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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
<TABLE>
<S> <C>
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM __________ TO __________
</TABLE>
COMMISSION FILE NO. 1-6098
DANIEL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 74-1547355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9753 PINE LAKE DRIVE 77055
HOUSTON, TEXAS (Zip code)
(Address of principal executive
offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 467-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
</TABLE>
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------------------------ ------------------------------------
<S> <C>
COMMON STOCK, $1.25 PAR VALUE NEW YORK STOCK EXCHANGE
RIGHTS TO PURCHASE PREFERRED SHARES NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
At November 30, 1994, the aggregate market value of Common Stock, $1.25 par
value, of the registrant held by non-affiliates of the registrant was
$122,800,379. As of that date, there were outstanding 12,032,470 shares of
Common Stock, $1.25 par value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
There is incorporated by reference in Part III of this Annual Report on
Form 10-K the information contained under the headings "Election of Director",
"Company Executive and Subsidiary Officer", "Executive Compensation", "Certain
Relationships and Related Transactions" and "Principal Stockholders" in the
Registrant's Proxy Statement for its Annual Meeting of Stockholders proposed to
be held February 2, 1995, which Proxy Statement shall be filed within 120 days
of the end of the registrant's fiscal year.
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<PAGE> 2
P A R T I
ITEM 1. BUSINESS.
Daniel Industries, Inc. is engaged in providing products and systems
used to measure rates of flow and accumulated volumes of fluids, primarily oil
and natural gas. The Company manufactures a variety of measurement devices
including orifice, turbine, positive displacement, ultrasonic and oval gear
meters and a wide range of electronic instruments used in conjunction with flow
measurement products. The Company also designs, fabricates and assembles
large, automated flow measurement systems to meet specific needs and
applications, as well as other systems utilized for enhanced oil recovery. The
Company's flow measurement products and systems are used mainly by producers,
refiners and transporters of oil and natural gas. The Company is also engaged
in the manufacture and sale of pipeline valves, fasteners and fabricated
production equipment.
Daniel Industries, Inc. was incorporated under the laws of Delaware in
1988 as the successor to a business started in 1930. Unless the context
indicates otherwise, references herein to the "Company" refer to Daniel
Industries, Inc., its subsidiaries and their predecessors.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company has two industry segments: Flow Measurement and Energy
Products. Financial information for the Company's industry segments is
presented in NOTE 13 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Such
information is hereby incorporated by reference herein.
FLOW MEASUREMENT
Since its inception in 1930, the Company has manufactured products
that employ a method known as differential orifice measurement to measure
fluids, primarily natural gas. These orifice measurement products cause a
decline in pressure as fluid flows through the device. This decline in
pressure is measured and used to determine rates of flow and accumulated
volumes of fluid. In addition to its orifice measurement products, the Company
manufactures flow measurement products using turbines whose frequency of
rotation indicates rates of flow and accumulated volumes of fluid. The Company
also manufactures positive displacement and oval gear meters for the
measurement of various liquid flows. Sales of all metering equipment worldwide
contributed 43%, 53% and 49% of this industry segment's revenues in fiscal
1994, 1993 and 1992, respectively.
The Company also manufactures a wide range of electronic instruments
used in conjunction with flow measurement products. Sales of electronic
products worldwide contributed approximately 20%, 24% and 25% of this industry
segment's revenues in fiscal 1994, 1993 and 1992, respectively. The Company's
electronic flow computers instantaneously compute and display the rate of flow
and accumulated volumes of fluid. The Company has developed several software
programs and has an in-house programming capability to meet specific customer
applications. Other electronic products manufactured by the Company include
chromatographs for analysis of natural gas to determine its BTU content and
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ultrasonic flowmeters for nonintrusive gas flow measurement. In addition, the
Company designs and manufactures electronic products for the automation of
liquid petroleum loading facilities.
The Company designs, fabricates and assembles large flow measurement
systems, including specialized electronic and control systems for the
automation of liquid petroleum product loading systems. Sales of all systems
worldwide contributed approximately 37%, 23% and 26% of this industry segment's
revenues in fiscal 1994, 1993 and 1992, respectively. A typical system is
mounted on one or more skids for ease of installation and contains various
mechanical equipment, electronic instruments, piping, supports and walkways. A
system can be operated manually or it can be completely automated through the
use of computers and other instrumentation supplied and programmed by the
Company. In the process of supplying a flow measurement system, the Company
first defines the total measurement requirements, and subsequently designs the
system. The Company then fabricates or supplies the various mechanical and
electronic components of the system. The system is assembled and tested at the
Company's Houston, Texas or Falkirk, Scotland plant. The Company also has the
capability to supervise on-site installation and start-up operations of the
system and to provide servicing for the system after installation.
The Company has sales offices in eight United States cities, Calgary,
Canada; Cramerview, South Africa; Dammam, Saudi Arabia; Datchet, England;
Edmonton, Canada; Falkirk, Scotland; Leiden, Holland; Moscow, Russia; Potsdam-
Babelsberg, Germany and Singapore through which it sells its flow measurement
products and systems. In addition, sales are made domestically and in certain
foreign countries through a system of sales representatives and distributors
working on a commission basis. Although the Company's flow measurement
products and systems have been used in water handling and the chemical and
power generation industries, sales are principally to integrated oil companies,
gas pipeline companies and other concerns engaged in the production,
transmission and marketing of oil and natural gas. The geographic market for
the Company's flow measurement products and systems is worldwide.
In competing for the sale of large systems, the Company may enter into
contracts which provide for the completion of the systems at specified prices
and in accordance with time schedules. These contracts may involve greater
risks as a result of unforeseen increases in the prices of raw materials and
other costs. In its financial statements, the Company accounts for large
systems using the percentage-of-completion method, which requires recognition
of revenues and costs over the life of the contract, rather than solely at the
time the contract is completed.
The Company has not compiled detailed market information regarding its
competitive position in the flow measurement industry. However, the Company
believes that, in terms of revenues, it is the largest United States producer
of orifice measurement products used to measure natural gas flows in custody
transfer. In addition, management considers the Company to be a major
international supplier of large flow measurement systems, which are used to
measure crude oil flows. Among the other devices used for flow measurement are
turbine measurement products, but the Company is less influential in the market
for those products. In general, the Flow Measurement segment of the Company
has
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numerous competitors, none of which is considered to be dominant. The
principal competitive factors in this industry include, singularly or in
various combinations, price, design, efficiency and the ability of the products
or systems to measure and display rates of flow and accumulated volumes of
fluid accurately.
At September 30, 1994 and 1993, the Company's backlog of orders
believed to be firm for the Flow Measurement segment's products and systems was
approximately $27,400,000 and $64,800,000, respectively. The Company expects
that substantially all of the backlog at September 30, 1994, will be filled
during the fiscal year ending September 30, 1995. (See "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." -
"Results of Operations".)
ENERGY PRODUCTS
The Energy Products segment offers to the energy markets an array of
services and products which include: pipeline valves, fasteners including stud
bolts, nuts, ring joint gaskets and industrial flanges, and energy recovery
products such as steam generators and fabricated production equipment.
The Company is engaged in the manufacture of fabricated gate valves
that range from 2" to 84" in diameter. The bodies of these valves are
fabricated from plate steel which is cut and welded, rather than from castings.
The Company's gate valve operation includes a line of cast gate valves ranging
from 2" to 6" in diameter and a round body design, which incorporates a
combination of fabricated and cast valve components, for large diameter and
high pressure applications. The Company manufactures a line of forged-body
trunnion ball valves in 2" through 48" bore sizes. Their primary application
is pipeline block valves and on/off service in liquid and gas systems. The
Company also manufactures two-way and four-way cast steel plug-type valves
ranging from 2" to 30" and 3" to 24" in diameter, respectively. These valves
are used in metering systems and other applications which require more precise
cutoff or control of pipeline flows.
The Company's pipeline valves are marketed by two domestic sales
offices and offices in Calgary, Canada; Cramerview, South Africa; Dammam, Saudi
Arabia; Datchet, England; Leiden, Holland; Moscow, Russia and Singapore. In
addition, sales are made worldwide through representatives working on a
commission basis. The Company's valves are sold primarily to contractors,
refineries and transmission companies for use in controlling liquid or gas
pipeline flows.
The Company competes worldwide with numerous manufacturers of
fabricated, forged and cast valves. Ability to meet strict delivery
requirements, as well as price and quality of the valves sold, are considered
to be the principal competitive factors in the sale of pipeline valves.
The Company manufactures a complete line of alloy stud bolts. Stud
bolts are unheaded bolts which are either entirely threaded or threaded only on
the ends. Generally, the stud bolts manufactured by the Company are sold with
attached nuts which are purchased from outside sources. The Company's bolt
manufacturing process uses on-site heat-treating furnaces which enable the
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Company to purchase untreated coils of alloy steel, rather than the more
expensive heat-treated and sized bars of steel traditionally used by stud bolt
manufacturers. The manufacturing process is conducted under strict quality
control, and various tests are run to ensure the strength and quality of the
bolts produced. The Company also manufactures ring joint gaskets for
production well-head equipment, valves and piping systems. These gaskets
frequently are used in conjunction with stud bolts and nuts. The Company also
manufactures industrial flanges.
The fasteners are sold through the Company's own sales force, located
in Aberdeen, Scotland; Edmonton, Canada; Gardena, California; and Houston,
Texas, to valve manufacturers, engineering contractors, supply houses and bolt
and nut distributors. The Company's fasteners are used mainly by manufacturing
industries which supply equipment to companies engaged in the production,
processing and transporting of oil and natural gas.
The Company is one of many foreign and domestic manufacturers of
fasteners. The Company believes that neither the Company nor any of its
competitors clearly dominates the market. However, competition from foreign
manufacturers is intense. Strength and uniformity of the product, price and
the ability to meet delivery requirements are the principal competitive factors
in the fastener industry.
The Company is a leading manufacturer of large steam generators and
water treatment equipment for enhanced oil recovery operations and also
produces equipment for pipeline and production facilities. While these markets
are not completely new, the international requirements for these products have
increased. To remove certain toxic materials from major gas pipelines, the
Company has designed and manufactured pipeline gas blow-down packages which
safely remove the unwanted materials. These trailer-mounted units separate
gas, liquids and solids; reduce pressure; measure flow rate and reduce noise of
blow-down gas to a permissible level. In addition, the Company makes LACT
units, separators, strainers, heater-treater units and meter provers.
At September 30, 1994 and 1993, the Company's backlog of orders
believed to be firm for the Energy Products segment was approximately
$6,000,000 and $7,400,000, respectively. The Company expects that
substantially all of the backlog at September 30, 1994, will be filled during
the fiscal year ending September 30, 1995.
FOREIGN OPERATIONS
Approximately 26% of the Company's consolidated revenues for its
fiscal year ended September 30, 1994, was attributable to sales of flow
measurement products and systems manufactured or assembled at the Company's
plants in Falkirk, Scotland and Potsdam-Babelsberg, Germany. Sales of Company
products and systems for foreign installation or use outside the United States,
inclusive of the Scotland and German operations, contributed approximately 60%,
52% and 54% of the Company's consolidated revenues in fiscal 1994, 1993 and
1992, respectively. The Company's operations outside the United States are
subject to the usual risks of such operations, including changes in
governmental policies, currency transfer restrictions and devaluation. The
Company endeavors to
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minimize these risks through the use of letters of credit, United States
dollar-denominated contracts and hedging of specific foreign currency
commitments.
Financial information about the Company's foreign and domestic
operations and export sales by geographic area is presented in NOTE 13 of NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS. Such information is hereby incorporated
by reference herein.
RAW MATERIALS
Raw materials and other supplies used by the Company in the
manufacture and fabrication of its products are purchased from suppliers and
other manufacturers. No purchases are made under long-term contracts, and the
Company does not consider that it is materially dependent upon any single
source of supply. From time to time, however, the Company encounters
difficulty in obtaining steel and steel castings.
CUSTOMERS
Occasionally, the Company's Flow Measurement segment is engaged to
supply one or more large flow measurement systems for a single installation. A
few contracts to design and assemble such systems would be of material
importance to that industry segment's results of operations for a particular
fiscal period. However, the Company is not dependent on a few customers on a
continuing basis.
PATENTS AND RESEARCH
The Company has sought patent protection for products which appear to
have commercial importance. The Company does not consider that the patents
currently held by it are material to its operations as a whole.
The Company engages in research activities with a view to the
development of new products as well as the improvement of existing products.
The amounts spent during the fiscal years ended September 30, 1994, 1993 and
1992, on research and product development activities were approximately
$4,100,000, $5,300,000 and $5,500,000, respectively.
EMPLOYEES
At September 30, 1994, the Company employed approximately 1,450
persons, of whom approximately 1,100 were located in the United States,
approximately 250 were located in the United Kingdom and 100 were located in
other nations.
ENVIRONMENTAL COMPLIANCE
Compliance with existing governmental regulations which have been
enacted or adopted regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment, does not have, nor
is expected to have, a material effect on the Company.
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OTHER BUSINESS CONDITIONS AND REGULATIONS
The Company's business is largely dependent upon the level and nature
of the activities in the worldwide oil and natural gas industries. The level
of such activities may be influenced by numerous factors, including general
economic conditions, the demand for oil and/or natural gas, development of
alternative energy sources, taxation, price controls and other political and
economic conditions.
The business of the Company is moderately seasonal to the extent that
many of the Company's products and systems are installed and its services
provided out-of-doors. Consequently, sales attributable to these products and
services tend to increase somewhat during the summer months when the weather is
more favorable, and there are more daylight hours.
For a discussion of the Company's practices relating to working
capital, see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS." - "Liquidity and Capital Resources."
ITEM 2. PROPERTIES.
The principal offices and manufacturing facilities of the Company are
as follows:
<TABLE>
<CAPTION>
APPROX. AREA
LOCATION (SQ. FT.) TENURE UTILIZATION
-------- ------------ ------ -----------
<S> <C> <C> <C>
Flow Measurement Segment
- ------------------------
Houston, Texas(a) 428,000 Owned Manufacture of flow
Falkirk, Scotland 258,000 Owned measurement products and
design, fabrication and
testing of flow measure-
ment systems.
Potsdam-Babelsberg, 180,000 Owned Manufacture of flow measure-
Germany ment products.
