-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, K7J3Oy9jGm0y3L3NL9EDcmjOtLBrpa6y0u4OF8KbtFyt+gRnMGc/n/HP7+5aDz7p g4ef11kq3q6wCx27QdEZiA== 0000892569-94-000387.txt : 19941130 0000892569-94-000387.hdr.sgml : 19941130 ACCESSION NUMBER: 0000892569-94-000387 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941029 FILED AS OF DATE: 19941123 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FURON CO CENTRAL INDEX KEY: 0000037755 STANDARD INDUSTRIAL CLASSIFICATION: 3050 IRS NUMBER: 951947155 STATE OF INCORPORATION: CA FISCAL YEAR END: 0203 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08088 FILM NUMBER: 94561689 BUSINESS ADDRESS: STREET 1: 29982 IVY GLENN DR CITY: LAGUNA NIGUEL STATE: CA ZIP: 92677 BUSINESS PHONE: 7148315350 FORMER COMPANY: FORMER CONFORMED NAME: FLUOROCARBON CO DATE OF NAME CHANGE: 19900322 10-Q 1 FURON COMPANY -- FORM 10-Q ENDING 10/29/94 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED OCTOBER 29, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-8088 FURON COMPANY (Exact name of registrant as specified in its charter) California 95-1947155 - - - ------------------------------------ ---------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 29982 Ivy Glenn Drive Laguna Niguel, CA 92677 - - - ------------------------------------- ---------------------- (Address of principal executive office (Zip Code)
Registrant's telephone number, including area code: (714) 831-5350 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 October 29, 1994: 8,710,415 2 FURON COMPANY INDEX PART I
PAGE NO. -------- Financial Statements Condensed Consolidated Balance Sheets October 29, 1994 and January 29, 1994 3-4 Condensed Consolidated Statements of Income Three and Nine Months Ended October 29, 1994 and October 30, 1993 5 Condensed Consolidated Statements of Cash Flows Nine Months Ended October 29, 1994 and October 30, 1993 6 Notes to Condensed Consolidated Financial Statements 7-9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12
PART II Other Information 13-14 Exhibits 15-16
3 FURON COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Unaudited)
October 29, January 29, In thousands 1994 1994 - - - ------------------------------------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 12,711 $ 18,483 Accounts receivable, less allowance for doubtful accounts of $746 at October 29, 1994 and $632 at January 29, 1994. 46,463 38,085 Inventories 29,857 26,279 Deferred tax benefit 9,707 9,154 Prepaid expenses and other assets 6,020 5,836 -------------- ------------- Total current assets 104,758 97,837 Property, plant & equipment, at cost: Land 457 448 Buildings and leasehold improvements 13,747 13,048 Machinery and equipment 95,556 87,599 -------------- ------------- 109,760 101,095 Less accumulated depreciation and amortization (59,263) (52,664) --------------- -------------- Net property, plant and equipment 50,497 48,431 Intangible assets at cost less accumulated amortization of $22,880 at October 29, 1994 and $20,308 at January 29, 1994. 18,820 21,359 Other assets 7,901 7,597 -------------- ------------- Total assets $ 181,976 $ 175,224 ============== =============
See accompanying notes. 3 4 FURON COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
October 29, January 29, In thousands, except share amounts 1994 1994 - - - ------------------------------------------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 18,681 $ 15,465 Salaries, wages and related benefits payable 11,961 10,073 Current portion of long-term debt 7,504 6,013 Income taxes payable 2,743 4,474 Other current liabilities 9,214 10,173 ------------- ------------- Total current liabilities 50,103 46,198 Long-term debt due after one year 14,753 20,750 Other long-term liabilities 17,845 18,045 Deferred taxes 9,407 9,416 Commitments and contingencies Stockholders' equity Capital stock: Preferred stock without par value, 2,000,000 shares authorized, none issued or outstanding - - Common stock without par value, 15,000,000 shares authorized, 8,710,415 shares issued and outstanding at October 29, 1994 and 8,625,706 at January 29, 1994. 36,160 35,320 Foreign currency translation adjustment 655 (1,034) Unearned ESOP shares (2,789) (2,688) Unearned compensation (956) (709) Retained earnings 56,798 49,926 ------------- ------------- Total stockholders' equity 89,868 80,815 ------------- ------------- Total liabilities and stockholders' equity $ 181,976 $ 175,224 ============= =============
