<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 MARCH 31, 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 May 5, 1995, there were outstanding 12,034,675 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
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
------------ -------------
(in thousands)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,487 $ 2,520
Receivables, net of reserve of $201 and $243 29,252 38,146
Costs in excess 1,295 14,888
Inventories 30,651 45,314
Deferred taxes on income 7,132 5,126
Other 1,751 5,657
Net assets held for sale 33,946
-------- --------
Total current assets 109,514 111,651
Property, plant and equipment at cost, net 55,506 69,796
Intangibles and other assets 3,714 5,890
-------- --------
$168,734 $187,337
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 9,200 $ 5,900
Current maturities of long-term debt 2,857 2,857
Accounts payable 10,609 16,946
Accrued expenses 18,669 19,958
-------- --------
Total current liabilities 41,335 45,661
Long-term debt 8,571 11,429
Deferred taxes on income 4,949 8,367
-------- --------
Total liabilities 54,855 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,
12,034,675 and 12,032,470 shares issued 15,043 15,041
Capital in excess of par value 89,687 89,675
Translation component 111 (2,061)
Retained earnings 9,038 19,225
-------- --------
Total stockholders' equity 113,879 121,880
-------- --------
$168,734 $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 March 31, Six Months Ended March 31,
-------------------------- --------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 38,737 $ 48,632 $ 81,035 $ 89,207
-------- -------- -------- --------
Costs and expenses:
Cost of sales 27,460 31,953 53,679 56,992
Depreciation and
amortization 1,950 1,873 4,184 3,696
Selling and admin-
istrative expenses 10,405 13,221 22,067 26,706
Research and develop-
ment expenses 750 959 1,544 1,927
Unusual items 12,330 12,330
Interest expense 502 410 1,027 876
-------- -------- -------- --------
Total expenses 53,397 48,416 94,831 90,197
-------- -------- -------- --------
Income (loss) before
income tax expense
(benefit) (14,660) 216 (13,796) (990)
Income tax expense
(benefit) (4,955) 96 (4,692) (269)
-------- -------- -------- --------
Net income (loss) $ (9,705) $ 120 $ (9,104) $ (721)
======== ======== ======== ========
Earnings (loss) per
common share $ (.81) $ .01 $ (.76) $ (.06)
======== ======== ======== ========
Cash dividends per
common share $ .045 $ .045 $ .09 $ .09
======== ======== ======== ========
Average number of shares
outstanding 12,033,377 12,030,265 12,032,918 12,029,238
========== ========== ========== ==========
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE> 4
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended March 31,
--------------------------
1995 1994
------- --------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(9,104) $ (721)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Non-cash portion of restructuring
and other items 11,124
Depreciation and amortization 4,184 3,696
Changes in operating assets and
liabilities 1,759 (9,539)
------- --------
Net cash provided by (used in) operating
activities 7,963 (6,564)
------- --------
Cash flows from investing activities:
Acquisition of product line (4,177)
Capital expenditures (2,404) (6,631)
Proceeds from sales of investment securities 2,039 1,000
Proceeds from sales of assets 57 127
------- --------
Net cash used in investing activities (4,485) (5,504)
------- --------
Cash flows from financing activities:
Net borrowings on lines of credit 3,300
Payments on long-term debt (2,858) (2,857)
Cash dividends paid (1,083) (1,083)
Activity under stock option plan 14 27
------- --------
Net cash used in financing activities (627) (3,913)
------- --------
Effect of exchange rate changes on cash 116 (54)
------- --------
Increase (decrease) in cash and cash
equivalents 2,967 (16,035)
Cash and cash equivalents, beginning of period 2,520 23,220
------- --------
Cash and cash equivalents, end of period $ 5,487 $ 7,185
======= ========
</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 March 31, 1995, the Company's reserve for employee terminations
totaled $2,535,000; approximately one-half 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. The largest such unit, Daniel
Industrial, Inc., manufactures flanges, stud bolts and ring gaskets. The
Company is actively pursuing sales of its non-core product lines and expects to
complete the sales in the second half of fiscal 1995.
At March 31, 1995, the Company recorded a current asset of $33,946,000
representing the book value of net assets held for sale consisting primarily of
inventory and property, plant and equipment of $16,700,000 and $12,500,000,
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 March 31, Six Months Ended March 31,
------------------------- --------------------------
1995 1994 1995 1994
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $9,869 $8,167 $17,856 $15,549
Operating
Income (Loss) 526 (1,155) 739 (2,407)
</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.
Note 3 - Acquisition
- --------------------
In October 1994, the Company acquired certain assets of another
company relating to its orifice metering product line. 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.
