<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 DECEMBER 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 Identification No.)
incorporation or organization)
9753 Pine Lake Drive, Houston, Texas 77055
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
713-467-6000
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(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 February 7, 1996, 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>
December 31, September 30,
1995 1995
---------- -----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 6,005 $ 3,895
Receivables, net of reserve of $186 and $98 33,962 34,807
Costs in excess 905 941
Inventories 40,966 35,889
Deferred taxes on income 7,892 7,982
Net assets held for sale 84 22,838
Other 5,997 2,427
-------- ---------
Total current assets 95,811 108,779
Property, plant and equipment at cost, net 52,939 52,677
Intangibles and other assets 10,908 3,012
-------- ---------
$159,658 $164,468
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 6,200 $ 10,000
Current maturities of long-term debt 2,857 2,857
Accounts payable 10,648 11,702
Accrued expenses 17,936 18,834
-------- ---------
Total current liabilities 37,641 43,393
Long-term debt 5,715 8,572
Deferred taxes on income 5,815 3,183
-------- ---------
Total liabilities 49,171 55,148
-------- ---------
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 shares issued 15,104 15,104
Capital in excess of par value 90,247 90,247
Translation component (759) (295)
Retained earnings 5,895 4,264
-------- ---------
Total stockholders' equity 110,487 109,320
-------- ---------
$159,658 $164,468
======== =========
</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>
Three Months Ended December 31,
-------------------------------
1995 1994
-------- --------
<S> <C> <C>
Revenues $ 40,638 $ 42,298
-------- --------
Costs and expenses:
Cost of sales 23,843 26,219
Depreciation and amortization 1,745 2,234
Selling and administrative expenses 10,582 11,662
Research and development expenses 383 794
Interest expense 471 525
-------- --------
Total expenses 37,024 41,434
-------- --------
Income before income tax expense 3,614 864
Income tax expense 1,439 263
-------- --------
Net income $ 2,175 $ 601
======== ========
Earnings per common share $ .18 $ .05
======== ========
Cash dividends per common share $ .045 $ .045
======== ========
Average number of shares outstanding 12,083,485 12,032,470
========== ==========
</TABLE>
See accompanying NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS.
<PAGE> 4
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,175 $ 601
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,745 2,234
Changes in operating assets and
liabilities (1,713) 2,305
-------- ---------
Net cash provided by operating activities 2,207 5,140
-------- ---------
Cash flows from investing activities:
Acquisition of product line (4,177)
Capital expenditures (874) (1,016)
Proceeds from sales of non-core assets 8,000
-------- ---------
Net cash provided by (used in) investing activities 7,126 (5,193)
-------- ---------
Cash flows from financing activities:
Net (payments) borrowings on lines of credit (3,800) 4,350
Payments on long-term debt (2,857) (2,857)
Cash dividend paid (544) (541)
-------- ---------
Net cash provided by (used in) financing activities (7,201) 952
-------- ---------
Effect of exchange rate changes on cash (22) (23)
-------- ---------
Increase in cash and cash equivalents 2,110 876
Cash and cash equivalents, beginning of period 3,895 2,520
-------- ---------
Cash and cash equivalents, end of period $ 6,005 $ 3,396
======== =========
</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, 1995.
As a result of the sale of the Company's non-core product lines, the
Company determined that it now has one business segment, fluid measurement and
flow control products and systems.
The Company has not elected early adoption of Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation",
effective for fiscal years beginning after December 15, 1995, which is the
Company's year ending September 30, 1997. The Company believes adoption of
this statement will not materially affect the Company's financial statements.
Note 2 - Acquisitions
On January 8, 1996, the Company signed a letter of intent to purchase
all of the outstanding stock of a valve manufacturer and refurbisher for
approximately $3 million. The transaction is subject, among other conditions,
to a due diligence examination by the Company and the signing of a definitive
agreement. Completion of the transaction is expected in the second quarter of
fiscal 1996. The operations related to this acquisition, which will be
accounted for under the purchase method, are not material to the Company's
results of operations.
As previously reported in the Company's Annual Report on Form 10-K for
the year ended September 30, 1995, 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.
