UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 No. 0-3108
TRION, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0922753
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 760, 101 McNeill Road, Sanford, North Carolina 27331-0760
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 919/775-2201
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of November 7, 1995.
6,451,483 shares of Common Stock, par value $.50.
<PAGE>
Part I
<TABLE>
Item 1. Financial Statements
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . .$28,383 $24,821 $11,080 $ 9,266
Other income . . . . . . . . . . 141 92 17 36
28,524 24,913 11,097 9,302
Cost and expenses:
Cost of products sold. . . . . 17,729 15,667 6,840 5,974
Selling, administrative
and engineering . . . . . . . 8,082 7,006 3,260 2,523
Interest . . . . . . . . . . . 231 124 133 47
Amortization . . . . . . . . . 55 - 55 -
. . . . . . . . . . . . . . . 26,097 22,797 10,288 8,544
Income before income taxes . . . 2,427 2,116 809 758
Income tax . . . . . . . . . . . 906 796 307 301
Net income for the period. . . .$ 1,521 $ 1,320 $ 502 $ 457
Net income per common share. . .$ .24 $ .21 $ .08 $ .07
Dividends declared . . . . . . .$ .06 $ None $ .02 $ None
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share amounts)
<CAPTION>
ASSETS
September 30 December 31
1995* 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . $ 859 $ 4,149
Trade accounts receivable, less
allowance for doubtful accounts
(1995;$303,000/1994;$175,000). . . . 11,320 6,914
Inventories. . . . . . . . . . . . . . 8,493 5,590
Prepaid expenses and other current
assets. . . . . . . . . . . . . . . 1,443 1,237
Total current assets. . . . . . . . 22,115 17,890
Property, plant and equipment:
Land . . . . . . . . . . . . . . . . . 78 78
Buildings. . . . . . . . . . . . . . . 5,058 5,058
Machinery and equipment. . . . . . . . 11,660 10,456
Allowance for depreciation . . . . . . (10,397) (9,801)
6,399 5,791
Goodwill & other intangibles (net) . . . 7,327 98
$35,841 $23,779
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accruals. . . . . $ 6,549 $ 3,244
Current portion of long-term debt. . . 360 360
Total current liabilities . . . . . . 6,909 3,604
Long-term debt . . . . . . . . . . . . . 10,290 2,840
Accrued management restructuring expenses 175 307
Deferred income taxes. . . . . . . . . . 298 232
17,672 6,983
Shareholders' equity:
Common stock, par value $.50 a share:
Authorized 10,000,000 shares
Issued and outstanding: 1995 - 6,431,183
and 1994 - 6,399,183 . . . . . . . . . 3,216 3,200
Additional paid-in capital. . . . . . . 1,457 1,327
Retained earnings. . . . . . . . . . . . 13,339 12,202
Foreign currency translation adjustment -
unrealized. . . . . . . . . . . . . . 157 67
18,169 16,796
$35,841 $23,779
<FN>
See notes to consolidated condensed financial statements.
*Unaudited
</TABLE>
<PAGE>
<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Nine Months Ended September 30
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . $ 1,521 $ 1,320
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization. . . . . . . 840 724
Deferred income taxes. . . . . . . . . . . 131 (35)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . (1,849) (1,274)
Inventory and prepaid expenses. . . . . (1,437) 191
Accounts payable and accrued expenses . 1,721 792
Gain on disposal of equipment. . . . . . . (18) (5)
Foreign currency transaction loss. . . . . (57) 108
Net cash provided by operating activities. 852 1,821
INVESTING ACTIVITIES
Purchase of property, plant and equipment. . (796) (515)
Purchase of Envirco, Inc.. . . .. (8,300) -
Proceeds from disposal of equipment. 21 13
Net cash used by investing activities. . . (9,075) (502)
FINANCING ACTIVITIES
Proceeds from bank borrowings. . . . . . . . 6,800 -
Payoff of Envirco, Inc. debt . . . . . . . . (1,958) -
Exercise of stock options. . . . . . . . . . 146 179
Cash dividends paid. . . . . . . . . . . . . (257) -
Net cash provided by financing activities. 4,731 179
Effect of exchange rate changes on cash. . . 202 118
Increase (Decrease) in cash and
cash equivalents . . . . . . . . . . . . . (3,290) 1,616
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . 4,149 2,139
Cash and cash equivalents at end of period . $ 859 $ 3,755
<FN>
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
TRION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1995
Note A - Basis of presentation
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been reflected in the reported financial
information. For further information, refer to the consolidated financial
statements and footnotes included in the Registrant's annual report on Form 10-K
for the year ended December 31, 1994.
