<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 SEPTEMBER 30, 1998
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 November 9, 1998, there were outstanding 17,507,680 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.
CONSOLIDATED BALANCE SHEET
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 4,891 $ 7,563
Receivables, net of reserve of $1,516 and $1,645 ....................... 65,679 60,908
Costs and estimated earnings in excess of billings
on uncompleted contracts ....................................... 7,024 6,635
Inventories ............................................................ 51,677 49,688
Deferred taxes on income ............................................... 5,560 5,957
Other .................................................................. 4,003 4,713
---------- ----------
Total current assets ........................................... 138,834 135,464
Property, plant and equipment, net .......................................... 65,428 62,990
Intangibles and other assets ................................................ 36,296 35,500
---------- ----------
Total assets ................................................... $ 240,558 $ 233,954
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ........................................................... $ 5,675 $ 7,984
Current maturities of long-term debt .................................... 7,615 7,602
Accounts payable ........................................................ 14,618 21,441
Accrued liabilities ..................................................... 27,205 21,387
---------- ----------
Total current liabilities ....................................... 55,113 58,414
Long-term debt .............................................................. 33,817 37,283
Deferred taxes on income .................................................... 7,693 7,831
---------- ----------
Total liabilities ............................................... 96,623 103,528
---------- ----------
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, 17,493 and 17,321 shares issued ..................... 21,867 21,651
Capital in excess of par value .......................................... 96,438 94,218
Accumulated other comprehensive income .................................. (3,594) (4,684)
Retained earnings ....................................................... 29,224 19,241
---------- ----------
Total stockholders' equity ...................................... 143,935 130,426
---------- ----------
Total liabilities and stockholders' equity ...................... $ 240,558 $ 233,954
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
<PAGE> 3
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues ......................................... $ 70,886 $ 71,334 $ 215,396 $ 197,470
Cost of sales .................................... 43,080 44,688 133,276 125,695
---------- ---------- ---------- ----------
Gross margin ..................................... 27,806 26,646 82,120 71,775
Selling, engineering and
administrative expenses ..................... 20,338 19,483 60,415 57,999
---------- ---------- ---------- ----------
Operating Income ................................. 7,468 7,163 21,705 13,776
Interest and other expenses, net ................. 746 914 1,967 2,060
---------- ---------- ---------- ----------
Income before income taxes ....................... 6,722 6,249 19,738 11,716
Income taxes ..................................... 2,521 2,649 7,402 4,921
---------- ---------- ---------- ----------
Net income ....................................... $ 4,201 $ 3,600 $ 12,336 $ 6,795
========== ========== ========== ==========
Income per common share:
Basic ....................................... $ .24 $ .21 $ .71 $ .40
========== ========== ========== ==========
Diluted ..................................... $ .24 $ .20 $ .69 $ .39
========== ========== ========== ==========
Cash dividends per common share .................. $ .045 $ .045 $ .135 $ .135
========== ========== ========== ==========
Average basic shares outstanding ................. 17,493 17,127 17,412 17,099
========== ========== ========== ==========
Average diluted shares outstanding ............... 17,808 17,687 17,969 17,543
========== ========== ========== ==========
</TABLE>
DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income ....................................... $ 4,201 $ 3,600 $ 12,336 $ 6,795
Other comprehensive income, net of tax:
Foreign currency translation
adjustment .............................. 783 (821) 1,090 (3,434)
---------- ---------- ---------- ----------
Comprehensive income ............................. $ 4,984 $ 2,779 $ 13,426 $ 3,361
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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DANIEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 12,336 $ 6,795
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ............................. 7,760 7,423
Changes in operating assets and liabilities ............... (9,971) (9,562)
---------- ----------
Net cash provided by operating activities ........................... 10,125 4,656
---------- ----------
Cash flows from investing activities:
Capital expenditures ............................................. (9,798) (8,049)
Proceeds from sales of assets .................................... 2,494 6,694
---------- ----------
Net cash used in investing activities ................................ (7,304) (1,355)
---------- ----------
Cash flows from financing activities:
Net borrowings (payments) under notes payable .................... (2,296) 1,152
Net (payments) on long-term debt ................................. (3,466) (2,121)
Cash dividends paid .............................................. (2,353) (2,309)
Activity under stock option plans ................................ 1,962 887
---------- ----------
Net cash used in financing activities ................................ (6,153) (2,391)
---------- ----------
Effect of exchange rate changes on cash .............................. 660 548
---------- ----------
Increase (decrease) in cash and cash equivalents ..................... (2,672) 1,458
Cash and cash equivalents, beginning of period ....................... 7,563 5,423
---------- ----------
Cash and cash equivalents, end of period ............................. $ 4,891 $ 6,881
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
4
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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 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 December 31, 1997. Certain
reclassifications have been made to prior year amounts in order to conform to
the current year classifications.
