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 SECUTIRIES
X EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 of 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)
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 and 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 May 8, 1996.
6,476,923 shares of Common Stock, par value $.50
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Part I
Item 1. Financial Statements
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended March 31
1996 1995
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $14,947 $ 8,504
Other income . . . . . . . . . . . . . . . . . 17 39
14,964 8,543
Cost and expenses:
Cost of products sold . . . . . . . . . . . 10,151 5,485
Selling, administrative and engineering . . 3,802 2,348
Interest . . . . . . . . . . . . . . . . . . 172 48
Amortization . . . . . . . . . . . . . . . . 86 -
14,211 7,881
Income before income taxes . . . . . . . . . . 753 662
Income tax expense . . . . . . . . . . . . . . 295 232
Net income for the period . . . . . . . . . . . $ 458 $ 430
Net income per common share . . . . . . . . . . $ .07 $ .07
Cash dividends declared per common share . . . $ .02 $ .02
<FN>
See notes to consolidated condensed financial statements
</TABLE>
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<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except per share amounts)
<CAPTION>
ASSETS
March 31 December 31
1996* 1995
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . $ 428 $ 497
Trade accounts receivable, less allowance
for doubtful accounts (1996 and 1995 -
$339,000) . . . . . . . . . . . . . . . . . 11,968 11,926
Inventories . . . . . . . . . . . . . . . . . 10,214 8,755
Prepaid expenses and other current assets . . 1,501 1,343
Total current assets . . . . . . . . . . . 24,111 22,521
Property, plant and equipment . . . . . . . . . . 78 78
Land . . . . . . . . . . . . . . . . . . . . . 5,058 5,058
Building . . . . . . . . . . . . . . . . . . . 12,845 11,970
Machinery and equipment . . . . . . . . . . . (10,787) (10,514)
Allowance for depreciation . . . . . . . . . . 7,194 6,592
Other assets:
Goodwill less accumulated amortization:
($229,000 in 1996 and $143,000 in 1995) . . 6,651 6,736
Other non-current assets . . . . . . . . . . . 816 830
7,467 7,566
$38,772 $36,679
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals . . . . . . . . $ 8,577 $ 6,741
Current portion of long-term debt . . . . . . - -
Total current liabilities . . . . . . . . . 8,577 6,741
Long-term debt . . . . . . . . . . . . . . . . . 10,458 10,458
Other non-current liabilities . . . . . . . . . . 237 281
Deferred income taxes . . . . . . . . . . . . . . 304 336
19,576 17,816
Shareholders' equity:
Common stock, par value $.50 a share:
Authorized 20,000,000 shares
Issued and outstanding:
1996 - 6,467,483 and
1995 - 6,424,183 . . . . . . . . . . . . 3,234 3,226
Additional paid-in capital . . . . . . . . . . 1,568 1,535
Retained earnings . . . . . . . . . . . . . . 14,251 13,922
Foreign currency translation
adjustment - unrealized . . . . . . . . . . 143 180
19,196 18,863
$38,772 $36,679
<FN>
See notes to consolidated condensed financial statements
* Unaudited
</TABLE>
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<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Three Months
Ended March 31
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . $ 458 $ 430
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . 397 255
Deferred income taxes . . . . . . . . . . . . . (73) 52
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . (67) (33)
Inventory and prepaid expenses . . . . . . . (1,600) (167)
Accounts payable and accrued expenses . . . 745 324
Gain on disposal of equipment . . . . . . . - (18)
Foreign currency transaction loss . . . . . . . 1 (4)
Net cash provided by operating activities. . (139) 839
INVESTING ACTIVITIES
Purchase of property, plant and equipment . . . . . (892) (511)
Proceeds from disposal of equipment . . . . . . . . - 21
Net cash provided by investing activities. . (892) (490)
FINANCING ACTIVITIES
Net proceeds from master credit facility . . . . . . 1,000 -
Exercise of stock options . . . . . . . . . . . . . 41 106
Cash dividends paid . . . . . . . . . . . . . . . . (129) -
Net cash provided by financing activities. . 912 106
Effect of foreign exchange rate changes on cash . . . . 50 122
Increase (decrease) in cash . . . . . . . . . . . . . . (69) 577
Cash at beginning of period . . . . . . . . . . . . . . 497 4,149
Cash at end of period . . . . . . . . . . . . . . . . . $ 428 $ 4,726
<FN>
See notes to consolidated condensed financial statements
</TABLE>
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<PAGE>
TRION, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1996
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, 1995.
