-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oh5f9vsjuJbwrONdaVXzpPD7n/l5JTJmz3+j28+C6KGQXF6c+yD2b9Elkk3uY6BU IhIrUbew2sMmkcg+dzHKvw== 0000950129-98-002182.txt : 19980518 0000950129-98-002182.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950129-98-002182 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANIEL INDUSTRIES INC CENTRAL INDEX KEY: 0000026821 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 741547355 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06098 FILM NUMBER: 98624537 BUSINESS ADDRESS: STREET 1: 9753 PINE LAKE DR CITY: HOUSTON STATE: TX ZIP: 77055 BUSINESS PHONE: 7134676000 MAIL ADDRESS: STREET 1: 9753 PINE LAKE DRIVE CITY: HOUSTON STATE: TX ZIP: 77055 10-Q 1 DANIEL INDUSTRIES, INC. 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 MARCH 31, 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 ------------ (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 May 8, 1998, there were outstanding 17,410,996 shares of Common Stock, $1.25 par value, of the registrant. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DANIEL INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET (in thousands except per share data) (Unaudited)
March 31, December 31, 1998 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents ................................................. $ 7,543 $ 7,563 Receivables, net of reserve of $1,494 and $1,645 .......................... 58,539 60,908 Costs and estimated earnings in excess of billings on uncompleted contracts ............................................ 5,942 6,635 Inventories ............................................................... 54,472 49,688 Deferred taxes on income .................................................. 5,811 5,957 Other ..................................................................... 4,261 4,713 ------------ ------------ Total current assets ................................................ 136,568 135,464 Property, plant and equipment, net ............................................. 63,827 62,990 Intangibles and other assets ................................................... 35,577 35,500 ------------ ------------ Total assets ........................................................ $ 235,972 $ 233,954 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable ............................................................. $ 7,007 $ 7,984 Current maturities of long-term debt ...................................... 7,604 7,602 Accounts payable .......................................................... 21,191 21,441 Accrued liabilities ....................................................... 19,683 21,387 ------------ ------------ Total current liabilities ......................................... 55,485 58,414 Long-term debt ................................................................ 38,019 37,283 Deferred taxes on income ...................................................... 8,016 7,831 ------------ ------------ Total liabilities ................................................. 101,520 103,528 ------------ ------------ 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, 17,366 and 17,321 shares issued .............................................. 21,708 21,651 Capital in excess of par value ............................................ 94,720 94,218 Accumulated other comprehensive income .................................... (4,178) (4,684) Retained earnings ......................................................... 22,202 19,241 ------------ ------------ Total stockholders' equity ........................................ 134,452 130,426 ------------ ------------ Total liabilities and stockholders' equity ........................ $ 235,972 $ 233,954 ============ ============
See accompanying Notes to Consolidated Condensed Financial Statements. 2 3 DANIEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (in thousands except per share data) (Unaudited)
Quarter Ended March 31, ------------------------- 1998 1997 ---------- ---------- Revenues ................................................... $ 67,210 $ 58,907 ---------- ---------- Costs, expenses and other income: Cost of sales ......................................... 41,553 38,111 Selling, engineering and administrative expenses ...... 18,077 17,936 Research and development expenses ..................... 1,143 996 Interest and other expenses ........................... 449 727 ---------- ---------- Total costs, expenses and other income .......... 61,222 57,770 ---------- ---------- Income before income tax expense ........................... 5,988 1,137 Income tax expense ......................................... 2,246 453 ---------- ---------- Net income ................................................. $ 3,742 $ 684 ========== ========== Basic earnings per common share ............................ $ .22 $ .04 ========== ========== Diluted earnings per common share .......................... $ .21 $ .04 ========== ========== Cash dividends per common share ............................ $ .045 $ .045 ========== ========== Average shares outstanding ................................. 17,331 17,081 ========== ========== Average diluted shares outstanding ......................... 18,053 17,279 ========== ==========
DANIEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in thousands) (Unaudited)
Quarter Ended March 31, ------------------------- 1998 1997 ---------- ---------- Net income ................................................. $ 3,742 $ 684 Other comprehensive income, net of tax: Foreign currency translation adjustments ............. 506 (2,316) ---------- ---------- Comprehensive income ....................................... $ 4,248 $ (1,632) ========== ==========
See accompanying Notes to Consolidated Condensed Financial Statements. 3 4 DANIEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Condensed) (in thousands) (Unaudited)
Quarter Ended March 31, -------------------------- 1998 1997 ---------- ---------- Cash flows from operating activities: Net income .................................................. $ 3,742 $ 684 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization ........................ 2,268 2,367 Changes in operating assets and liabilities .......... (3,009) (7,472) ---------- ---------- Net cash provided by (used in) operating activities ............. 3,001 (4,421) ---------- ---------- Cash flows from investing activities: Capital expenditures ........................................ (3,277) (1,819) Proceeds from sales of assets ............................... 657 452 ---------- ---------- Net cash used in investing activities ........................... (2,620) (1,367) ---------- ---------- Cash flows from financing activities: Net borrowings (payments) under notes payable ............... (1,168) 6,584 Net borrowings (payments) on long-term debt ................. 929 (1,876) Cash dividends paid ......................................... (781) (768) Activity under stock option plans ........................... 560 161 ---------- ---------- Net cash provided by (used in) financing activities ............. (460) 4,101 ---------- ---------- Effect of exchange rate changes on cash ......................... 59 (200) ---------- ---------- Decrease in cash and cash equivalents ........................... (20) (1,887) Cash and cash equivalents, beginning of period .................. 7,563 5,423 ---------- ---------- Cash and cash equivalents, end of period ........................ $ 7,543 $ 3,536 ========== ==========
See accompanying Notes to Consolidated Condensed Financial Statements. 4 5 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. Note 2 - Earnings Per Share Effective with its December 31, 1997 financial statements, the Company implemented Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share." SFAS 128 requires the presentation of both basic and diluted earnings per share amounts. 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 quarters ended March 31, 1998 and 1997, average shares outstanding were increased by 722,000 and 198,000, 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 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. Total comprehensive income (loss) for the quarters ended March 31, 1998 and 1997 amounted to approximately $4.2 million and $(1.6) million, respectively. 5 6 Note 4 - Inventories
March 31, December 31, 1998 1997 ------------ ------------ (in thousands) Raw materials ................................................... $ 26,043 $ 24,330 Work in process ................................................. 14,912 13,329 Finished goods .................................................. 20,669 19,097 ------------ ------------ Inventories before LIFO reserve ............................ 61,624 56,756 Less LIFO reserve ............................................... 7,152 7,068 ------------ ------------ Total inventories .......................................... $ 54,472 $ 49,688 ============ ============
Note 5 - Debt Long-term debt includes the following:
March 31, December 31, 1998 1997 ------------ ------------ (in thousands) Term loan from banks (unsecured); 6.77% interest payable monthly; principal payable in quarterly installments of $1,071; matures April 30, 2004 .............. $ 27,857 $ 28,929 Revolving credit facility (unsecured); interest (6.44% at March 31, 1998 and 6.69% at December 31, 1997) payable monthly; matures April 30, 2000 ..................... 12,000 10,000 Term loan from bank (secured); interest at Canadian prime rate (6.50% at March 31, 1998 and 6.00% at December 31, 1997); principal and interest payable monthly; payable through August 31, 2001 .................... 1,233 1,311 Payable to four insurance companies (unsecured); 11.5%; final annual principal installment of $2,857 due December 1, 1998; interest payable semi- annually .................................................... 2,857 2,857 Miscellaneous obligations ....................................... 1,676 1,788 ------------ ------------ Total obligations ..................................... 45,623 44,885 Less portion due within one year ............................... 7,604 7,602 ------------ ------------ Long-term debt ........................................ $ 38,019 $ 37,283 ============ ============
