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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________________ TO _____________________
Commission File Number 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 No.)
</TABLE>
9753 Pine Lake Drive, Houston, Texas 77055
(Address of principal executive offices) (Zip Code)
713-467-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No _____.
On August 1, 1994, there were outstanding 12,030,265 shares of Common
Stock, $1.25 par value, of the registrant.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
DANIEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1994 1993
------------ -------------
(in thousands)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 3,469 $ 23,220
Receivables, net of reserve of $182 and $96 38,892 33,105
Costs in excess 16,044 6,054
Inventories 50,261 39,446
Deferred taxes on income 4,288
Other 4,353 3,350
------------ -------------
Total current assets 117,307 105,175
Property, plant and equipment at cost, net 68,290 64,477
Intangibles, net 4,651 4,786
Investments and other assets 1,647 3,630
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$ 191,895 $ 178,068
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 14,000
Current maturities of long-term debt 2,857 $ 2,857
Accounts payable 17,606 17,395
Accrued expenses 17,116 17,714
------------ -------------
Total current liabilities 51,579 37,966
Long-term debt 11,429 14,286
Deferred taxes on income 8,961 4,766
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Total liabilities 71,969 57,018
------------ -------------
Stockholders' equity:
Preferred stock, $1.00 par value,
1,000,000 shares authorized, 150,000
shares designated as Series A junior
participating preferred stock, no
shares issued or outstanding
Common stock, $1.25 par value,
20,000,000 shares authorized,
12,030,265 and 12,026,450 shares issued 15,038 15,033
Capital in excess of par value 89,586 89,564
Translation component (2,898) (3,614)
Retained earnings 18,200 20,067
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Total stockholders' equity 119,926 121,050
------------ -------------
$ 191,895 $ 178,068
============ =============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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DANIEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of dollars, except per share data and number of shares)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30, Nine Months Ended June 30,
------------------------ --------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 56,239 $ 50,009 $ 145,446 $ 128,987
----------- ---------- ---------- -----------
Costs and expenses:
Cost of goods sold 39,292 31,827 98,022 78,813
Selling, general and
administrative expenses 15,570 15,141 46,161 44,344
Interest expense 475 384 1,351 1,536
----------- ---------- ---------- -----------
Total expenses 55,337 47,352 145,534 124,693
----------- ---------- ---------- -----------
Income (loss) before income
tax expense 902 2,657 (88) 4,294
Income tax expense 425 852 156 1,633
----------- ---------- ---------- -----------
Net income (loss) $ 477 $ 1,805 $ (244) $ 2,661
=========== ========== ========== ===========
Earnings (loss) per
common share(a) $ .04 $ .15 $ (.02) $ .22
=========== ========== ========== ===========
Cash dividends per common
share $ .045 $ .045 $ .135 $ .135
=========== ========== ========== ===========
Average number of shares
outstanding(a) 12,030,265 11,996,922 12,029,580 11,982,860
=========== ========== ========== ===========
</TABLE>
(a) Earnings (loss) per common share are computed on the basis of the
average number of shares outstanding. The effect of outstanding stock
options on earnings (loss) per share was insignificant.
See accompanying notes to consolidated condensed financial statements.
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DANIEL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
------------------------------
1994 1993
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (244) $ 2,661
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 5,673 4,808
Changes in operating assets and
liabilities (27,053) (4,379)
------------ ------------
Net cash provided by (used in) operating
activities (21,624) 3,090
------------ ------------
Cash flows from investing activities:
Capital expenditures (8,924) (7,008)
Investment in license agreement (2,667)
Purchase of investment securities (1,579)
Proceeds from sale of investment securities 1,000
Proceeds from sales of assets 290 1,087
------------ ------------
Net cash used in investing activities (7,634) (10,167)
------------ ------------
Cash flows from financing activities:
Net borrowings on lines of credit 14,000
Payments on long-term debt (2,857) (2,857)
Cash dividends paid (1,623) (1,618)
Activity under stock option plan 27 326
------------ ------------
Net cash provided by (used in) financing
activities 9,547 (4,149)
------------ ------------
Effect of exchange rate changes on cash (40) (578)
------------ ------------
Decrease in cash and cash equivalents (19,751) (11,804)
Cash and cash equivalents, beginning of period 23,220 29,249
------------ ------------
Cash and cash equivalents, end of period $ 3,469 $ 17,445
============ ============
Cash payments (refunds) for income taxes $ 1,621 $ (1,182)
Cash payments for interest 1,860 2,136
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 - General
The foregoing financial statements have been prepared from the books
and records of the Company without audit. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments necessary for a
fair statement of the results for the interim periods presented, are reflected
in such financial statements.