Note B - Reclassification
Certain amounts in 1994 have been reclassified to conform to 1995
classifications. These reclassifications have no effect on previously reported
shareholders' equity or financial results.
Note C - Net Income per Share of Common Stock
Net income per share of common stock is computed by dividing net income by the
average number of shares of common stock outstanding during the periods. The
average number of common shares outstanding for the nine-month period ended
September 30 was 6,431,183 in 1995 and 6,376,885 in 1994, and 6,430,759 and
6,395,183 for the three-month periods ended September 30, 1995 and 1994;
respectively. Outstanding stock options are not considered in computing
earnings per share as the effect would not be material.
Note D - Inventories
The Registrant does not maintain an integrated dollar perpetual inventory
system. During the interim periods, inventories are charged with actual costs
incurred and relieved at product standard costs. Such standards are updated at
least annually. Based upon the components of inventory at the preceding physical
inventory date and charges to and relief of inventories during the interim
period, the components of inventory are estimated as follows (in thousands):
September 30 December 31
1995 1994
Raw materials $ 4,162 $ 2,147
Work-in-process and
finished goods 4,331 3,443
$ 8,493 $ 5,590
Cost of domestic raw materials inventory is determined by the last-in, first-out
method. No provision has been made during the interim period to reflect changes
in last-in, first-out values since the preceding December 31. Management
believes that such provision, if any, would not be significant.
<PAGE>
Note E - Acquisition
On August 1, 1995 the Registrant acquired all of the outstanding common stock of
Envirco Corporation, a manufacturer and distributor of ultra-clean air systems
and components located in Albuquerque, New Mexico for aggregate cash
consideration of approximately $8.3 million. The Registrant incurred costs of
approximately $0.5 million; consisting principally of a finders fee, accounting
and legal expenses. The acquisition was financed through a combination of cash
on hand and borrowings of $6.8 million. The details of the credit facility are
discussed in Note F.
In a related transaction, the Registrant and/or Envirco Corporation entered into
employment agreements and/or non-compete agreements with five key employees of
the Envirco Corporation. These agreements have terms which vary from two to
five years, maintain salary levels previously in effect, and, in certain
circumstances based upon company performance, provide incentive payments and
options to purchase the Registrant's stock at values no less than fair market
value.
The Envirco acquisition was accounted for using the purchase method, with the
assets and liabilities of the business recorded at their estimated fair value at
the acquisition date. The excess of total acquisition cost over the fair value
of the net assets acquired was classified as goodwill and is being amortized on
a straight line basis over 20 years. The results of operations of Envirco are
included in the accompanying condensed consolidated statements of income as of
the date of the acquisition.
The following unaudited pro forma summary of consolidated results of operations
has been prepared as if Envirco had been acquired at the beginning of 1995 and
1994 (in thousands, except per share data):
Nine months ended September 30
1995 1994
Net sales $36,126 $32,381
Net income 1,618 1,394
Net income per share 0.25 0.22
These pro forma results do not purport to be indicative of the results that
would have actually been attained, or that will be attained in the future, if
Envirco had been acquired at the beginning of 1995 or 1994, respectively.
