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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1997
COMMISSION FILE NUMBER 0-5240
VERSA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
39-1143618
(I.R.S. Employer
Identification No.)
9301 WASHINGTON AVENUE, RACINE, WISCONSIN
(Address of principal executive offices)
53406
(Zip Code)
Registrant's telephone number, including area code 414/886-1174
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. [X] Yes [ ] No
Common stock outstanding as of July 28, 1997 -- 5,589,458 shares.
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VERSA TECHNOLOGIES, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
EXHIBIT REFERENCE
OR FORM 10-Q
PAGE NUMBER
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets 10-Q, Page 3
June 30, 1997 (Unaudited) and March 31, 1997
Consolidated Statements of Earnings 10-Q, Page 4
Three months ended June 30, 1997 and 1996 (Unaudited)
Consolidated Statements of Cash Flows 10-Q, Page 5
Three months ended June 30, 1997 and 1996 (Unaudited)
Notes to Consolidated Financial Statements 10-Q, Page 6
(Unaudited)
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-Q, Page 8
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10-Q, Page 9
</TABLE>
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VERSA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS*
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
-------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................................. $ 1,150 $ 1,127
Receivables, net of allowances......................................... 14,001 13,203
Inventories............................................................ 11,876 11,501
Prepaid expenses and taxes............................................. 1,262 1,467
-------- --------
Total current assets.............................................. 28,289 27,298
PROPERTY, PLANT, AND EQUIPMENT**......................................... 23,463 23,376
INTANGIBLES.............................................................. 11,005 11,127
OTHER ASSETS............................................................. 176 190
-------- --------
$ 62,933 $61,991
======= =======
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term debt........................................................ $ -- $ 2,981
Accounts payable....................................................... 5,176 3,843
Accrued expenses....................................................... 4,535 4,682
Income taxes........................................................... 1,301 317
Employee stock purchase and payroll savings plan....................... 87 47
-------- --------
Total current liabilities......................................... 11,099 11,870
DEFERRED INCOME TAXES.................................................... 2,020 2,059
DEFERRED PENSION, DEFERRED COMPENSATION AND POSTRETIREMENT BENEFITS
EXPENSE................................................................ 3,078 2,936
SHAREHOLDERS' EQUITY..................................................... 46,736 45,126
-------- --------
$ 62,933 $61,991
======= =======
</TABLE>
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* In thousands of dollars. March 31, 1997 figures condensed from audited
financial statements.
** Net of accumulated depreciation of $26,460,000 at June 30, 1997 and
$25,570,000 at March 31, 1997.
3
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VERSA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)*
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1997 1996
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<S> <C> <C>
NET SALES................................................................. $27,057 $19,365
Cost of Sales........................................................... 19,524 14,000
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GROSS PROFIT.............................................................. 7,533 5,365
Selling and administrative expenses....................................... 4,107 2,940
------- -------
OPERATING INCOME.......................................................... 3,426 2,425
------- -------
OTHER INCOME
Interest (expense) income............................................... (4) 160
Miscellaneous, net...................................................... 42 34
------- -------
38 194
------- -------
EARNINGS BEFORE INCOME TAXES.............................................. 3,464 2,619
INCOME TAXES.............................................................. 1,351 975
------- -------
NET EARNINGS.............................................................. $ 2,113 $ 1,644
======= =======
NET EARNINGS PER SHARE.................................................... $ .38 $ 0.29
======= =======
Average shares outstanding................................................ 5,581 5,729
======= =======
</TABLE>
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* Amounts are in thousands except earnings per share. Interim results are not
necessarily indicative of full year and are subject to audit.
4
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VERSA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)*
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings............................................................ $ 2,113 $ 1,644
Depreciation............................................................ 922 848
Amortization............................................................ 126 9
Provision for losses on accounts receivable............................. 21 15
Increase in deferred liabilities........................................ 104 139
(Loss) gain on disposition of equipment................................. (8) 1
(Increase) decrease in current assets other than cash and cash
equivalents.......................................................... (987) 279
Increase (decrease) in current liabilities.............................. 2,210 (207)
------- -------
Net cash provided by operating activities.......................... 4,501 2,728
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Cash flows from investing activities:
Capital expenditures.................................................... (1,010) (1,704)
Other................................................................... 16 24
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Net cash used in investing activities.............................. (994) (1,680)
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Cash flows from financing activities:
Net payments under line of credit agreement............................. (2,981) --
Dividends paid.......................................................... (558) (580)
Purchase of treasury stock.............................................. -- (3,105)
Sale of stock under option plans........................................ 55 109
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Net cash used in financing activities.............................. (3,484) (3,576)
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Increase (decrease) in cash and cash equivalents.......................... 23 (2,528)
Cash and cash equivalents at beginning of period.......................... 1,127 14,746
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Cash and cash equivalents at end of period................................ $ 1,150 $12,218
======= =======
Supplemental Disclosures of Cash Flow Information
Cash paid during period for:
Interest................................................................ $ 4 --
Income taxes............................................................ $ 405 $ 356
</TABLE>
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* Amounts are in thousands.