Note 3 - Divestiture
As previously reported in the Company's Annual Report on Form 10-K for
the year ended September 30, 1995, the Company sold, effective November 1995,
the net assets of its fastener subsidiary, Daniel Industrial, Inc., to an
investor group for $8,000,000 cash and $9,500,000 in notes, discounted to
$8,600,000. The charge to operations from this transaction was recorded in
fiscal 1995. Notes receivable include:
<PAGE> 6
<TABLE>
<CAPTION>
December 31, 1995
-----------------
(in thousands)
<S> <C>
Note receivable; interest of 8.5% for the first five years
and 12.5% thereafter; interest payable quarterly;
principal due November 29, 2002 $ 6,000
Note receivable; collaterized by certain inventory; discounted
at an effective rate of 11%; annual principal payments with
the last payment due December 31, 1999 2,600
-------
8,600
Less current portion (included in other current assets) (357)
-------
Long-term portion (included in intangibles and other assets) $ 8,243
=======
</TABLE>
Minimum annual principal payments on these notes receivable are as
follows: 1996 - $357,000, 1997 - $422,000, 1998 - $469,000, 1999 and thereafter
- - $7,352,000.
Note 4 - Inventories
Major components of inventories include:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
---------- ----------
(in thousands)
<S> <C> <C>
Raw materials $ 15,111 $ 14,527
Work-in-process 12,122 10,752
Finished goods 19,031 15,751
--------- ---------
46,264 41,030
Less LIFO reserve 5,298 5,141
--------- ---------
$ 40,966 $ 35,889
========= =========
</TABLE>
Note 5 - Accrued Expenses
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
---------- ----------
(in thousands)
<S> <C> <C>
Other accrued expenses $ 13,506 $ 14,382
Accrued taxes other than income 2,763 2,325
Salaries and wages 1,667 2,127
--------- ---------
$ 17,936 $ 18,834
========= =========
</TABLE>
Substantially all of the planned terminations associated with the
Company's restructuring program announced in fiscal 1995 had occurred as of
December 31, 1995.
<PAGE> 7
Note 6 - Notes Payable
At December 31, 1995, the Company had uncommitted short-term lines of
credit aggregating approximately $45,000,000. One of these lines contains
restrictions regarding the amount of the line available for short-term
borrowings and the amount available for issuance of letters of credit. The
other lines are available for either short-term borrowings or the issuance of
letters of credit. Loans under these lines may be made in such amounts and at
such maturities and interest rates as may be offered by the banks and accepted
by the Company at the time of each borrowing. At December 31, 1995, borrowings
under these lines were $6,200,000, and $26,400,000 was available for additional
short-term borrowings. These borrowings were at a weighted average interest
rate of 6.38% and were due at varying dates through January 9, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended December 31, 1995 vs. Three Months Ended December 31, 1994
As a result of the sale of the Company's non-core product lines, the
Company determined that it now has one business segment, fluid measurement and
flow control products and systems.
Consolidated revenues for the quarter ended December 31, 1995 were
$40,638,000 compared to $42,298,000 last year, inclusive of revenues from
divested product lines of $4,815,000 and $7,037,000, respectively. Revenues
from sales of fluid measurement and flow control products increased 11% from
the prior year reflecting increased worldwide demand for the Company's
products, particularly valves. This trend is expected to continue through the
remainder of fiscal 1996. Sales of measurement systems decreased due to the
timing of completion of orders. Revenues in the current period include a
pretax gain of approximately $1,200,000 from the sale of certain
non-manufacturing property in Germany. The Company's backlog at December 31,
1995 was approximately $43,800,000, an increase of 27% from the balance at
December 31, 1994, reflecting a significant improvement in orders for valve
products and a modest improvement in orders for measurement products.
The consolidated gross profit margin for the quarter ended December 31,
1995, inclusive of the pretax gain on the sale of the property mentioned above,
improved to 41% of revenues compared to 38% of revenues last year primarily due
to the current year divestiture of the low-margin, non-core fastener product
line and a change in product mix towards fluid measurement products which have
higher margins than systems.