Note F - Credit Agreement
On September 8, 1995 the Registrant obtained a master credit facility for
$18 million. The structure of the facility include an $8 million 36 month
revolving line of credit and a $10 million 60 month declining balance term
loan; both having an interest rate at the London Interbank Offering Rate
plus 1.3%. This facility replaced the previous $3 million line of credit
which was at the prime rate of interest less 0.25%. At September 30, 1995
the Company had $6.8 million outstanding on the credit facility.
Note G - Subsequent Event
On November 3, 1995, the Registrant refunded the $3.2 million balance on the
1984 Industrial Revenue Bond, bearing interest based upon a percentage of
prime, 68.5% in 1994 or 5.99% at current levels. The entire amount was
refinanced with a Variable Rate Demand Bond, due in November, 2011, bearing
interest, inclusive of fees for the letter of credit, remarketing, and other
financing charges, of approximately 5.5%.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Material Changes in Results of Operations
Net sales for the quarter ended September 30, 1995 were $11,080,000 as compared
to $9,266,000 a year ago, a 20% increase in 1995 over 1994. In North America,
the engineered products segment increased by 164% with the majority of the
increase due to the acquisition of Envirco Corporation on August 1, 1995,
whereas sales in the consumer products segment were 23% less than the comparable
period of the prior year reflecting lower shipments to a major retail customer
during the period. European operations were lower by 12% on a comparative
quarter basis, primarily due to lower sales in the eastern European market.
Net sales for the nine months ended September 30, 1995 increased 14% over the
prior year, from $24,821,000 in 1994 to $28,383,000 in 1995. During the nine
month period North America consumer products decreased by 2% and engineered
product shipments increased 58% as compared to the prior year period. Net
sales by European operations during the first nine months of 1995 declined 1%
on a comparable period basis due to the third quarter decline in net sales in
eastern Europe.
Backlog for the Company's unshipped orders increased 53% at September 30, 1995
to $6,395,000 as compared to $4,185,000 at September 30, 1994. The entire
increase in backlog was attributable to engineered products, with a majority of
the increase due to the Envirco acquisition. Year to date, order bookings in
1995 for engineered products continue to exceed current year shipment levels.
The backlog of orders for consumer products at September 30, 1995 declined 2%
from levels at September 30, 1994.
As a percentage of net sales, the Company experienced a decrease in the cost of
products sold during the quarter ended September 30, 61.2% in 1995 as compared
to 64.5% in 1994, primarily due to favorable product mix offset by increases in
the cost of raw materials. For the nine months ended September 30, 1995 and
1994, cost of products sold as a percentage of net sales were 62.5% and 63.1%,
respectively.
Selling, administrative and engineering expenses as a percentage of net sales
were 29.4% and 27.2% during the third quarter of 1995 and 1994, respectively.
On a year to date basis and as a percentage of net sales, operating expenses
were 28.5% in 1995 and 28.2% in 1994. These changes reflect the deliberate move
on the company's part to increase sales and strengthen its product distribution
and product development efforts. In addition, the Company continues to realize
savings due to the successful consolidation of its European operations,
approximately $231,000 on a year to date basis. As a percentage of net sales,
operating expenses for Envirco were slightly lower than those of the Company's
historic businesses. Overall, the Company monitors costs and expenses closely
and has continued to focus on cost reduction and profit improvement programs.
Interest expense has increased in both the third quarter and year to date
comparative periods due to the $6,800,000 financing required for the Envirco
purchase plus a slight rise in interest rates in 1995 as compared to 1994. In
addition, amortization of goodwill amounted to $55,000 during both the third
quarter and year to date periods due to the Envirco acquisition on
August 1, 1995.
The third quarter of 1995 yielded a slight reduction in the income tax rate as a
percent of income before income taxes from the third quarter of 1994; 37.9% in
1995 as compared to 39.7% in 1994. On a year to date basis, the rate was 37.3%
and 37.6% for 1995 and 1994, respectively.