The Company has adopted Statement of Financial Accounting Standards No.
131 ("SFAS 131"), "Disclosures about Segments of an Enterprise" for its year
ending December 31, 1998. SFAS 131 requires disclosure of select information
regarding the operating segments of the Company. However, in accordance with
SFAS 131, these disclosures need not be applied to interim financial statements
in the initial year of application.
The Company intends to adopt the Statement of Financial Accounting
Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and
Hedging Activities", issued on June 15, 1998. SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999 (i.e., the
Company's fiscal year beginning January 1, 2000.) SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value will be recorded each period in either current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction, and if so, the type of hedge
transaction. Due to Daniel's limited use of derivative instruments, management
anticipates that adoption of SFAS 133 will not have a significant effect on the
Company's results of operations or its financial position.
Note 2 - Earnings Per Share
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. While diluted earnings per
share is computed similarly, it also provides for the effect that securities
such as common stock options, if dilutive, would have on net income and average
common shares outstanding if exercised at the beginning of the year. For the
nine months ended September 30, 1998 and 1997, average shares outstanding were
increased by 557,000 and 444,000, respectively, for stock options assumed
exercised to arrive at weighted average shares outstanding for purposes of
calculating diluted earnings per share. Net income remained the same in the
calculation of both basic and diluted earnings per share for all periods
presented.
Note 3 - Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income".
SFAS 130 establishes
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new requirements for reporting comprehensive income and its components. Adoption
of this statement had no impact on the Company's net income or stockholders'
equity for the periods presented. SFAS 130 requires unrealized gains or losses
on the Company's foreign currency translation adjustments, which prior to
adoption were reported separately in stockholders' equity, to be included in
other comprehensive income.
Note 4 - Inventories
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------- ----------
(in thousands)
<S> <C> <C>
Raw materials .................................... $ 25,875 $ 24,330
Work in process .................................. 14,786 13,329
Finished goods ................................... 18,428 19,097
---------- ----------
Inventories before LIFO reserve ............. 59,089 56,756
Less LIFO reserve ................................ 7,412 7,068
---------- ----------
Total inventories ........................... $ 51,677 $ 49,688
========== ==========
</TABLE>
Note 5 - Debt
Long-term debt includes the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------- ----------
(in thousands)
<S> <C> <C>
Term loan from banks (unsecured); interest
(6.65% at September 30, 1998 and 6.77% at December 31, 1997)
payable monthly; principal payable in quarterly
installments of $1,071; matures April 30, 2004 ............................ $ 25,714 $ 28,929
Revolving credit facility (unsecured); interest (6.075%
at September 30, 1998 and 6.69% at December
31, 1997) payable monthly; matures April 30, 2000 ......................... 10,000 10,000
Term loan from bank (secured); interest at Canadian
prime rate (6.50% at September 30, 1998 and
6.00% at December 31, 1997); principal and interest
payable monthly; payable through August 31, 2001 .......................... 979 1,311
Payable to four insurance companies (unsecured); interest
(11.5%) payable semi-annually; final annual principal installment of
$2,857 due December 1, 1998 ............................................... 2,857 2,857
Miscellaneous obligations ...................................................... 1,882 1,788
---------- ----------
Total obligations ......................................................... 41,432 44,885
Less portion due within one year ............................................... 7,615 7,602
---------- ----------
Long-term debt ............................................................ $ 33,817 $ 37,283
========== ==========
</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.
