-----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, RVVVyHBISogUJKvAz8zAAu3fM1G6xy2YyyeDUEOklOHGWtHOiSH6OCNtvZj8CfNi bmCNgejJYDrkEiDOSNwqtQ== 0000034629-97-000004.txt : 19970507 0000034629-97-000004.hdr.sgml : 19970507 ACCESSION NUMBER: 0000034629-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970506 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARR CO CENTRAL INDEX KEY: 0000034629 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 951288401 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04723 FILM NUMBER: 97596611 BUSINESS ADDRESS: STREET 1: 26161 MARGUERITE PARKWAY SUITE CITY: MISSION VIEJO STATE: CA ZIP: 92692 BUSINESS PHONE: 7143480900 MAIL ADDRESS: STREET 2: 26161 MARQUERITE PARKWAY SUITE B CITY: MISSION VIEJO STATE: CA ZIP: 92692 10-Q 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 AND EXCHANGE ACT OF 1934 For the Quarterly Period ended March 29, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-4723 FARR COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 95-1288401 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 2221 Park Place, El Segundo, CA 90245 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (310) 536-6300 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 ( ) Number of shares of common stock outstanding as of close of the period covered by this report: 5,721,464. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PART I - FINANCIAL INFORMATION FARR COMPANY AND SUBSIDIARIES INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 29, 1997 Part I - Financial Information INTRODUCTION CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Balance Sheets - March 29, 1997 and December 28, 1996 Income Statements for the three months ended March 29, 1997 and March 30, 1996 Statements of Cash Flows for the three months ended March 29, 1997 and March 30, 1996 Notes to Condensed Consolidated Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS Part II - Other Information EXHIBITS FARR COMPANY AND SUBSIDIARIES INTRODUCTION TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 29, 1997 The Condensed Consolidated Financial Statements included herein have been prepared by the Company without audit, and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position as of March 29, 1997 and the results of operations for the three months ended March 29, 1997 and March 30, 1996 pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. FARR COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Assets
(Unaudited) (Audited) Mar. 29, 1997 Dec. 28,1996 ------------- ------------ Current Assets: Cash and cash equivalents................................. $ 2,899,000 $ 1,997,000 Accounts receivable, less allowance of $309,000 in 1997 and $297,000 in 1996............................. 20,886,000 20,551,000 Inventories Raw materials........................................ 5,177,000 5,380,000 Work in process...................................... 4,296,000 3,979,000 Finished goods....................................... 3,282,000 3,175,000 ----------- ----------- 12,755,000 12,534,000 Prepaid expenses.......................................... 836,000 790,000 Deferred tax benefit...................................... 1,807,000 1,807,000 ----------- ----------- Total current assets................................ 39,183,000 37,679,000 ----------- ----------- Property, Plant and Equipment at cost Land...................................................... 2,100,000 2,107,000 Buildings and improvements................................ 15,197,000 15,247,000 Machinery and equipment................................... 34,641,000 34,907,000 ----------- ----------- 51,938,000 52,261,000 Less-accumulated depreciation and amortization............ 36,513,000 36,650,000 ----------- ----------- 15,425,000 15,611,000 Other........................................................ 721,000 397,000 ----------- ----------- $ 55,329,000 $ 53,687,000 ============ ============
The accompanying notes are an integral part of these balance sheets. FARR COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Liabilities & Stockholders' Investment
(Unaudited) (Audited) Mar. 29, 1997 Dec. 28,1996 ------------- ------------ Current Liabilities: Notes/overdraft payable to banks.......................... $ 739,000 $ 874,000 Current portion of long-term debt......................... -- 23,000 Accounts payable.......................................... 8,589,000 8,665,000 Accrued liabilities....................................... 7,942,000 7,566,000 Income taxes payable and deferred taxes................... 1,525,000 745,000 ----------- ----------- Total current liabilities.............................. 18,795,000 17,873,000 ----------- ----------- Long-Term Debt, Net of Current Portion....................... 1,000,000 2,068,000 Deferred Income Taxes........................................ 2,350,000 2,350,000 Other Non-current Liabilities................................ 468,000 186,000 Commitments and Contingencies................................ -- -- Stockholders' Investment: Common stock, $.10 par value--Authorized 10,000,000 shares Outstanding--5,721,464 shares at March 29, 1997 and 5,707,404 shares at December 28, 1996................. 555,000 544,000 Additional paid-in capital................................ 11,670,000 11,603,000 Cumulative translation adjustments........................ (1,478,000) (1,206,000) Retained earnings: Balance beginning of year.............................. 20,269,000 14,379,000 Net income for the period.............................. 1,700,000 5,890,000 ----------- ----------- Balance at end of period............................... 21,969,000 20,269,000 ----------- ----------- Total stockholders' investment...................... 32,716,000 31,210,000 ----------- ----------- $ 55,329,000 $ 53,687,000 ============ ============
