<PAGE> 1
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, 1995
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------------------- ----------------------
Commission File Number 1-6098
-----------------------
DANIEL INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 74-1547355
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9753 Pine Lake Drive, Houston, Texas 77055
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
713-467-6000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
--- ---
On August 4, 1995, there were outstanding 12,083,485 shares of Common
Stock, $1.25 par value, of the registrant.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
DANIEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except per share data and number of shares)
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
------------ -------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 9,927 $ 2,520
Receivables, net of reserve of $204 and $243 27,032 38,146
Costs in excess 2,318 14,888
Inventories 35,933 45,314
Deferred taxes 7,424 5,126
Other 3,435 5,657
Net assets held for sale 34,431
-------- --------
Total current assets 120,500 111,651
Property, plant and equipment at cost, net 53,912 69,796
Intangibles and other assets 3,429 5,890
-------- --------
$177,841 $187,337
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 13,400 $ 5,900
Current maturities of long-term debt 2,857 2,857
Accounts payable 14,388 16,946
Accrued expenses 17,578 19,958
-------- --------
Total current liabilities 48,223 45,661
Long-term debt 8,571 11,429
Deferred taxes 6,116 8,367
-------- --------
Total liabilities 62,910 65,457
-------- --------
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,
12,083,485 and 12,032,470 shares issued 15,104 15,041
Capital in excess of par value 90,188 89,675
Translation component (138) (2,061)
Retained earnings 9,777 19,225
-------- --------
Total stockholders' equity 114,931 121,880
-------- --------
$177,841 $187,337
======== ========
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE> 3
DANIEL INDUSTRIES, INC.
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,
-------------------------- --------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 42,028 $ 56,239 $ 123,063 $ 145,446
----------- ---------- --------- ---------
Costs and expenses:
Cost of sales 24,468 38,347 78,147 95,339
Depreciation and
amortization 1,673 1,977 5,857 5,673
Selling and admin-
istrative expenses 11,359 13,490 33,426 40,196
Research and develop-
ment expenses 621 1,048 2,165 2,975
Unusual items 12,330
Loss on disposal
of asset 1,371 1,371
Interest expense 493 475 1,520 1,351
----------- ---------- --------- ---------
Total expenses 39,985 55,337 134,816 145,534
----------- ---------- --------- ---------
Income (loss) before
income tax expense
(benefit) 2,043 902 (11,753) (88)
Income tax expense
(benefit) 762 425 (3,930) 156
----------- ---------- --------- ---------
Net income (loss) $ 1,281 $ 477 $ (7,823) $ (244)
=========== ========== ========= =========
Earnings (loss) per
common share $ .11 $ .04 $ (.65) $ (.02)
=========== ========== ========= =========
Cash dividends per
common share $ .045 $ .045 $ .135 $ .135
=========== ========== ========= =========
Average number of shares
outstanding 12,041,919 12,030,265 12,035,918 12,029,580
=========== ========== ========== ==========
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE> 4
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
------------------------------
1995 1994
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,823) $ (244)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Non-cash portion of restructuring
and other items 12,495
Depreciation and amortization 5,857 5,673
Changes in operating assets and
liabilities (1,102) (27,053)
---------- -----------
Net cash provided by (used in) operating
activities 9,427 (21,624)
---------- -----------
Cash flows from investing activities:
Acquisition of product line (4,177)
Capital expenditures (3,612) (8,924)
Proceeds from sales of investment securities 2,039 1,000
Proceeds from sales of assets 91 290
---------- -----------
Net cash used in investing activities (5,659) (7,634)
---------- -----------
Cash flows from financing activities:
Net borrowings on lines of credit 7,500 14,000
Payments on long-term debt (2,858) (2,857)
Cash dividends paid (1,625) (1,623)
Activity under stock option plan 576 27
---------- -----------
Net cash provided by financing activities 3,593 9,547
---------- -----------
Effect of exchange rate changes on cash 46 (40)
---------- -----------
Increase (decrease) in cash and cash
equivalents 7,407 (19,751)
Cash and cash equivalents, beginning of period 2,520 23,220
---------- -----------
Cash and cash equivalents, end of period $ 9,927 $ 3,469
========== ===========
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE> 5
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, 1994.