6
<PAGE> 7
At September 30, 1998, the Company had both committed and uncommitted
short-term lines of credit aggregating approximately $37.4 million, which are
available for short-term borrowings or issuance of letters of credit. At
September 30, 1998 and December 31, 1997, borrowings under these lines were $5.7
million and $8.0 million, respectively, with approximately $12.2 million
available for short-term borrowings at September 30, 1998. The Company had
letters of credit outstanding at September 30, 1998 totaling $6.1 million under
these lines.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This material contains "forward-looking statements" as defined in the
Securities Exchange Acts of 1933 and 1934 that could involve substantial risk
and uncertainties. When words such as "anticipate", "believe", "estimate",
"intend", "expect", "plan" and similar expressions are used, they are intended
to identify the statements as forward-looking. Actual results, performance or
achievements may differ materially from results suggested by these
forward-looking statements.
Results of Operations
Nine Months Ended September 30, 1998 vs. Nine Months Ended September 30, 1997
Revenues for the nine months ended September 30, 1998 were $215.4
million, a 9% increase over the same period of last year. This increase was
primarily attributable to Daniel's actuator and valve businesses, largely the
result of increased project orders when compared to the same period of last
year. The Company's measurement and control business revenues, however, were
down 4% when compared to the first nine months of last year, reflecting a
decline in international metering systems project activity, as well as lower
sales of spare parts and small production meters. The Company's backlog at
September 30, 1998 was $67.6 million, a decrease of 13% and 7% when compared to
the backlog balances at September 30, 1997 and December 31, 1997, respectively.
This backlog decline is largely attributable to a slowdown in new orders
resulting from lower energy prices, and the impact of the unstable economic
situation in the Far East.
The gross margin percentage for the nine months ended September 30,
1998 increased to 38% compared to 36% for the same period in 1997. The Company's
valve and actuator businesses showed margin improvement due to higher
throughput, continued improvements in manufacturing and selective price
increases. The gross margin percentage of the measurement and control business
declined slightly due to operating inefficiencies of the metering systems
business. In order to improve its profitability into the future, the metering
systems business has been restructured and streamlined to operate more
efficiently in current market conditions.
Selling, engineering and administrative ("SE&A") expenses increased
$2.4 million to $60.4 million in the current period, largely due to increased
sales commissions and travel expenses. As a percentage of revenues, SE&A
expenses were 28% for the nine months ended September 30, 1998 compared to 29%
in the same period of 1997.
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<PAGE> 8
Net interest and other expenses decreased $0.1 million in the first
nine months of 1998 compared to the same period of last year. The decrease is
largely attributable to a decrease in interest expense resulting from a $3.5
million reduction of debt and the Company's refinancing of its domestic bank
facility indebtedness in the last quarter of 1997.
The effective tax rate for the nine months ended September 30, 1998 was
37.5% as compared to 42.0% for the same period in the prior year. The decrease
is attributable to foreign losses in 1997 for which no tax benefit was
available.
Quarter Ended September 30, 1998 vs. Quarter Ended September 30, 1997
Revenues for the quarter ended September 30, 1998 were $70.9 million
compared to $71.3 million for the same period in 1997. The decrease was
primarily due to a decline in the Company's measurement and control business
revenues attributable to reduced international metering systems activity, as
well as lower sales of spare parts and small production meters. This decline was
partially offset, however, by improved revenues from Daniel's valve and actuator
businesses largely due to increased project orders.
The gross margin for the quarter increased to 39% of revenues from 37%
in the same quarter of last year. The increased margin percentage is
attributable to the Company's actuator and valve operations due to large
pipeline projects, increased throughput, continued cost cutting initiatives and
selective price increases. The gross margin percentage of Daniel's measurement
and control operations, however, was flat when compared to the same period of
last year. The measurement and control operations did experience gross margin
percentage gains, particularly in Canada, which were offset by a margin decline
in the metering systems area, primarily in the Pacific Rim and Middle East, and
reduced contribution of typically high margin spare parts relative to the total
sales mix.