The accompanying notes are an integral part of these balance sheets. ================================================================================ FARR COMPANY AND SUBSIDIARIES ================================================================================ CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) Three Months Ended March 29, 1997 March 30, 1996 -------------- -------------- Net Sales...................................... $ 30,341,000 $ 31,079,000 Cost of Sales.................................. 22,450,000 23,925,000 ----------- ----------- Gross Margin................................... 7,891,000 7,154,000 Selling, general and administrative expense.. 5,118,000 4,916,000 Interest expense............................. 75,000 247,000 ------------ ----------- Total Expenses................................. 5,193,000 5,163,000 ------------ ----------- Income Before Income Taxes..................... 2,698,000 1,991,000 Income Taxes................................... 998,000 813,000 ------------ ----------- Net Income..................................... $ 1,700,000 $ 1,178,000 ============ ============ Earnings per Common Share * ................... $ 0.30 $ 0.21 ============ =========== * Based upon 5,619,750 and 5,476,564 average shares outstanding at March 29, 1997 and March 30, 1996, respectively. The accompanying notes are an integral part of these statements. FARR COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Cash Provided by ( Used in ) : Three Months Ended Mar. 29, 1997 Mar. 30, 1996 ------------- ------------- Operating Activities: Net Income..................................................... $ 1,700,000 $ 1,178,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................... 579,000 638,000 Provision for loss on accounts receivable................... 41,000 37,000 Benefit retirement trust.................................... 282,000 -- Change in deferred income taxes............................. -- 331,000 Net loss on sale/retirement of P,P & E...................... 4,000 -- Decrease (increase) in inventories.......................... (338,000) 1,159,000 Increase in receivables and prepaid expenses................ (539,000) (772,000) Increase (decrease) in accounts payable & accrued expenses.. 277,000 (953,000) Net change in current income taxes payable.................. 803,000 292,000 Exchange gain (loss)........................................ (29,000) 1,000 ----------- ----------- Net cash provided by operating activities.................. 2,780,000 1,911,000 ----------- ----------- Investing Activities: Purchases of property, plant and equipment..................... (473,000) (143,000) Purchase of investments, benefits trust........................ (282,000) -- ----------- ----------- Net cash used in investing activities...................... (755,000) (143,000) ----------- ----------- Financing Activities: Proceeds from revolving line of credit, and long-term borrowings...................................... -- 8,200,000 Principal payments on revolving line of credit and long-term debt and overdrafts............................. (1,168,000) (9,900,000) Principal payments received on notes........................... 2,000 1,000 Proceeds from sale of stock, stock option plans................ 78,000 13,000 ----------- ----------- Net cash used in financing activities....................... (1,088,000) (1,686,000) ----------- ----------- Effect of Exchange Rate Changes on Cash........................ (35,000) (1,000) ----------- ----------- Increase in Cash and Cash Equivalents.......................... 902,000 81,000 Cash and Cash Equivalents at Beginning of Period............... 1,997,000 812,000 ----------- ----------- Cash and Cash Equivalents at End of Period..................... $ 2,899,000 $ 893,000 =========== ===========
The accompanying notes are an integral part of these statements. FARR COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 29, 1997 (UNAUDITED) 1. There have been no significant changes in the Company's policies, practices or position from that described in the notes to the Consolidated Financial Statements included in the 1996 Annual Report to Stockholders which was incorporated by reference in the Annual Report on Form 10-K for the year ended December 28, 1996. MANAGEMENT'S DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Financial Condition - ------------------- As of March 29, 1997, working capital was $20,388,000 compared to $19,806,000 at the end of 1996, representing a $582,000 increase in total working capital for the first three months of 1997. The primary components of the change in working capital during the first quarter were increases in cash ($902,000), accounts receivable ($335,000) and inventories ($221,000) partially offset by an increase in accounts payable, taxes and accrued liabilities ($1,080,000). The increase in accounts payable and accrued liabilities primarily reflects an increase in income taxes payable during the quarter. Total long-term debt was decreased $1,091,000, or 53 percent during the first quarter. Borrowing availability under the Company's domestic revolving credit facility at the end of the first quarter was $9,000,000. Capital expenditures of $473,000 during the first quarter increased over the same period last year by $330,000. Capital expenditures are anticipated to increase over 1996 levels in order to meet increased plant capacity needs, upgrade machinery and equipment and to refurbish the Company's corporate headquarters. Current debt maturities and operating capital requirements of the Company are anticipated to be provided through cash flows generated from operating activities and borrowing availability under the Company's domestic