In connection with the determination of certain restructuring and
other charges recognized in the second quarter of fiscal 1995, the Company
elected early adoption of Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" effective for fiscal years beginning after December
15, 1995, which is the Company's fiscal 1997.
Note 2 - Restructuring and Other Items
In February 1995, the Company announced that its Board of Directors
approved and adopted a restructuring plan to improve the Company's overall
profitability through a greater focus on high margin and market leading product
lines and cost reductions in overhead and direct expenses.
In the second quarter of fiscal 1995, the Company recorded pretax
charges of $16,115,000 relating to restructuring and other items as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Recorded as unusual items:
Employee terminations $ 3,997
Impairments of property, plant
and equipment and other assets 7,339
Expenses incurred in connection
with an unsolicited merger
proposal 600
Other 394
-------
12,330
Recorded as cost of sales adjustments:
Inventory writedowns 3,785
-------
Total charges $16,115
=======
</TABLE>
Charges for asset impairments and writedowns are non-cash in nature.
At June 30, 1995, the Company's reserve for employee terminations
totaled $1,783,000; approximately two-thirds of the 245 planned terminations
had occurred as of that date.
<PAGE> 6
As part of the restructuring plan, the Company announced its plan to
divest identified non-core product lines. In August 1995, the Company sold its
airplane. Accordingly, related net assets were classified as a current asset
at June 30, 1995 and a loss on disposal of $1,371,000 was recorded in the
statement of operations for the June quarter. The Company is engaged in
ongoing discussion with prospective buyers for the remaining businesses that
are being divested.
At June 30, 1995, the Company recorded a current asset of $34,431,000
representing the book value of net assets held for sale. These net assets
consist primarily of inventory and property, plant and equipment of
approximately $14,800,000 and $13,000,000, respectively. Any gain or loss from
divestitures of non-core product lines will be recorded in the periods the
transactions are finalized.
The results of operations for non-core businesses included in the
Consolidated Statement of Operations are as follows:
<TABLE>
<CAPTION>
Quarter Ended June 30, Nine Months Ended June 30,
------------------------- --------------------------
1995 1994 1995 1994
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $10,037 $9,782 $27,893 $25,331
Operating
Income (loss) 1,250 (461) 1,989 (2,868)
</TABLE>
Operating income (loss) amounts have been determined based upon
management's estimate of certain costs and expenses which have been allocated
to the non-core product lines. Effective February 1, 1995, depreciation was
discontinued on non-core assets held for sale.
Note 3 - Acquisition
In October 1994, the Company acquired the orifice metering product
line assets of another company. Acquisition and related costs of $4,177,000
were paid in cash. The operations related to this acquisition, which was
accounted for under the purchase method, are not material to the Company's
results of operations.
<PAGE> 7
Note 4 - Inventories
Major components of inventories include:
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
------------ -------------
(in thousands)
<S> <C> <C>
Raw materials $13,996 $16,412
Work-in-process 10,158 8,854
Finished goods 16,813 27,490
------- -------
40,967 52,756
Less LIFO reserve 5,034 7,442
------- -------
$35,933 $45,314
======= =======
</TABLE>
Note 5 - Accrued Expenses
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
------------ -------------
(in thousands)
<S> <C> <C>
Other accrued expenses $11,659 $14,873
Accrued taxes other than income 2,083 2,809
Salaries and wages 2,053 2,276
Reserve for restructuring 1,783
------- -------
$17,578 $19,958
======= =======
</TABLE>
Note 6 - Notes Payable
At June 30, 1995, 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 banks and accepted by the Company at the time of each borrowing. At June
30, 1995, borrowings under these lines were $13,400,000. These borrowings were
at a weighted average interest rate of 6.65% and were due on or before July 6,
1995. Some borrowings were subsequently replaced with other borrowings under
these lines.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Restructuring and Other Unusual Charges
In February 1995, the Company announced that its Board of Directors
approved and adopted a restructuring plan to improve the Company's overall
profitability through a greater focus on high margin and market leading product
lines, and annual cost reductions in overhead and direct expenses of
approximately $8 to $10 million. Significant benefits of the restructuring
will be realized in the second half of fiscal 1995. As discussed in Note 2 to
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, the Company recorded
charges aggregating $16,115,000 related to employee terminations, inventory
writedowns, impairment of certain assets and other costs, and $1,371,000
related to a loss on the sale of the Company's airplane.