See accompanying notes. 4 5 FURON COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Nine months ended ------------------------------ ------------------------------- October 29, October 30, October 29, October 30, In thousands, except per share amounts 1994 1993 1994 1993 - - - ------------------------------------------------------------------------------------------------------------------- Net sales $ 81,071 $ 70,034 $ 231,158 $ 217,418 Cost of sales 55,979 49,825 161,526 156,453 ------------- ----------- ------------- -------------- Gross profit 25,092 20,209 69,632 60,965 Selling, general and administrative expenses 20,056 16,500 56,310 50,674 Other (income), net (672) (698) (1,718) (1,568) Interest expense 589 784 1,855 2,594 ------------- ---------- -------------- ------------- Income before income taxes 5,119 3,623 13,185 9,265 Provision for income taxes 1,762 1,403 4,747 3,706 ------------- ----------- ------------- ------------- Net income $ 3,357 $ 2,220 $ 8,438 $ 5,559 ============= =========== ============= ============= Net income per share $ .37 $ .25 $ .94 $ .63 ============= =========== ============= =============
See accompanying notes. 5 6 FURON COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended --------------------------------- October 29, October 30, In thousands 1994 1993 - - - -------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 8,438 $ 5,559 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 6,745 6,352 Amortization 2,905 2,670 Provision for losses on accounts receivable 252 324 Increase (decrease) in deferred income taxes (561) 975 (Gain) loss on sale of assets (24) 113 Working capital changes: Accounts receivable (8,630) (2,711) Inventories (3,578) (164) Accounts payable and accrued liabilities 5,105 2,060 Income taxes payable (1,732) 1,294 Other current assets and liabilities, net (1,165) (1,904) Changes in other long-term operating assets and liabilities (1,043) (2,820) ------------- ------------ Net cash provided by operating activities 6,712 11,748 INVESTING ACTIVITIES Purchases of property, plant and equipment (8,476) (5,406) Proceeds from sale of equipment 160 603 Proceeds from sale of operations - 6,022 Proceeds from notes receivable 961 1,789 Increase in notes receivable (244) (630) ------------- ------------ Net cash (used) provided by investing activities (7,599) 2,378 FINANCING ACTIVITIES Proceeds from long-term debt 7 27 Principal payments on long-term debt (4,514) (7,105) Proceeds from issuance of common stock 130 347 Increase in loan to ESOP (486) - Principal payments received from loan to ESOP 384 384 Dividends paid on common stock (1,564) (1,551) ------------- ------------ Net cash used by financing activities (6,043) (7,898) Effect of exchange rate changes on cash 1,158 (1,581) ------------- ------------ Increase (decrease) in cash and cash equivalents (5,772) 4,647 ------------- ------------ Cash and cash equivalents at beginning of period 18,483 9,447 ------------- ------------ Cash and cash equivalents at end of period $ 12,711 $ 14,094 ============= ============
See accompanying notes. 6 7 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 29, 1994 (Unaudited) 1. GENERAL The accompanying unaudited consolidated financial statements have been condensed in certain respects and should therefore, be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report to Shareholders on Form 10-K for the fiscal year ended January 29, 1994. Certain reclassifications have been made to prior year amounts in order to be consistent with the current year presentation. In the opinion of the Company, the accompanying unaudited, condensed consolidated financial statements contain all adjustments necessary (consisting only of normal recurring adjustments) to present fairly, the financial position of the Company as of October 29, 1994, results of operations for the three and nine months ended October 29, 1994 and October 30, 1993 and cash flows for the nine months ended October 29, 1994 and October 30, 1993. The results of its operations for the nine months ended October 29, 1994 are not necessarily indicative of the results to be expected for the full year. Income taxes paid for the nine months ended October 29, 1994 and October 30, 1993 were $6,700,000 and $1,900,000, respectively. 2. INVENTORIES Substantially all inventories are valued at the lower of cost (first-in, first out) or market, and are summarized as follows:
October 29, January 29, In thousands 1994 1994 ------------------------------------------------------------------------------------------------------ Raw materials and purchased parts $ 12,562 $ 11,333 Work-in-process 8,672 6,865 Finished goods 8,623 8,081 ------------ ------------ $ 29,857 $ 26,279 ============ ============
3. INTANGIBLE ASSETS Intangible assets acquired in business combinations are summarized as follows:
October 29, January 29, In thousands 1994 1994 ------------------------------------------------------------------------------------------------------ Goodwill $ 321 $ 351 Other intangible assets 18,499 21,008 ------------ ------------ $ 18,820 $ 21,359 ============ ============