Note 4 - Inventories
- --------------------
Major components of inventories include:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
--------- -------------
(in thousands)
<S> <C> <C>
Raw materials $12,133 $16,412
Work-in-process 9,579 8,854
Finished goods 13,756 27,490
------- -------
35,468 52,756
Less LIFO reserve 4,817 7,442
------- -------
$30,651 $45,314
======= =======
</TABLE>
<PAGE> 7
Note 5 - Accrued Expenses
- -------------------------
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
------------ -------------
(in thousands)
<S> <C> <C>
Other accrued expenses $13,076 $14,873
Reserve for restructuring 2,535
Salaries and wages 1,711 2,276
Accrued taxes other than income 1,347 2,809
------- -------
$18,669 $19,958
======= =======
</TABLE>
Note 6 - Notes Payable
- ----------------------
At March 31, 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 March,
31, 1995, borrowings under these lines were $9,200,000. These borrowings were
at a weighted average interest rate of 6.69% and were due on or before April
27, 1995. Some borrowings were subsequently replaced with other borrowings
under these lines.
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 are
expected to 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.
Six Months Ended March 31, 1995 vs. Six Months Ended March 31, 1994
Consolidated revenues decreased 9% to $81,035,000 for the current
period compared to $89,207,000 for the same period last year. Revenues in the
flow measurement segment were $55,486,000 in the current period compared to
$65,913,000 last year. Revenues from sales of flow measurement systems, which
accounted for 23% and 34% of this segment's revenues in the respective periods,
declined due to the Company's decreased focus on large measurement systems and
the inclusion in the prior year of revenues related to the construction of two
<PAGE> 8
large gas metering stations destined for the North Sea. Revenues from sales of
flow measurement products remained unchanged between the two periods, although
the mix of revenues from domestic customers increased to 56% of revenues from
49% of revenues last year. This change represents an improvement in domestic
market share for the Company's flow measurement products as a result of the
product line acquisition mentioned in Note 3 to NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS. Revenues in the energy products segment increased 10% to
$25,422,000 from $23,033,000 last year. Revenues from sales of fastener
products, which accounted for 50% and 45% 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 were unchanged between the two periods.
The consolidated gross profit margin for the six months ended March
31, 1995 declined to 34% of revenues from 36% of revenues last year. Margins
were negatively impacted in the current period by the $3,785,000 charge for
inventory writedowns recorded in connection with the Company's focus on its
strategic plan related to ongoing business, implemented during the second
quarter of fiscal 1995. The gross profit margin in the flow measurement
segment declined to 38% of revenues in the current period from 39% of revenues
last year. This decline is due to the charge for inventory writedowns
partially offset by 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 declined to 24% of
revenues in the current period compared to 26% 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 expenses increased 13% to $4,184,000
from the prior year due to the amortization of intangibles associated with the
acquisition in fiscal 1995 (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 $22,067,000 in the current period. S&A expenses in the flow measurement
segment declined 13% to $14,101,000, expenses in the energy products segment
declined 28% to $4,861,000 and corporate expenses declined 15% to $3,105,000.
These declines are attributable to the decreases in revenues and the
realization of early benefits from the restructuring program.
The unusual charges of $12,330,000 represents restructuring and other
charges as previously discussed.
Interest expense increased 17% to $1,027,000 from the prior period due
to increased short-term borrowing levels partially offset by lower long-term
debt levels.
Quarter Ended March 31, 1995 vs. Quarter Ended March 31, 1994
Consolidated revenues decreased 20% to $38,737,000 for the quarter
ended March 31, 1995. Revenues in the flow measurement segment were
$25,770,000 for the current quarter compared to $36,097,000 for the same period
last year. This
<PAGE> 9
decline is 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, and the Company's decreased focus on large measurement systems in
the current year. Revenues from sales of flow measurement systems represented
18% and 39% of this segment's revenues in the respective periods. Revenues
from sales of metering and electronics products were unchanged between the two
periods, although the mix of revenues from domestic customers increased to 56%
of revenues in the current quarter from 48% of revenues in the prior period.
This change represents an improvement in domestic demand for the Company's
products as a result of the product line acquisition. Revenues in the energy
products segment increased 4% to $12,890,000 for the current quarter. Revenues
from sales of fastener products, which accounted for 53% and 44% 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. This increase was partially offset by decreased sales of valve
products due to the slowdown in pipeline construction which reduced demand for
the Company's fabricated large diameter gate valves.
The consolidated gross profit margin for the quarter ended March 31,
1995 declined to 29% of revenues compared to 34% of revenues last year.