The Company adopted FASB 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of, in the first quarter of
1996. The adoption of this accounting standard did not have a material effect
on the results of the period.
Note B - Net Income per Share of Common Stock
Net income per share of common stock is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
periods. The average number of common shares outstanding was 6,462,450 in
1996 and 6,412,147 in 1995. Outstanding stock options are not considered in
computing earnings per share as the effect would not be material.
Note C - 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 products 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):
March 31 December 31
1996 1995
Raw materials . . . . . . . . . . . . . $ 5,769 $ 4,757
Work-in-process and finished goods. . . 4,445 3,998
$10,214 $ 8,755
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.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material Changes in Results of Operations
Consolidated net sales for the quarter ended March 31, 1996 were $14,947,000
compared to $8,504,000 from the same period a year ago, a 76 percent increase
over 1995. This sizable increase was directly attributable to the added
revenues generated by the acquisition of Envirco Corporation ("Envirco") on
August 1, 1995. North America Consumer Products sales declined by 27 percent
as a result of a consumer promotional program offered in 1995 by a major
retail customer which was not repeated in the first quarter of 1996. However,
improvement in sales of traditional Engineered Products did improve during the
period and acted to mitigate the decline. Sales by our consolidated European
operations decreased 9 percent from the same period last year and were
impacted by a 3 percent decline in exchange rates.
Consolidated net income increased to $458,000 during this first quarter of
1996, representing a 7 percent improvement over the $430,000 reported a year
ago. This increase was directly attributable to the higher volume although
product mix and inefficiencies, mainly due to severe winter weather in the
months of January and February causing the loss of five production days,
impacted reported earnings.
The Company's backlog of unshipped customer orders increased to $11,056,000 at
March 31, 1996, a 117 percent increase over last year s $5,088,000 which did
not include Envirco activity, and 19 percent over 1995's year-end backlog of
$9,301,000 which does include the Envirco acquisition.
Cost of products sold as a percentage of sales were 67.9 percent in the first
quarter of 1996 as compared to 64.5 percent in the same period a year ago.
Higher prices for raw materials and generally lower margins on products
manufactured by the Envirco operation account for the majority of the
increase. Also contributing to the higher cost percentage were certain
inefficiencies related to the establishment of work cells, set up of
additional production lines and plant rearrangements, both in Sanford and in
Albuquerque, to handle the increasing volume. These changes are expected to
lower future manufacturing costs. In terms of dollars, 1996 consolidated
gross margin grew to $4,796,000, an increase of $1,777,000 which, again, is
largely attributable to the additional volume contribution from Envirco.
Selling, engineering and administrative consolidated expenses increased during
the first three months of 1996 to $3,802,000 as compared to $2,348,000 in
1995. The primary cause for the increase is attributed to the Envirco
acquisition. However, following a trend noted during last year s first
quarter, operating expenses as a percentage of sales declined 2.2 points to
25.4 percent. This improvement as a percentage of sales reflects the
Company s continuing efforts to monitor and control spending in relation to
the gains made in sales volume.
Interest expense during the first quarter of 1996 was $172,000. This is an
increase of $124,000 over the same period in 1995 and is directly attributable
to the $6,800,000 borrowed to finance the Envirco acquisition.
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Income taxes were $295,000 or 39.2 percent of earnings before tax. This
compares to 1995's reported income tax of $232,000 at a rate of 35.0 percent
of pretax earnings. The primary reason for the increase in the effective tax
rate is the non-deductibility of goodwill amortization expense related to the
Envirco acquisition.
The resulting earnings per share from the first three months of 1996 were
$0.07, on par with the 1995 results.
