<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(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, 1997
------------------------------------------------
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 incorporation (I.R.S. Employer Identification No.)
or organization)
</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 May 7, 1997, there were outstanding 17,090,030 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 except per share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,536 $ 5,423
Receivables, net of reserve of $1,252 . . . . . . . . . . . . . . . . . . . 51,187 50,588
Costs and estimated earnings in excess of billings on uncompleted
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,751 3,671
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,701 52,006
Deferred taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . 8,387 8,807
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,704 6,618
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 126,266 127,113
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . 73,252 75,555
Intangibles and other assets . . . . . . . . . . . . . . . . . . . . . . . 30,101 30,907
-------- --------
$229,619 $233,575
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,871 $ 18,287
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . 5,478 5,552
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,365 18,311
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,180 30,591
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 72,894 72,741
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,431 30,233
Deferred taxes on income. . . . . . . . . . . . . . . . . . . . . . . . . . 8,611 8,789
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 109,936 111,763
-------- --------
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000 shares authorized, 150 shares
designated as Series A junior participating preferred stock, no
shares issued or outstanding. . . . . . . . . . . . . . . . . . . . . .
Common stock, $1.25 par value, 40,000 shares authorized, 17,090 and
17,064 shares issued . . . . . . . . . . . . . . . . . . . . . . . . . 21,363 21,330
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . 90,970 90,732
Translation component . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,322) (2,006)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,672 11,756
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . 119,683 121,812
-------- --------
$229,619 $233,575
======== ========
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE> 3
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------------
1997 1996
---------- ----------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59,338 $55,822
------- -------
Costs, expenses and other income:
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,111 35,573
Selling, engineering and administrative expenses. . . . . . . . . . . . . 18,122 14,975
Research and development expenses. . . . . . . . . . . . . . . . . . . . 892 348
Gain on divestitures of assets. . . . . . . . . . . . . . . . . . . . . . (1,499)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,076 685
------- -------
Total costs, expenses and other income. . . . . . . . . . . . . . . 58,201 50,082
------- -------
Income before income tax expense. . . . . . . . . . . . . . . . . . . . . . . 1,137 5,740
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453 2,362
------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 684 $ 3,378
======= =======
Earnings per common share. . . . . . . . . . . . . . . . . . . . . . . . . . . $ .04 $ .20
======= =======
Cash dividends per common share. . . . . . . . . . . . . . . . . . . . . . . . $ .045 $ .032
======= =======
Average number of shares outstanding. . . . . . . . . . . . . . . . . . . . . 17,081 17,009
======= =======
</TABLE>
See accompanying NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE> 4
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
--------------------------
1997 1996
-------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 684 $3,378
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . 2,367 2,241
Changes in operating assets and liabilities . . . . . . . . . . (7,472) (10,231)
------ ------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . (4,421) (4,612)
------ ------
Cash flows from investing activities:
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,733)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . (1,819) (1,685)
Proceeds from sales of assets . . . . . . . . . . . . . . . . . . . . . 452 3,077
------ ------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (1,367) (1,341)
------ ------
Cash flows from financing activities:
Net borrowings under notes payable . . . . . . . . . . . . . . . . . . . 6,584 3,535
Net borrowings (payments) on long-term debt . . . . . . . . . . . . . . . (1,876) 1,234
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . (768) (545)
Activity under stock option plans. . . . . . . . . . . . . . . . . . . . 161 276
------ ------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . 4,101 4,500
------ ------
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . (200) 20
------ ------
Decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . (1,887) (1,433)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . 5,423 6,806
------ ------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . $3,536 $5,373
====== ======
</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 Daniel Industries, Inc. ("Daniel" or 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 the financial statements.
