operating results. This was the best six months of earnings for your
company in over fourteen years.
FINANCIAL CONDITION:
Cash and cash equivalents were up $2,124,000 for the quarter and
$3,837,000 since the beginning of the year. Working capital at the end
of the second quarter was $32,925,000, compared to $28,307,000 at last
year end, an increase of $4,618,000. Inventories are down $30,000 since
the year end. Progress is being made in our efforts to decrease
inventories while supporting increased sales volumes.
Management believes that its current cash and cash equivalents,
together with earnings, are sufficient to cover both capital and
dividend requirements for the balance of the year. The cleanup of the
old Puddledock foundry site has been completed, and substantially all
the environmental expenditures have been paid. We believe this project
is at last behind us.
7
BRENCO, INCORPORATED AND SUBSIDIARIES
Part II Other Information
Item 1. Legal Proceedings
On June 16, 1994, Brenco and four of its subsidiaries filed suit
in the United States District Court for the Eastern District of Virginia
against Roller Bearing Industries, Inc. ("RBI"). Brenco alleges that
RBI violated unfair competition provisions of the Lanham Act and engaged
in common law fraud and unfair competition. The claims arise out of
RBI's remanufacture of certain freight car roller bearing raceway
components in contravention of rules established by the American
Association of Railroads, and its passing off of those remanufactured
components as Brenco products. Brenco seeks compensatory damages in the
sum of at least $16 million and punitive damages in the sum of $25
million.
RBI has filed a counterclaim in the action, alleging violations
of the Sherman and Clayton Acts and the Virginia Antitrust Act, tortious
interference with contract, and defamation. RBI seeks compensatory and
punitive damages in excess of $30 million. Brenco believes that RBI's
claims are without merit and does not anticipate that they will have any
material impact upon Brenco's financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
(a) At the Annual Meeting of Shareholders of the Company held on
April 21, 1994, 8,541,171 of the Company's 10,037,572 outstanding shares
were present in person or by proxy and entitled to vote, which
constituted a quorum.
(b) At the Annual Meeting, the following nominees were elected
to serve until the 1995 Annual Meeting:
Jacob M. Feichtner
Steven M. Johnson
John C. Kenny
J. Craig Rice
James M. Wells III
Needham B. Whitfield
Frederic W. Yocum, Jr.
(c) At the Annual Meeting the following matters were voted upon
and received the vote set forth below:
8
(1) Election of Directors. Provided that a quorum is
present, the nominees receiving the greatest number of votes cast are
elected as directors and, as a result in tabulating the vote, votes
withheld have no effect upon the election of directors. Each nominee
for director was elected, having received the following vote:
FOR WITHHELD
Nominee
Jacob M. Feichtner 8,535,240 5,931
Steven M. Johnson 8,535,416 5,755
John C. Kenny 8,535,616 5,555
J. Craig Rice 8,535,262 5,909
James M. Wells III 8,533,116 8,055
Needham B. Whitfield 8,535,462 5,709
Frederic W. Yocum, Jr. 8,535,616 5,555
(2) Approval of designation of McGladrey & Pullen as
independent auditors for the current year. Provided that a quorum is
present, ratification of the auditors requires the affirmative vote of a
majority of the votes cast, and as a result, in tabulating the vote,
abstentions do not have the effect of working against ratification.
Designation of the auditors was approved, having received the following
vote:
FOR: 8,521,717
AGAINST: 3,938
ABSTAIN: 15,516
(3) Approval of an amendment to the 1987 Restricted
Stock Plan authorizing an additional 100,000 shares of Common Stock for
issuance under the Plan. Provided that a quorum is present, approval of
the amendment to the Plan requires the affirmative vote of a majority of
the shares present in person or by proxy and entitled to vote and, as a
result, in tabulating the vote, abstentions have the effect of a vote
against the amendment and broker non-votes have no effect. The
amendment to the Plan was approved, having received the following vote,
with the number of broker non-votes indicated:
FOR: 8,457,012
AGAINST: 32,775
ABSTAIN: 51,384
BROKER NON-VOTES: -0-
9
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K filed during the quarter - none
10
SIGNATURES
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.
BRENCO, INCORPORATED
(Registrant)
DATED: August 11, 1994 BY: J. Craig Rice
J. Craig Rice
President
DATED: August 11, 1994 BY: Jacob M. Feichtner
Jacob M. Feichtner
Executive Vice President
Secretary and Treasurer
11