Consolidated selling and administrative expenses ("S&A"), as a
percentage of revenues, declined two percentage points to 26% of revenues in
the current period. This decline is primarily attributed to the realization of
benefits from the restructuring program, which was adopted in fiscal 1995,
and from the gain on sale of property mentioned above.
Consolidated depreciation and amortization expense decreased 22% to
$1,745,000 for the quarter ended December 31, 1995 primarily due to the current
year divestiture of the non-core fastener product line.
Consolidated interest expense decreased 10% to $471,000 in the current
quarter due to both lower short-term and long-term debt levels.
The Company has not elected early adoption of Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation",
effective for fiscal years beginning after December 15,
<PAGE> 8
1995, which is the Company's year ending September 30, 1997. The Company
believes adoption of this statement will not materially affect the Company's
financial statements.
Liquidity and Capital Resources
The primary sources of the Company's liquidity for the three months
ended December 31, 1995, were proceeds from the sale of the net assets of the
fastener subsidiary (see Note 3 of NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS), internally generated funds and cash and cash equivalents
available at the beginning of the year. These funds were used primarily for
capital expenditures, payments on short-term and long-term debt, and the
payment of a dividend.
Working capital decreased $7,216,000 from the balance at September 30,
1995 to $58,170,000 at December 31, 1995, primarily due to the
reclassification to non-current assets of the notes received from the sale
mentioned above. The Company considers its financial position to be strong,
with debt to total capitalization of 12%. The Company's working capital ratio
at December 31, 1995, of 2.5 to 1.0 is adequate to meet the Company's needs.
In the first three months of fiscal 1996 and in fiscal 1995, the Company
relied upon short-term borrowings under its bank lines of credit to supplement
its working capital and other cash requirements. At December 31, 1995, the
Company had uncommitted short-term lines of credit aggregating approximately
$45,000,000. At December 31, 1995 and February 6, 1996, borrowings under these
lines were $6,200,000, at weighted average interest rates of 6.38% and 6.0%,
respectively. While the Company expects its borrowings requirements to
generally decrease during the remainder of fiscal year 1996 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.
The Company anticipates capital expenditures in fiscal 1996 of
approximately $4,000,000. Capital expenditures for the three months ended
December 31, 1995 were $874,000. On January 8, 1996, the Company signed a
letter of intent to purchase all of the outstanding stock of a valve
manufacturer and refurbisher for approximately $3,000,000. The Company
continues to seek acquisitions that would build upon its expertise in the
manufacturing and marketing of fluid measurement and flow control products and
systems.
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) During the quarter for which this report is filed, the Company
filed a Report on Form 8-K dated December 13, 1995, which
described the divestiture of Daniel Industrial, Inc.
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DANIEL INDUSTRIES, INC.
---------------------------------
(Registrant)
Date February 12, 1996 By /s/ W. A. Griffin, III
-------------------------------
W. A. Griffin, III
President and
Chief Executive Officer
Date February 12, 1996 By /s/ Henry G. Schopfer, III
--------------------------------
Henry G. Schopfer, III
Vice President and
Chief Financial Officer
Date February 12, 1996 By /s/ Mary R. Beshears
--------------------------------
Mary R. Beshears
Corporate Controller and
Chief Accounting Officer
<PAGE> 10
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,005
<SECURITIES> 0
<RECEIVABLES> 34,148
<ALLOWANCES> 186
<INVENTORY> 40,966
<CURRENT-ASSETS> 95,811
<PP&E> 52,939
<DEPRECIATION> 0
<TOTAL-ASSETS> 159,658
<CURRENT-LIABILITIES> 37,641
<BONDS> 0
0
0
<COMMON> 15,104
<OTHER-SE> 95,383
<TOTAL-LIABILITY-AND-EQUITY> 159,658
<SALES> 40,638
<TOTAL-REVENUES> 40,638
<CGS> 23,843
<TOTAL-COSTS> 23,843
<OTHER-EXPENSES> 12,710
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 471
<INCOME-PRETAX> 3,614
<INCOME-TAX> 1,439
<INCOME-CONTINUING> 2,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,175
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