6 7 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. At March 31, 1998, the Company had both committed and uncommitted short-term lines of credit aggregating approximately $38,740,000, which are available for short-term borrowings or issuance of letters of credit. At March 31, 1998 and December 31, 1997, borrowings under these lines were $7,000,000 and $8,000,000, respectively, with approximately $10,900,000 available for short-term borrowings at March 31, 1998. The Company had letters of credit outstanding at March 31, 1998 totaling $12,300,000 under these lines. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Quarter Ended March 31, 1998 vs. Quarter Ended March 31, 1997 Revenues for the quarter ended March 31, 1998 were $67,210,000 compared to $58,907,000 for the same period in 1997. The increase can be attributed to successful integration of businesses acquired in mid-1996, an increase in large pipeline projects requiring slab gate valves, and increased revenues from the sale of differential and ultrasonic metering products. The Company's backlog at March 31, 1998 was $75,938,000, an increase of 5% and 7% from the backlog balance at December 31, 1997 and March 31, 1997, respectively. The gross profit margin for the quarter ended March 31, 1998 increased to 38% of revenues from 35% of revenues in the quarter ended March 31, 1997. The increased margin is primarily attributable to improved margins on the sales of valves and valve actuators due to an increase in gate valve sales, increased throughput, selective price increases, and cost savings initiatives. Selling, engineering and administrative ("SE&A") expenses increased $141,000 to $18,077,000 in the current period when compared to the same quarter of last year. The increase was primarily attributable to increased selling expenses of $212,000. As a percentage of revenues, however, SE&A expenses were 27% in the quarter ended March 31, 1998 compared to 30% in the same period of last year. Research and development expenses increased $147,000 to $1,143,000 in the current period reflecting increased spending on electronic development projects. The favorable variance in interest and other expense was due primarily to the net effect of a gain on the sale of an investment and a payment relating to the settlement of a lawsuit. The effective tax rate for the three months ended March 31, 1998 was 37.5% as compared to 39.8% for the same period in the prior year. The decrease was principally due to foreign losses in the prior year for which no tax benefit was allowed. Liquidity and Capital Resources The primary sources of the Company's liquidity for the three months ended March 31, 1998 were internally generated funds, long-term borrowings, and proceeds from the sale of assets. These funds were used primarily for capital expenditures, reduction of short-term borrowings, and payment of cash dividends. 7 8 Working capital at March 31, 1998 of $81,083,000 reflects an increase of $4,033,000 from the balance at December 31, 1997. The change is primarily due to an increase in inventories. Daniel considers its financial position to be strong with a current ratio at March 31, 1998 of 2.5 to 1.0. Working capital at March 31, 1998 included $60,283,000 in inventory and deferred tax assets, which are not as liquid as other current assets. Capital expenditures for the quarter ended March 31, 1998 were $3,277,000. 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 hardware and software to correctly recognize the change in date from 1999 to 2000. The Company recognizes that the Year 2000 issue creates significant uncertainty and that Year 2000 compliance to safeguard operations and minimize business disruption is a key business obligation. While the Company has a program in progress to ensure that critical business systems, products and services are Year 2000 compliant, the assessment of existing products and services is incomplete. Based on the assessments completed to date, the Company believes that Year 2000 problems can be overcome. Although an estimate of the cost of addressing the issue has not been completed, the Company does not believe that the costs will be material. Costs incurred to become Year 2000 compliant will be treated as period costs and expensed as incurred. 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 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended March 31, 1998. 8 9 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: May 14, 1998 By: /s/ James M. Tidwell ------------ ------------------------------------- Executive Vice President and Chief Financial Officer Date: May 14, 1998 By: /s/ Wilfred M. Krenek ------------ ------------------------------------- Vice President, Controller and Chief Accounting Officer 9 10 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 7,543 0 60,033 1,494 54,472 136,568 63,827 0 235,972 55,485 0 0 0 21,708 112,744 235,972 67,210 67,210 41,553 41,553 19,220 0 449 5,988 2,246 3,742 0 0 0 3,742 .22 .21
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