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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(MARK ONE)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1993
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 1-6098
DANIEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-1547355
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9753 Pine Lake Drive, Houston, Texas 77055
(Address of principal executive offices) (Zip Code)
713-467-6000
(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 X No
_____ _____
On January 31, 1994, there were outstanding 12,030,265 shares of
Common Stock, $1.25 par value, of the registrant.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
DANIEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
December 31, September 30,
1993 1993
------------ -------------
(in thousands)
ASSETS
------
Current assets:
Cash and cash equivalents $ 13,449 $ 23,220
Receivables, net of reserve of $104 and $96 33,572 33,105
Costs in excess 3,732 6,054
Inventories 43,402 39,446
Deferred taxes on income 3,959
Other 3,821 3,350
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Total current assets 101,935 105,175
Property, plant and equipment at cost, net 65,361 64,477
Intangibles, net 4,692 4,786
Investments and other assets 2,965 3,630
---------- ----------
$ 174,953 $ 178,068
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 2,857 $ 2,857
Accounts payable 17,232 17,395
Accrued expenses 15,662 17,714
---------- ----------
Total current liabilities 35,751 37,966
Long-term debt 11,429 14,286
Deferred taxes on income 8,961 4,766
---------- ----------
Total liabilities 56,141 57,018
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Stockholders' equity:
Preferred stock, $1.00 par value,
1,000,000 shares authorized, 150,000
shares designated as Series A junior
participating preferred stock, no
shares issued or outstanding
Common stock, $1.25 par value,
20,000,000 shares authorized,
12,030,265 and 12,026,450 shares issued 15,038 15,033
Capital in excess of par value 89,586 89,564
Translation component (4,496) (3,614)
Retained earnings 18,684 20,067
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Total stockholders' equity 118,812 121,050
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$ 174,953 $ 178,068
========== ==========
See accompanying notes to consolidated condensed financial statements.
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DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For The Quarter Ended December 31,
----------------------------------
1993 1992
--------------- --------------
(in thousands except per
share amounts and shares)
Revenues $ 40,575 $ 35,866
---------- ----------
Costs and expenses:
Cost of goods sold 25,928 21,408
Selling, general and administrative expenses 15,387 14,126
Interest expense 466 576
---------- ----------
41,781 36,110
---------- ----------
Loss before income tax benefit (expense) (1,206) (244)
Income tax benefit (expense) 365 (94)
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Net loss $ (841) $ (338)
========== ==========
Loss per common share(a) $ (.07) $ (.03)
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Cash dividends per common share $ .045 $ .045
========== ==========
Average number of shares outstanding(a) 12,028,233 11,970,461
========== ==========
(a) Earnings per common share are computed on the basis of the average
number of shares outstanding. The effect of outstanding stock options on
earnings per share was insignificant.
See accompanying notes to consolidated condensed financial statements.
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DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Unaudited)
For The Quarter Ended December 31,
----------------------------------
1993 1992
-------------- --------------
(in thousands)
Cash flows from operating activities:
Net loss $ (841) $ (338)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 1,823 1,604
Changes in operating assets and
liabilities (3,959) 2,941
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Net cash provided by (used in)
operating activities (2,977) 4,207
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Cash flows from investing activities:
Capital expenditures (3,373) (1,511)
Proceeds from sales of assets 2 14
--------- ---------
Net cash used in investing activities (3,371) (1,497)
--------- ---------
Cash flows from financing activities:
Reductions to debt (2,857) (2,857)
Cash dividends paid (542) (539)
Activity under stock option plan 27 96
--------- ---------
Net cash used in financing activities (3,372) (3,300)
--------- ---------
Effect of exchange rate changes on cash (51) (512)
--------- ---------
Decrease in cash and cash equivalents (9,771) (1,102)
Cash and cash equivalents, beginning of period 23,220 29,249
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Cash and cash equivalents, end of period $ 13,449 $ 28,147
========= =========
Cash payments (refunds) for income taxes $ 136 $ (98)
Cash payments for interest 986 1,150
See accompanying notes to consolidated condensed financial statements.