SE&A expenses increased $0.9 million to $20.3 million in the current
period when compared to the same quarter of last year. The increase was
primarily due to increased commission expenses associated with the higher
revenues in the actuator and valve businesses.
Net interest and other expenses decreased $0.2 million to $0.7 million
in the third quarter of 1998 compared to the same period of last year. This was
primarily due to decreased interest expense resulting from a reduction of debt,
coupled with the effect of Daniel's refinancing of its domestic bank facility
indebtedness in the last quarter of 1997.
The effective tax rate for the quarter ended September 30, 1998 was
37.5% as compared to 42.4% for the same quarter of last year. The reduction was
principally due to foreign losses incurred in 1997 for which no tax benefit was
available.
Current Operating Conditions
As mentioned above, the Company's backlog at September 30, 1998
decreased approximately 13% from the year earlier amount. The decrease in
backlog is attributable to, among other factors, lower energy prices which have
caused many of the Company's customers to reduce their near-term spending and to
delay projects. As a result of the decreased industry activity, the Company
expects fourth quarter earnings to fall short of the
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$.21 per share, on a diluted basis, reported for the comparable 1997 quarter.
The Company anticipates that it, along with others in the industry, will
encounter a difficult business environment into 1999 and expects first quarter
results, while profitable, to be below the first quarter 1998 results of $.21
per share on a diluted basis.
Liquidity and Capital Resources
The primary sources of the Company's liquidity for the nine months
ended September 30, 1998 were internally generated funds, proceeds from the sale
of assets, and stock option activity. These funds were used primarily for
capital expenditures, reduction of long-term debt, and payment of cash
dividends.
Working capital at September 30, 1998 of $83.7 million reflects an
increase of $6.7 million from December 31, 1997. The change is primarily due to
increases in receivables related to increased sales coupled with a reduction of
notes and accounts payable. Daniel considers its financial position to be strong
with a current ratio at September 30, 1998 of 2.5 to 1.0. Working capital at
September 30, 1998 included $57.2 million in inventory and deferred tax assets,
which are not as liquid as other current assets.
Capital expenditures for the nine months ended September 30, 1998 were
$9.8 million, up 22% over the same period in 1997. 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.
Year 2000
The "Year 2000" issue is the inability of computer systems (both
hardware and software) to recognize the change in date from 1999 to 2000. The
issue affects not only information technology ("IT") but non-IT systems as well.
Non-IT systems typically include embedded technology such as microcontrollers.
These system types are more difficult to assess and often require replacement
rather than repair. The Company has recognized the significant uncertainty
associated with the Year 2000 issue and has developed a team approach at each of
its business segments. These teams are charged with the responsibility of
eliminating or minimizing any effects Year 2000 issues may have.
Products
The Company has established a phased program for testing its products
for Year 2000 compliance. Phase One of that testing program, the testing of
currently marketed products, is substantially completed. Although unable to
accurately estimate the cost of modifications at this time, the Company does not
believe that significant costs will be incurred. It is Daniel's current
intention to have substantially all necessary modifications completed and tested
by June 30, 1999.
9
<PAGE> 10
Certain of the Company's products contain customized software, either
added by the customer after delivery or, at the customer's request, added by the
Company. Testing of such customized products is usually only practical at the
customer's location and will generally be undertaken only if requested, and paid
for, by the customer.
Internal Systems
The review of Daniel's internal systems is proceeding toward a
scheduled completion date of June 30, 1999. At the present time, no "mission
critical" systems requiring significant modification or replacement have been
identified, other than the management information systems discussed below.
The Company recently implemented a new management information system,
licensed from JD Edwards World Solutions Company ("JD Edwards"), which is being
utilized at two of the Company's domestic operating divisions as well as at
Corporate headquarters. This new system replaces various obsolete legacy systems
that have been developed internally over many years. The decision to replace the
existing systems during 1998 was heavily influenced by the extremely high
estimate of the costs required to make the legacy systems Year 2000 compliant.