Houston, Texas 54,000 Owned Fabrication of flow computers,
automation systems, gas
chromatographs and instrument
panels.
Calgary, Canada 15,000 Leased Manufacture and sales of flow
measurement products.
</TABLE>
(a) Includes Corporate headquarters.
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<TABLE>
<S> <C> <C> <C>
Houston, Texas 13,000 Owned The building is being held
for future use or possible
sale.
Waller County, Texas 321 acres Owned Land purchased for future
development.
Energy Products Segment
- -----------------------
Houston, Texas 189,000 Owned Manufacture of stud bolts,
ring joint gaskets and
industrial flanges.
Houston, Texas 213,000 Owned Manufacture of pipeline
valves.
Houston, Texas 44,000 Owned Fabrication and assembly of
energy recovery products.
Matamoros, Mexico 35,000 Owned The building was leased to a
suitable tenant through August
1994. A tentative agreement
has been reached for the sale
of this property.
Gardena, California 20,000 Leased Wholesale gaskets, bolts and
nuts.
Edmonton, Canada 16,000 Leased Wholesale gaskets, bolts and
nuts.
</TABLE>
ITEM 3. 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 amounts of
ultimate liability, if any, with respect to these actions will not materially
affect the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There was no matter during the fourth quarter of the fiscal year
covered by this Annual Report on Form 10-K submitted to a vote of security
holders, through the solicitation of proxies or otherwise.
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P A R T II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The shares of common stock, $1.25 par value, of the Company are traded
on the New York Stock Exchange under the symbol DAN. At November 30, 1994, the
approximate number of holders of record of shares of common stock of the
Company was 1,372. The following table sets forth for each quarterly period
during the fiscal years ended September 30, 1994 and 1993 (i) the high and low
sales prices of shares of common stock of the Company and (ii) the amount of
cash dividends per share paid on the common stock of the Company. Such
dividends were declared and paid on a quarterly basis.
<TABLE>
<CAPTION>
PRICE OF COMMON DIVIDENDS
STOCK PAID
----------------- ---------
HIGH LOW
------ ------
<S> <C> <C> <C>
Fiscal 1994 Quarter Ended:
December 31, 1993. . . . . . . . . . . . . $15 7/8 $12 3/8 $.045
March 31, 1994 . . . . . . . . . . . . . . 13 5/8 10 1/2 .045
June 30, 1994. . . . . . . . . . . . . . . 12 3/8 10 3/8 .045
September 30, 1994 . . . . . . . . . . . . 12 1/2 9 7/8 .045
Fiscal 1993 Quarter Ended:
December 31, 1992. . . . . . . . . . . . . 12 1/4 10 1/2 .045
March 31, 1993 . . . . . . . . . . . . . . 14 1/4 10 3/4 .045
June 30, 1993. . . . . . . . . . . . . . . 14 1/8 12 1/4 .045
September 30, 1993 . . . . . . . . . . . . 15 3/4 13 1/4 .045
</TABLE>
The Company is authorized by its Certificate of Incorporation to issue
up to 1,000,000 shares of serial preferred stock, $1 par value, but no shares
of serial preferred stock of the Company have been issued. Subject to the
rights of holders of serial preferred stock, the holders of shares of common
stock of the Company are entitled to receive dividends when and as declared by
the Board of Directors of the Company out of funds legally available therefor.
The Company has paid cash dividends on its common stock during each
year since 1948. The Company's future dividend policy with respect to its
common stock, including the frequency, type and amount of dividends, if any,
will be determined by its Board of Directors in light of its results of
operations, its cash flow, its anticipated capital requirements, possible
future issuances of serial preferred stock and the restrictions as to payment
of dividends contained in instruments pursuant to which the Company has issued
long-term debt. (See NOTE 9 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . .$203,766 $180,249 $210,362 $201,744 $170,558
Net Income (Loss). . . . . 1,324 5,025 8,373 (1,969) 8,112
Total Assets . . . . . . . 187,337 178,068 177,079 192,091 155,827
Long-Term Debt . . . . . . 11,429 14,286 17,143 20,000 23,600
Earnings (Loss) per Share. .11 .42 .70 (.18) .78
Cash Dividends per Share . .18 .18 .18 .18 .18
Average Shares Outstanding 12,030 11,991 11,960 10,925 10,372
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
OVERVIEW
Revenues for the fiscal year ended September 30, 1994 were
$203,766,000 compared to $180,249,000 in fiscal 1993. Net income was
$1,324,000, or $.11 per share, compared to $5,025,000, or $.42 per share, last
year. The Company's Flow Measurement segment, which consists of meters,
electronic instruments and engineered systems, reported higher revenues and
earnings for fiscal 1994 compared to a year ago. The Flow Measurement segment
serves primarily worldwide natural gas markets. The Energy Products segment,
which consists of valves, industrial fasteners and energy recovery equipment,
reported lower revenues and earnings for fiscal 1994 compared to last year.
The Energy Products segment serves primarily the domestic crude oil markets.
FISCAL 1994 VS. FISCAL 1993
Consolidated revenues increased 13% to $203,766,000 for fiscal 1994,
from $180,249,000 for fiscal 1993. The Flow Measurement segment posted a 32%
increase in revenues to $145,657,000 for the current year, from $110,009,000
for last year. Sales of flow measurement systems, which comprised 37% and 23%
of this segment's revenues in the respective periods, increased significantly
in the more recent period due primarily to construction of two gas metering
stations destined for the North Sea. Sales of flow measurement products
increased eight percent, reflecting increased demand for the Company's metering
and electronic products, primarily in foreign markets. The Energy Products
segment experienced a 17% decline in revenues to $57,739,000 for the current
year, compared to $69,424,000 for last year. Sales of pipeline valves, which
comprised approximately one-half of this segment's revenues in the respective
periods, decreased due to a more competitive worldwide market.
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Consolidated backlog at September 30, 1994, was approximately
$33,400,000, compared to $72,200,000 a year ago. The decline in backlog is due
to inclusion in the prior year of an unusually large order for a flow
measurement system in the amount of approximately $23,000,000.
The consolidated gross profit margin declined to 32% of revenues for
fiscal 1994, compared to 38% of revenues for fiscal 1993. The gross profit
margin in the Flow Measurement segment declined seven percentage points to 35%
of revenues primarily due to a shift in product mix towards sales of flow
measurement systems, which earn lower margins than sales of flow measurement
products. The gross profit margin in the Energy Products segment declined
seven percentage points to 23% of revenues primarily as a result of current
year pricing pressures for pipeline valve and fastener products and declines in
operational efficiencies at both the valve and fastener operations.
Consolidated selling, general and administrative expenses increased to
$57,026,000 for fiscal 1994, from $52,592,000 for fiscal 1993. However, these
expenses, as a percentage of revenues, declined slightly between the two
periods. Within the Flow Measurement segment, selling expenses declined as a
percentage of revenues due to the change in product mix towards sales of flow
measurement systems, which have lower sales commissions than sales of flow
measurement products. General and administrative expenses also declined as a
percentage of revenues, resulting from the significant increase in sales. The
Energy Products segment's expenses increased as a percentage of revenues since
certain of these expenses are fixed and do not decrease proportionately with
sales. Corporate expenses increased 66% to $8,273,000 primarily due to
reductions of accruals in fiscal 1993 relating to settled litigation.
Research and development expenses decreased 23% to $4,094,000 for
fiscal 1994, compared to $5,343,000 for fiscal 1993, primarily due to
completion of certain electronics projects.
Consolidated depreciation and amortization expense increased 14% to
$7,483,000 for fiscal 1994 due to capital expenditures in fiscal 1993 in both
the Flow Measurement and Energy Products segments.
Consolidated interest expense decreased eight percent to $1,927,000
for fiscal 1994 due to lower long-term debt levels, partially offset by
increased short-term borrowing levels.
The effective tax rate for fiscal 1994 of 38% is consistent with the
effective tax rate in fiscal 1993. Effective October 1, 1993, the Company
adopted the Financial Accounting Standards Board's Statement No. 109,
"Accounting for Income Taxes" ("FAS 109"), changing the method of determining
reported income tax expense. Financial statements for prior years have not
been restated and the cumulative effect of the accounting change was not
material. (See NOTE 8 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
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FISCAL 1993 VS. FISCAL 1992
Consolidated revenues decreased 14% to $180,249,000 for fiscal 1993,
from $210,362,000 for fiscal 1992. The Flow Measurement segment experienced a
10% decline in revenues to $110,009,000 for fiscal 1993. Sales of flow
measurement products, which comprised approximately three-fourths of this
segment's sales in both fiscal 1993 and 1992, decreased $5,206,000 due to the
severe slowdown in the domestic oil and gas markets. Sales of flow measurement
systems, which accounted for approximately 25% of this segment's sales in both
fiscal 1993 and 1992, decreased $6,492,000. This decrease can be attributed to
a temporary decline in volume at the Company's U.K. subsidiary and the
strengthening of the U.S. dollar against the British pound. The Energy
Products segment experienced a 21% decline in revenues to $69,424,000 for
fiscal 1993. Sales of pipeline valve products, which comprised approximately
half of this segment's sales in fiscal 1993 and 1992, decreased $9,832,000 as a
result of comparison to fiscal 1992 which included an unusually large
international order. Sales of fasteners and related products, which accounted
for approximately one-third of this segment's sales in both fiscal 1993 and
1992, decreased $3,450,000 due primarily to the severe slowdown in the domestic
oil and gas markets.
The consolidated gross profit margin remained flat at 38% of revenues
for fiscal 1993 and 1992. The gross profit margin in both the Flow Measurement
and Energy Products segments remained unchanged at 42% and 30% of revenues,
respectively.
Consolidated selling, general and administrative expenses decreased
10% to $52,592,000 for fiscal 1993, compared to $58,408,000 for fiscal 1992.
The Flow Measurement segment's expenses decreased 8% to $31,488,000 and the
Energy Products segment's expenses decreased 4% to $16,119,000. Corporate
expenses decreased 33% to $4,985,000 due primarily to the realization of
$1,500,000 pretax income from an insurance settlement. This settlement was a
reimbursement of litigation expenses and defense costs incurred in prior years.
Consolidated selling, general and administrative expenses, however, increased
as a percentage of sales since certain of these expenses are fixed and do not
decrease proportionately with revenues.
Consolidated interest expense declined 13% to $2,088,000 for fiscal
1993 as a result of the retirement of debt.
The effective tax rate of approximately 38% for fiscal 1993 is greater
than the U.S. statutory rate primarily due to losses at the Company's German
operation for which no tax benefits are currently recognized.
IMPACT OF INFLATION
An effect of inflation is to increase the prices of labor and raw
materials used to manufacture the Company's products, which may require
periodic increases in the prices for those products to maintain gross profit
margins. Although this principle impacts most manufacturers, management does
not consider the Company to have any unique difficulty in managing the effects
of inflation on the Company's business. With respect to the effect of
inflation on reported income,
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the Company applies the LIFO method to a majority of its inventories to account
for production costs.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1994, the Company's working capital balance was
$65,990,000, compared to $67,209,000 at September 30, 1993. Although the
Company's working capital position decreased slightly between the two periods,
its cash balance declined significantly to $2,520,000 at September 30, 1994,
from $23,220,000 at September 30, 1993. The decrease in cash was due to
capital expenditures, the funding of operational activities, payments on
long-term debt and payments of dividends. Receivables, inventories and costs
in excess of billings on contracts in progress increased an aggregate of
$19,743,000, consistent with the increase in revenues in the Flow Measurement
segment. The Company recorded a current deferred tax asset, in the amount of
$5,126,000 at September 30, 1994, in connection with the implementation of FAS
109. (See NOTE 8 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
Working capital at September 30, 1994, included $45,314,000 of
inventory, which is not as liquid as other current assets.
Since April 1994, the Company has relied upon short-term borrowings
under its bank lines of credit to supplement its working capital and other cash
requirements. At September 30, 1994, the Company had uncommitted short- term
lines of credit aggregating approximately $40,000,000. As of September 30,
1994 and December 19, 1994, borrowings under these lines were $5,900,000 and
$13,550,000, respectively, at weighted average interest rates of 5.54% and
6.3%, respectively. While the Company expects its borrowing requirements to
generally increase in fiscal 1995 over present levels, the timing of one or a
few major expenditures or receipts may affect the level of borrowings at a
particular point in time. The Company considers its financial position to be
strong, with a working capital ratio of 2.4 to 1.0 and debt to total
capitalization of 14%. The Company believes that its current financial
position and available lines of credit will provide ample sources of funds to
meet foreseeable requirements.
The Company anticipates capital expenditures in fiscal 1995 of
approximately $6,000,000, compared to $13,631,000 in fiscal 1994 and
$11,793,000 in fiscal 1993. Most of the anticipated capital expenditures for
fiscal 1995 are not the subject of firm commitments, and the Company may modify
its plans depending upon future results of operations and other factors.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required to be filed under this item are
presented on pages 19 through 36 of this report, and the supplementary
financial information required to be filed under this item is presented in NOTE
14 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Such financial statements
are hereby incorporated by reference under this Item 8.
12
<PAGE> 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During the twenty-four months prior to September 30, 1994, the Company
did not file a Form 8-K which reports a change of accountants or disagreement
with its accountants on any matter of accounting principles, practices or
financial statement disclosure.
P A R T III
ITEMS 10 TO 13 INCLUSIVE.
The information contained under the headings "Election of Directors",
"Company Executive and Subsidiary Officers", "Executive Compensation", "Certain
Relationships and Related Transactions" and "Principal Stockholders" in the
Company's Proxy Statement for its Annual Meeting of Stockholders proposed to be
held February 2, 1995, which Proxy Statement shall be filed within 120 days of
the end of the Company's fiscal year, is hereby incorporated by reference
herein.
13
<PAGE> 15
P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS A PART OF THIS REPORT
1. Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of independent accountants . . . . . . . . . . . . . 18
Consolidated balance sheet at September 30, 1994 and 1993. . 19
Consolidated statement of operations for the years ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . 20
Consolidated statement of stockholders' equity for the
years ended September 30, 1994, 1993 and 1992. . . . . . 21
Consolidated statement of cash flows for the years
ended September 30, 1994, 1993 and 1992. . . . . . . . . 22
Notes to consolidated financial statements . . . . . . . . 23 - 36
</TABLE>
2. Financial Statement Schedules
<TABLE>
<S> <C> <C> <C>
V - Property, plant and equipment . . . . . . . . . . . . 37
VI - Accumulated depreciation of property,
plant and equipment . . . . . . . . . . . . . . . 38
IX - Short-term borrowings . . . . . . . . . . . . . . . . 39
</TABLE>
All other schedules and financial statements are omitted because they
are not applicable or the required information is shown in the financial
statements or notes thereto listed above in Item 14(a) 1.
3. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C>
2.1 - Plan and Agreement of Merger dated as of January 22, 1988, by and between Daniel Industries, Inc., a
Texas corporation ("Daniel Texas"), and Daniel Industries, Inc., a Delaware corporation (the
"Company"), filed as Exhibit 2.1 to the Company's Registration of Securities of Certain Successor
Issuers on Form 8-B, and hereby incorporated by reference herein.
3.1 - Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Company's Registration of
Securities of Certain Successor Issuers on Form 8-B dated May 5, 1988, and hereby incorporated by
reference herein.
3.2 - Bylaws of the Company, as amended through February 25, 1994.
3.3 - Certificate of Designation, Powers, Preferences and Rights of Series A Junior Participating Preferred
Stock filed as Exhibit 3.3 in the
</TABLE>
14
<PAGE> 16
<TABLE>
<S> <C> <C>
Company's Amendment to Application or Report on Form 8, and hereby incorporated by reference herein.
4.1 - Note Purchase Agreement dated as of December 5, 1988, between the Company and The Variable Annuity Life
Insurance Company, The Mutual Benefit Life Insurance Company, MONY Life Insurance Company of America
and MONY Legacy Life Insurance Company (including the form of the Company's Senior Notes in the
aggregate in the principal amount of $20,000,000) filed as Exhibit 4.3 to the Company's Annual Report
on Form 10-K for the year ended September 30, 1988, and hereby incorporated by reference herein.
4.2 - Rights Agreement dated as of May 31, 1990, between the Company and Wachovia Bank and Trust Company,
N.A., as Rights Agent, filed as Exhibit 1 to the Company's Registration of Certain Classes of
Securities on Form 8-A filed June 5, 1990, and hereby incorporated by reference herein.
4.3 - Certificate of Designation, Powers, Preferences and Rights of Series A Junior Participating Preferred
Stock (included as Exhibit 3.3 hereto).
10.1 - Description of the Company's key employees' bonus arrangement filed as Exhibit 10.1 in the Company's
Amendment to Application or Report on Form 8, and hereby incorporated by reference herein.
10.2 - 1977 Stock Option Plan, as amended and restated on December 16, 1993.
10.3 - 1981 Stock Option Plan, as amended and restated on December 31, 1986, filed as Exhibit 19.2 to Daniel
Texas's Quarterly Report on Form 10-Q for the quarter ended December 31, 1986, and hereby incorporated
by reference herein.
10.4 - Form of Director's Stock Option Agreements dated October 9, 1986, between Daniel Texas and the several
non-employee directors, filed as Exhibit 19.1 to Daniel Texas's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1987, and hereby incorporated by reference herein.
10.5 - Form of Agreement dated as of February 9, 1984, Amending and Restating Employment Agreement between
Daniel Texas and Each of W. A. Griffin and H. D. Morrison, Jr. filed as Exhibit 10.5 in the Company's
Amendment to Application or Report on Form 8, and hereby incorporated by reference herein.
10.6 - Deferred Compensation Agreement for Employees effective as of October 31, 1986, filed as Exhibit 19.3
to Daniel Texas's Quarterly Report on Form 10-Q for the quarter ended December 31, 1986, and hereby
incorporated by reference herein.
</TABLE>
15
<PAGE> 17
<TABLE>
<S> <C> <C>
10.7 - Agreement Amending Amended and Restated Director's Stock Option Agreement between the Company and
Gibson Gayle, Jr. filed as Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1991, and hereby incorporated by reference herein.
10.8 - Agreement Amending Amended and Restated Director's Stock Option Agreement between the Company and each
of Ronald C. Lassiter, William C. Morris, Joseph L. Parrish, Richard L. O'Shields and James R. Whatley,
filed as exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended September 30,
1991, and hereby incorporated by reference herein.
10.9 - Agreement amending Director's Stock Option Agreement between the Company and Leo E. Linbeck, Jr. filed
as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended September 30, 1991, and
hereby incorporated by reference herein.
21 - Subsidiaries of the Company.
23 - Consent of Independent Accountants.
27 - Financial data schedule.
</TABLE>
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the fourth
quarter of its fiscal year ended September 30, 1994.
16
<PAGE> 18
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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: DECEMBER 16, 1994 BY W. A. GRIFFIN
W. A. Griffin
CHAIRMAN OF THE BOARD
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
W. A. GRIFFIN Chairman of the Board December 16, 1994
- ------------------------------ and a Director
(W. A. Griffin) (Chief Executive Officer)
W. A. GRIFFIN, III President and a Director December 16, 1994
- ------------------------------ (Chief Operating Officer)
(W. A. Griffin, III)
HENRY G. SCHOPFER, III Vice President, Finance December 16, 1994
- ------------------------------
(Henry G. Schopfer, III)
MICHAEL R. YELLIN Vice President, Secretary December 16, 1994
- ------------------------------ and Treasurer
(Michael R. Yellin)
RALPH H. CLEMONS, JR. Director December 16, 1994
- ------------------------------
(Ralph H. Clemons, Jr.)
RICHARD L. O'SHIELDS Director December 16, 1994
- ------------------------------
(Richard L. O'Shields)
WILLIAM C. MORRIS Director December 16, 1994
- ------------------------------
(William C. Morris)
BRIAN E. O'NEILL Director December 16, 1994
- ------------------------------
(Brian E. O'Neill)
GIBSON GAYLE, JR. Director December 16, 1994
- ------------------------------
(Gibson Gayle, Jr.)
RONALD C. LASSITER Director December 16, 1994
- ------------------------------
(Ronald C. Lassiter)
LEO E. LINBECK, JR. Director December 16, 1994
- ------------------------------
(Leo E. Linbeck, Jr.)
</TABLE>
17
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
DANIEL INDUSTRIES, INC.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) 1 and 2 on page 14 present fairly, in all material
respects, the financial position of Daniel Industries, Inc. and its
subsidiaries at September 30, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
November 15, 1994
18
<PAGE> 20
DANIEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
September 30,
-----------------------
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 2,520 $ 23,220
Receivables, net of reserve of $243 and $96 . . . . . . . . . . . . . . 38,146 33,105
Costs in excess . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,888 6,054
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,314 39,446
Deferred taxes on income . . . . . . . . . . . . . . . . . . . . . . . 5,126
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,657 3,350
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 111,651 105,175
Property, plant and equipment at cost, net . . . . . . . . . . . . . . . 69,796 64,477
Intangibles and other assets . . . . . . . . . . . . . . . . . . . . . . 5,890 8,416
-------- --------
$187,337 $178,068
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,900
Current maturities of long-term debt . . . . . . . . . . . . . . . . . 2,857 $ 2,857
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,946 17,395
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,958 17,714
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 45,661 37,966
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,429 14,286
Deferred taxes on income . . . . . . . . . . . . . . . . . . . . . . . . 8,367 4,766
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 65,457 57,018
-------- --------
Commitments and contingencies
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,
12,032,470 and 12,026,450 shares issued . . . . . . . . . . . . . . . 15,041 15,033
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . 89,675 89,564
Translation component . . . . . . . . . . . . . . . . . . . . . . . . . (2,061) (3,614)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,225 20,067
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 121,880 121,050
-------- --------
$187,337 $178,068
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 21
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------
1994 1993 1992
---------- --------- ---------
(in thousands except per share amounts)
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $203,766 $180,249 $210,362
-------- -------- --------
Costs and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . 138,599 112,144 131,112
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . 57,026 52,592 58,408
Research and development expenses . . . . . . . . . . . . 4,094 5,343 5,474
Interest expense . . . . . . . . . . . . . . . . . . . . 1,927 2,088 2,412
-------- -------- --------
201,646 172,167 197,406
-------- -------- --------
Income before income tax expense . . . . . . . . . . . . . 2,120 8,082 12,956
Income tax expense . . . . . . . . . . . . . . . . . . . . 796 3,057 4,583
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,324 $ 5,025 $ 8,373
======== ======== ========
Earnings per common share . . . . . . . . . . . . . . . . . $ .11 $ .42 $ .70
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 22
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
Capital
Common Stock in Excess
-------------------- of Par Translation Retained
Shares Amount Value Component Earnings Total
---------- -------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1991 . 11,899,334 $14,874 $88,613 $(1,126) $10,982 $113,343
Net income . . . . . . . . . 8,373 8,373
Cash dividends . . . . . . . (2,154) (2,154)
Exercise of stock options 69,653 87 391 478
Aggregate translation
adjustment for the year . . 387 387
---------- ------- ------- ------- ------- --------
Balance at September 30, 1992 . 11,968,987 14,961 89,004 (739) 17,201 120,427
Net income . . . . . . . . . 5,025 5,025
Cash dividends . . . . . . . (2,159) (2,159)
Exercise of stock options,
including tax benefits . . 57,463 72 560 632
Aggregate translation
adjustment for the year . . (2,875) (2,875)
---------- ------- ------- ------- ------- --------
Balance at September 30, 1993 . 12,026,450 15,033 89,564 (3,614) 20,067 121,050
Net income . . . . . . . . . 1,324 1,324
Cash dividends . . . . . . . (2,166) (2,166)
Exercise of stock options,
including tax benefits . . 6,020 8 111 119
Aggregate translation
adjustment for the year . . 1,553 1,553
---------- ------- ------- ------- ------- --------
Balance at September 30, 1994 . 12,032,470 $15,041 $89,675 $(2,061) $19,225 $121,880
========== ======= ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 23
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------
1994 1993 1992
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,324 $ 5,025 $ 8,373
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . 7,483 6,584 6,598
Deferred income taxes . . . . . . . . . . . . . . . . . (1,810) 468 5,205
Changes in operating assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . (5,041) 1,521 2,821
Inventories . . . . . . . . . . . . . . . . . . . . . (5,868) 1,122 6,395
Costs in excess . . . . . . . . . . . . . . . . . . . (8,834) (3,150) 2,444
Accounts payable and accrued liabilities. . . . . . . 2,079 4,698 (17,876)(a)
Other assets/liabilities, net . . . . . . . . . . . . 1,223 (100)(a) 1,654
------- ------- -------
Net cash provided by (used in) operating activities . . . . . (9,444) 16,168 15,614
------- ------- -------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . (13,631) (11,793) (8,758)
Acquisition and related costs . . . . . . . . . . . . . . . (4,931)
Purchase of investment securities . . . . . . . . . . . . . (3,067)
Investment in license agreement . . . . . . . . . . . . . . (2,667)
Proceeds from sale of investment securities . . . . . . . . 1,000
Proceeds from sale of assets. . . . . . . . . . . . . . . . 304 375 1,203
------- ------- -------
Net cash used in investing activities . . . . . . . . . . . . (12,327) (17,152) (12,486)
------- ------- -------
Cash flows from financing activities:
Net borrowings on lines of credit . . . . . . . . . . . . . 5,900
Payments on long-term debt. . . . . . . . . . . . . . . . . (2,857) (2,857) (3,600)
Cash dividends paid, $.18 per share . . . . . . . . . . . . (2,166) (2,159) (2,154)
Activity under stock option plan . . . . . . . . . . . . . 119 632 478
------- ------- -------
Net cash provided by (used in) financing activities . . . . . 996 (4,384) (5,276)
------- ------- -------
Effect of exchange rate changes on cash and cash equivalents. 75 (661) 166
------- ------- -------
Decrease in cash and cash equivalents . . . . . . . . . . . . (20,700) (6,029) (1,982)
Cash and cash equivalents, beginning of year. . . . . . . . . 23,220 29,249 31,231
------- ------- -------
Cash and cash equivalents, end of year. . . . . . . . . . . . $ 2,520 $23,220 $29,249
======= ======= =======
(a) Includes the effects of the litigation settlement.
Cash payments for (refunds of) income taxes . . . . . . . . . $ 1,835 $ (199) $ 256
Cash payments for interest. . . . . . . . . . . . . . . . . . 2,022 2,136 2,477
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
TRANSLATION OF FOREIGN CURRENCIES
Gains and losses resulting from balance sheet translation of foreign
operations where a foreign currency is the functional currency are included as
a separate component of stockholders' equity. Gains and losses resulting from
balance sheet translation of foreign operations where the U. S. dollar is the
functional currency are included in the consolidated results of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management has determined that the fair value of the Company's
financial instruments is equivalent to the carrying amount of such instruments
as presented or disclosed in the financial statements.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
A substantial portion of the Company's trade receivables are with
customers primarily in the petroleum industry.
REVENUE RECOGNITION
Sales and cost of goods sold of large systems contracts are recorded
using the percentage-of-completion method, based on the ratio of costs incurred
to date to total estimated costs on each contract. Losses, if any, to be
incurred on contracts in progress are charged to income in full as soon as they
become apparent, and estimated warranty costs are accrued as revenues are
earned. Sales and cost of goods sold of products are recorded when the
customer takes title to the products.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost, which
includes material, labor and overhead, is determined principally by the
last-in, first-out (LIFO) method and by the average cost method.
INVESTMENTS
Marketable securities are carried at the lower of aggregate cost or
market. Realized gains and losses on the sale of investments are recognized in
income.
The Company has not elected early adoption of the Financial Accounting
Standards Board Statement No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" effective for fiscal years beginning after December 15,
1993, which is the Company's year ended September 30, 1995. The Company
believes
23
<PAGE> 25
adoption of this Statement will not materially affect the Company's financial
statements.
PROPERTY, PLANT AND EQUIPMENT
Depreciation of plant and equipment is provided over the estimated
useful lives of the various classes of assets using the straight-line method.
Maintenance and repairs are charged to expense. Renewals and betterments are
capitalized. On retirement or sale of assets, the cost of such assets and
accumulated depreciation are removed from the accounts and the gain or loss, if
any, is credited or charged to income.
INTANGIBLE ASSETS
Goodwill, representing the excess cost of purchased subsidiaries over
the fair value of net assets acquired, is amortized using the straight-line
method over a 40-year period. Other intangible assets are amortized using the
straight-line method over their estimated useful lives, none of which exceeds
12 years. At September 30, 1994 and 1993, accumulated amortization on
intangibles was approximately $2,600,000 and $2,400,000, respectively.