Nine Months Ended June 30, 1995 vs. Nine Months Ended June 30, 1994
Consolidated revenues decreased 15% to $123,063,000 for the current
period compared to $145,446,000 for the same period last year. Revenues in the
flow measurement segment were $83,441,000 in the current period compared to
$106,211,000 last year. Revenues from sales of flow measurement systems, which
accounted for 20% and 38% of this segment's revenues in the respective periods,
declined primarily due to the inclusion in the prior year of revenues related
to the construction of two large gas metering stations destined for the North
Sea. Revenues from sales of flow measurement products remained unchanged
between the two periods. Revenues in the energy products segment increased
slightly to $39,423,000 in the current period from $38,932,000 last year.
Revenues from sales of fastener products, which accounted for 52% and 42% of
this segment's revenues in the respective periods, benefitted from price
increases and improved demand as a result of improved deliverability of
fastener products. Revenues from sales of pipeline valves decreased due to the
competitive foreign market.
The consolidated gross profit margin for the nine months ended June
30, 1995 increased to 36% of revenues from 34% of revenues last year. The
gross profit margin in the flow measurement segment improved to 41% of revenues
in the current period from 37% of revenues last year. This improvement is due
to a change in product mix towards sales of products, which earn higher margins
than sales of flow measurement systems, partially offset by the charge for
inventory writedowns recorded in the second quarter of fiscal 1995 in
connection with the Company's focus on its strategic plan related to ongoing
business. The gross profit margin in the energy products segment declined
slightly to 26% of revenues in the current period compared to 27% of revenues
last year. This decline is due to the charge for inventory writedowns
partially offset by improved margins for fastener products due to price
increases.
Depreciation and amortization expense increased 3% to $5,857,000 from
the prior year due to the amortization of intangibles associated with the
acquisition
<PAGE> 9
(see Note 3 of NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS), partially
offset by the discontinuation of depreciation of assets held for sale.
Consolidated selling and administrative ("S&A") expenses declined 17%
to $33,426,000 in the current period. S&A expenses in the flow measurement
segment declined 12% to $21,335,000; expenses in the energy products segment
declined 23% to $7,800,000 and corporate expenses declined 24% to $4,291,000.
These declines are attributable to the decreases in revenues and the
realization of benefits from the restructuring program.
The unusual charges of $12,330,000 represents restructuring and other
charges as previously discussed.
In August 1995, the Company sold its airplane and recorded a loss on
disposal of $1,371,000 in the period ended June 30, 1995.
Interest expense increased 13% from the same period a year ago due to
increased short-term borrowing levels partially offset by lower long-term debt
levels.
Quarter Ended June 30, 1995 vs. Quarter Ended June 30, 1994
Consolidated revenues decreased 25% to $42,028,000 for the quarter
ended June 30, 1995. Revenues in the flow measurement segment were $27,955,000
for the current quarter compared to $40,298,000 for the same period last year.
This decline is due primarily to the inclusion in the prior year of revenues
related to the construction of two large gas metering stations destined for the
North Sea. Revenues from sales of flow measurement systems represented 16% and
44% of this segment's revenues in the respective periods. Revenues from sales
of flow measurement products increased 5% to $23,521,000 reflecting improved
demand for the Company's metering and electronic products. Revenues in the
energy products segment decreased 12% to $14,001,000 for the current quarter.
Decreased sales of valve products due to the competitive foreign market were
partially offset by increased revenues from the sales of fastener products due
to price increases and improved demand.
The consolidated gross profit margin for the quarter ended June 30,
1995 improved significantly to 42% of revenues compared to 32% of revenues last
year. The gross profit margin in the flow measurement segment improved to 47%
of revenues in the current period from 33% last year due a favorable change in
product mix towards sales of products, which earn higher margins than sales of
flow measurement systems. The gross profit margin in the energy products
segment increased to 32% of revenues in the current period from 29% of revenues
last year. Improved margins on fabricated and fastener products, due to a
change in inventory reserves and price increases, respectively, were partially
offset by lower margins on pipeline valve products due to the competitive
market.