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DANIEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 - General
The foregoing financial statements have been prepared from the books
and records of the Company without audit. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments necessary for a
fair statement of the results for the interim periods presented, are reflected
in such financial statements.
These condensed statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1993.
Note 2 - Acquisitions and Discontinuances
As previously reported in the Company's Annual Report of Form 10-K for
the year ended September 30, 1993, the Company acquired, effective January 1,
1992, from an agency of the German government, a facility in Potsdam-Babelsberg
in the former German Democratic Republic ("GDR"). The facility manufactures
oval gear meters and will produce other Company products. Acquisition and
related costs, aggregating approximately $4,900,000, are recorded primarily in
property, plant and equipment. An administrative agency of the German
government has resolved all ownership claims to the assets in favor of the
Company. However, registration of legal title has been delayed. This
administrative delay does not affect the Company's ownership of the assets.
Upon registration of legal title in the Company's name, the purchase price,
which is being held in a restricted account, will be released to the seller.
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Note 3 - Inventories
Major components of inventories include:
December 31, September 30,
1993 1993
------------ -------------
(in thousands)
Raw materials $17,535 $14,193
Work-in-process 7,706 9,663
Finished goods 25,058 22,377
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50,299 46,233
Less LIFO reserve (6,897) (6,787)
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$43,402 $39,446
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Note 4 - Accrued Expenses
Accrued expenses are summarized as follows:
December 31, September 30,
1993 1993
------------ -------------
(in thousands)
Other accrued expenses $11,159 $12,711
Accrued taxes other than income 2,555 2,588
Salaries and wages 1,948 2,415
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$15,662 $17,714
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Note 5 - Income Taxes
The Company adopted the Financial Accounting Standards Board's
Statement No. 109, "Accounting for Income Taxes" ("FAS 109") effective October
1, 1993, changing the method of determining reported income tax expense.
Adoption of FAS 109 had an immaterial impact on the Company's quarter ended
December 31, 1993.
The adjustments to the October 1, 1993 balance sheet to adopt FAS 109
resulted in a reclassification from noncurrent deferred tax liability to
current deferred tax asset. The reclassification is necessary to meet FAS 109
requirements that deferred taxes be classified on the balance sheet based upon
the assets and/or liabilities to which they relate.
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Deferred tax liabilities (assets) were as follows:
October 1, 1993
---------------
(in thousands)
Deferred Tax Liabilities:
Excess book over tax basis of property & equipment $ 8,238
Partnership income 380
Other 1,489
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10,107
-------
Deferred Tax Assets:
Excess tax over book basis of inventories (1,989)
Inventory reserves (552)
Intercompany transfer pricing (495)
Insurance reserves (383)
Discontinued operations (342)
Loss on sales of subsidiaries (304)
Vacation accruals (288)
Other (692)
-------
(5,045)
-------
Deferred Tax Asset Valuation Allowance 0
-------
$ 5,062
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Quarter Ended December 31, 1993 vs. Quarter Ended December 31, 1992
Consolidated revenues increased 13% to $40,575,000 for the quarter
ended December 31, 1993, from $35,866,000 for the same period last year. The
Flow Measurement segment posted a 30% increase in revenues to $29,816,000 for
the quarter ended December 31, 1993, compared to $22,892,000 for the same
period last year. Significant increases in sales of flow measurement products,
which comprised 72% and 83% of this segment's revenues for the respective
periods, and sales of flow measurement systems, are attributable to continued
growth in the worldwide markets for natural gas. The Energy Products segment
posted a 16% decline in revenues to $10,595,000 for the quarter ended December
31, 1993, compared to $12,678,000 for the same period last year. Sales of
pipeline valves, which comprised 40% of this segment's revenues in both
periods, decreased due to a more competitive worldwide market as a result of
lower crude oil prices. Sales of fasteners and related products, which
comprised 47% and 45% of this segment's revenues for the respective periods,
declined due to severe pricing pressures in both the domestic and foreign
markets. Sales of fabricated production equipment declined due to timing of
completion of orders.
