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, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
_____ EXCHANGE ACT OF 1934
For the transition period from to
Commission File 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 9, 1997.
7,005,097 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
1997 1996
(Restated)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $13,572 $16,869
Cost and expenses:
Cost of products sold . . . . . . . . . . . 9,175 11,408
Selling, administration
and engineering expenses . . . . . . . . . 4,110 4,255
Interest . . . . . . . . . . . . . . . . . . 224 204
Amortization . . . . . . . . . . . . . . . . 86 86
Other expense (income), net . . . . . . . . (33) (21)
13,562 15,932
Income before income taxes . . . . . . . . . . 10 937
Income tax expense . . . . . . . . . . . . . . 4 363
Net income for the period . . . . . . . . . . . $ 6 $ 574
Net income per common share . . . . . . . . . . $ 0.00 $ 0.08
Cash dividends declared per common share . . . $ .02 $ .02
See notes to consolidated condensed financial statements
</TABLE>
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<TABLE>
TRION, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
<CAPTION>
ASSETS
March 31 December 31
1997* 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . $ 2,057 $ 2,073
Trade accounts receivable, less allowance
for doubtful accounts (1997 and 1996 -
$448,000) . . . . . . . . . . . . . . . . . 10,404 11,650
Inventories . . . . . . . . . . . . . . . . . 9,972 9,329
Prepaid expenses and other current assets . . 885 882
Deferred current income taxes . . . . . . . . 94 94
Total current assets . . . . . . . . . . . 23,412 24,028
PROPERTY, PLANT AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . 78 78
Building . . . . . . . . . . . . . . . . . . . 5,456 5,467
Machinery and equipment . . . . . . . . . . . 18,110 16,928
Allowance for depreciation . . . . . . . . . . (13,629) (13,250)
10,015 9,223
OTHER ASSETS
Goodwill less accumulated amortization:
($573,000 in 1997 and $487,000 in 1996) . . 6,307 6,393
Deferred income taxes . . . . . . . . . . . . 338 338
Other non-current assets . . . . . . . . . . . 791 814
7,436 7,545
$40,863 $40,796
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals . . . . . . . . $ 7,577 $ 7,182
Current portion of long-term debt . . . . . . 2,664 2,664
Total current liabilities . . . . . . . . . 10,241 9,846
LONG-TERM DEBT . . . . . . . . . . . . . . . . . 9,857 9,908
20,098 19,754
SHAREHOLDERS' EQUITY
Common stock, par value $0.50 a share:
Authorized 20,000,000 shares
Issued and outstanding:
1997 - 6,997,519 and
1996 - 6,997,519 . . . . . . . . . . . . 3,499 3,499
Additional paid-in capital . . . . . . . . . . 1,017 1,017
Retained earnings . . . . . . . . . . . . . . 16,059 16,193
Foreign currency translation . . . . . . . . . 190 333
20,765 21,042
$40,863 $40,796
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
1997 1996
(Restated)
<S> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . $ 6 $ 574
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . 420 356
Amortization . . . . . . . . . . . . . . . . . 86 86
Deferred income taxes . . . . . . . . . . . . . - (73)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . 1,246 (217)
Inventory and prepaid expenses . . . . . . . (1,055) (1,722)
Accounts payable and accrued expenses . . . 395 965
Foreign currency transaction loss . . . . . . . 30 1
Net cash provided (used) by
operating activities . . . . . . . . . . . 1,128 (30)
INVESTING ACTIVITIES
Purchases of property, plant and equipment . . . . . (1,233) (968)
Proceeds from disposal of equipment . . . . . . . . - -
Net cash used by investing activities . . . (1,233) (968)
FINANCING ACTIVITIES
Net proceeds from master credit facility . . . . . . 1,200 1,000
Principal payments on long-term debt . . . . . . . . (1,250) (33)
Stock issued . . . . . . . . . . . . . . . . . . . . - 41
Cash dividends paid . . . . . . . . . . . . . . . . (140) (129)
Net cash provided (used) by
financing activities . . . . . . . . . . . (190) 879
Effect of foreign exchange rate changes on cash . . . . 279 50
Increase (decrease) in cash . . . . . . . . . . . . . . (16) (69)
Cash at beginning of period . . . . . . . . . . . . . . 2,073 497
Cash at end of period . . . . . . . . . . . . . . . . . $ 2,057 $ 428
See notes to consolidated condensed financial statements
</TABLE>
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TRION, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1997
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, 1996.
Certain amounts in the consolidated condensed financial statements for the
period ended March 31, 1996 have been reclassified to conform with the
presentations and classifications consistent with the unaudited consolidated
condensed financial statements for the three month period ended March 31,
1997.
On August 30, 1996, the Company issued 500,000 shares of common stock at a par
value of $0.50 per share in exchange for 100% of the common stock outstanding
of Herrmidifier Company, Inc. ("Herrmidifier"). The purchase price, as
determined by the Stock Purchase Agreement dated July 31, 1996, totaled
approximately $2,952,000. The transaction was accounted for under the pooling
of interests method of accounting. All prior period financial statements and
financial information have been restated to reflect the combination.
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.
Note B - Net Income per Share of Common Stock
The pro forma weighted average shares outstanding for the period ended March
31, 1996 gives effect to the issuance of 500,000 shares of the Company's
common stock as the purchase price of Herrmidifier. These shares are included
in the computation of pro forma weighted average shares outstanding as if they
had been issued as of January 1, 1996.
