-----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, KWb6Fx6YXkxx/QHnPerjsgyJzcm2OiMHhX7Zq2OBTaRpbvyDLIaiiMRdJEIPSsR6 A/knaGecpIZsoS2rVIyotQ== 0000892569-96-000855.txt : 19960531 0000892569-96-000855.hdr.sgml : 19960531 ACCESSION NUMBER: 0000892569-96-000855 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960504 FILED AS OF DATE: 19960530 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FURON CO CENTRAL INDEX KEY: 0000037755 STANDARD INDUSTRIAL CLASSIFICATION: GASKETS, PACKAGING AND SEALING DEVICES & RUBBER & PLASTIC HOSE [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: 96574498 BUSINESS ADDRESS: STREET 1: 1199 SOUTH CHILLICOTHE ROAD CITY: AURORA STATE: OH ZIP: 44202 BUSINESS PHONE: 7148315350 FORMER COMPANY: FORMER CONFORMED NAME: FLUOROCARBON CO DATE OF NAME CHANGE: 19900322 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED MAY 4, 1996 1 UNITED STATES 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 MAY 4, 1996 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 organization) Identification No.) 29982 Ivy Glenn Drive Laguna Niguel, CA 92677 - ---------------------------------------- ------------------------- (Address of principal executive offices) (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 May 4, 1996: 8,957,875. 1 2 FURON COMPANY INDEX
PAGE NO. -------- PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Condensed Consolidated Balance Sheets May 4, 1996 and February 3, 1996 3 Condensed Consolidated Statements of Income Three months ended May 4, 1996 and April 29, 1995 5 Condensed Consolidated Statements of Cash Flows Three months ended May 4, 1996 and April 29, 1995 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II - OTHER INFORMATION 14 - ---------------------------
2 3 ITEM 1. FINANCIAL STATEMENTS FURON COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Unaudited)
May 4, February 3, In thousands 1996 1996 - ------------------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ - $ - Accounts receivable, less allowance for doubtful accounts of $1,505 at May 4, 1996 and $1,367 at February 3, 1996 55,004 51,681 Inventories 44,842 39,827 Deferred income taxes 5,102 5,178 Prepaid expenses and other assets 5,085 5,367 -------- -------- Total current assets 110,033 102,053 Property, plant & equipment, at cost: Land 1,302 1,305 Buildings and leasehold improvements 18,956 18,044 Machinery and equipment 131,540 128,396 -------- -------- 151,798 147,745 Less accumulated depreciation and amortization (70,943) (68,093) -------- -------- Net property, plant and equipment 80,855 79,652 Intangible assets, at cost less accumulated amortization of $27,282 at May 4, 1996 and $26,612 at February 3, 1996 26,637 23,543 Other assets 6,220 6,236 -------- -------- $223,745 $211,484 ======== ========
See accompanying notes. 3 4 FURON COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
May 4, February 3, In thousands, except share data 1996 1996 - ----------------------------------------------------------------------------------------- Current liabilities: Cash, less checks outstanding $ 2,045 $ 1,052 Accounts payable 21,681 18,851 Salaries, wages and related benefits payable 8,371 11,101 Current portion of long-term debt 1,522 278 Other current liabilities 10,510 10,345 -------- -------- Total current liabilities 44,129 41,627 Long-term debt 42,046 38,443 Other long-term liabilities 22,473 20,807 Deferred income taxes 7,839 7,725 Commitments and contingencies Stockholders' equity: Preferred stock without par value, 2,000,000 shares authorized, none issued or outstanding - - Common stock without par value, 15,000,000 shares authorized, 8,957,875 shares issued and outstanding at May 4, 1996 and 8,906,905 at February 3, 1996 38,229 37,575 Foreign currency translation adjustment 309 403 Unearned ESOP shares (3,528) (3,205) Unearned compensation (437) (556) Additional pension liability (1,649) (1,649) Retained earnings 74,334 70,314 -------- -------- Total stockholders' equity 107,258 102,882 -------- -------- $223,745 $211,484 ======== ========
See accompanying notes. 4 5 FURON COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended ------------------------------- May 4, April 29, In thousands, except per share amounts 1996 1995 - --------------------------------------------------------------------------------------- Net sales $94,763 $88,453 Cost of sales 68,266 62,893 ------- ------- Gross profit 26,497 25,560 Selling, general and administrative expenses 20,005 20,380 Other (income), net (1,090) (776) Interest expense 676 794 ------- ------- Income before income taxes 6,906 5,162 Provision for income taxes 2,348 1,807 ------- ------- Net income $ 4,558 $ 3,355 ======= ======= Net income per share of Common Stock $ 0.50 $ 0.37 ======= =======