The cost of the new JD Edwards system, which will be amortized over its expected
useful life, was approximately $4,700,000, exclusive of the internal costs of
installation and related systems modification.
The essential management information systems of Daniel's other
operating divisions are either substantially Year 2000 compliant due to the
installation of regular upgrades to existing systems, which are primarily
packaged systems provided by a major supplier, or will be made compliant through
such upgrades prior to the end of 1999. No material expenditures, which would
not have been made absent Year 2000 considerations, have been required in
relation to the various upgrades.
Vendors
Daniel is in the process of identifying and communicating with those of
its suppliers and vendors where failure by such third parties to achieve Year
2000 compliance could reasonably be expected to have a material, lasting impact
on the Company. This process is scheduled to be substantially complete prior to
December 31, 1998. When the survey process is completed, the Company intends to
develop a contingency plan to deal with the identified significant risks, if
any. With the exception of third parties, such as banks and telephone service
providers, where business interruption would impact a large section of the
economy, the Company has not identified any significant dependency for which
alternate sources are not readily available.
"Most Likely Worst Case Scenario"
The Company has not developed a "most likely worst case scenario" as
referred to by the Securities and Exchange Commission. If reasonably
quantifiable risks are identified, development of such a scenario will be
considered.
10
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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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 First Amendment to Credit Agreement dated June 4,
1998 between Daniel and Bank One, Texas N.A., Chase
Bank of Texas, National Association, CIBC Inc., and
Credit Lyonnais New York
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
11
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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: November 12, 1998 By: /s/ James M. Tidwell
------------------ --------------------------------
Executive Vice President and
Chief Financial Officer
Date: November 12, 1998 By: /s/ Wilfred M. Krenek
------------------ --------------------------------
Vice President, Controller and
Chief Accounting Officer
12
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.1 First Amendment to Credit Agreement dated June 4,
1998 between Daniel and Bank One, Texas N.A., Chase
Bank of Texas, National Association, CIBC Inc., and
Credit Lyonnais New York
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 10.1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as of
June 4, 1998, is by and among Daniel Industries, Inc., a Delaware corporation
(the "Borrower"), Bank One, Texas, NA ("Bank One"), Chase Bank of Texas,
National Association (f/k/a Texas Commerce Bank National Association) ("Chase"),
CIBC Inc., Credit Lyonnais New York Branch, and the other lenders from time to
time parties hereto (each a "Lender" and collectively, the "Lenders"), Bank One,
as administrative agent for the Lenders (in such capacity, the "Agent") and
Chase, as co-agent for the Lenders (in such capacity, the "Co-Agent").
WITNESSETH:
WHEREAS, the Borrower, the Lenders, the Agent and the Co-Agent have
entered into that certain Credit Agreement dated as of November 19, 1997, as
amended by that certain letter agreement dated March 3, 1998 (the "Credit
Agreement"), pursuant to which the Lenders have made and agreed to make Loans to
the Borrower and issued and agreed to issue Letters of Credit for the account of
the Borrower; and
WHEREAS, the Borrower, the Lenders, the Agent and the Co-Agent desire
to further amend the Credit Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrower, the Lenders, the Agent and the
Co-Agent hereby agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 6.13(i) is hereby amended by adding the
clause ", any Liens securing Indebtedness permitted
by Section 6.14(f) on assets of any such foreign
Subsidiary incurring any such Indebtedness" after
"Section 6.14(i)" in the second line thereof.
(b) Section 6.14(f) is hereby deleted in its entirety and
the following inserted in its place:
"(f) Indebtedness of any foreign Subsidiaries of
the Borrower not otherwise permitted by this
Section 6.14 not to exceed $15,000,000
(excluding Indebtedness under undrawn
letters of credit issued for the account of
any such foreign Subsidiary in the ordinary
course of its business but including
Indebtedness listed on Schedule 6.14, to the
extent applicable) in the aggregate at any
time outstanding;".