INCOME TAXES
Prior to October 1, 1993, the Company provided deferred income taxes
for timing differences arising when revenues or expenses were recognized in
different periods for financial reporting and tax purposes. Effective October
1, 1993, the Company adopted the Financial Accounting Standards Board Statement
No. 109, "Accounting for Income Taxes" ("FAS 109"). The statement requires the
use of an asset and liability approach for financial accounting and reporting
for income taxes. Information on the adoption of FAS 109 is set forth in NOTE
8 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
The Company does not provide for U.S. income taxes on foreign
subsidiaries' undistributed earnings intended to be permanently reinvested in
foreign operations.
EARNINGS (LOSS) AND DIVIDENDS PER SHARE
Earnings (loss) per share are computed based on the average number of
shares outstanding during each year. Dividends per share are stated at the
current equivalent of the number of shares outstanding at the time the
dividends were declared. Stock options outstanding have not been included in
the computation of earnings per share since the effect is not significant.
NOTE 2 - ACQUISITION
As previously reported in the Company's Annual Report on 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. Registration of legal title in the Company's
name was completed in June 1994.
24
<PAGE> 26
In connection with the Company's scheduled expenditures and committed
employment level at the German facility, the Company received formal
notification that a government subsidy of approximately $1,650,000 was granted.
Approximately $411,000 and $535,000 of this subsidy has been recognized in the
Company's fiscal 1994 and 1993 results of operations, respectively.
NOTE 3 - CONTRACTS IN PROGRESS
Information with respect to contracts in progress accounted for under
the percentage-of-completion method is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1994 1993
------ -------
(IN THOUSANDS)
<S> <C> <C>
Cost and estimated earnings on contracts in progress $47,017 $17,360
Less billings applicable thereto . . . . . . . . . . 32,368 11,876
------- -------
$14,649 $ 5,484
======= =======
Presented in accompanying financial statements as:
Costs in excess . . . . . . . . . . . . . . . . . $14,888 $ 6,054
Billings in excess (included in
accrued expenses) . . . . . . . . . . . . . . . 239 570
------- -------
$14,649 $ 5,484
======= =======
</TABLE>
NOTE 4 - INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Inventories by valuation method are as follows:
Last-in, first-out (LIFO) . . . . . . . . . . . . $25,286 $21,731
Average cost . . . . . . . . . . . . . . . . . . 20,028 17,715
------- -------
$45,314 $39,446
======= =======
Major components of inventories include:
Raw materials . . . . . . . . . . . . . . . . . . $16,412 $14,193
Work in process . . . . . . . . . . . . . . . . . 8,854 9,663
Finished goods. . . . . . . . . . . . . . . . . . 27,490 22,377
------- -------
52,756 46,233
Less LIFO reserve . . . . . . . . . . . . . . . . 7,442 6,787
------- -------
$45,314 $39,446
======= =======
</TABLE>
Inventory reduction in fiscal 1993 resulted in liquidation of LIFO
inventory layers carried at lower costs prevailing in prior periods as compared
with current costs, the effect of which increased earnings by approximately
$.02 per share.
25
<PAGE> 27
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and related accumulated depreciation are
summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, ESTIMATED
-------------------- USEFUL LIFE
1994 1993 IN YEARS
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Land . . . . . . . . . . . . . . . . $ 7,411 $ 7,745
Buildings. . . . . . . . . . . . . . 34,881 30,835 10-45
Machinery and equipment. . . . . . . 48,975 45,800 3-12
Computer and peripheral equipment. . 8,603 7,740 3-5
Office furniture and equipment . . . 6,022 5,519 3-10
Automotive equipment . . . . . . . . 1,719 1,765 3-4
Other transportation equipment . . . 4,183 4,183 8-15
Other. . . . . . . . . . . . . . . . 13,308 11,085 5-20
------- --------
125,102 114,672
Less accumulated depreciation. . . . 55,306 50,195
------- --------
$69,796 $ 64,477
======= ========
</TABLE>
NOTE 6 - NOTES PAYABLE
At September 30, 1994, the Company had uncommitted short-term lines of
credit aggregating approximately $40,000,000. Loans under these lines may be
made in such amounts and at such maturities and interest rates as are offered
by the banks and accepted by the Company at the time of each borrowing. At
September 30, 1994, borrowings under these lines were $5,900,000. These
borrowings were at a weighted average interest rate of 5.54% and were due at
varying dates through October 1994.
NOTE 7 - ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Other accrued expenses . . . . . . . . . . . . . . . $14,873 $12,711
Accrued taxes other than on income . . . . . . . . . 2,809 2,588
Salaries and wages . . . . . . . . . . . . . . . . . 2,276 2,415
------- -------
$19,958 $17,714
======= =======
</TABLE>
26
<PAGE> 28
NOTE 8 - INCOME TAXES
The Company adopted the Financial Accounting Standards Board's
Statement No. 109, "Accounting for Income Taxes" ("FAS 109") effective October
1, 1993. Financial statements for prior years have not been restated. The
cumulative effect of the accounting change was not material. Adoption of FAS
109 resulted in the reclassification of certain current deferred tax assets
which had previously been offset against non-current deferred tax liabilities.
Deferred tax liabilities (assets) are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
------------------
(IN THOUSANDS)
<S> <C>
Gross deferred tax liabilities:
Excess book over tax basis of property & equipment $ 9,144
Partnership income 312
Property tax accrual 291
Other 1,502
-------
11,249
-------
Gross deferred tax assets:
Operating loss carryforward from subsidiary (3,648)
Excess tax over book basis of inventories (2,551)
Inventory reserves (699)
Intercompany transfer pricing (687)
Insurance reserves (673)
Other reserves (479)
Loss on sales of subsidiaries (408)
Vacation accruals (270)
Alternative minimum tax credit carryforward (263)
Other (750)
-------
(10,428)
-------
Deferred tax asset valuation allowance 2,420
-------
$ 3,241
=======
</TABLE>
Through September 30, 1994, the Company's German subsidiary has
generated a tax loss carryforward of $6,993,000 which may be carried forward
indefinitely. The valuation allowance relates to the amount of the German loss
carryforward which may not be realized.
27
<PAGE> 29
Income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-----------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current . . . . . . . . . . . . . . . . $ 1,327 $1,758 $(2,023)
Deferred. . . . . . . . . . . . . . . . (1,486) 281 4,938
Foreign:
Current . . . . . . . . . . . . . . . . 1,259 782 1,047
Deferred. . . . . . . . . . . . . . . . (359) 187 267
State and local: . . . . . . . . . . . . . . 55 49 354
------- ------ -------
Income tax expense. . . . . . . . . . . $ 796 $3,057 $ 4,583
======= ====== =======
</TABLE>
The 1992 deferred tax expense of $5,205,000 results principally from
realization of the deferred tax benefit of certain expenses associated with a
litigation settlement recognized in 1991 for financial reporting purposes.
The components of income before income tax expense (benefit) are:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-----------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic. . . . . . . . . . . . . . . . . . . . $ 421 $8,339 $10,829
Foreign . . . . . . . . . . . . . . . . . . . . 1,699 (257) 2,127
------ ------ -------
$2,120 $8,082 $12,956
====== ====== =======
</TABLE>
The cumulative undistributed earnings of foreign subsidiaries, on
which U.S. taxes have not been provided, were approximately $12,700,000,
$10,100,000 and $8,800,000 at September 30, 1994, 1993 and 1992, respectively.
The U.S. income tax effect associated with the repatriation of these earnings
may be offset by foreign tax credits.
28
<PAGE> 30
Components of the difference between the income tax expense (benefit)
computed at the U.S. statutory income tax rate and the income tax expense
(benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
---------------------------
1994 1993 1992
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax expense of income at 34% . . . . . . . . . . $ 721 $2,748 $4,405
Foreign Sales Corporation (FSC) provisions . . . (373) (384) (494)
Loss of foreign subsidiary with no
tax benefit . . . . . . . . . . . . . . . . . 172 737 466
Goodwill amortization. . . . . . . . . . . . . . 40 41 41
Tax exempt interest. . . . . . . . . . . . . . . (61) (179) (215)
Non-deductible expenses. . . . . . . . . . . . . 197 156 187
State income taxes . . . . . . . . . . . . . . . (5) 32 218
Other tax effects related to foreign operations. 150 (112) 109
Other, net . . . . . . . . . . . . . . . . . . . (45) 18 (134)
----- ------ ------
Income tax expense . . . . . . . . . . . . $ 796 $3,057 $4,583
===== ====== ======
Effective tax expense rate . . . . . . . . . 38% 38% 35%
===== ====== ======
</TABLE>
NOTE 9 - LONG-TERM DEBT
Long-term debt includes the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Payable to four insurance companies (unsecured);
11.5%; principal payable in annual installments of
$2,857,140; interest payable semi-annually . . . . . $14,286 $17,143
Less portion due within one year. . . . . . . . . . . . 2,857 2,857
------- -------
$11,429 $14,286
======= =======
</TABLE>
In December 1988, four insurance companies purchased an aggregate of
$20,000,000 of the Company's unsecured 11.5% Senior Notes due 1998. Prepayment
of amounts in excess of scheduled maturities are subject to certain
restrictions and would be at a premium. The note purchase agreement related to
the sale of these notes requires the maintenance of a specified current ratio
and a specified amount of net worth and also includes restrictive covenants
relating to additional indebtedness and leases, creation of liens, payment of
dividends, mergers and disposition of assets. Retained earnings was
unrestricted as to the payment of dividends at September 30, 1994.
29
<PAGE> 31
Long-term debt at September 30, 1994, matures as follows:
<TABLE>
<CAPTION>
AMOUNT
YEAR ENDING --------------
SEPTEMBER 30, (IN THOUSANDS)
-------------
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,857
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,857
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,857
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,857
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,858
</TABLE>
NOTE 10 - STOCKHOLDERS' EQUITY, STOCK OPTIONS AND PROFIT SHARING AND SAVINGS
PLAN
On May 31, 1990, the Board of Directors declared a dividend of one
Preferred Share Purchase Right (the "Right") for each outstanding share of
common stock. Under certain conditions, each Right may be exercised to
purchase one one-hundredth share of a new series of junior participating
preferred stock at an exercise price of $60, subject to adjustment. The Rights
may only be exercised 10 days following a public announcement that a third
party has acquired 20% or more of the outstanding common shares or 10 days
following the commencement of, or announcement of an intention to make a tender
offer or exchange offer, the consummation of which would result in the
beneficial ownership by a third party of 20% or more of such outstanding common
shares. The Rights, which do not have voting rights, expire May 31, 2000, and
at the Company's option, may be redeemed by the Company prior to expiration for
$.01 per Right. In the event that the Company is acquired in a merger or other
business combination or 50% or more of its consolidated assets or earning power
are sold, provision shall be made so that each holder of a Right shall have the
right to receive, upon exercise thereof at the then current exercise price,
that number of shares of common stock of the surviving company which at the
time of such transaction would have a market value of two times the exercise
price of the Right.
During fiscal 1994, the Company had options outstanding under two
stock option plans and under separate stock option agreements. A description
of the plans and agreements follows:
STOCK OPTION PLANS
In 1977, the Board of Directors of the Company adopted a non-qualified
stock option plan and reserved 100,000 shares of common stock for issuance upon
the exercise of options granted to executives and other key personnel. In
December 1986, each option holder was granted a new stock option subject to
relinquishment of previously granted options. In 1993 and 1989, the Board of
Directors amended the non-qualified stock option plan and reserved 400,000 and
250,000 shares of common stock, respectively, for issuance upon the exercise of
options granted to executives and other key personnel. Approval of the
stockholders was obtained.
30
<PAGE> 32
In 1981, the Board of Directors of the Company adopted an incentive
stock option plan and reserved 300,000 shares of common stock for issuance upon
the exercise of options granted to executives and other key personnel. In 1984,
the Board of Directors amended the incentive stock option plan and reserved an
additional 100,000 shares of common stock for issuance upon the exercise of
options granted to executives and other key personnel. Effective December 31,
1986, as a result of changes in the federal income tax treatment of incentive
stock options, the Board of Directors amended and restated the 1981 Plan to
provide for the granting of options not intended to qualify as incentive stock
options. In addition, in December 1986, each option holder was granted a new
stock option subject to the relinquishment of previously granted options.
For each of these plans, a committee of the Board of Directors
determines which eligible employees will receive options, the times at which
such options are to be granted, the number of shares subject to such options
and the exercise price and duration of such options. In the case of the 1981
Plan, optionees may, with the committee's permission, exercise options using
previously-owned shares of common stock, in lieu of cash, to satisfy all or
part of the exercise price.
Options that have been granted under the 1977 Plan are for a ten-year
term and are exercisable either from the date of grant or at the end of the
first year of the term. The fair market value of the shares on the dates the
options outstanding at September 30, 1994, were granted was approximately
$5,000,000. At September 30, 1994 and 1993, there were 461,376 and 38,876
shares (adjusted for stock dividends and a stock split) reserved for future
options that may be granted under the 1977 Plan.
Under the provisions of the 1981 Plan, the exercise price may not be
less than the fair market value of the shares on the date of grant. Options
that have been granted are for a ten-year term and are exercisable either from
the date of grant or at the end of the first year of the term. The fair market
value of the shares on the dates the options outstanding at September 30, 1994,
were granted was approximately $2,000,000. At September 30, 1994 and 1993,
there were no shares reserved for future options that may be granted under the
1981 Plan.
NON-EMPLOYEE DIRECTORS' STOCK OPTION AGREEMENTS
In February 1986, the Board of Directors of the Company granted to
non-employee members of the Board of Directors options to purchase 60,000
shares of common stock and reserved an additional 30,000 shares for future
grants to non-employee Board members. The 1986 options were granted subject to
both the relinquishment by the non-employee members of the Board of Directors
of the December 1981 options granted to them and approval by shareholders of
the Company, which was obtained in February 1987. In addition, the Board of
Directors released from reservation 15,000 shares of common stock that were
reserved in 1982 for grants of options to future non-employee directors of the
Company. The Board of Directors determines which future non-employee directors
will receive options and the terms of such options. Options are exercisable
for six years from the date of grant. The fair market value of the shares on
the date the options outstanding at September 30, 1994, were granted was
approximately $100,000. At September 30, 1994 and 1993, there were 10,000 and
31
<PAGE> 33
20,000 shares reserved for future options that may be granted to non-employee
directors of the Company.