See accompanying notes. 5 6 FURON COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended ------------------------ May 4, April 29, In thousands 1996 1995 - -------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 4,558 $ 3,355 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 3,202 2,510 Amortization 778 1,032 Provision for losses on accounts receivable 105 105 Increase in deferred income taxes 76 - Loss on sale of assets - 11 Working capital changes, net of acquisitions and disposals: Accounts receivable 22 (1,231) Inventories (2,438) (5,612) Accounts payable and accrued liabilities (1,567) (792) Income taxes payable 558 651 Other current assets and liabilities, net 235 1,218 Changes in other long-term operating assets and liabilities (1,429) 25 ------- ------- Net cash provided by operating activities 4,100 1,272 INVESTING ACTIVITIES Acquisition of business (3,294) (23,763) Purchases of property, plant and equipment (4,505) (3,342) Proceeds from sale of divestitures 406 567 Proceeds from sale of equipment 260 47 Proceeds from notes receivable 4 9 ------- ------- Net cash used in investing activities (7,129) (26,482) FINANCING ACTIVITIES Proceeds from long-term debt 7,000 21,000 Principal payments on long-term debt (4,000) (3,001) Proceeds from issuance of common stock 697 601 Loan to ESOP (323) - Dividends paid on common stock (538) (531) ------- ------- Net cash provided by financing activities 2,836 18,069 EFFECT OF EXCHANGE RATE CHANGES ON CASH 193 666 ------- ------- DECREASE IN CASH AND CASH EQUIVALENTS - (6,475) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - 6,475 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ - ======= =======
See accompanying notes. 6 7 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS May 4, 1996 (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, thereto, contained in the Company's Annual Report to Shareholders on Form 10-K for the fiscal year ended February 3, 1996. 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 May 4, 1996, and the results of operations and cash flows for the three months ended May 4, 1996 and April 29, 1995. Results of the Company's operations for the three months ended May 4, 1996 are not necessarily indicative of the results to be expected for the full year. 2. INVENTORIES Inventories, stated at the lower of cost (first-in, first-out) or market, are summarized as follows:
May 4, February 3, In thousands 1996 1996 -------------------------------------------------------------------------------- Raw materials and purchased parts $15,868 $13,604 Work-in-process 12,896 11,503 Finished goods 16,078 14,720 ------- ------- $44,842 $39,827 ======= =======
3. INTANGIBLES Intangible assets, primarily acquired in business combinations, net of accumulated amortization, are summarized as follows:
May 4, February 3, In thousands 1996 1996 --------------------------------------------------------------------------------- Goodwill $12,119 $ 9,113 Other intangible assets 14,518 14,430 ------- ------- $26,637 $23,543 ======= =======
7 8 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS May 4, 1996 (Unaudited) 4. LONG-TERM DEBT Long-term debt is summarized as follows:
May 4, February 3, In thousands 1996 1996 ------------------------------------------------------------------------------------- Loans under bank credit agreements due through fiscal year 2000 $41,000 $38,000 Other 2,568 721 ------- ------- Total long-term debt 43,568 38,721 Less current portion 1,522 278 ------- ------- Due after one year $42,046 $38,443 ======= =======
For the three months ended May 4, 1996, the weighted average interest rate on the loans under bank credit agreements was 6.4%. In August 1988, the Company entered into an 8-year Interest Rate Swap agreement. The notional amount of the swap totaled $4.0 million at May 4, 1996. The swap agreement effectively changes the Company's interest rate on $4.0 million of its variable borrowings to a fixed interest rate of 9.938%. Interest paid for the three months ended May 4, 1996 and April 29, 1995 was $775,000 and $628,000, respectively. 5. STOCKHOLDERS' EQUITY During the first quarter of 1996, the Company advanced $323,000 to the Employee Stock Ownership Plan (ESOP) which has been presented as unearned ESOP shares in the accompanying condensed consolidated balance sheet. The ESOP used the funds to acquire 15,000 shares of the Company's common stock from a Director of the Company. 8 9 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS May 4, 1996 (Unaudited) 6. INCOME TAXES The Company's effective tax rate for the first quarter ended May 4, 1996 was 34% as compared to 35% for the same period last year. The lower effective tax rate in the current quarter as compared to the same period in the prior year was primarily due to lower state income taxes. Income taxes paid for the three months ended May 4, 1996 and April 29, 1995 were $500,000 and $650,000, respectively. 7. CONTINGENCIES At May 4, 1996, the Company had approximately $2,100,000 of foreign currency hedge contracts outstanding consisting of over-the-counter forward contracts. The contracts reflect the selective hedging of the Belgium Franc with varying maturities up to six months. Net unrealized gains from hedging activities totaled $106,000 as of May 4, 1996. At May 4, 1996, the Company is obligated under irrevocable letters of credit totaling $2,171,000. The Company is currently involved in various litigation. Management of the Company is of the opinion that the ultimate resolution of such litigation should not have a material adverse effect on the Company's consolidated financial position or results of operations. Compliance with environmental laws and regulations designed to regulate the discharge of materials into the environment or otherwise protect the environment requires continuing management effort and expenditures by the Company. The Company does not believe that the operating costs incurred in the ordinary course of business to satisfy air and other permit requirements, properly dispose of hazardous wastes and otherwise comply with these laws and regulations form or will form a material component of its operating costs or have or will have a material adverse effect on its competitive or consolidated financial positions. 