The consolidated gross profit margin declined to 36% of revenues for
the quarter ended December 31, 1993, compared to 40% of revenues for same
period last year. The gross profit margin in the Flow Measurement segment
declined two percentage points to 41% of revenues primarily due to a shift in
product mix towards sales of flow measurement systems, which earn lower margins
than sales
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of flow measurement products. The gross profit margin in the Energy Products
segment declined to 22% of revenues this year, from 34% of revenues last year,
as a result of current year pricing pressures for both pipeline valve and
fastener products.
Consolidated selling, general and administrative expenses increased 9%
to $15,387,000 for the quarter ended December 31, 1993, compared to the same
period last year. This increase is due to the reversal of accruals in the
first quarter of fiscal 1993.
Consolidated depreciation and amortization expense of $1,823,000 for
the quarter ended December 31, 1993 increased 14% compared to the same period
last year. Additional capital expenditures in fiscal 1993 by the Flow
Measurement segment was principally responsible for this increase.
Consolidated interest expense decreased 19% to $466,000 for the
quarter ended December 31, 1993, as a result of the retirement of debt.
The effective tax rate of approximately 30% for the three months ended
December 31, 1993, is less than the U. S. statutory rate primarily due to the
tax benefits associated with the Company's foreign sales corporation.
Liquidity and Capital Resources
At December 31, 1993, the Company's working capital balance was
$66,184,000 compared to $67,209,000 at September 30, 1993. Although the
Company's working capital position remained relatively unchanged between the
two periods, its cash balance at December 31, 1993 decreased to $13,449,000
from $23,220,000 at September 30, 1993. This decline in cash was due to
routine uses (i.e. capital expenditures, reductions in debt and payment of
dividends) as well as the funding of operating activities. In addition,
inventories increased $3,956,000 reflecting the Company's response to improved
demand for its products and systems. Current deferred taxes on income of
$3,959,000 were recorded at December 31, 1993 due to a reclassification from
non-current deferred taxes on income as a result of fiscal 1994 implementation
of Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes" (see Note 5 of NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS).
Working capital at December 31, 1993 included $43,402,000 in
inventory, which is not as liquid as other current assets.
The Company has uncommitted short-term lines of credit aggregating
approximately $40,000,000. There were no amounts outstanding under these lines
at December 31, 1993.
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The Company anticipates capital expenditures in fiscal 1994 of
approximately $14,000,000. Capital expenditures for the quarter ended December
31, 1993 were $3,373,000. The Company continues to seek acquisitions that
would expand its existing business.
The Company considers its financial position to be strong, with a
working capital ratio of 2.9 to 1.0, and debt to total capitalization of 11%.
The Company believes that its current financial position and available lines of
credit will provide ample sources of funds to meet foreseeable requirements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to legal proceedings and claims which arise in
the ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position of the Company. Additionally, in the ordinary course of
business, the Company issues standby letters of credit and bank guarantees as
security for advances, progress payments and performance on long-term
contracts. The Company is contingently liable for such obligations which
amounted to approximately $16,350,000 at December 31, 1993.
Item 6. Exhibits and Reports on Form 8-K
(b) The Company did not file any report on Form 8-K during the
quarter for which this report is filed.
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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.
DANIEL INDUSTRIES, INC.
________________________________
(Registrant)
Date February 11, 1994 By /s/ W. A. GRIFFIN, III
________________________________
W. A. Griffin, III
President
(Chief Operating Officer)
Date February 11, 1994 By /s/ Henry G. Schopfer, III
________________________________
Henry G. Schopfer, III
Vice President, Finance
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