Material Changes in Financial Condition
The financial condition of the Company remains strong with the current ratio
at 2.8:1 and working capital decreasing slightly to $15,534,000 from the
$15,780,000 at 1995 year-end. This change reflects the Company's increased
investment in capital equipment necessary to maintain the revenue gains
realized and expected in the future. Long-term debt is 54.5 percent of equity
and total shareholders equity has risen to $19,196,000. The Company believes
working capital and current credit agreements will be adequate to meet its
operating and capital requirements during the foreseeable future.
It is a standard and accepted practice used by the Company in the preparation
of the financial statements in conformity with generally accepted accounting
principles that estimates and assumptions are used by management that affect
the amounts reported in the financial statements. Actual results could differ
from those estimates.
<TABLE>
SEGMENT DATA
(Unaudited)
(In thousands)
<CAPTION>
Three Months
Ended March 31
1996 1995*
<S> <C> <C>
Net sales to unaffiliated customers:
North American Operations:
Engineered Products . . . . . . . . . . . . . $11,035 $3,509
Consumer Products . . . . . . . . . . . . . . 2,557 3,506
European Operations . . . . . . . . . . . . . . 1,356 1,489
14,948 8,504
Income (loss) from operations:
North American Operations:
Engineered Products . . . . . . . . . . . . . 1,254 643
Consumer Products . . . . . . . . . . . . . . 173 539
European Operations . . . . . . . . . . . . . . (29) (48)
1,398 1,134
General Corporate:
Other income . . . . . . . . . . . . . . . . . 17 39
Interest (U.S.) . . . . . . . . . . . . . . . . (172) (48)
Other expense . . . . . . . . . . . . . . . . . (490) (463)
(645) (472)
Income before income taxes . . . . . . . . . . . . $ 753 $ 662
<FN>
*Certain amounts in 1995 have been reclassified to conform to 1996
classifications.
</TABLE>
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<PAGE>
There was a $7,526,000 increase in shipments of North American Engineered
Products during the first quarter of 1996 as compared to the same quarter a
year ago. This dramatic improvement was driven by the Envirco acquisition and
augmented by improving residential and packaged products sales within the
Engineered Products segment. Income from operations in the Engineered
Products segment rose $611,000 over last year s comparable period. Management
expectations are for the Engineered Products component to continue to out
perform the Company s other segments.
Consumer Products sales in North America declined $949,000 during the first
three months of 1996 as compared to the same period last year. This drop was
primarily due to the aforementioned major retail promotional program that was
offered in 1995, but not repeated in 1996. Income from 1996 first quarter
operations decreased $366,000 from the same period a year ago due to the drop
in sales volume.
Sales in the European Operations segment declined 9 percent or $133,000.
However, despite these lower sales there was a $19,000 improvement in the
segment reported loss from operations. Going forward, the consolidated
European Operations are expected to generate further savings.
PART II
Item 6(b). Exhibits
The following exhibit is filed herewith:
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.
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 thereto duly authorized.
TRION, INC.
(Registrant)
Date: May 14, 1996 /s/ Steven L. Schneider
Steven L. Schneider
President and Chief
Executive Officer
Date: May 14, 1996 /s/ Calvin J. Monsma
Calvin J. Monsma
Vice President and Chief
Financial Officer
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 428,000
<SECURITIES> 0
<RECEIVABLES> 12,307,000
<ALLOWANCES> 339,000
<INVENTORY> 10,214,000
<CURRENT-ASSETS> 24,111,000
<PP&E> 17,981,000
<DEPRECIATION> 10,787,000
<TOTAL-ASSETS> 38,772,000
<CURRENT-LIABILITIES> 8,577,000
<BONDS> 3,200,000
0
0
<COMMON> 3,234,000
<OTHER-SE> 15,962,000
<TOTAL-LIABILITY-AND-EQUITY> 38,772,000
<SALES> 14,947,000
<TOTAL-REVENUES> 14,947,000
<CGS> 10,151,000
<TOTAL-COSTS> 13,953,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 48,000
<INTEREST-EXPENSE> 172,000
<INCOME-PRETAX> 753,000
<INCOME-TAX> 295,000
<INCOME-CONTINUING> 458,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 458,000
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