Depreciation and amortization expense decreased 15% to $1,673,000 in
the current period due to the discontinuation of depreciation of assets held
for sale, partially offset by the amortization of intangibles associated with
the acquisition in fiscal 1995 (see Note 3 to NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS).
<PAGE> 10
Consolidated S&A expenses declined 16% to $11,359,000 in the current
period. Expenses in the flow measurement segment declined 11% to $7,234,000;
expenses in the energy products segment declined 13% to $2,939,000 and
corporate expenses declined 40% to $1,186,000. These declines are attributable
to the decreases in revenues and the realization of benefits from the
restructuring program.
In August 1995, the Company sold its airplane and recorded a loss on
disposal of $1,371,000 in the quarter ended June 30, 1995.
Liquidity and Capital Resources
The primary sources of the Company's liquidity for the nine months
ended June 30, 1995 were internally generated funds, short-term borrowings,
proceeds from sales of investment securities and cash and cash equivalents
available at the beginning of the year. These funds were used primarily for
the acquisition of certain assets related to a product line (see Note 3 to
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS), capital expenditures,
payments on long-term debt and payments of dividends.
Net cash provided by operations for the nine months ended June 30,
1995 was $9,427,000 consisting primarily of the collection of amounts billed on
long-term construction contracts and a net decline in receivables and payables,
consistent with the decrease in revenues.
During the second quarter of fiscal 1995, the Company recorded charges
related to restructuring and other items of $16,115,000. In the third quarter
of fiscal 1995, the Company recorded a loss on the sale of the Company's
airplane of $1,371,000. The non-cash portion of these charges aggregated
$12,495,000. The remaining charges represented employee terminations and other
costs aggregating $4,991,000, of which $2,507,000 was accrued at June 30, 1995.
The Company expects to pay the remainder of these costs within the next twelve
months.
Working capital at June 30, 1995 included $35,933,000 in inventory
which is not as liquid as other current assets.
In the first nine months of fiscal 1995 and in 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, 1995,
the Company had uncommitted short-term lines of credit aggregating
approximately $40,000,000. At June 30, 1995 and August 4, 1995, borrowings
under these lines were $13,400,000 and $12,800,000, respectively, at weighted
average interest rates of 6.65% and 6.39%, respectively. While the Company
expects its borrowing requirements to generally decrease during the remainder
of fiscal 1995 from current levels, the timing of one or several major
expenditures or receipts may affect the level of borrowings at a particular
point in time. As previously mentioned, the Company adopted a strategic
restructuring plan. The Company expects to have considerable flexibility with
cash proceeds from divestitures as well as borrowing capacity to make
acquisitions to complement its core business group.
<PAGE> 11
The Company anticipates capital expenditures in fiscal 1995 of
approximately $6,000,000. Capital expenditures for the nine months ended June
30, 1995 were $3,612,000.
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) The Company did not file any report on Form 8-K during the
quarter for which this report is filed.
<PAGE> 12
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, 1995 By /s/ W. A. Griffin, III
W. A. Griffin, III
President and
Chief Executive Officer
Date August 10, 1995 By /s/ Henry G. Schopfer, III
Henry G. Schopfer, III
Vice President and
Chief Financial Officer
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 9,927
<SECURITIES> 0
<RECEIVABLES> 27,236
<ALLOWANCES> 204
<INVENTORY> 35,933
<CURRENT-ASSETS> 120,500
<PP&E> 53,912
<DEPRECIATION> 0
<TOTAL-ASSETS> 177,841
<CURRENT-LIABILITIES> 48,223
<BONDS> 0
<COMMON> 15,104
0
0
<OTHER-SE> 90,188
<TOTAL-LIABILITY-AND-EQUITY> 177,841
<SALES> 123,063
<TOTAL-REVENUES> 123,063
<CGS> 78,147
<TOTAL-COSTS> 78,147
<OTHER-EXPENSES> 21,723<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,520
<INCOME-PRETAX> (11,753)
<INCOME-TAX> (3,930)
<INCOME-CONTINUING> (7,823)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,823)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> (.65)
<FN>
<F1>Amount is comprised of unusual items, depreciation and amortization, research
and development expenses and loss on disposal of asset.
</FN>
</TABLE>