7 8 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 29, 1994 (Unaudited) 4. LONG-TERM DEBT Long-term debt is summarized as follows:
October 29, January 29, In thousands 1994 1994 ------------------------------------------------------------------------------------------------------ Loans under bank credit agreements due through fiscal 1998 $ 22,250 $ 26,750 Other 7 13 ------------ ------------ Total long-term debt 22,257 26,763 Less current portion (7,504) (6,013) ------------ ------------ Due after one year $ 14,753 $ 20,750 ============ ============
At October 29, 1994, the weighted average interest rate on the loans under bank credit agreements was 9.3%. On August 29, 1988, the Company entered into an 8-year Interest Rate Swap agreement. The notional amount of the swap totaled $16 million at October 29, 1994. The swap agreement effectively changes the Company's interest rate exposure on the majority of its borrowings to a fixed interest rate of 9.938% plus a .75% spread on the notional portion of the facility. Interest paid for the nine months ended October 29, 1994 and October 30, 1993, was $1,887,000 and $2,695,000, respectively. 5. STOCKHOLDERS' EQUITY During June 1994, the Company contributed $562,000 to the Employee Stock Ownership Plan (ESOP) for the plan year ended April 30, 1994. Of this amount $384,000 served to reduce loans previously made to the plan. In addition, the Company advanced an additional $486,000 to the ESOP which has been presented as unearned ESOP shares in the accompanying condensed consolidated balance sheets. The ESOP used the funds to acquire 30,000 shares of the Company's common stock at fair market value from a Director of the Company. Excluded from the Statement of Cash Flows for the nine months ended October 29, 1994 and October 30, 1993, are noncash transactions that related to the issuance of restricted shares. These transactions resulted in increases to common stock and unearned compensation of $711,000 and $324,000, respectively, which is being amortized to expense over the shares' five year vesting periods. 8 9 6. CONTINGENCIES At October 29, 1994, the Company had approximately $1,063,000 of foreign currency hedge contracts outstanding consisting of forward contracts. The contracts reflect the selective hedging of the Belgium Franc with varying maturities up to six months. Net unrealized losses from hedging activities totaled $59,000 at October 29, 1994. At October 29, 1994, the Company is obligated under irrevocable letters of credit totaling $3,259,000. The Company is currently involved in litigation arising in the normal course of business. Management of the Company is of the opinion that such litigation will not have a material effect on the Company's consolidated financial position or results of operations. 9 10 FURON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales for the three and nine months ended October 29, 1994 increased 15.8% and 6.3% respectively, from the same periods in the prior year. When removing the effect of the businesses sold or to be divested, sales from continuing operations for the three and nine months ended October 29, 1994 increased 17.3% and 11.8%, respectively, as compared to the prior year. Sales were particularly strong in the chemical processing, semiconductor and industrial equipment markets, however, the Company continued to experience increased demand from most markets served. This sustained improvement also includes encouraging results stemming from Europe's continuing economic recovery, which were further enhanced by favorable foreign currency rates. The gross profit percentage for the three month period has improved from 28.9% to 31.0% and has improved from 28.0% to 30.1% for the nine months ended October 29, 1994 as compared to the same periods last year. When removing the effect of the businesses sold or identified for divestiture, gross profit margins from continuing operations increased from 29.5% to 31.5% and from 29.1% to 30.7% for the three and nine months ended October 30, 1993 and October 29, 1994, respectively. The higher volume of sales and the associated absorption of fixed overhead accounted for most of the improvement in gross profit percentage. Operating expenses increased $3.6 and $5.6 million, respectively, for three and nine months ended October 29, 1994 as compared to the same periods of the prior year. Selling expense increased, reflecting the Company's efforts to improve its customer and market focus, additional marketing personnel and increased selling expenses on the higher volume of sales. Major factors in the increase in general and administrative expenses are higher professional fees incurred in connection with various consulting projects, and charges associated