Margins were negatively impacted in the current period by the $3,785,000 charge
for inventory writedowns recorded in connection with the Company's focus on its
strategic plan related to ongoing business, implemented during the second
quarter of fiscal 1995. The gross profit margin in the flow measurement
segment declined to 35% of revenues in the current period from 37% of revenues
last year. This decline is due to the charge for inventory writedowns
partially offset by 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 declined to 17% of
revenues in the current period compared to 25% 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 expenses increased 4% to $1,950,000 from
the prior year due to the amortization of intangibles associated with the
acquisition in fiscal 1995 (see Note 3 of NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS) and additional capital expenditures in fiscal 1994 in the
flow measurement segment, partially offset by the discontinuation of
depreciation of assets held for sale.
Consolidated S&A expenses declined 21% to $10,405,000 in the current
period. S&A expenses in the flow measurement segment declined 15% to
$6,719,000, expenses in the energy products segment declined 32% to $2,334,000
and corporate expenses declined 27% to $1,352,000. These declines are
attributable to the decreases in revenues and the realization of early benefits
from the restructuring program.
The unusual item of $12,330,000 recorded in the current quarter
represents restructuring and other charges as previously discussed.
Interest expense increased 22% to $502,000 from the prior period due
to increased short-term borrowing levels, partially offset by lower long-term
debt levels.
<PAGE> 10
Liquidity and Capital Resources
The primary sources of the Company's liquidity for the six months
ended March 31, 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 of
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS), payments on long-term
debt, capital expenditures and payments of dividends.
Net cash provided by operations for the six months ended March 31,
1995 was $7,963,000 consisting primarily of a decline in unbilled costs
incurred on long-term construction contracts and a net decline in receivables
and payables, consistent with the decrease in revenues in the flow measurement
segment.
During the second quarter of fiscal 1995, the Company recorded charges
of $16,115,000 related to restructuring and other items. The non-cash portion
of these charges, representing asset impairments and writedowns, aggregated
$11,124,000. The remaining charges represented employee terminations and other
costs aggregating $4,991,000, of which $3,429,000 was accrued at March 31,
1995. The Company expects to pay the remainder of these costs over the next
twelve months.
Working capital at March 31, 1995, included $30,651,000 in inventory,
which is not as liquid as other current assets.
In the first six 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 March 31, 1995, the
Company had uncommitted short-term lines of credit aggregating approximately
$40,000,000. At March 31, 1995 and May 5, 1995, borrowings under these lines
were $9,200,000 and $8,200,000, respectively, at weighted average interest
rates of 6.69% and 6.62%, respectively. While the Company expects its
borrowing requirements to generally decrease in 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 groups.
The Company anticipates capital expenditures in fiscal 1995 of
approximately $6,000,000. Capital expenditures for the six months ended March
31, 1995 were $2,404,000.
<PAGE> 11
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) Exhibit 27 - Financial Data Schedule
(b) During the quarter for which this report is filed, the
Company filed a Report on Form 8-K dated February 9, 1995.
That Report described the adoption, by the Company's
Board of Directors, of a strategic restructuring plan.
<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 May 12, 1995 By /s/ W. A. Griffin, III
----------------------------
W. A. Griffin, III
President and
Chief Executive Officer
Date May 12, 1995 By /s/ Henry G. Schopfer, III
---------------------------------
Henry G. Schopfer, III
Vice President and
Chief Financial Officer
<PAGE> 13
EHIBIT INDEX
Exhibit No. Description
----------- -----------
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000026821
<NAME> DANIEL INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> MAR-31-1995
<CASH> 5,487
<SECURITIES> 0
<RECEIVABLES> 29,453
<ALLOWANCES> 201
<INVENTORY> 30,651
<CURRENT-ASSETS> 109,514
<PP&E> 55,506
<DEPRECIATION> 0
<TOTAL-ASSETS> 168,734
<CURRENT-LIABILITIES> 41,335
<BONDS> 0
<COMMON> 15,043
0
0
<OTHER-SE> 89,687
<TOTAL-LIABILITY-AND-EQUITY> 168,734
<SALES> 81,035
<TOTAL-REVENUES> 81,035
<CGS> 53,679
<TOTAL-COSTS> 53,679
<OTHER-EXPENSES> 18,058<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,027
<INCOME-PRETAX> (13,796)
<INCOME-TAX> (4,692)
<INCOME-CONTINUING> (9,104)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,104)
<EPS-PRIMARY> (.76)
<EPS-DILUTED> (.76)
<FN>
<F1>Amount is comprised of unusual items, depreciation and amortization and
research and development expenses.
</FN>
</TABLE>