9 10 FURON COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS May 4, 1996 (Unaudited) 7. CONTINGENCIES (CONTINUED) The Company or one of its subsidiaries is currently involved in environmental remediation at six former manufacturing sites. In addition, one of the Company's subsidiaries is involved as an EPA-named potentially responsible party or private cost recovery/contribution action defendant in connection with environmental remediation at the following "superfund" waste disposal sites: Solvents Recovery Service of New England site in Southington, Connecticut; Gallups Quarry site in Plainfield, Connecticut; and the Davis Liquid Waste and Picillo Superfund sites in Coventry, Rhode Island. As of May 4, 1996 the Company's reserves for environmental matters totaled approximately $2.0 million. While neither the timing nor the amount of the ultimate costs associated with the remediation matters described above can be determined with certainty, based on investigations to determine the nature of the potential liability at each site, the estimated amount of investigation and remedial costs expected to be necessary to complete the remediation and other factors, the Company presently believes that these reserves should be sufficient to cover the Company's aggregate liability for these matters and, accordingly, does not expect them to have a material adverse effect on its consolidated financial position or results of operations. The actual costs to be incurred by the Company at each site will depend on a number of factors, including one or more of the following: the final delineation of contamination; the final determination of the remedial action required; negotiations with governmental agencies with respect to cleanup levels; changes in regulatory requirements; innovations in investigatory and remedial technology; effectiveness of remedial technologies employed; and the ultimate ability to pay of any other responsible parties. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Consolidated sales for the three months ended May 4, 1996 of $95 million represented a 7% increase over the same period of the prior year. Net of acquisitions and divestitures over the same period, sales were up slightly. Effective April 1, 1996 the Company completed the acquisition of all the assets of Econocruise Ltd. based in Rugby, England. Econocruise had sales of approximately $18 million for its year ended March 31, 1996. Econocruise manufactures state of the art electronic control products such as speed control systems, electronic foot pedals, and drive-by-wire systems for mobile equipment and major truck manufacturers in Europe. Furon manufactures a number of complementary polymer based and mechanical control products for these markets in the United States. Along with the net effect of acquisitions, the Company has benefited from continued strength in specific industrial markets. Sales to the electronics and industrial equipment markets were particularly strong. Sales to the aircraft, agriculture and construction, and medical markets also increased. Sales to the chemical processing market were flat, while sales to the heavy duty truck market began to soften, consistent with industry expectations. Sales for the three months ended May 4, 1996 of the Company's European operations were up 13% (18% after removing the effect of foreign currency exchange rate changes) over the same period of the prior year. Gross profit as a percentage of sales for the first quarter ended May 4, 1996 was down 0.9% from the same period of the prior year to 28%. After removing the effects of acquisitions and divestitures, gross profit margin was down 0.7% from 29.1% to 28.4% for the same periods. The operating leverage effect of sales increasing at a greater rate than fixed manufacturing costs, and continued productivity improvements was not enough to offset the impact of increased raw material prices, experienced last year subsequent to the first quarter. Selling, general and administrative expenses as a percentage of sales were 21.1% for the quarter ended May 4, 1996, down from 23.0% in the same period a year ago. After removing the effect of acquisitions and divestitures, these same operating expenses were 22.3%, down from 23.9% in the first quarter of the prior year and down from the 23.9% incurred in the fourth quarter of the prior year. The decline in selling, general and administrative expense as a percentage of sales from last year is mainly the result of fewer costs incurred related to reduced travel and professional fees. Product development expenses were up in the first quarter over the same period prior year as a percentage of sales by 0.2% to 2.7%, reflecting the Company's continued commitment to new products and materials development. 