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VERSA TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES --
The consolidated balance sheet as of June 30, 1997 and the consolidated
statements of earnings and cash flows for the three-month periods ended June 30,
1997 and 1996 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have been
included. Such adjustments consisted only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-Q,
and do not contain certain information included in the annual financial
statements and notes of Versa Technologies, Inc. and subsidiaries for the year
ended March 31, 1997.
2. INVENTORIES --
Interim inventories are based on perpetual records which are partially
verified by interim physical counts.
3. INTANGIBLES --
Intangibles include $797,000 relating to pre-1970 acquisitions that are not
being amortized. Included in intangible assets at June 30, 1997 was $10.2
million which is related to the acquisition of Eder Industries, Inc. (See Note
6). Goodwill of $8.1 million represented the excess of the acquisition cost over
the fair value of net assets acquired and is amortized on a straight-line basis
over 40 years. Other acquired intangibles (principally customer or employment
related items) were $2.1 million and are being amortized on a straight-line
basis over periods ranging from 3 to 40 years. Amortization expenses for the
quarter ended June 30, 1997 for the above items was approximately $126,000.
4. SHORT-TERM DEBT --
At June 30, 1997, the Company had no borrowings under a $15 million
unsecured line of credit agreement. The line bears interest at a variable rate
based on the current thirty-day LIBOR rate plus 75 basis points. The line of
credit renews annually on July 31.
5. SHAREHOLDERS' EQUITY --
Shareholders' equity is composed of the following elements (in thousands):
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
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<S> <C> <C>
Common stock, par value $.01 per share..................... $ 61 $ 61
Additional paid-in capital................................. 18,649 18,648
Retained earnings.......................................... 34,523 32,968
-------- ---------
53,233 51,677
Less treasury shares at cost............................... 6,497 6,551
-------- ---------
$ 46,736 $45,126
======= =======
</TABLE>
Total shares of common stock outstanding net of treasury shares was
5,584,458 at June 30, 1997 and 5,580,533 at March 31, 1997.
During the three months ended June 30, 1997, 3,905 shares of treasury stock
were re-issued under the provision of the Company's 1982 Incentive Stock Option
Plan (the 1982 Plan), the Company's 1992 Incentive Stock Option Plan (the 1992
Plan) and the Company's 1996 Employee Stock Purchase and Payroll Savings
6
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VERSA TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Plan (the 1996 Plan). Treasury stock cost basis in excess of the proceeds
received was charged to additional paid-in capital.
As of June 30, 1997, 76,650 shares of common stock were reserved for issue
under the Company's 1982 Plan; 486,125 shares were reserved for issue under the
Company's 1992 Plan; 30,643 shares were reserved for issue under the Company's
1996 Plan; and 30,000 shares were reserved for non-qualified stock options held
by outside directors and an outside officer of the Company.
During the three months ended June 30, 1997, retained earnings was credited
with net income of $2,113,000 and charged with $558,000 for dividends paid.
6. EARNINGS PER SHARE CALCULATION --
Earnings per share have been computed on the basis of weighted average
shares outstanding during the respective interim periods. Common share
equivalents were excluded because their dilutive effect is not significant.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Consolidated sales for the three months increased $7.7 million, or 40% from
the prior year. Comparative sales in thousands were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
------------------
1997 1996
------- -------
<S> <C> <C>
Fluid Power................................................ $14,423 $10,969
Engineered Materials....................................... 6,930 8,602
Electronics................................................ 5,965 --
Less -- interdivisional sales............................ (261) (206)
------- -------
$27,057 $19,365
======= =======
</TABLE>
Sales and operating income for the Fluid Power segment grew at 32% and 40%,
respectively. Power Gear had a particularly strong sales performance with new
business for slide-out systems for the RV market gained last year, which is now
in full production. Quarter-to-quarter sales comparisons will continue to be
favorable through the end of the Company's third fiscal quarter. Sales to the RV
market were 53% of this segment's sales for the quarter.
The Engineered Materials segment's sales were down $1.7 million or 19%.