These condensed statements should be read in conjunction with the
financial statements and the related notes included in the Company's Annual
Report on Form 10-K for the year ended September 30, 1996 and the Transition
Report on Form 10-Q filed for the three-month transition period ended December
31, 1996. As noted in that transition report, (1) on December 12, 1996, the
Company completed a merger with Bettis Corporation, accounted for as a pooling
of interests, and accordingly, the Company's financial statements have been
restated to include the operations of Bettis for all periods presented, and (2)
the Company's year end has been changed to December 31 from September 30.
The Company adopted Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation" for its year ending December 31,
1997. The Company does not intend to elect expense recognition for stock
options and, therefore, implementation will not materially affect its financial
statements.
Note 2 - Earnings per Share
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" ("EPS") which requires a calculation of
basic and fully diluted EPS. The statement is effective for periods ending
after December 15, 1997, which is the Company's fourth quarter of 1997, with
early adoption prohibited and restatement of prior EPS amounts required. The
Company does not expect adoption to materially affect its EPS amounts because
of the Company's simple capital structure and the immaterial effect of common
stock equivalents.
EPS for the quarters ended March 31, 1997 and March 31, 1996 are
calculated as primary EPS (net income divided by weighted average shares
outstanding including common stock equivalents).
Note 3 - Divestitures
As previously reported in the Company's Annual Report on Form 10-K for
the year ended September 30, 1996, the Company sold in March 1996, a
non-manufacturing property in Germany for a pretax gain of $1,499,000.
<PAGE> 6
Note 4 - Inventories
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- ----------
(in thousands)
<S> <C> <C>
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,829 $26,036
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,260 12,809
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,241 19,803
-------- --------
Inventories before LIFO reserve. . . . . . . . . . . . . . . . . 58,330 58,648
Less LIFO reserve . . . . . . . . . . . . . . . . . . . . . . . . . . 6,629 6,642
--------- ---------
Total inventories. . . . . . . . . . . . . . . . . . . . . . . . $51,701 $52,006
======= =======
</TABLE>
Note 5 - Notes Payable
Notes payable at March 31, 1997 and December 31, 1996 of $24,871,000 and
$18,287,000, consisted of borrowings under lines of credit and notes to banks.
Interest rates ranged from 4.8% to 8.6% at March 31, 1997.
At March 31, 1997, the Company had both committed and uncommitted
short-term lines of credit aggregating approximately $78,000,000. Some of
these lines contain restrictions regarding the amount available for short-term
borrowings or issuance of letters of credit. At March 31, 1997 approximately
$36,000,000 was available for additional short-term borrowings.
Note 6 - Long-Term Debt
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
(in thousands)
<S> <C> <C>
Revolving credit facility (secured by Bettis' U.S. assets);
interest at prime rate (8.50% at March 31, 1997 and 8.25% at
December 31, 1996); interest payable quarterly; principal due
April 30, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . $20,100 $21,100
Payable to four insurance companies (unsecured); 11.5%;
principal payable in annual installments of $2,857,140; interest
payable semi-annually. . . . . . . . . . . . . . . . . . . . . . 5,715 5,715
Note payable to bank (secured by Bettis' U.S. assets); 5.95%;
principal payable in quarterly installments of $500,000;
interest payable quarterly . . . . . . . . . . . . . . . . . . . 4,500 5,000
Term loan to bank (secured by Bettis' Canadian assets);
interest at the Canadian prime rate (4.75% at March 31, 1997 and
December 31, 1996); principal and interest payable monthly;
payable through August 31, 2001. . . . . . . . . . . . . . . . . 1,625 1,733
Capital lease obligations. . . . . . . . . . . . . . . . . . . . . . 1,819 2,056
Miscellaneous obligations . . . . . . . . . . . . . . . . . . . . . . 150 181
---------- ----------
Total obligations. . . . . . . . . . . . . . . . . . . . . . . . 33,909 35,785
Less portion due within one year. . . . . . . . . . . . . . . . . . . 5,478 5,552
--------- ---------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . $28,431 $30,233
======= =======
</TABLE>
The terms of certain financing agreements contain, among other
provisions, requirements for maintaining defined levels of working capital, net
worth, capital expenditures and various financial ratios, including debt to
equity.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Quarter Ended March 31, 1997 vs. Quarter Ended March 31, 1996
Revenues for the quarter ended March 31, 1997 were $59,338,000 compared
to $55,822,000 for the same period in 1996. The increase is due primarily to
revenues from measurement and actuator businesses acquired in 1996 of
approximately $7,500,000 partially offset by a decline in revenues from sales
of valve products. The Company's backlog at March 31, 1997 was $71,000,000, an
increase of 14% from the backlog balance at December 31, 1996, resulting from
improved demand for the Company's measurement and actuator products.