2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. To induce the
Lenders, the Agent and the Co-Agent to enter into this Amendment, the Borrower
hereby reaffirms, as of the
<PAGE> 2
date hereof, that its representations and warranties contained in the Credit
Agreement are true and correct in all material respects (except to the extent
such representations and warranties (x) are not so true and correct in all
material respects as a result of the transactions expressly permitted under the
Credit Agreement or under the other Credit Documents or (y) relate solely to an
earlier date) and additionally represents and warrants as follows:
(i) The execution and delivery by the Borrower
of this Amendment and the performance by the
Borrower of its obligations under this
Amendment and the Credit Agreement, as
amended hereby, are within the Borrower's
corporate powers, have been duly authorized
by all necessary corporate action of the
Borrower and do not and will not contravene
any applicable provision of any law,
statute, rule or regulation, or any
applicable order, writ, injunction or decree
of any court or governmental
instrumentality, except where such
contravention is not reasonably expected to
have a Material Adverse Effect or conflict
with or result in any breach of any term,
covenant, condition or other provision of,
or constitute a default under (except where
such conflict, breach or default is not
reasonably expected to have a Material
Adverse Effect), or result in the creation
or imposition of (or the obligation to
create or impose) any Lien other than any
Permitted Lien upon any of the property or
assets of the Borrower or any of its
Subsidiaries under the terms of any
contractual obligation to which the Borrower
or any of its Subsidiaries is a party or by
which it or any of its properties or assets
are bound or to which it may be subject, or
violate or conflict with any provision of
the Certificate of Incorporation or Bylaws
of the Borrower;
(ii) The execution and delivery by the Borrower
of this Amendment have received all
necessary governmental approvals or other
consents (if any shall be required);
(iii) This Amendment and the Credit Agreement, as
amended hereby, are legal, valid and binding
obligations of the Borrower enforceable
against the Borrower in accordance with
their terms, subject as to enforcement only
to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting
the enforcement of creditors' rights
generally and by general principles of
equity, regardless of whether in a
proceeding in equity or at law;
(iv) There are no lawsuits (including, without
limitation, derivation or injunctive
actions), arbitration proceedings or
governmental proceedings pending or, to the
best knowledge of the Borrower,
-2-
<PAGE> 3
threatened, involving the Borrower or any of
its Subsidiaries except as disclosed in
Schedule 5.4 to the Credit Agreement and
except for such lawsuits or other
proceedings which are not reasonably
expected to have a Material Adverse Effect;
(v) No Default or Event of Default has occurred
and is continuing; and
(vi) There have been no amendments to the
Certificate of Incorporation or Bylaws of
the Borrower since November 19, 1997.
3. REAFFIRMATION OF CREDIT AGREEMENT. This Amendment shall be deemed to
be an amendment to the Credit Agreement, and the Credit Agreement, as amended
hereby, is hereby ratified, approved and confirmed in each and every respect.
All references to the Credit Agreement in the Credit Agreement and the other
Credit Documents (excluding this Amendment) shall hereafter be deemed to refer
to the Credit Agreement, as amended hereby.
4. DEFINED TERMS. Terms used but not defined herein when defined in the
Credit Agreement shall have the same meanings herein unless the context
otherwise requires.
5. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(A) THIS AMENDMENT AND THE OTHER CREDIT DOCUMENTS, AND THE
RIGHTS AND DUTIES OF THE PARTIES HERETO AND THERETO, SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS.
(B) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO AGREE THAT ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH, THIS AMENDMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF THE LENDERS OR THE BORROWER MAY BE BROUGHT AND MAINTAINED IN THE
COURTS OF THE STATE OF TEXAS SITTING IN HARRIS COUNTY OR THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE BORROWER, THE LENDERS, THE AGENT AND THE
CO-AGENT HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF TEXAS AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH
ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE BORROWER, THE LENDERS, THE AGENT AND THE CO-AGENT FURTHER
IRREVOCABLY
-3-
<PAGE> 4
CONSENTS TO THE SERVICE OF PROCESS, BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE BORROWER, THE LENDERS, THE AGENT AND
THE CO-AGENT HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY
HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT
IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER, ANY
LENDER, THE AGENT OR THE CO-AGENT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PERSON HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AMENDMENT AND THE OTHER CREDIT
DOCUMENTS.