with the implementation of the new operating strategy. Product development expenses also increased reflecting increased Research and Development activity. Interest expense for the three and nine months ended October 29, 1994 decreased by 25% and 28%, respectively, as compared with the same periods of the prior year. Amounts owing under the Company's bank credit facility decreased by approximately $5.8 million from October 30, 1993. Income before taxes of $5.1 million for the quarter ended October 29, 1994 represented a 41% improvement over the third quarter of the prior year. Year-to-date income before taxes increased from $9.3 million to $13.2 million or 42%. This was primarily the result of higher sales volume, further improved by lower cost of sales and interest expense, as noted above. Income before taxes also includes lower than expected group insurance expenses arising from a sustained trend of lower claims experience. The impact is reflected in both cost of goods sold and selling, general and administrative expenses. 10 11 FURON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) During January 1992, the Company identified certain businesses not meeting the long-term strategy of the Company. Consistent with that plan, the following table presents the Company's results of continuing operations and operations sold or to be divested during the third quarter of the current and prior year:
Three months ended ------------------------------------------------------------------------------------- October 29, 1994 October 30, 1993 --------------------------------------- ------------------------------------------ Continuing Divestiture Continuing Divestiture (in $000's) Operations Operations Total Operations Operations Total - - - ----------- --------------------------------------- ------------------------------------------ Net sales $78,741 $2,330 $81,071 $67,147 $2,887 $70,034 Cost of sales 53,970 2,009 55,979 47,346 2,479 49,825 ------- ------ ------- ------- ------ ------- Gross profit 24,771 321 25,092 19,801 408 20,209 Selling, general and administrative expenses 19,842 214 20,056 16,139 361 16,500 Other expense (income), net (779) 107 (672) (744) 46 (698) Interest expense 589 0 589 783 1 784 ------- ------ ------- ------- ------ ------- Income before income taxes $ 5,119 $ - $ 5,119 $ 3,623 $ - $ 3,623 ======= ====== ======= ======= ====== =======
Within divestiture operations, the financial results for the businesses to be divested, or those already divested, has been eliminated. This elimination is included in the other (income) expense line and amounts to $93,000 of pretax profit for the three months ended October 29, 1994 and $56,000 of pretax profit for the three months ended October 30, 1993. During the third quarter, the Company's effective tax rate for the current year was revised from 37% to 36%. The effect of the decrease in the tax provision was recorded in the current quarter, resulting in a 34.4% effective rate for the third quarter. The decrease resulted from the utilization of foreign tax credits and research and development credits during the period. The effective tax rate for the nine months ended October 30, 1993 was 40% as compared to 36% in the current nine months. This decrease was primarily due to the increase in tax benefits realized from the amortization of certain intangible assets acquired in fiscal 1990, as a result of the resolution of an Internal Revenue Service audit. 11 12 FURON COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES During the nine months ended October 29, 1994, net cash flow provided by operations was $6.7 million, a $5.0 million decrease from the same period of the prior year. The decrease is attributable to the unfavorable changes associated with accounts receivable and inventory levels of $5.9 and $3.4 million, respectively, as compared to changes in the same period of the prior year. These increases in working capital are due to higher sales volume. Additionally, there was an unfavorable change associated with income taxes payable of $3.0 million due to tax payments made in the current year pursuant to a settlement of prior Internal Revenue Service audits. This was partially offset by improved operating results and favorable changes to accounts payable, accrued liabilities and smaller favorable changes in other areas of the balance sheet. Net cash flow provided by operations for the three months ended October 29, 1994 totaled $1.5 million, a $2.3 million decrease from the same period of the prior year. This decrease was primarily attributable to the impact of higher sales volume on working capital; accounts receivable in particular. A portion of the net cash flow provided by operations for the nine months ended October 29, 1994 was used to fund