<PAGE>
Net income for the third quarter ended September 30, 1995 was $502,000 as
compared to $457,000 for the comparable quarter of 1994, a 10% increase.
Improvements experienced through better product mix and the increase in total
net sales volume were offset by increases in the cost of raw materials as well
as operating expenses caused by the company's continued investment in sales,
marketing and engineering efforts. For the nine month period, $1,521,000 in net
income was reported, or a 15% increase over the $1,320,000 posted in 1994
period.
The net income per common share increased to $0.08 during the third quarter in
1995 from $0.07 for the third quarter of 1994. The nine months ended
September 30, 1995 and 1994 generated $0.24 and $0.21 net income per common
share, respectively.
Material Changes in Liquidity and Financial Condition
The financial condition of the Company remains strong although there were
significant changes during the reporting period, primarily due to the
acquisition and financing of Envirco Corporation. Significant cash on hand was
used to fund the acquisition, thereby reducing the current ratio to 3.2 to 1 as
compared to 5.0 to 1 at 1994 year end; however, in the aggregate, consolidated
working capital increased to $15,206,000 at September 30, 1995. In addition,
long-term debt increased to 57% of equity at September 30, 1995 due to
borrowings required for the transaction. Shareholders' equity rose to
$18,169,000 reflecting the earnings for the quarter.
<TABLE>
SEGMENT DATA
(Unaudited)
(In thousands)
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers:
North American Operations:
Engineered Products . . . . . $10,539 $ 6,677 $ 5,321 $ 2,013
Consumer Products . . . . . . 13,682 14,025 4,518 5,850
European Operations. . . . . . 4,162 4,119 1,241 1,403
$28,383 $24,821 $11,080 $ 9,266
Income (loss) from operations:
North American Operations:
Engineered Products . . . . . $ 1,681 $ 1,397 $ 616 $ 432
Consumer Products . . . . . . 2,214 2,459 660 937
European Operations. . . . . . (40) (400) 80 (155)
3,855 3,456 1,356 1,214
General Corporate:
Other income . . . . . . . . . 141 92 17 36
Interest (U.S.). . . . . . . . (230) (124) (132) (47)
Other expense. . . . . . . . . (1,339) (1,308) (432) (445)
(1,428) (1,340) (547) (456)
Income before income taxes . . . $ 2,427 $ 2,116 $ 809 $ 758
</TABLE>
<PAGE>
PART II
Item 6(a). Exhibits
27 Financial Data Schedule.
Item 6(b). Report on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the period
covered by this report. Information regarding the Envirco acquisition was
reported in the Form 10-Q and the Form 10-QA filed for the June 30, 1995 period.
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.
TRION, INC.
(Registrant)
Date: November 10, 1995 /s/ Steven L. Schneider
Steven L. Schneider
President and Chief Executive
Officer
Date: November 10, 1995 /s/ Calvin J. Monsma
Calvin J. Monsma
Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 859,000
<SECURITIES> 0
<RECEIVABLES> 11,623,000
<ALLOWANCES> 303,000
<INVENTORY> 8,493,000
<CURRENT-ASSETS> 22,115,000
<PP&E> 16,796,000
<DEPRECIATION> 10,397,000
<TOTAL-ASSETS> 35,841,000
<CURRENT-LIABILITIES> 6,909,000
<BONDS> 3,200,000
<COMMON> 3,216,000
0
0
<OTHER-SE> 14,953,000
<TOTAL-LIABILITY-AND-EQUITY> 35,841,000
<SALES> 28,383,000
<TOTAL-REVENUES> 28,383,000
<CGS> 17,729,000
<TOTAL-COSTS> 25,866,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 96,000
<INTEREST-EXPENSE> 231,000
<INCOME-PRETAX> 2,427,000
<INCOME-TAX> 906,000
<INCOME-CONTINUING> 1,521,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,521,000
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