When stock options are exercised, the par value of the shares issued
is credited to the common stock account and the excess of the exercise price
over such par value is credited to capital in excess of par value. Any tax
benefits resulting from the exercise of options in excess of those included in
income are credited to capital in excess of par value.
Additional information regarding shares of the Company's common stock
related to the Company's stock options is as follows:
<TABLE>
<CAPTION>
Non-Employee
1977 1981 Directors'
Plan Plan Agreements
------- ------- ----------
<S> <C> <C> <C>
Outstanding, September 30, 1993 . . . 375,079 133,570 10,000
Cancelled. . . . . . . . . . . . . (22,500)
Exercised. . . . . . . . . . . . . (6,020)(b)
Granted. . . . . . . . . . . . . . 10,000
------- ------- -------
Outstanding, September 30, 1994 . . . 352,579 (a) 127,550 (c) 20,000 (d)
======= ======= =======
Exercisable, September 30, 1994 . . . 352,579 127,550 20,000
======= ======= =======
</TABLE>
- ----------
(a) Options were granted in 1989 at $10.00 per share, in 1991 at $16.75
per share, in 1992 at $11.875 per share and in 1993 at $14.125 per
share.
(b) Options were exercised at $7.00 per share.
(c) Options were granted in 1986 at $7.00 and $7.70 per share and in 1991
at $16.75 and $18.425 per share.
(d) Options were granted in 1989 at $12.75 per share and in 1994 at
$11.00 per share.
PROFIT SHARING AND SAVINGS PLAN
The Company and certain of its domestic subsidiaries have adopted a
profit sharing and savings plan in which substantially all employees are
eligible to participate. Annual contributions to the profit sharing portion of
the plan are discretionary, and are determined by the Company's Board of
Directors. Contributions to the savings portion of the plan are made on a
monthly basis in an amount as required by the plan. Contributions accrued and
expenses related to this plan were approximately $1,800,000, $1,300,000 and
$1,200,000 for the years 1994, 1993 and 1992, respectively.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
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
32
<PAGE> 34
business, the Company has issued standby letters of credit and bank guarantees
as security for advances, progress payments and performance on long-term
contracts and, as a result, is contingently liable in the amount of
approximately $26,300,000 at September 30, 1994.
NOTE 12 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of unaudited quarterly financial data for
fiscal 1994 and 1993:
<TABLE>
<CAPTION>
NET EARNINGS
GROSS INCOME (LOSS)
REVENUES PROFIT (LOSS) PER SHARE
-------- ------ ------ ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Quarter Ended:
December 31, 1993 . . . . $40,575 $14,647 $ (841) $(.07)
March 31, 1994 . . . . . 48,632 15,830 120 .01
June 30, 1994 . . . . . . 56,239 16,947 477 .04
September 30, 1994 . . . 58,320 17,743 1,568 .13
Quarter Ended:
December 31, 1992 . . . . $35,866 $14,458 $ (338) $(.03)
March 31, 1993 . . . . . 43,112 17,534 1,194 .10
June 30, 1993 . . . . . . 50,009 18,182 1,805 .15
September 30, 1993 . . . 51,262 17,931 2,364 .20
</TABLE>
During the fourth quarter of fiscal 1993, the Company realized
$1,500,000 of pretax income from an insurance settlement. This settlement was
a reimbursement of litigation expenses and defense costs incurred in prior
years.
There were no other unusual or infrequently occurring items or
adjustments, other than normal recurring adjustments, in any of the quarters
presented.
NOTE 13 - INDUSTRY SEGMENTS
The Company has two principal industry segments: Flow Measurement and
Energy Products. The Flow Measurement segment manufactures and services
products and systems used to measure rates of flow and accumulated volumes of
fluids, primarily oil and natural gas. The Energy Products segment offers an
array of products and services to the energy markets. Operations of this
segment include the manufacture of pipeline valves used on both gas and liquid
pipelines, the production of fasteners for use in oil, gas and process
industries and energy recovery products.
Intersegment transfers (primarily Energy Products to Flow Measurement)
and transfers to other geographic areas (primarily U.S. to U.K.) are not
significant to the operations of either segment or geographic area and are
accounted for as transfers at cost on the following schedules. Segment
operating income represents revenues less operating expenses and is not reduced
for interest
33
<PAGE> 35
expense, general corporate expenses and income taxes. Identifiable assets are
those tangible and intangible assets that are identified with the operations of
a particular industry segment or geographic area.
INFORMATION ON INDUSTRY SEGMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
OPERATING IDENTI- CAPITAL DEPRECIATION
INCOME FIABLE EXPENDI- AND
REVENUES (LOSS) ASSETS TURES AMORTIZATION
-------- --------- ------ -------- ------------
<S> <C> <C> <C> <C> <C>
FISCAL 1994
- -----------
Flow Measurement. . $145,657 $13,454 $117,388 $ 8,416 $3,986
Energy Products . . 57,739 (1,501) 54,193 5,002 2,588
-------- ------- -------- ------- ------
Subtotal. . . . . 203,396 11,953 171,581 13,418 6,574
Corporate . . . . . 370 (7,906) 15,756 213 909
Interest Expense. . (1,927)
-------- ------- -------- ------- ------
Total . . . . . . $203,766 $ 2,120 $187,337 $13,631 $7,483
======== ======= ======== ======= ======
FISCAL 1993
- -----------
Flow Measurement. . $110,009 $ 9,601 $ 97,909 $ 7,250 $3,561
Energy Products . . 69,424 4,747 50,454 3,879 2,236
-------- ------- -------- ------- ------
Subtotal. . . . . 179,433 14,348 148,363 11,129 5,797
Corporate . . . . . 816 (4,178)(a) 29,705 664 787
Interest Expense. . (2,088)
-------- ------- -------- ------- ------
Total . . . . . . $180,249 $ 8,082 $178,068 $11,793 $6,584
======== ======= ======== ======= ======
FISCAL 1992
- -----------
Flow Measurement. . $121,707 $12,201 $ 86,219 $ 3,852 $3,382
Energy Products . . 87,720 9,692 56,343 3,647 2,372
-------- ------- -------- ------- ------
Subtotal. . . . . 209,427 21,893 142,562 7,499 5,754
Corporate . . . . . 935 (6,525) 34,517 1,259 844
Interest Expense. . (2,412)
-------- ------- -------- ------- ------
Total . . . . . . $210,362 $12,956 $177,079 $ 8,758 $6,598
======== ======= ======== ======= ======
</TABLE>
(a) Includes pretax income of $1,500 from an insurance settlement.
34
<PAGE> 36
INFORMATION ON GEOGRAPHIC OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNITED
STATES EUROPE CANADA CONSOLIDATED
------ ------ ------ ------------
<S> <C> <C> <C> <C>
FISCAL 1994
- -----------
Revenues . . . . . . . . . . . . . $134,904 $52,962 $15,530 $203,396
======== ======= ======= ========
Operating income . . . . . . . . . $ 4,553 $ 2,476 $ 4,924 $ 11,953
======== ======= ======= ========
Identifiable assets at
September 30, 1994 . . . . . . . $116,514 $48,851 $ 6,216 $171,581
======== ======= ======= ========
FISCAL 1993
- -----------
Revenues . . . . . . . . . . . . . $140,639 $29,133 $ 9,661 $179,433
======== ======= ======= ========
Operating income . . . . . . . . . $ 10,724 $ 675 $ 2,949 $ 14,348
======== ======= ======= ========
Identifiable assets at
September 30, 1993 . . . . . . . $106,526 $36,807 $ 5,030 $148,363
======== ======= ======= ========
FISCAL 1992
- -----------
Revenues . . . . . . . . . . . . . $165,501 $35,721 $ 8,205 $209,427
======== ======= ======= ========
Operating income . . . . . . . . . $ 17,146 $ 2,502 $ 2,245 $ 21,893
======== ======= ======= ========
Identifiable assets at
September 30, 1992 . . . . . . . $106,856 $30,682 $ 5,024 $142,562
======== ======= ======= ========
</TABLE>
Included in United States revenues were export sales of $52,800,000,
$55,500,000 and $69,900,000 in fiscal 1994, 1993 and 1992, respectively. These
sales were primarily to Africa, the Far East, the Middle East, and South
America. At September 30, 1994, 1993 and 1992, the Company's investment in
consolidated foreign subsidiaries, primarily its U.K. subsidiary, approximated
$40,200,000, $30,100,000 and $28,100,000, respectively.
Foreign currency transaction gains and losses included in income were
immaterial in fiscal 1994, 1993 and 1992.
35
<PAGE> 37
NOTE 14 - SUPPLEMENTARY STATEMENT OF INCOME INFORMATION
The following amounts were charged to costs and expenses:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
----------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Depreciation and amortization. . . . . . . $7,483 $6,584 $6,598
Maintenance and repairs. . . . . . . . . . 3,660 3,809 4,142
Ad valorem taxes . . . . . . . . . . . . . 2,468 2,656 2,807
Lease expense (a). . . . . . . . . . . . . 1,368 1,460 1,591
</TABLE>
(a) Minimum operating lease commitments relate principally to
office space and manufacturing facilities and are not material
to the Company.
36
<PAGE> 38
Schedule V
DANIEL INDUSTRIES, INC.
PROPERTY, PLANT AND EQUIPMENT
(in thousands)
<TABLE>
<CAPTION>
==================================================================================================
Balance at Balance
beginning Additions at end of
Classification of period at cost Retirements Other period
==================================================================================================
<S> <C> <C> <C> <C> <C>
For the year ended September 30, 1994:
Land . . . . . . . . . . . . . . . . . $ 7,745 $ 156 $ (490) $ 7,411
Buildings. . . . . . . . . . . . . . . 30,835 3,377 $ 332 1,001 34,881
Machinery and equipment. . . . . . . . 45,800 3,736 790 229 48,975
Computer and peripheral equipment. . . 7,740 1,562 818 119 8,603
Office furniture and equipment . . . . 5,519 144 170 529 6,022
Automotive equipment . . . . . . . . . 1,765 55 132 31 1,719
Other transportation equipment . . . . 4,183 4,183
Other. . . . . . . . . . . . . . . . . 8,015 1,411 237 90 9,279
Construction in progress . . . . . . . 3,070 3,190 (2,231) 4,029
-------- ------- ------ ------- --------
$114,672 $13,631 $2,479 $ (722) $125,102
======== ======= ====== ======= ========
For the year ended September 30, 1993:
Land . . . . . . . . . . . . . . . . . $ 8,162 $ 107 $ 197 $ (327) $ 7,745
Buildings. . . . . . . . . . . . . . . 29,250 2,156 21 (550) 30,835
Machinery and equipment. . . . . . . . 45,383 3,891 3,065 (409) 45,800
Computer and peripheral equipment. . . 7,815 1,398 1,267 (206) 7,740
Office furniture and equipment . . . . 5,355 687 301 (222) 5,519
Automotive equipment . . . . . . . . . 2,095 152 392 (90) 1,765
Other transportation equipment . . . . 4,183 4,183
Other. . . . . . . . . . . . . . . . . 7,671 1,049 527 (178) 8,015
Construction in progress . . . . . . . 679 2,353 8 46 3,070
-------- ------- ------ ------- --------
$110,593 $11,793 $5,778 $(1,936) $114,672
======== ======= ====== ======= ========
For the year ended September 30, 1992:
Land . . . . . . . . . . . . . . . . . $ 4,387 $ 1,285 $ 2,490 $ 8,162
Buildings. . . . . . . . . . . . . . . 26,301 2,328 $ 39 660 29,250
Machinery and equipment. . . . . . . . 41,763 3,162 1,019 1,477 45,383
Computer and peripheral equipment. . . 6,830 1,401 408 (8) 7,815
Office furniture and equipment . . . . 4,759 770 111 (63) 5,355
Automotive equipment . . . . . . . . . 1,862 284 137 86 2,095
Other transportation equipment . . . . 8,663 4,480 4,183
Other. . . . . . . . . . . . . . . . . 7,454 398 187 6 7,671
Construction in progress . . . . . . . 1,798 (870) (249) 679
-------- ------- ------ ------- --------
$103,817 $ 8,758 $6,381 $ 4,399 (a) $110,593
======== ======= ====== ======= ========
</TABLE>
(a) Includes acquisition of a facility in Germany.
37
<PAGE> 39
Schedule VI
DANIEL INDUSTRIES, INC.
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(in thousands)
<TABLE>
<CAPTION>
===================================================================================================
Additions
Balance at charged to Balance
beginning costs and at end of
Classification of period expenses Retirements Other period
===================================================================================================
<S> <C> <C> <C> <C> <C>
For the year ended September 30, 1994:
Buildings. . . . . . . . . . . . . . . $ 7,747 $1,062 $ 51 $ (244) $ 8,514
Machinery and equipment. . . . . . . . 28,124 2,713 656 68 30,249
Computer and peripheral equipment. . . 4,183 1,302 787 53 4,751
Office furniture and equipment . . . . 3,110 394 158 39 3,385
Automotive equipment . . . . . . . . . 1,209 244 132 31 1,352
Other transportation equipment . . . . 922 422 1,344
Other. . . . . . . . . . . . . . . . . 4,900 996 198 13 5,711
------- ------ ------ ------- -------
$50,195 $7,133 $1,982 $ (40) $55,306
======= ====== ====== ======= =======
For the year ended September 30, 1993:
Buildings. . . . . . . . . . . . . . . $ 7,034 $ 826 $ 11 $ (102) $ 7,747
Machinery and equipment. . . . . . . . 28,201 2,683 2,493 (267) 28,124
Computer and peripheral equipment. . . 4,470 1,000 1,196 (91) 4,183
Office furniture and equipment . . . . 3,081 391 285 (77) 3,110
Automotive equipment . . . . . . . . . 1,328 273 330 (62) 1,209
Other transportation equipment . . . . 500 422 922
Other. . . . . . . . . . . . . . . . . 4,914 525 501 (38) 4,900
------- ------ ------ ------- -------
$49,528 $6,120 $4,816 $ (637) $50,195
======= ====== ====== ======= =======
For the year ended September 30, 1992:
Buildings. . . . . . . . . . . . . . . $ 6,309 $ 761 $ 4 $ (32) $ 7,034
Machinery and equipment. . . . . . . . 26,150 2,759 776 68 28,201
Computer and peripheral equipment. . . 3,851 907 253 (35) 4,470
Office furniture and equipment . . . . 2,794 471 87 (97) 3,081
Automotive equipment . . . . . . . . . 1,207 273 123 (29) 1,328
Other transportation equipment . . . . 2,968 545 3,013 500
Other. . . . . . . . . . . . . . . . . 4,604 535 167 (58) 4,914
------- ------ ------ ------- -------
$47,883 $6,251 $4,423 $ (183) $49,528
======= ====== ====== ======= =======
</TABLE>
38
<PAGE> 40
Schedule IX
DANIEL INDUSTRIES, INC.