revolving credit facility. Cash Flow - --------- Cash flow from operating activities during the first quarter totaled $2,780,000 compared to $1,911,000 for the same period a year ago. The increase in cash flow from operating activities was related to increased income and a decrease in working capital requirements net of changes in cash compared to the same period a year ago. RESULTS OF OPERATIONS 1997 first quarter sales of $30,341,000 were down $738,000 or 2 percent from 1996 first quarter sales of $31,079,000. The decline in sales volume was related to lower sales of gas turbine filter house products that were near record levels in the first quarter of 1996. Foreign subsidiary sales were up 19 percent during the first quarter due to railroad and heating, ventilating and air conditioning product sales. Record first quarter net income totaled $1,700,000, up $522,000 or 44 percent from $1,178,000 in the first quarter last year. Improved gross margins, operating efficiencies and lower interest expense were the primary factors driving the improved net income results. Foreign consolidated subsidiaries net income totaled approximately 21 percent of the consolidated net income, up from 18 percent during last year's first quarter. Gross margin as a percent of sales during the first quarter increased to 26 percent, up 3 percent from 23 percent in the first quarter last year. The increase in gross margin percentage was related to improved operating efficiencies and a better sales mix of products with higher margins. In the first quarter of 1996, gross margins were unfavorably impacted by poor manufacturing efficiencies related to gas turbine filter house products. Selling, general and administrative expenses as a percentage of sales during the first quarter of 1997 and 1996 were 17 and 16 percent, respectively. First quarter spending totaled $5,118,000 compared to $4,916,000 for the same period last year, reflecting modest increases in marketing and selling expenses. Interest expense declined to $75,000 during the first quarter compared to $247,000 last year. The continued decrease in interest expense is related to the decrease in the Company's long-term debt. The effective tax rate during the first quarter dropped to 37 percent from 40.8 percent last year due to the utilization of foreign tax credits. On March 3, 1997, the FASB released Statement of Financial Accounting Standards No. 128, "Earnings per Share", (SFAS 128), and Statement of Financial Accounting Standards No. 129, "Disclosure of Information About Capital Structure", (SFAS 129). The new statements are effective for fiscal years ending after December 15, 1997. When adopted, SFAS 128 will require restatement of the Company's 1996 and prior years' earnings per share information. Under the provisions of SFAS 128, the Company's basic earnings per share for 1996 and 1995 would be $1.08 and $.57, respectively. SFAS 129 requires additional disclosures regarding the Company's capital structure. Adoption of these standards will not have a material effect on the Company's financial position or results of operations. FARR COMPANY AND SUBSIDIARIES List of Exhibits Item 6.a. Exhibits The following are being filed with this Quarterly Report on Form 10-Q. - Exhibit 11 Earnings per share calculation. (unaudited). - Exhibit 27 Financial Data Schedule. ------------------- Copies of Exhibits are available, on prepayment of 15 cents per page, by writing to the Secretary of the Company at the address set forth on the cover page of this Form 10-Q. PART II - OTHER INFORMATION - CONTINUED 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 hereunto duly authorized. FARR COMPANY --------------------------------- (Registrant) May 6, 1997 /s/ Kenneth W. Gerstner --------------------------------- Kenneth W. Gerstner Senior Vice President Chief Financial Officer EX-11 2 EPS CALCULATIONS 1ST QTR 1997 Exhibit 11 FARR COMPANY AND SUBSIDIARIES EARNINGS PER SHARE CALCULATIONS (Unaudited) As a result of the 3 for 2 stock split to be distributed on March 28, 1997, per share amounts for 1996 have been restated to reflect the weighted average number of shares of common stock outstanding, increased by shares issued for the stock split. The per share amounts in 1996 are calculated as though the stock split occurred on the first day of the year. March 29, 1997 March 30, 1996 -------------- -------------- BASIC EARNINGS PER SHARE CALCULATION - ------------------------------------ Earnings: Net Income................................ $1,700,000 $1,178,000 ========== ========== Shares: Weighted average number of common shares outstanding...................... 5,466,879 5,437,732 ========== ========== Net Income Per Common Share.................. $ 0.31 $ 0.21 ========== ========== PRIMARY EARNINGS PER SHARE CALCULATION - -------------------------------------- Earnings: Net Income................................. $1,700,000 $1,178,000 ========== ========== Shares: Weighted average number of common shares outstanding....................... 5,466,879 5,437,732 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options................. 152,871 38,832 ---------- --------- Weighted average number of common shares and dilutive common share equivalents outstanding.................. 5,619,750 5,476,564 ========== ========== Net Income Per Common Share.................... $ 0.30 $ 0.21 ========== ========== EX-27 3 ART. 5 FDS FOR FIRST QUARTER 10-Q 1997
5 3-MOS JAN-03-1998 DEC-29-1996 MAR-29-1997 2,899,000 0 20,886,000 309,000 12,755,000 39,183,000 51,938,000 36,513,000 55,329,000 18,795,000 0 0 0 555,000 32,161,000 55,329,000 30,341,000 30,341,000 22,450,000 22,450,000 5,118,000 0 75,000 2,698,000 998,000 1,700,000 0 0 0 1,700,000 $0.30 $0.30
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