11 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) Other income and expense net, reflected increased income from the Company's investments, as well as decreased other expense attributable to the elimination of higher income related to businesses previously held for sale in the same period last year. Interest expense for the three months ended May 4, 1996 was down 15% from the same period in the prior year. Although there has been an increase in the amount of debt as a result of acquisitions of the assets of Fluorglas and Econocruise, higher interest rate portions of long-term debt have been paid off, resulting in lower expense. Pretax results of operations improved 34% to $6.9 million from $5.2 million for the three months ended May 4, 1996 and April 29, 1995, respectively. Net of acquisitions and divestitures, pretax results of operations were up 26% from the same period last year. The improvement is generally the result of higher sales, continued productivity improvements and lower operating expenses, somewhat offset by higher material costs. The Company's effective tax rate for the first quarter ended May 4, 1996 was 34% compared to 35% in the same period last year. The lower effective tax rate in the current quarter as compared to the same period in the prior year was primarily due to lower state income taxes. LIQUIDITY AND CAPITAL RESOURCES The Company's financial condition remained strong at May 4, 1996. The Company's ratio of current assets to current liabilities was 2.5 to 1.0, unchanged from the beginning of the period. Net working capital increased $5.5 million during the first quarter to a total of $65.9 million. Cash provided by operations during the quarter was $4.1 million, approximately $2.8 million higher than the same period last year. Net of the Econocruise acquisition, accounts receivable decreased less than $0.1 million, inventories increased $2.4 million and accounts payable and accrued liabilities decreased $1.6 million from the prior year end. Capital expenditures totaled $4.5 million and were primarily for renovating existing facilities, leasehold improvements, or replacement of existing equipment in addition to implementation of the operating systems to support the Company's new structure. Cash and cash equivalents (cash, less checks outstanding) decreased $1 million primarily as a result of cash used in the Econocruise acquisition and to fund capital expenditures and working capital requirements. Long-term debt increased approximately $4 million as a result of funds borrowed to complete the acquisition of Econocruise. The Company's debt to equity ratio is currently .41 to 1.0, an increase from .38 to 1.0 at the beginning of the period. 12 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The Company continues to believe that it generates sufficient cash flow from its operations to finance near and long-term internal growth, capital expenditures and the principal and interest payments on its loans payable to banks. The Company will continue to evaluate its employment of capital resources including asset management and other sources of financing. The Company continually reviews possible acquisitions and should the Company make a substantial acquisition, it could require the utilization of the remaining $59 million available on its existing credit facility or financing from other sources. ENVIRONMENTAL MATTERS For information regarding environmental matters and other contingencies, see note 7 to the Notes to Condensed Consolidated Financial Statements. 13 14 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: PAGE NUMBER ----------- 11 Statement re: Computation of Net Income Per Share 16 27 Financial Data Schedule 17 (b) Reports on Form 8-K: There were no reports on Form 8-K for the three months ended May 4, 1996. 14 15 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 - -------------------------------- Monty A. Houdeshell Vice President, Chief Financial Officer and Treasurer May 30, 1996 15 EX-11 2 COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11 FURON COMPANY Computation of Net Income Per Share
Three months ended -------------------------------- May 4, April 29, 1996 1995 - ---------------------------------------------------------------------------------- PRIMARY INCOME PER SHARE Earnings: Net income $4,558,000 $3,355,000 ========== ========== Shares: Weighted average number of common shares outstanding 8,862,000 8,831,000 Shares issuable from assumed exercise of stock options 218,000 251,000 ---------- ---------- Average shares as adjusted 9,080,000 9,082,000 ========== ========== Primary income per share $ 0.50 $ 0.37 ========== ========== FULLY DILUTED INCOME PER SHARE Earnings: Net income $4,558,000 $3,355,000 ========== ========== Shares: Weighted average number of common shares outstanding 8,862,000 8,831,000 Shares issuable from assumed exercise of stock options 252,000 251,000 ---------- ---------- Average shares as adjusted for full dilution 9,114,000 9,082,000 =========== ========== Fully diluted income per share $ 0.50 $ 0.37 =========== ==========
16 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 CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED MAY 4, 1996. 1,000 U.S. DOLLARS 3-MOS FEB-01-1997 MAY-04-1996 1,000 0 0 56,509 1,505 44,842 110,033 151,798 70,943 223,745 44,129 0 0 0 38,229 69,029 223,745 94,763 94,763 68,266 88,271 (1,090) 105 676 6,906 2,348 4,558 0 0 0 4,558 0.50 0.50
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