The gross profit margin for the quarter ended March 31, 1997 remained
constant at 36% of revenues. Improved margins from sales of measurement
products due to lower manufacturing costs were offset by decreased margins at
the valve operations due to lower production levels and by decreased margins
due to a change in the product mix of actuators sold.
Selling, engineering and administrative ("SE&A") expenses increased
$3,147,000 to $18,122,000 in the current period due primarily to SE&A expenses
of companies acquired in 1996. Research and development expenses increased
$544,000 to $892,000 in the current period representing increased expenditures
on electronic development projects.
Interest expense increased $391,000 to $1,076,000 in the current period
due primarily to increased borrowings which were used to fund acquisitions in
1996.
In the quarter ended March 31, 1996, the Company recorded a pretax gain
of $1,499,000 on the sale of a non-manufacturing property in Germany.
Liquidity and Capital Resources
The primary source of the Company's liquidity for the quarter ended
March 31, 1997 was short-term borrowings. These funds were used primarily for
capital expenditures, funding of operations, payments on short-term and
long-term debt, payment of severance costs which were accrued at December 31,
1996, and for the payment of cash dividends.
Working capital at March 31, 1997 of $53,372,000 remained essentially
unchanged from the balance at December 31, 1996. Daniel considers its financial
position to be strong with a current ratio at March 31, 1997 of 1.7 to 1.0.
Working capital at March 31, 1997 included $60,088,000 in inventory and
deferred tax assets, which are not as liquid as other current assets.
At March 31, 1997, the Company had both committed and uncommitted
short-term lines of credit aggregating approximately $78,000,000. Some of these
lines contain restrictions regarding the amount available for short-term
borrowings or the issuance of letters of credit. At March 31, 1997,
approximately $36,000,000 was available for additional short-term borrowings.
Capital expenditures for the quarter ended March 31, 1997 were
$1,819,000. The Company continues to seek acquisitions that would build upon
its expertise in the manufacture and sale of fluid measurement, flow control,
actuation and analytical products and services.
The Company believes that its working capital, cash generated from
operations and amounts available under its short-term lines of credit will be
adequate to meet its operating needs for the foreseeable future.
<PAGE> 8
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 or results of operations of the Company.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1997.
<PAGE> 9
SIGNATURE
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, 1997 By: /s/ James M. Tidwell
------------------------------
Executive Vice President and
Chief Financial Officer
<PAGE> 10
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,536
<SECURITIES> 0
<RECEIVABLES> 52,439
<ALLOWANCES> 1,252
<INVENTORY> 51,701
<CURRENT-ASSETS> 126,266
<PP&E> 73,252
<DEPRECIATION> 0
<TOTAL-ASSETS> 229,619
<CURRENT-LIABILITIES> 72,894
<BONDS> 0
0
0
<COMMON> 21,363
<OTHER-SE> 98,320
<TOTAL-LIABILITY-AND-EQUITY> 229,619
<SALES> 59,338
<TOTAL-REVENUES> 59,338
<CGS> 38,111
<TOTAL-COSTS> 38,111
<OTHER-EXPENSES> 19,014
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,076
<INCOME-PRETAX> 1,137
<INCOME-TAX> 453
<INCOME-CONTINUING> 684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 684
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