SHORT-TERM BORROWINGS
(in thousands except percentages)
<TABLE>
<CAPTION>
==================================================================================================
Weighted
Maximum Average average
Weighted amount amount interest
Category of Balance at average outstanding outstanding rate
aggregate end interest during the during the during the
short-term borrowings (a) of period rate period period (b) period (c)
==================================================================================================
<S> <C> <C> <C> <C> <C>
For the year ended
September 30, 1994:
Bank borrowings . . . . . . . $5,900 5.54% $16,000 $4,153 5.10%
- ----------
</TABLE>
(a) Borrowings during fiscal 1994 were made under bank lines of credit.
Maturities ranged from one to 61 days.
(b) Average amount outstanding during the period was computed by dividing
the total of daily outstanding principal balances by the number of
days in the fiscal year.
(c) Weighted average interest rate during the period was computed by
dividing the actual short-term interest expense by the average amount
outstanding during the period as described in (b) above.
39
<PAGE> 41
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
2.1 - Plan and Agreement of Merger dated as of January 22, 1988, by and between Daniel Industries, Inc., a
Texas corporation ("Daniel Texas"), and Daniel Industries, Inc., a Delaware corporation (the
"Company"), filed as Exhibit 2.1 to the Company's Registration of Securities of Certain Successor
Issuers on Form 8-B, and hereby incorporated by reference herein.
3.1 - Certificate of Incorporation of the Company, filed as Exhibit 3.1 to the Company's Registration of
Securities of Certain Successor Issuers on Form 8-B dated May 5, 1988, and hereby incorporated by
reference herein.
3.2 - Bylaws of the Company, as amended through February 25, 1994.
3.3 - Certificate of Designation, Powers, Preferences and Rights of Series A Junior Participating Preferred
Stock filed as Exhibit 3.3 in the Company's Amendment to Application or Report on Form 8, and hereby
incorporated by reference herein.
4.1 - Note Purchase Agreement dated as of December 5, 1988, between the Company and The Variable Annuity Life
Insurance Company, The Mutual Benefit Life Insurance Company, MONY Life Insurance Company of America
and MONY Legacy Life Insurance Company (including the form of the Company's Senior Notes in the
aggregate in the principal amount of $20,000,000) filed as Exhibit 4.3 to the Company's Annual Report
on Form 10-K for the year ended September 30, 1988, and hereby incorporated by reference herein.
4.2 - Rights Agreement dated as of May 31, 1990, between the Company and Wachovia Bank and Trust Company,
N.A., as Rights Agent, filed as Exhibit 1 to the Company's Registration of Certain Classes of
Securities on Form 8-A filed June 5, 1990, and hereby incorporated by reference herein.
</TABLE>
<PAGE> 42
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
4.3 - Certificate of Designation, Powers, Preferences and Rights of Series A Junior Participating Preferred
Stock (included as Exhibit 3.3 hereto).
10.1 - Description of the Company's key employees' bonus arrangement filed as Exhibit 10.1 in the Company's
Amendment to Application or Report on Form 8, and hereby incorporated by reference herein.
10.2 - 1977 Stock Option Plan, as amended and restated on December 16, 1993.
10.3 - 1981 Stock Option Plan, as amended and restated on December 31, 1986, filed as Exhibit 19.2 to Daniel
Texas's Quarterly Report on Form 10-Q for the quarter ended December 31, 1986, and hereby incorporated
by reference herein.
10.4 - Form of Director's Stock Option Agreements dated October 9, 1986, between Daniel Texas and the several
non-employee directors, filed as Exhibit 19.1 to Daniel Texas's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1987, and hereby incorporated by reference herein.
10.5 - Form of Agreement dated as of February 9, 1984, Amending and Restating Employment Agreement between
Daniel Texas and Each of W. A. Griffin and H. D. Morrison, Jr. filed as Exhibit 10.5 in the Company's
Amendment to Application or Report on Form 8, and hereby incorporated by reference herein.
10.6 - Deferred Compensation Agreement for Employees effective as of October 31, 1986, filed as Exhibit 19.3
to Daniel Texas's Quarterly Report on Form 10-Q for the quarter ended December 31, 1986, and hereby
incorporated by reference herein.
10.7 - Agreement Amending Amended and Restated Director's Stock Option Agreement between the Company and
Gibson Gayle, Jr. filed as Exhibit 19.1 to the Company's Quarterly Report on Form
</TABLE>
<PAGE> 43
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
10-Q for the quarter ended March 31, 1991, and hereby incorporated by reference herein.
10.8 - Agreement Amending Amended and Restated Director's Stock Option Agreement between the Company and each
of Ronald C. Lassiter, William C. Morris, Joseph L. Parrish, Richard L. O'Shields and James R. Whatley,
filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended September 30,
1991, and hereby incorporated by reference herein.
10.9 - Agreement amending Director's Stock Option Agreement between the Company and Leo E. Linbeck, Jr., filed
as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended September 30, 1991, and
hereby incorporated by reference herein.
21 - Subsidiaries of the Company.
23 - Consent of Independent Accountants.
27 - Financial data schedule.
</TABLE>
<PAGE> 1
BY-LAWS
OF
DANIEL INDUSTRIES, INC.
(as amended through February 25, 1994)
Article I
Meetings of Stockholders
Section 1.1. Place of Meetings. All meetings of stockholders
shall be held at such place, either within or without the State of Delaware, as
shall be determined from time to time by the Board of Directors.
Section 1.2. Annual Meetings. The annual meeting of
stockholders shall be held at such date and time as shall be determined from
time to time by the Board of Directors. The annual meeting shall be held for
the purpose of electing directors in accordance with Article X of the
Certificate of Incorporation and transacting such other business as may be
properly brought before the meeting.
Section 1.3. Special Meetings. Special meetings of
stockholders may be called only by the Board of Directors. The Board of
Directors shall determine the date and time of each special meeting of
stockholders. The business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice of that meeting.
-1-
<PAGE> 2
Section 1.4. Notice of Meetings. Written notice of each
meeting of stockholders, stating the time and place and purpose or purposes
thereof, shall be given to each stockholder entitled to vote at the meeting,
within the time prescribed by statute.
Section 1.5. Quorum. The holders of a majority of the shares
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at any meeting of stockholders except as otherwise provided
by statute. The holders of a majority of the shares entitled to vote thereat,
present in person or represented by proxy, whether or not a quorum is present,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted that might have been
transacted at the meeting as originally notified.
Section 1.6. Voting. When a quorum is present or represented
at any meeting of stockholders, the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the stockholders
in all matters, including the election of directors, unless the matter is one
upon which, by express provision of the statutes, of the Certificate of
Incorporation or of these by-laws, a different vote is required, in which case
such express provision shall govern and
-2-
<PAGE> 3
control the decision of that matter. Every stockholder having the right to
vote shall be entitled to vote in person, or by proxy appointed by an
instrument in writing subscribed by such stockholder, bearing a date not more
than three years prior to voting, unless such instrument provides for a longer
period, and filed with the Secretary of the corporation before, or at the time
of, the meeting. If such instrument shall designate two or more persons to act
as proxies, unless such instrument shall provide to the contrary, a majority of
such persons present at any meeting at which their powers thereunder are to be
exercised shall have and may exercise all the powers of voting thereby
conferred.
Section 1.7. Consents of Stockholders. As provided in Article
VI of the Certificate of Incorporation, the right of stockholders of the
corporation to take action by a consent in writing is denied.
Article II
Board of Directors
Section 2.1. Powers. The business and affairs of the
corporation shall be managed under the direction of its Board of Directors,
which may exercise all powers of the corporation and do all lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
by-laws required to be exercised or done by the stockholders.
Section 2.2. Number and Classification. The number of
directors shall be fixed in the manner provided by, and the directors shall be
divided into classes in accordance with, Article X of the Certificate of
Incorporation. The number of directors so fixed shall constitute
-3-
<PAGE> 4
the total number of directors of the corporation. By the affirmative vote of
not less than 80% of the number of directors of the corporation in office at
the time, the directors may appoint advisory directors. Advisory directors
will be entitled to attend and participate at meetings of the Board of
Directors but shall not be entitled to vote on any matter submitted to
directors or to exercise any other power vested in a director. Advisory
directors shall not constitute directors of the corporation and shall have none
of the duties of directors to the corporation. Any advisory director may be
removed without cause by the affirmative vote of not less than 80% of the
number of directors of the corporation in office at the time. Advisory
directors shall be compensated in accordance with Section 2.9 of these by-
laws.
Section 2.3. Removal. A director may not be removed except in
accordance with Article X of the Certificate of Incorporation.
Section 2.4. Annual Meetings. The annual meeting of the Board
of Directors shall be held each year, without other notice than this by-law, at
the place of, and immediately following, the annual meeting of stockholders.
However, if a majority of the whole Board of Directors shall so consent in
writing, such regular meeting may be held at such time and place as shall be
fixed by such consent, and the Secretary shall give notice of such regular
meeting, stating such time and place, in the manner required by these by-laws.
Section 2.5. Other Meetings. Other meetings of the Board of
Directors may be called by the Chairman of the Board of Directors, the
President or any two directors. Except as provided in Section 2.4 of these
by-laws, notice of each meeting of the Board of Directors
-4-
<PAGE> 5
stating the time and place of the meeting shall be given not less than
seventy-two hours before the time of the meeting, by or at the direction of the
person or persons calling the meeting, to each director. If the person or
persons calling the meeting shall instruct the Secretary or any Assistant
Secretary to give such notice, then the Secretary or such Assistant Secretary
shall promptly do so in the manner required by these by-laws.
Section 2.6. Waiver of Notice. The attendance of a director at
any meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 2.7. Quorum. A majority of the total number of
directors, determined in accordance with Section 2.2 of these by-laws, shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, and the vote of a majority of the directors present at a meeting
at which there is a quorum shall be the act of the Board of Directors unless
the Certificate of Incorporation or these by-laws shall require a vote of a
greater number of directors. If a quorum shall not be present at any meeting
of the Board of Directors, a majority of the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
-5-
<PAGE> 6
Section 2.8. Action by Consent of Directors. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all of the directors.
Section 2.9. Compensation of Directors. The Board of
Directors, irrespective of any personal interest of any of its members, shall
have authority to fix the compensation of all directors for services to the
corporation as directors, as members of one or more committees of the Board of
Directors, as officers, or otherwise.
Article III
Committees of Directors
Section 3.1. Designation, Powers and Name. The Board of
Directors may, by resolution passed by a majority of the whole Board of
Directors, designate one or more committees, including, if they shall so
determine, an Executive Committee, each such committee to consist of one or
more of the directors of the corporation. The Board of Directors may designate
one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of such committee. In the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
-6-
<PAGE> 7
Section 3.2. Meetings of and Action by Committees. Except as
otherwise provided in the resolution pursuant to which a particular committee
of the Board of Directors was designated, (i) meetings of such committee may be
held within or without the State of Delaware and may be called by any member
thereof, (ii) notice of each meeting of such committee stating the time and
place of the meeting shall be given not less than forty-eight hours before the
time of the meeting, by or at the direction of the person or persons calling
the meeting, to each member of such committee, and if the person or persons
calling the meeting shall instruct the Secretary or any Assistant Secretary to
give such notice, then the Secretary or such Assistant Secretary shall promptly
do so in the manner required by these by-laws, (iii) attendance of a director
at any meeting of such committee shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened, (iv) neither the business to be transacted at,
nor the purpose of, any meeting of such committee need be specified in the
notice or waiver of notice of such meeting, (v) at all meetings of such
committee, a majority of the number of directors comprising such committee, as
fixed by such resolution, shall constitute a quorum for the transaction of
business, (vi) the vote of a majority of the members present at a meeting of
such committee at which there is a quorum shall be the act of such committee,
and (vii) if a quorum shall not be present at any meeting of such committee, a
majority of the members present at such meeting may adjourn such meeting from
time to time, without notice other than announcement at such meeting, until
-7-
<PAGE> 8
a quorum shall be present. The Board of Directors, by resolution adopted by a
majority of the whole Board of Directors, may amend or repeal the resolution
pursuant to which any committee of the Board of Directors was designated, may
remove any member of any committee, and may fill any vacancy occurring on any
committee. Each committee of directors shall keep regular minutes of its
proceedings and report the same to the Board of Directors when requested to do
so.
Section 3.3. Action by Consent. Any action required or
permitted to be taken at any meeting of any committee of the Board of Directors
may be taken without a meeting if a consent in writing, setting forth the
action so taken, is signed by all of the members of such committee.
Article IV
Notice
Section 4.1. Methods of Giving Notice. Whenever under the
provisions of the statutes, the Certificate of Incorporation or these by-laws,
notice is required to be given to any director, member of any committee or
stockholder, such notice shall be in writing and delivered personally or mailed
to such director, member or stockholder; provided that in the case of a
director or a member of any committee such notice may be given orally or by
telephone or telegram. If mailed, notice to a director, member of a committee
or stockholder shall be deemed to be given when deposited in the United States
mail first class in a sealed envelope, with postage thereon prepaid, addressed,
in the case of a stockholder, to the stockholder at the
-8-
<PAGE> 9
stockholder's address as it appears on the records of the corporation or, in
the case of a director or a member of a committee, to such person at his
business or home address. If sent by telegraph, notice to a director or member
of a committee shall be deemed to be given when the telegram, so addressed, is
delivered to the telegraph company.