(C) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH
PARTY HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AMENDMENT, THE CREDIT AGREEMENT, ANY
OTHER CREDIT DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH
THIS AMENDMENT, THE CREDIT AGREEMENT, ANY OTHER CREDIT DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the different parties on different counterpart signature
pages, each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same Amendment.
7. SEVERABILITY. Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
-4-
<PAGE> 5
8. HEADINGS. Section headings used in this Amendment are for reference
only and shall not affect the construction of this Amendment.
9. NOTICE OF ENTIRE AGREEMENT. This Amendment, together with the other
Credit Documents, constitute the entire understanding among the Borrower, the
Lenders, the Agent and the Co-Agent and supersede all earlier or contemporaneous
agreements, whether written or oral, concerning the subject matter of the Credit
Documents. THIS WRITTEN AMENDMENT, TOGETHER WITH THE OTHER CREDIT DOCUMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have entered into this First
Amendment to Credit Agreement as of the date first written above.
BORROWER:
DANIEL INDUSTRIES, INC.,
a Delaware corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-5-
<PAGE> 6
LENDERS:
BANK ONE, TEXAS, NA, as Agent and a Lender
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-6-
<PAGE> 7
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION (f/k/a TEXAS COMMERCE
BANK NATIONAL ASSOCIATION), as Co-Agent
and a Lender
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-7-
<PAGE> 8
CIBC INC., as a Lender
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-8-
<PAGE> 9
CREDIT LYONNAIS NEW YORK BRANCH, as a
Lender
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Approval was obtained from necessary bank group and this signature is not
required.
-9-
<PAGE> 10
CONSENT AND ACKNOWLEDGMENT
Each of the undersigned Guarantors, by its signature hereto,
acknowledges and agrees to the terms and conditions of that certain First
Amendment to Credit Agreement (the "Amendment") dated as of June 4, 1998, by and
among Daniel Industries, Inc., a Delaware corporation (the "Borrower"), Bank
One, Texas, NA ("Bank One"), Chase Bank of Texas, National Association (f/k/a
Texas Commerce Bank National Association) ("Chase"), CIBC Inc., Credit Lyonnais
New York Branch, and the other lenders from time to time parties hereto
(collectively, the "Lenders"), Bank One, as administrative agent for the Lenders
(in such capacity, the "Agent") and Chase, as co-agent for the Lenders (in such
capacity, the "Co-Agent"). Each of the undersigned acknowledges and reaffirms
its obligations under its Guaranty dated November 19, 1997 (collectively, the
"Guaranties"), and agrees that the Guaranties shall remain in full force and
effect. Although the undersigned Guarantors have been informed by the Company of
the matters set forth in the Amendment, and the undersigned have acknowledged
and agreed to same, the undersigned understand neither the Agent, the Co-Agent
nor any of the Lenders have any duty to notify any of the Guarantors of, or to
seek any of the Guarantor's acknowledgment or agreement to, the Amendment, and
nothing contained herein shall create such a duty as to any transactions
hereafter.
Dated as of June 4, 1998.
DANIEL MEASUREMENT AND CONTROL,
INC.
DANIEL VALVE COMPANY
BETTIS CORPORATION
SHAFER VALVE COMPANY
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
-10-
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<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,891
<SECURITIES> 0
<RECEIVABLES> 67,195
<ALLOWANCES> 1,516
<INVENTORY> 51,677
<CURRENT-ASSETS> 138,834
<PP&E> 65,428
<DEPRECIATION> 0
<TOTAL-ASSETS> 240,558
<CURRENT-LIABILITIES> 55,113
<BONDS> 0
0
0
<COMMON> 21,867
<OTHER-SE> 122,068
<TOTAL-LIABILITY-AND-EQUITY> 240,558
<SALES> 215,396
<TOTAL-REVENUES> 215,396
<CGS> 133,276
<TOTAL-COSTS> 133,276
<OTHER-EXPENSES> 60,415
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<INTEREST-EXPENSE> 1,967
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<INCOME-TAX> 7,402
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<EPS-PRIMARY> .71
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