capital expenditures of $8.5 million, an increase of $3.1 million over the first nine months of 1993. In addition, the Company made principal payments on long-term debt of $4.5 million. At October 29, 1994 the Company's ratio of long-term debt to equity equaled .25:1, an improvement from .33:1 at January 29, 1994. At October 29, 1994, the Company's working capital was $54.7 million, an increase of $3.0 million from the prior year end. At October 29, 1994, the Company's ratio of current assets to current liabilities was 2.1:1, unchanged from January 29, 1994. The Company continually reviews possible acquisitions and should the Company make a substantial acquisition, it could require the utilization of the remaining $30 million available from its existing credit facility or financing from other sources. Cash and cash equivalents at October 29, 1994 was $12.7 million. One of the Company's subsidiaries was notified by the Environmental Protection Agency that it has been named as a potentially responsible party in connection with the clean up of hazardous wastes at two sites: The Solvents Recovery Service of New England site in Southington Connecticut (notified June 1992); and the Gallups Quarry site in Plainfield, Connecticut (notified April 1993). Since these matters are in their preliminary stages, no assurance can be given at this time concerning the ultimate outcome. However, based on preliminary investigations to determine the nature of the subsidiary's potential liability and the estimated amount of remedial costs necessary to clean up the sites, the Company presently does not expect these matters to have a material adverse effect on its consolidated financial position or operations. 12 13 FURON COMPANY PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not applicable. ITEM 2. CHANGES IN SECURITIES. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None Page Number ----------- The exhibits listed in the accompanying index are filed as part of this quarterly report. Exhibit 11 Statement re: Computation of Net Income Per Share 15 Exhibit 27 Financial Data Schedule 16
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for the three months ended October 29, 1994. 13 14 FURON COMPANY PART II (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 thereunto duly authorized. FURON COMPANY ______________________________ REGISTRANT /S/ MONTY A. HOUDESHELL /S/ KOICHI HOSOKAWA - - - ------------------------------ -------------------------------- Monty A. Houdeshell Koichi Hosokawa Vice President, Controller Chief Financial Officer and Treasurer November 17, 1994 14 EX-11 2 COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11 FURON COMPANY Computation of Net Income Per Share
Three months ended Nine months ended -------------------------- ------------------------------ October 29, October 30, October 29, October 30, 1994 1993 1994 1993 - - - ------------------------------------------------------------------------------------------------------------------- PRIMARY NET INCOME PER SHARE Earnings Net income $3,357,000 $2,220,000 $8,438,000 $5,559,000 ========== ========== ========== ========== Shares Weighted average number of common shares outstanding 8,710,380 8,621,651 8,685,491 8,612,698 Shares issuable from assumed exercise of stock options 325,631 125,031 282,395 243,088 ---------- ---------- ---------- ---------- Average shares as adjusted 9,036,011 8,746,682 8,967,886 8,855,786 ========== ========== ========== ========== Primary net income per share $ .37 $ .25 $ .94 $ .63 ========== ========== ========== ========== FULLY DILUTED NET INCOME PER SHARE Earnings Net income $3,357,000 $2,220,000 $8,438,000 $5,559,000 ========== ========== ========== ========== Shares Weighted average number of common shares outstanding 8,710,380 8,621,651 8,685,491 8,612,698 Shares issuable from assumed exercise of stock options 415,548 125,050 418,815 243,129 ---------- ---------- ---------- ---------- Average shares as adjusted for full dilution 9,125,928 8,746,701 9,104,306 8,855,827 ---------- ---------- ---------- ---------- Fully diluted net income per share $ .37 $ .25 $ .93 $ .63 ========== ========== ========== ==========
15 EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Company's consolidated statements of Income, consolidated balance sheets and consolidated statements of cashflows and is qualified in its entirety by reference to such financial statements contained within the Company's Form 10-Q for the quarter ended October 29, 1994. 1 U.S. DOLLARS 9-MOS JAN-28-1995 OCT-29-1994 1 12,711 0 47,209 746 29,857 104,758 109,760 59,263 181,976 50,103 0 36,160 0 0 53,708 181,976 231,158 231,158 161,526 161,526 0 252 1,855 13,185 4,747 8,438 0 0 0 8,438 .94 .93
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