Section 4.2. Written Waiver. Whenever any notice is required
to be given under the provisions of the statutes, the Certificate of
Incorporation or these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
Article V
Officers
Section 5.1. Officers. The officers of the corporation shall
be a Chairman of the Board of Directors, a President, one or more Vice
Presidents, a Secretary and a Treasurer, each of whom shall be elected by the
Board of Directors. The Board of Directors may elect or appoint other officers
and agents, including Assistant Secretaries and Assistant Treasurers, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined by the Board of Directors. Any two or more
offices, other than the offices of President and Secretary, may be held by the
same person.
Section 5.2. Term of Office. Each officer shall hold office
until his successor is elected by the Board of Directors or until his earlier
death, resignation or removal from office.
-9-
<PAGE> 10
Section 5.3. Removal and Resignation. Any officer or agent
elected or appointed by the Board of Directors may be removed without cause by
the Board of Directors whenever, in its sole judgment, the best interests of
the corporation shall be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights. Any officer may resign at any time by giving written notice
to the corporation. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5.4. Vacancies. Any vacancy occurring in any office of
the corporation by death, resignation or removal from office may be filled only
by the Board of Directors.
Section 5.5. Salaries. The salaries of all officers of the
corporation shall be fixed by the Board of Directors or pursuant to its
direction. No officer shall be prevented from receiving a salary by reason of
his also being a director.
Section 5.5. Chief Executive Officer. The Board of Directors
shall designate either the Chairman of the Board of Directors or the President
as the Chief Executive Officer of the corporation, and the person last so
designated shall be the Chief Executive Officer of the corporation until a
successor Chief Executive Officer is designated by the Board of Directors or
until such person ceases to hold the office held by him at the time of such
designation. The Chief Executive Officer shall be the principal executive
officer of the corporation for purposes
-10-
<PAGE> 11
of all filings by the corporation with the United States Securities and
Exchange Commission, shall preside at all meetings of stockholders, shall have
general and active management of the business of the corporation, and shall see
that all resolutions of the Board of Directors are carried into effect. The
Board of Directors may change the designation of Chief Executive Officer at any
time, but no such change shall constitute removal of any person from the office
of Chairman of the Board of Directors or President, as the case may be. If the
Chairman of the Board of Directors shall have been last designated as Chief
Executive Officer, then in the absence or disability of the Chairman of the
Board of Directors, the President shall perform the duties and have the
authority of the Chief Executive Officer. If the President shall have been
last designated as Chief Executive Officer, then in the absence or disability
of the President, the Chairman of the Board of Directors shall perform the
duties and have the authority of the Chief Executive Officer.
Section 5.6. Chairman of the Board of Directors. The Chairman
of the Board of Directors shall preside at all meetings of the Board of
Directors, and he shall have such other authority and perform such other duties
as may be determined from time to time by resolution of the Board of Directors
not inconsistent with these by-laws. If the Chairman of the Board of Directors
shall have been last designated as Chief Executive Officer, then he also shall
have the authority and perform the duties appertaining to that designation, as
specified in Section 5.5 of these by-laws.
-11-
<PAGE> 12
Section 5.7. President. The President shall be the Chief
Operating Officer of the corporation, and he shall have general supervision of
the day-to-day operations of the corporation's several industry segments.
Unless the Board of Directors shall have designated a particular officer of the
corporation as Chief Financial Officer, then the President shall be the
Principal Financial Officer of the corporation for purposes of all filings by
the corporation with the United States Securities and Exchange Commission. The
President shall have such other authority and perform such other duties as may
be determined from time to time by resolution of the Board of Directors not
inconsistent with these by-laws. If the President shall have been last
designated as Chief Executive Officer, then he also shall have the authority
and perform the duties appertaining to that designation, as specified in
Section 5.5 of these by-laws.
Section 5.8. Vice Presidents. The Vice Presidents shall have
such authority and perform such duties as may be determined from time to time
by resolution of the Board of Directors not inconsistent with these by-laws or
as the Chairman of the Board of Directors or the President may from time to
time delegate. The Board of Directors may, at the time of the election of any
Vice President of the corporation, designate such Vice President a "Senior Vice
President" or "Executive Vice President" of the corporation or designate such
Vice President by reference to a principal business function, such as "Finance"
or "Administration".
Section 5.9. Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
shall record all of the proceedings of such meetings in minute books to be kept
for that purpose. If any member of any committee of the
-12-
<PAGE> 13
Board of Directors shall so request, the Secretary shall perform like duties in
respect of the proceedings of meetings of such committee. If requested by any
person or persons having authority to call such a meeting, the Secretary shall
give, or cause to be given, notice of each meeting of the Board of Directors
and notice of each meeting of stockholders, such notice to be given promptly in
the manner required by these by-laws. The Secretary shall keep in safe custody
the seal of the corporation and, when authorized by the Board of Directors,
shall affix the same to any instrument requiring it. The Secretary shall have
such other authority and perform such other duties as may be determined from
time to time by resolution of the Board of Directors not inconsistent with
these by-laws or as the Chief Executive Officer may from time to time delegate.
Section 5.10. Assistant Secretary. The Assistant Secretary
shall, in the absence or disability of the Secretary, have the authority and
perform the duties of the Secretary. He shall have such other authority and
perform such other duties as may be determined from time to time by resolution
of the Board of Directors not inconsistent with these by-laws or as the
Secretary may from time to time delegate.
Section 5.11. Treasurer. The Treasurer shall have custody of
the corporate funds and securities and shall keep full and accurate accounts
and records of receipts, disbursements and other transactions in books
belonging to the corporation. He shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such depositories
as may be designated by the Board of Directors. He shall disburse the funds of
the corporation
-13-
<PAGE> 14
as and when ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and to the Board
of Directors, when the Chief Executive Officer or the Board of Directors so
requires, an account of all his transactions as Treasurer and of the financial
condition of the corporation. The Treasurer shall have such other authority
and perform such other duties as may be determined from time to time by
resolution of the Board of Directors not inconsistent with these by-laws or as
the Chief Executive Officer may from time to time delegate.
Section 5.12. Assistant Treasurer. The Assistant Treasurer
shall, in the absence or disability of the Treasurer, have the authority and
perform the duties of the Treasurer. He shall have such other authority and
perform such other duties as may be determined from time to time by resolution
of the Board of Directors not inconsistent with these by-laws or as the
Treasurer may from time to time delegate.
Article VI
Checks and Deposits
Section 6.1. Checks, etc. All checks, demands, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers or such agent or agents of the corporation, and in such manner, as
shall be determined by the Board of Directors.
-14-
<PAGE> 15
Section 6.2. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositories as the Board
of Directors may select.
Article VII
Certificates of Stock
Section 7.1. Issuance. Each stockholder of the corporation
shall be entitled to a certificate or certificates showing the number of shares
of stock registered in his name on the books of the corporation. The
certificates shall be in such form as may be determined by the Board of
Directors, shall be issued in numerical order and shall be entered in the books
of the corporation as they are issued. They shall exhibit the holder's name
and number of shares and shall be signed by the President or a Vice President
and by the Secretary or an Assistant Secretary, provided that such signatures
may be facsimile. All certificates surrendered to the corporation's transfer
agent for transfer shall be cancelled, and no new certificate shall be issued
until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in the case of a lost, stolen, destroyed
or mutilated certificate a new one may be issued therefor upon such terms and
with such indemnity, if any, to the corporation as the Board of Directors may
prescribe. Unless otherwise provided in the resolution or resolutions of the
Board of Directors providing for the issuance of shares of Preferred Stock of
the corporation of a particular series, certificates shall not be issued
representing fractional shares of stock.
-15-
<PAGE> 16
Section 7.2. Lost Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against
the corporation with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed, or both.
Section 7.3. Registered Stockholders. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Delaware.
Article VIII
Dividends
-16-
<PAGE> 17
Section 8.1. Declaration. Dividends upon the stock of the
corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of stock.
Section 8.2. Reserve. Before payment of any dividend, there
may be set aside out of any funds of the corporation available for dividends
such sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interest of the corporation.
Article IX
Indemnification
Section 9.1. Third Party Actions. The corporation shall
indemnify any natural person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that he is or was
a director or officer of the corporation, or is or was serving at the request
of the corporation as a director or officer or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
-17-
<PAGE> 18
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 9.2. Actions by or in the Right of the Corporation.
The corporation shall indemnify any natural person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view
-18-
<PAGE> 19
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 9.3. Determination of Conduct. The determination
whether an officer, director or agent has met the applicable standard of
conduct set forth in Sections 9.1 and 9.2 (unless indemnification is ordered by
a court) shall be made (1) by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such quorum is not obtainable, or even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
Section 9.4. Payment of Expenses in Advance. Expenses incurred
by an officer, director or agent in defending a civil or criminal action, suit
or proceeding for which such person may be entitled to indemnity under this
Article IX shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified under this
Article IX.
Section 9.5. Definitions. For purposes of this Article IX,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers, so that any person who is or who was a director or
officer of such constituent
-19-
<PAGE> 20
corporation, or is or was serving at the request of such constituent
corporation as a director, officer or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article IX with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued. For purposes of this
Article IX, references to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to any employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director or
officer of the corporation that imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the best interest of the participants
and beneficiaries in the employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interests of the corporation" as referred to
in this Article IX.
Section 9.6. Indemnity Not Exclusive. The indemnification and
advancement of expenses provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any agreement, vote of
stockholders, vote of disinterested directors, insurance arrangement or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
-20-
<PAGE> 21
Section 9.7. Continuation. The indemnification and advancement
of expenses provided by this Article IX shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 9.8. No Further Authorization Required. This Article
IX is intended to make mandatory the indemnification permitted by Section 145
of the Delaware General Corporation Law. This Article IX shall be deemed to
constitute the authorization required by subsection (d) of said Section 145,
and no further authorization by the Board of Directors or the stockholders of
the corporation shall be necessary in any specific case if the indemnification
or advancement of expenses referred to in this Article IX is, by the terms of
this Article IX, required to be afforded in that case.
Article X
By-Law Amendments; Application of Section 203
of the Delaware General Corporation Law
Section 10.1. Certificate of Incorporation to Govern. These
by-laws may not be adopted, amended or repealed otherwise than in accordance
with Article VI of the Certificate of Incorporation, provided that Section 10.2
of these by-laws may not be further amended by the Board of Directors.
Section 10.2. No Application of Section 203. The corporation
hereby expressly elects not to be governed by Section 203 of the Delaware
General Corporation Law entitled "Business Combinations with Interested
Stockholders".
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<PAGE> 1
DANIEL INDUSTRIES, INC.
1977 Stock Option Plan
(As Amended and Restated on December 16, 1993)
1. Purpose. This 1977 Stock Option Plan (this "Plan") of
Daniel Industries, Inc. (the "Company"), for executive officers and other key
employees of the Company, is intended to advance the best interests of the
Company by providing those individuals who have substantial responsibility for
its management and growth with additional incentive and by increasing their
proprietary interest in the success of the Company, thereby encouraging them to
remain in its employ.
2. Administration. This Plan shall be administered by a
committee (the "Committee") designated by the Board of Directors of the Company
in accordance with the provisions of Article III of the by-laws of the Company.
The Committee shall consist of three directors of the Company, each of whom
shall be a disinterested person.
For purposes of this Paragraph 2, "disinterested person" means a
person who is not, at any time during such person's service as a member of the
Committee or at any time during one year prior to such service, granted Options
(as hereinafter defined) or granted or awarded other equity securities pursuant
to any other plan of the Company or any of its affiliates.
All action by the Committee shall be taken in accordance with
the provisions of Article III of the by- laws of the Company. The Committee
shall designate a chairman from among its members, who shall preside at all of
its meetings, and shall designate a secretary, without regard to whether that
person is a member of the Committee, who shall keep the minutes of the
proceedings of the Committee and all records, documents and data pertaining to
the administration of this Plan.
All questions of interpretation and application of this Plan, or
of options granted or to be granted hereunder ("Options"), shall be subject to
the determination, which shall be final, binding and conclusive, of the
Committee.
3. Option Shares. Subject to the provisions of Paragraph
17 hereof, the shares of stock issuable upon the exercise of Options shall be
shares of Common Stock, $1.25 par value ("Stock"), of the Company. The
aggregate number of shares of Stock that may be issued upon the exercise of
Options shall not exceed 987,363, consisting of (i) 100,000 shares provided for
under this Plan on the date this Plan became effective, (ii) 250,000 additional
shares provided for under this Plan on August 22, 1989, (iii) 400,000
additional shares provided for under this Plan on December 16, 1993, and (iv)
237,363 shares that, after the date the Plan became effective but prior to
December 17, 1993, became available for issuance upon the exercise of Options
by reason of Paragraph 17 hereof. 173,408 shares have been issued in
accordance with the terms of the Plan after the date the Plan became effective
but prior to December 17, 1993, such that
<PAGE> 2
813,955 of such aggregate number of shares, and the class thereof, shall be
subject to adjustment in accordance with the provisions of Paragraph 17 hereof
in respect of any event referred to in Paragraph 17 hereof that occurs on or
after December 17, 1993. Such shares of Stock may be treasury shares or
authorized but unissued shares.
In the event that any outstanding Option for any reason shall
expire or terminate or be forfeited or canceled, whether by reason of the death
or severance of employment of the individual to whom such Option was granted,
the relinquishment of such Option, or any other cause, the shares of Stock
allocable to the unexercised portion of such Option may be made the subject of
one or more other Options granted on or after the date of the expiration,
termination, forfeiture or cancellation of such first-mentioned Option.
4. Authority to Grant Options. The Committee may grant
from time to time to such eligible individuals as it shall from time to time
determine one or more Options to purchase a stated number of shares of Stock
subject to the terms and conditions of this Plan and the terms and conditions
of the agreement evidencing such Option. The number of shares of Stock
issuable upon the exercise of any Option shall be determined by the Committee
at the time such Option is granted, provided that such number of shares of
Stock shall be subject to adjustment in accordance with the provisions of
Paragraph 17 hereof.
5. Eligibility. The individuals who shall be eligible to
be granted Options shall be those executive officers and other key employees
(including officers who may be directors of the Company, but excluding any
officer or other key employee who shall have been designated by the Board of
Directors of the Company as ineligible for the grant of Options) of the
Company, or of any parent or subsidiary corporation of the Company, as the
Committee shall determine from time to time.