These condensed statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1993.
Note 2 - Acquisitions
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 July 1994.
Note 3 - Inventories
Major components of inventories include:
<TABLE>
<CAPTION>
June 30, September 30,
1994 1993
------------ -------------
(in thousands)
<S> <C> <C>
Raw materials $ 16,202 $ 14,193
Work-in-process 11,494 9,663
Finished goods 29,511 22,377
------------ -------------
57,207 46,233
Less LIFO reserve (6,946) (6,787)
------------ -------------
$ 50,261 $ 39,446
============ =============
</TABLE>
Inventory reductions in fiscal 1993 resulted in liquidations 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 for the nine months ended June 30, 1993.
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Note 4 - Accrued Expenses
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
June 30, September 30,
1994 1993
------------ -------------
(in thousands)
<S> <C> <C>
Other accrued expenses $ 12,883 $ 12,711
Salaries and wages 2,212 2,415
Accrued taxes other than income 2,021 2,588
------------ -------------
$ 17,116 $ 17,714
============ =============
</TABLE>
Note 5 - Notes Payable
At June 30, 1994, the Company had uncommitted short-term lines of
credit aggregating approximately $45,000,000. 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
June 30, 1994, borrowings under these lines were $14,000,000. These borrowings
were at a weighted average interest rate of 5.12% and were due at varying dates
through August 1, 1994. Some borrowings were subsequently replaced with other
borrowings under these lines.
Note 6 - Income Taxes
Effective October 1, 1993, the Company adopted the Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes"
("FAS 109"). Information on the adoption of FAS 109 is set forth in Note 5 of
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS of the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1993.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Nine Months Ended June 30, 1994 vs. Nine Months Ended June 30, 1993
Consolidated revenues increased 13% to $145,446,000 for the nine
months ended June 30, 1994, from $128,987,000 for the same period last year.
The Flow Measurement segment posted a 37% increase in revenues to $106,211,000
for the current period, from $77,780,000 for the same period last year. Sales
of flow measurement systems, which accounted for 38% and 22% of this segment's
revenues in the respective periods, increased significantly in the current
period due to construction of liquid and gas metering systems destined
principally for the North Sea and Europe. Sales of flow measurement products
increased 9% reflecting increased demand for the Company's metering and
electronic products, primarily in foreign markets. The Energy Products segment
experienced a 23% decline in revenues to $38,932,000 for the current period,
compared to $50,529,000 for the same period last year. Sales of pipeline
valves, which comprised 43% and 50% of
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this segment's revenues in the respective periods, decreased due to a more
competitive worldwide market as a result of lower crude oil prices. Sales of
fasteners, which comprised 42% and 35% of this segment's revenues in the
respective periods, decreased due to an unusually large order for flanges
shipped during the nine-month period ended June 30, 1993.
The consolidated gross profit margin declined to 33% of revenues for
the nine months ended June 30, 1994, compared to 39% of revenues for the same
period last year. The gross profit margin in the Flow Measurement segment
declined six percentage points to 36% 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 nine percentage points to 24% of revenues primarily
as a result of current year pricing pressures for both pipeline valve and
fastener products, declines in operational efficiencies at the fastener
operation and a change in inventory reserves.
Consolidated selling, general and administrative expenses increased
4% to $46,161,000 for the nine months ended June 30, 1994, compared to
$44,344,000 for the same period last year. However, these expenses, as a
percentage of revenues, declined two percentage points to 32% of revenues in
the current period. The Flow Measurement segment's expenses declined
significantly to 27% of revenues because a comparatively larger portion of
those revenues was attributable to sales of flow measurement systems which have
lower sales commissions than do sales of flow measurement products. Also
contributing to the decline was a decrease in engineering expenses due
primarily to completion of certain research and development projects. The
Energy Products segment's expenses increased five percentage points to 28% of
revenues since certain of these expenses are fixed and do not decrease
proportionately with sales. Corporate expenses increased 35% to $6,325,000
primarily because of reversals in the prior year of reserves associated with
settled litigation.
Consolidated depreciation and amortization expense increased 18% to
$5,673,000 for the nine months ended June 30, 1994, compared to the same period
last year due to additional capital expenditures in fiscal 1993 in both the
Flow Measurement and Energy Products segments.
Consolidated interest expense decreased 12% to $1,351,000 for the nine
months ended June 30, 1994, compared to the same period last year primarily as
a result of payments on long-term debt.
The effective tax rate for the nine months ended June 30, 1994, is
greater than the U.S. statutory rate primarily due to the losses at the
Company's German operation for which no tax benefits are currently recognized.