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 6,997,519 in
1997 and 6,962,450 in 1996. 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):
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March 31 December 31
1997 1996
Raw materials . . . . . . . . . . . . . $ 5,271 $ 4,939
Work-in-process and finished goods. . . 4,701 4,390
$ 9,972 $ 9,329
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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis incorporates the performance of
Herrmidifier. The acquisition was accounted for as a pooling of interests,
whereby the current and prior period statements of financial condition and
results of operations are included. Accordingly, the prior periods presented
and discussed have been restated.
Results of Operations
<TABLE>
SEGMENT DATA
(Unaudited)
(In thousands)
<CAPTION>
Three Months Ended
March 31,
1997 1996*
(Restated)
<S> <C> <C>
Net sales to unaffiliated customers:
North American Operations:
Engineered Products . . . . . . $10,324 $12,802
Consumer Products . . . . . . . 2,029 2,711
European Operations . . . . . . . 1,219 1,356
13,572 16,869
Income (loss) from operations:
North American Operations:
Engineered Products . . . . . . 879 1,443
Consumer Products . . . . . . . - 196
European Operations . . . . . . . (148) (29)
731 1,610
General Corporate:
Other income . . . . . . . . . . 33 21
Interest (U.S.) . . . . . . . . . (224) (204)
Other expense . . . . . . . . . . (530) (490)
(721) (673)
Income before income taxes . . . . . $ 10 $ 937
* Certain amounts in 1996 have been reclassified to conform to 1997
classifications.
</TABLE>
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Consolidated net sales for the quarter ended March 31, 1997 were $13,572,000
compared to $16,869,000 from the same period a year ago, a 20 percent decrease
from 1996. This decrease was primarily attributable to the lower level of
revenues generated by the Company's subsidiary Envirco Corporation ("Envirco")
during the first quarter of 1997 as compared to the same period in 1996. This
reduction was due to the significant decrease in capital spending by the
semiconductor and microelectronics industry, a primary market served by
Envirco. Most recently, the Company has seen an improvement in the level of
orders received and the order backlog related to this market.
Additionally, sales in the Company's North American Consumer Products segment
were adversely impacted by the delayed shipment of a new line of consumer
appliance products recently introduced. This delay was primarily due to
supplier delivery difficulties. These problems have since been resolved and
production and shipments are now back on schedule.
Sales in the Company's European Operations segment declined slightly due to
lower shipments into the eastern European region. Income from operations was
adversely impacted by the lower sales volume and changes in product mix.
The Company's backlog of unshipped customer orders increased to $9,217,000 at
March 31, 1997, a 33 percent increase over December 31, 1996 year-end backlog
of $6,912,000. All major segments showed improved backlog compared to the
prior year-end levels. Order backlog on March 31, 1996 was $11,319,000. The
decline as compared to the current levels was due primarily to the
aforementioned slowdown in capital spending in the semiconductor and
microelectronics industry which impacted activity at Envirco.
On a consolidated basis, the cost of products sold as a percentage of sales
was 67.6 percent in both the first quarter of 1997 and in the first quarter of
1996. Reduced sales volumes during the current period generally caused
costs to be at a higher rate due to lower levels of overhead absorption. In
the prior year, higher costs were incurred as a result of inefficiencies
related to manufacturing process changes in Sanford and Albuquerque
facilities. The Company has not incurred any significant price increases for
raw materials as compared to those experienced a year ago. Consolidated gross
profit for the 1997 period was $4,397,000 as compared to $5,461,000 in the
1996 period, the difference being attributable to the lower sales volume.
Consolidated selling, administration and engineering expenses decreased during
the first three months of 1997 to $4,110,000 as compared to $4,255,000 in
1996. The primary cause for the decrease was lower spending for variable
selling and promotion expenses related to the lower reported sales volume.
Interest expense during the first quarter of 1997 was $224,000 as compared to
$204,000 the year before due to additional borrowings.
Income taxes for the first quarter of 1997 were $4,000 as compared to $363,000
in 1996.
Consolidated net income was $6,000 during the first quarter of 1997 as
compared to $574,000 reported a year ago. This decrease was directly
attributable to the lower sales volumes posted by the Company as described
above.
The resulting earnings per share from the first three months of 1997 were
$0.00 as compared to the $0.08 recorded in 1996.
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Liquidity and Sources of Capital
The financial condition of the Company remains strong with the current ratio
at 2.3:1. Working capital decreased to $13,171,000 from the $14,182,000 at
1996 year-end. This change is primarily the result of the Company's continued
investment in tooling and capital equipment necessary to bring new products to
market and improve and streamline production processes. Long-term debt is 47.5
percent of equity and total shareholders' equity is $20,765,000. The Company
believes working capital and current credit arrangements will be adequate to
meet its operating and capital requirements during the foreseeable future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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 thereunto duly authorized.
TRION, INC.
(Registrant)
Date: May 15, 1997 /s/ Steven L. Schneider
Steven L. Schneider
President and Chief
Executive Officer
Date: May 15, 1997 /s/ Calvin J. Monsma
Calvin J. Monsma
Vice President and Chief
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,057,000
<SECURITIES> 0
<RECEIVABLES> 10,852,000
<ALLOWANCES> 448,000
<INVENTORY> 9,972,000
<CURRENT-ASSETS> 23,412,000
<PP&E> 23,644,000
<DEPRECIATION> 13,629,000
<TOTAL-ASSETS> 40,863,000
<CURRENT-LIABILITIES> 10,241,000
<BONDS> 3,200,000
0
0
<COMMON> 3,499,000
<OTHER-SE> 17,266,000
<TOTAL-LIABILITY-AND-EQUITY> 40,863,000
<SALES> 13,572,000
<TOTAL-REVENUES> 13,572,000
<CGS> 9,175,000
<TOTAL-COSTS> 13,562,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 224,000
<INCOME-PRETAX> 10,000
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 6,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,000
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