6. Option Price. The price at which shares of Stock may
be purchased upon the exercise of an Option (the "Option Price") shall be
determined by the Committee at the time such Option is granted and shall be
expressed in United States dollars. The Option Price with respect to any
Option may be less than, equal to, or greater than the fair market value on the
date such Option is granted of the shares of Stock that may be purchased upon
the exercise of such Option. In no event, however, shall the Option Price with
respect to any Option be less than the greater of (i) 50% of the fair market
value on the date such Option is granted of the shares of Stock that may be
purchased upon the exercise of such Option or (ii) the aggregate par value of
the shares of Stock that may be purchased upon the exercise of such Option.
7. Duration of Options. The Committee, in its discretion,
may provide that an Option shall be exercisable during any period of time from
the date such Option is granted, provided that no Option may be exercised until
the expiration of six months following the date such Option was granted.
-2-
<PAGE> 3
8. Amount Exercisable. Each outstanding Option may be
exercised, either with respect to all or less than all of the number of shares
of Stock subject to such Option, subject to such conditions as the Committee,
in its discretion, may provide in the agreement evidencing such Option.
9. Exercise of Options. The individual to whom an Option
is granted (an "Optionee") may exercise such Option by delivering to the
Company a written notice stating (i) that such Optionee wishes to exercise such
Option on the date such notice is so delivered, (ii) the number of shares of
Stock with respect to which such Option is to be exercised and (iii) the
address to which the certificate representing such shares of Stock should be
mailed.
In order to be effective, such written notice shall be
accompanied by (i) payment of the Option Price of such shares of Stock and (ii)
payment of an amount of money necessary to satisfy any withholding tax
liability that may result from the exercise of such Option. Each such payment
shall be made to the Company in United States dollars.
In its discretion, the Committee may require, as an additional
condition to the issuance of shares of Stock upon the exercise of an Option,
that the Optionee to whom such Option was granted execute and deliver to the
Company a stock purchase agreement, in such form as may be required by the
Committee, within three business days after such form of agreement is presented
to such Optionee.
As promptly as practicable after the receipt by the Company of
(i) such written notice from the Optionee, (ii) payment, in the form required
by the foregoing provisions of this Paragraph 9, of the Option Price of the
shares of Stock with respect to which such Option is to be exercised, (iii)
payment, in the form required by the foregoing provisions of this Paragraph 9,
of an amount of money necessary to satisfy any withholding tax liability that
may result from the exercise of such Option, and (iv) an executed stock
purchase agreement in the form required by the Committee, if any is so
required, the Company shall cause to be delivered to such Optionee (or to a
specified escrow agent, if so required under the terms of such stock purchase
agreement) a certificate representing the number of shares of Stock with
respect to which such Option has been so exercised, such certificate to be
registered in the name of such Optionee, provided that such delivery shall be
considered to have been made when such certificate shall have been mailed,
postage prepaid, to such Optionee at the address specified for such purpose in
such written notice from the Optionee to the Company.
10. Transferability of Options. An Option shall not be
transferable by the Optionee to whom such Option was granted otherwise than by
will or under the laws of descent and distribution or pursuant to a qualified
domestic relations order, as defined by the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act, or the
rules thereunder. The designation by an Optionee of a beneficiary shall not
constitute a transfer of an Option for purposes of this Plan.
-3-
<PAGE> 4
11. Termination of Employment or Death of Optionee. All
Options granted to an Optionee shall terminate immediately upon severance of
the employment relationship between the Company and such Optionee for any
reason, for or without cause, other than death. Whether authorized leave of
absence, or absence on military or government service, shall constitute
severance of the employment relationship between the Company and any Optionee
shall be determined by the Committee at the time thereof.
In the event of the death of an Optionee while in the employ of
the Company and before the date of expiration of any Option granted to such
Optionee, such Option shall terminate on the earlier of such date of expiration
or one year following the date of such Optionee's death. After the death of
such Optionee, the Optionee's executors or administrators, or the person to
whom such Optionee's Option shall have been transferred by will or under the
laws of descent and distribution, shall have the right, at any time prior to
such termination, to exercise such Option, as a whole (without regard to any
limitations set forth in or imposed pursuant to the first sentence of Paragraph
8 hereof) or in part.
For the purpose of determining the employment relationship
between the Company and an Optionee, employment by any parent or subsidiary
corporation of the Company shall be considered employment by the Company.
12. Requirements of Law. The Company shall not be required
to issue any shares of Stock upon the exercise of any Option if the issuance of
such shares of Stock would constitute or result in a violation by the Company,
or by the Optionee to whom such Option was granted, of any provision of any
applicable law, statute or regulation of any governmental authority.
Upon the exercise of any Option, the Company shall not be
required to issue any shares of Stock unless the Committee shall have received
evidence satisfactory to it that the Optionee to whom such Option was granted
will not transfer such shares of Stock until a registration statement with
respect to such shares of Stock shall have become effective under the
Securities Act of 1933 or until an opinion of counsel satisfactory to the
Company shall have been received by the Company to the effect that such
registration is not required. Any determination in this connection by the
Committee shall be final, binding and conclusive.
The Company may, but shall in no event be obligated to, register
under the Securities Act of 1933, or register or otherwise qualify for sale
under the securities laws of any state, the shares of Stock issuable upon the
exercise of one or more Options. In the event that any shares of Stock
issuable upon the exercise of an Option are not registered under the Securities
Act of 1933, the Company may imprint on the certificates representing such
shares of Stock the following legend or any other legend that counsel for the
Company considers necessary or advisable to comply with the Securities Act of
1933:
-4-
<PAGE> 5
The shares of stock represented by this certificate have
not been registered under the Securities Act of 1933 or under the
securities laws of any state and may not be sold or transferred
except upon such registration or upon receipt by the Corporation of
an opinion of counsel satisfactory to the Corporation, in form and
substance satisfactory to the Corporation, that registration is not
required for such sale or transfer.
The Company shall not be obligated to take any other affirmative
action to cause the exercise of any Option, or the issuance of shares of Stock
upon the exercise of any Option, to comply with any law, statute or regulation
of any governmental authority.
13. No Rights as Shareholder. No Optionee shall have any
right as a shareholder with respect to any shares of Stock issuable upon the
exercise of any Option granted to such Optionee until the date of issuance to
such Optionee of a certificate representing such shares of Stock. Except as
otherwise provided in Paragraph 17 hereof, no adjustment for dividends, or
otherwise, shall be made if the record date therefor is prior to the date of
issuance of such certificate.
14. Employment Obligation. The granting of any Option
shall not impose upon the Company, or upon any parent or subsidiary corporation
of the Company, any obligation to employ or continue to employ any Optionee.
The right of the Company, or of any parent or subsidiary corporation of the
Company, to terminate the employment of any person shall not be diminished or
otherwise affected by reason of the fact that an Option has been granted to
him.
15. Forfeiture for Competition. If the Committee finds
that the holder of any outstanding Option, at any time following the date upon
which such Option was granted, directly or indirectly owned, operated, managed
or controlled, or participated in the ownership, management, operation or
control of, or was employed or was paid as a consultant or as an independent
contractor by, a business that competed at any time after that date with the
Company or with any parent or subsidiary corporation of the Company, then such
holder shall thereupon forfeit all outstanding Options granted to him, provided
that such holder shall not forfeit any outstanding Option solely on account of
such holder's ownership of shares or other securities issued by any corporation
so long as such ownership does not result in the direct or indirect control by
such holder of such corporation.
16. Forfeiture for Dishonesty. If the Committee finds that
an Optionee has engaged in fraud, embezzlement, theft, commission of a felony,
or proven dishonesty in the course of such Optionee's employment by the Company
or by any parent or subsidiary corporation of the Company and that such action
has damaged the Company or such parent or subsidiary corporation, or if the
Committee finds that an Optionee has disclosed trade secrets
-5-
<PAGE> 6
of the Company or of any parent or subsidiary corporation of the Company, then
such Optionee shall thereupon forfeit all outstanding Options granted to such
Optionee.
17. Changes in the Capital Structure of the Company. The
existence of outstanding Options shall not affect in any manner the right of
the Company (i) to make any change in the Company's capital structure or its
business, (ii) to effect any merger or consolidation of the Company, (iii) to
issue any bonds, debentures or other evidences of indebtedness, (iv) to issue
any preferred stock or any other securities affecting the Stock or the rights
of the holders thereof, (v) to cause the dissolution of the Company or any sale
or transfer of all or any part of the assets or business of the Company, or
(vi) to take any other corporate action or proceeding, whether of a similar
character or otherwise.
If the Company shall effect a reclassification of shares of
Stock, the payment of a stock dividend to holders of shares of Stock, or some
other increase or reduction in the number of shares of Stock outstanding
without receiving compensation therefor in money, services or property, then
(i) the number, class and per share price of shares of Stock issuable upon the
exercise of any outstanding Option shall be appropriately adjusted so that the
Optionee to whom such Option was granted shall be entitled upon the exercise of
such Option to receive, for the same aggregate consideration, the same number
and class of shares that such Optionee would have received had such Optionee
exercised such Option immediately prior to the occurrence of the event
requiring such adjustment and (ii) the aggregate number of shares of Stock, and
the class thereof, that may be issued upon the exercise of Options that are not
at the time outstanding shall be adjusted by substituting for such number and
class that number and class of shares that would have been received by the
holder of record of an equal number of outstanding shares of Stock as the
result of the occurrence of the event requiring such adjustment.
After a merger of one or more corporations into the Company, or
after a consolidation of the Company and one or more corporations under
circumstances in which the Company is the surviving corporation, each holder of
an outstanding Option shall be entitled upon the exercise of such Option to
receive (subject to any required action by shareholders), in lieu of the number
of shares of Stock issuable upon the exercise of such Option, the number and
class of shares or other securities to which such holder would have been
entitled pursuant to the terms of the agreement of merger or consolidation if,
immediately prior to such merger or consolidation, such holder had been the
holder of record of a number of shares of Stock equal to the number of shares
of Stock issuable upon the exercise of such Option.
If the Company is merged into or consolidated with another
corporation under circumstances in which the Company is not the surviving
corporation, or if the Company dissolves, (i) subject to the provisions of
clause (iii) of this grammatical paragraph, after the effective date of such
merger or consolidation, as the case may be, each holder of an outstanding
Option shall be entitled upon the exercise of such Option to receive, in lieu
of shares of Stock, such shares or other securities as the holders of shares of
Stock received
-6-
<PAGE> 7
pursuant to the terms of such merger or consolidation; (ii) the Board of
Directors of the Company, in its discretion, may waive any limitations set
forth in or imposed pursuant to the first sentence of Paragraph 8 hereof so
that all outstanding Options shall be exercisable in full from and after a date
prior to the effective date of such merger, consolidation or dissolution, as
the case may be; and (iii) all outstanding Options may be canceled by the Board
of Directors as of the effective date of such merger, consolidation or
dissolution, provided that (x) notice of such cancellation shall be given to
each holder of an outstanding Option and (y) such holder shall have the right
to exercise such Option in full (without regard to any limitations set forth in
or imposed pursuant to the first sentence of Paragraph 8 hereof) during the
30-day period immediately preceding the effective date of such merger,
consolidation or dissolution.
Except as in this Paragraph 17 expressly provided, the issue by
the Company of shares of any class, or securities convertible into shares of
any class, for money or services or property, either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number, class or Option Price of any shares issuable upon
the exercise of any outstanding Option.
18. Substitute Options. Options may be granted from time
to time in substitution for options held by employees of other corporations who
concurrently become employees of the Company as the result of a merger or
consolidation of such other corporation with or into the Company, the
acquisition by the Company of assets of such other corporation, or the
acquisition by the Company of stock of such other corporation. The terms and
conditions of such substitute Options may vary from the terms and conditions
set forth herein to such extent as the Board of Directors of the Company may
deem appropriate to conform, in whole or in part, to the provisions of the
options in substitution for which such substitute Options are granted.
19. Amendment or Termination of Plan. The Board of
Directors of the Company may modify, revise or terminate this Plan at any time
and from time to time, provided that without the further approval of the
holders of a majority of the outstanding shares of Stock, the Board of
Directors of the Company may not (i) materially increase the benefits accruing
to participants under this Plan, (ii) change the aggregate number of shares of
Stock that may be issued upon the exercise of Options (except to the extent
that the actions of the Board of Directors may require adjustment of such
number pursuant to the provisions of Paragraph 17), or (iii) change the class
of employees to whom Options may be granted.
20. Option Agreements. Each Option shall be evidenced by a
written agreement that shall be subject to the terms and conditions of this
Plan and shall be executed by the Optionee to whom such Option is granted and
by the Company. Each such agreement shall contain such other provisions as the
Committee, in its discretion, shall deem advisable.
-7-
<PAGE> 8
21. Effective Date of Plan. This Plan shall become
effective and shall be deemed to have been adopted on January 1, 1977, subject
only to approval by the holders of a majority of the outstanding shares of
Stock within 12 months after such date. This Plan shall terminate (i) when the
total number of shares of Stock with respect to which Options may be granted
shall have been issued upon the exercise of Options or (ii) by action of the
Board of Directors of the Company pursuant to Paragraph 19 hereof.
-8-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION
------------------ ---------------
Daniel Bolt and Gasket, Ltd. Canada
Daniel de Mexico, S.A. Mexico
Daniel En-Fab Systems, Inc. Delaware
Daniel Flow Products, Inc. Delaware
Daniel Flow Products, Ltd. Canada
Daniel Industrial, Inc. Delaware
Daniel Industries Foreign Sales Corporation U.S. Virgin Islands
Daniel Industries Limited United Kingdom
Daniel Messtechnik GmbH Babelsberg Germany
Daniel Valve Company Delaware
Danmasa, S.A. de C.V. Mexico
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in (i) the Registration
Statement on Form S-8 (SEC File No. 2- 65288), (ii) the Registration Statement
on Form S-8 (SEC File No. 2-79399), (iii) the Registration Statement on Form
S-8 (SEC File No. 2-79660) and (iv) the Registration Statement on Form S-8 (SEC
File No. 33-000162), including all Post- Effective Amendments thereto filed
prior to the date of this consent, of Daniel Industries, Inc. of our report
dated November 15, 1994, appearing on page 18 of this Annual Report on Form
10-K.
PRICE WATERHOUSE LLP
Houston, Texas
December 16, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1993
<PERIOD-END> SEP-30-1994
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0
0
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</TABLE>