Quarter Ended June 30, 1994 vs. Quarter Ended June 30, 1993
Consolidated revenues increased 12% to $56,239,000 for the quarter
ended June 30, 1994, from $50,009,000 for the same period last year. The Flow
Measurement segment posted a 41% increase in revenues to $40,298,000 for the
current period, from $28,578,000 for the same period last year. Sales of flow
measurement systems, which accounted for 44% and 27% of this segment's revenues
in the respective periods, increased significantly due to construction of
liquid
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and gas metering systems destined principally for the North Sea and Europe.
Sales of flow measurement products increased 8% reflecting increased demand for
the Company's electronic products, primarily in foreign markets. The Energy
Products segment experienced a 25% decline in revenues to $15,899,000 in the
current period, compared to $21,281,000 for the same period last year. Sales
of pipeline valves, which comprised 46% and 53% of this segment's revenues in
the respective periods, decreased due to a more competitive worldwide market as
a result of lower crude oil prices.
The consolidated gross profit margin declined to 30% of revenues for
the quarter ended June 30, 1994, compared to 36% of revenues for the same
period last year. The gross profit margin in the Flow Measurement segment
declined nine percentage points to 32% 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 four percentage points to 26% of revenues primarily
as a result of a decline in operational efficiencies at the fastener operation.
Consolidated selling, general and administrative expenses increased 3%
to $15,570,000 for the quarter ended June 30, 1994, compared to the same period
last year. However, these expenses as a percentage of revenues, declined two
percentage points to 28% of revenues in the current period. The Flow
Measurement segment's expenses declined significantly to 24% of revenues
because of the shift in product mix towards sales of flow measurement systems
which have lower sales commissions than do sales of flow measurement products.
The Energy Products segment's expenses increased five percentage points to 23%
of revenues since certain of these expenses are fixed and do not decrease
proportionately with revenues.
Consolidated depreciation and amortization expense increased 22% to
$1,977,000 for the quarter ended June 30, 1994, compared to the same period
last year due to additional capital expenditures in fiscal 1993 in both the
Flow Measurement and Energy Products segments.
Consolidated interest expense increased 24% to $475,000 for the
quarter ended June 30, 1994, compared to the same period last year due to the
borrowings under bank lines of credit in the current period.
The effective tax rate for the quarter ended June 30, 1994 is greater
than the U.S. statutory rate primarily due to the losses at the Company's
German operation for which no tax benefits are currently recognized.
Liquidity and Capital Resources
At June 30, 1994, the Company's working capital balance was
$65,728,000, 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 $3,469,000 at June 30, 1994, from
$23,220,000 at September 30, 1993. This decrease in cash was due to the
funding of operational activities, capital expenditures, payments on long-term
debt and payments of dividends. Inventories and costs in excess of billings on
contracts in progress increased an aggregate $20,805,000, consistent with the
increase in revenues in the Flow Measurement segment. The recording of a
current deferred tax asset, in
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the amount of $4,288,000 at June 30, 1994, is attributable to a
reclassification from non-current deferred tax liabilities as a result of
fiscal 1994 implementation of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (see Note 6 of NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS).
Working capital at June 30, 1994, included $50,261,000 of inventory,
which is not as liquid as other current assets.
During the third quarter of fiscal 1994, the Company relied upon
short-term borrowings under its bank lines of credit to supplement its working
capital and other cash requirements. At June 30, 1994, the Company had
uncommitted short-term lines of credit aggregating approximately $45,000,000.
As of June 30, 1994 and August 3, 1994, borrowings under these lines were
$14,000,000 and $11,850,000, respectively, and at weighted average interest
rates of 5.12% and 5.30%, respectively. While the Company expects its
borrowing requirements to decrease over the near term, 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 and 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 1994 of
approximately $14,000,000. Capital expenditures for the nine months ended June
30, 1994, were $8,924,000. The Company continues to seek acquisitions that
would expand its existing business.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to legal proceedings and claims which arise in
the ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position of the Company. Additionally, in the ordinary course of
business, the Company issues standby letters of credit and bank guarantees as
security for advances, progress payments and performance on long-term
contracts. The Company is contingently liable for such obligations which
amounted to approximately $26,400,000 at June 30, 1994.
Item 6. Exhibits and Reports on Form 8-K
(b) The Company did not file any report on Form 8-K during the
quarter for which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DANIEL INDUSTRIES, INC.
(Registrant)
Date August 10, 1994 By /s/ W. A. GRIFFIN, III
W. A. Griffin, III
President
(Chief Operating Officer)
Date August 10, 1994 By /s/ HENRY G. SCHOPFER, III
Henry G. Schopfer, III
Vice President, Finance