Approximately $1.5 million of the decline related to sales for the two plastics
businesses which were reported in last year's first quarter results, but
subsequently sold later in fiscal 1997. Excluding the plastics units, sales and
operating income gains in the medical sector were more than offset by an
unsatisfactory performance by the industrial silicone business. This unit
continues to struggle with both poor product mix and high over head cost. Plans
to correct the situation are under way.
Results for the quarter include the operations of Eder Industries, Inc.
which was acquired October 30, 1996. Sales of $6.0 million exceeded internal
projections due to strong demand from several key customers.
On a consolidated basis, gross margin, selling and administrative expenses
and operating income as a percentage of sales were all unchanged versus the
prior year. Below the operating income line there was a $165,000 swing from
interest income to interest expense. With the acquisition of Eder Industries for
$15.4 million effective October 1996, the Company's cash position changed from
cash and short-term investments to short-term debt.
7
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VERSA TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The effective tax rate increased from 37.25% to 39.0% for the first quarter
of fiscal 1998. This increase was due primarily to two factors. First, moving
from a net cash position to a net debt position resulted in the loss of the
benefit of investing in Federal tax exempt bonds. Second, the amortization of
the goodwill associated with the acquisition of Eder Industries Inc. is not tax
deductible.
Cash Flows and Liquidity
Cash provided from operating activities was $4.5 million for the quarter,
up from $2.7 million for the same period last year. This improvement was due to
higher earnings combined with a net favorable change in the current section of
the balance sheet. The increase in current liabilities, excluding short-term
debt, more than offset increases in current assets.
Commitments for capital expenditures (investing activities) for the balance
of fiscal 1998 include an expansion project at Eder Industries totaling $2.5
million. With this exception, there are no other significant amounts anticipated
in excess of a normal level of replacement and improvements to facilities and
equipment.
Net cash outflows for financing activities were approximately the same for
the quarter ended June 30, 1997 versus the same period last year. During the
first quarter of fiscal 1998, $3.0 million was used to repay all borrowings
under an unsecured line of credit agreement. In the same period last year $3.1
million was used to repurchase Company stock.
The Company has a stock buy back program approved by the Board of Directors
to purchase up to 15% of outstanding shares. Through June 30, 1997, 522,300
shares of the total 900,000 authorized have been repurchased under the plan at a
total cost of $7.1 million.
At June 30, 1997, the Company had working capital of $17.2 million.
Management anticipates that this liquidity plus $15 million in available credit
under an unsecured revolving business note agreement will be sufficient to cover
known demands for uses of working capital.
Outlook
Order backlog on June 30, 1997 was $24.9 million versus $12.7 million one
year ago. Included in backlog on June 30, 1997 was $15.1 million for Eder.
Backlog for the Engineered Materials segment decreased $2.1 million versus one
year ago while Fluid Power's backlog was level with last year.
8
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PART II
OTHER INFORMATION
ITEM 5 -- PLANT CLOSING
On August 7, 1997 the Company announced plans to consolidate the operations
of its industrial silicone business, Moxness Products. As part of the plan,
production from Moxness' Wausau, Wisconsin plant will be transferred to the
company's other plants located in Racine and East Troy, Wisconsin. It is
expected that the transfer of all production will be completed by December 31,
1997. Moxness has been unable to bring in the business needed to fill available
manufacturing capacity which resulted in the need to reduce fixed costs. The
consolidation, along with other cost reductions, is expected to have a favorable
effect on corporate earnings in fiscal 1999. The impact on consolidated earnings
for the current fiscal year will be minimal.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no documents filed as part of this report.
(b) Reports on Form 8-K
There were no form 8-K's filed during the quarter.
9
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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 to sign on behalf of the registrant and as
principal financial officer.
VERSA TECHNOLOGIES, INC.
--------------------------------------
(Registrant)
/s/ ROBERT M. SUKALICH
--------------------------------------
Vice President -- Finance, Treasurer
and Principal Financial Officer
Date: August 8, 1997
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,150
<SECURITIES> 0
<RECEIVABLES> 14,253
<ALLOWANCES> 252
<INVENTORY> 11,876
<CURRENT-ASSETS> 28,289
<PP&E> 49,923
<DEPRECIATION> 26,460
<TOTAL-ASSETS> 62,933
<CURRENT-LIABILITIES> 11,099
<BONDS> 0
0
0
<COMMON> 61
<OTHER-SE> 46,675
<TOTAL-LIABILITY-AND-EQUITY> 62,933
<SALES> 27,057
<TOTAL-REVENUES> 27,057
<CGS> 19,524
<TOTAL-COSTS> 19,524
<OTHER-EXPENSES> 4,107
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 18
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<NET-INCOME> 2,113
<EPS-PRIMARY> 0.38
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</TABLE>
