-----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, AVe8xKFfZV+dMVnIMWsdcvwjDOXmTEf+oAztrQzAmYQtSJ6IlBhFDxj7EL1HPwBH R5EciTyVefGfopEDfiGkqA== 0000103071-96-000001.txt : 19960613 0000103071-96-000001.hdr.sgml : 19960613 ACCESSION NUMBER: 0000103071-96-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960504 FILED AS OF DATE: 19960612 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARLEN CORP CENTRAL INDEX KEY: 0000103071 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 132651100 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05374 FILM NUMBER: 96579770 BUSINESS ADDRESS: STREET 1: 55 SHUMAN BLVD STREET 2: P O BOX 3089 CITY: NAPERVILLE STATE: IL ZIP: 60566-7089 BUSINESS PHONE: 7084200400 MAIL ADDRESS: STREET 1: 55 SHUMAN BLVD STREET 2: P O BOX 3089 CITY: NAPERVILLE STATE: IL ZIP: 60566-7089 10-Q 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 quarterly period ended May 4, 1996 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 0-5374 VARLEN CORPORATION (exact name of registrant as specified in its charter) DELAWARE 13-2651100 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 55 Shuman Boulevard, P.O. Box 3089 Naperville, Illinois 60566-7089 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (708)420-0400 Indicate by check 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 At June 3, 1996, approximately 5,768,000 shares, par value $.10 per share, of common stock of the Registrant were outstanding. This amount reflects a 10% stock dividend declared by the issuer on May 29, 1996 to holders of record on July 1, 1996. See Note 4 to the condensed consolidated financial statements. PART I. FINANCIAL STATEMENTS VARLEN CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) (Thousands of Dollars) May 4, January 31, 1996 1996
Assets Cash and short-term investments 19,795 22,915 Accounts receivable, less 46,412 43,297 allowance for doubtful accounts of $1,152 and $1,318 Inventories: Raw materials 19,489 18,230 Work in process 9,172 8,760 Finished goods 8,819 9,501 37,480 36,491 Deferred and refundable income taxes 4,344 4,344 Other current assets 3,977 4,467 Total current assets 112,008 111,514 Property, plant, and equipment 141,946 137,279 Less: accumulated depreciation 70,341 67,604 71,605 69,675 Goodwill and other intangible assets, net 41,985 42,837 Investments and other assets 8,525 6,848 234,123 230,874 Liabilities and Stockholders' Equity Current maturities of long-term debt 62 87 Accounts payable 22,204 20,954 Accrued expenses 17,759 22,313 Income taxes payable 4,176 1,116 Total current liabilities 44,201 44,470 Long-term debt: Convertible subordinated debentures 69,000 69,000 Other long-term debt 4,403 4,398 Total long-term debt 73,403 73,398 Deferred income taxes 4,522 4,539 Other liabilities 10,598 10,514 Common stock 541 541 Other stockholders' equity (note 4) 100,858 97,412 234,123 230,874 See Notes to Condensed Consolidated Financial Statements
VARLEN CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Unaudited) (In Thousands, Except Per Share Amounts) Three Months Ended May 4, April 29, 1996 1995
Net sales 91,975 106,969 Cost of sales 68,178 79,611 Gross profit 23,797 27,358 Selling, general and administrative expenses 14,254 15,289 Interest expense, net 1,053 1,173 Earnings before income taxes 8,490 10,896 Income taxes 3,668 4,740 Net earnings 4,822 6,156 Earnings per share (note 4): Primary 0.79 1.01 Fully diluted 0.60 0.75 Weighted average number of shares outstanding - primary (note 4) 6,095 6,101 Weighted average number of shares outstanding - fully diluted (note 4) 9,159 9,166 Dividends per common share (note 4) 0.09 0.08 See Notes to Condensed Consolidated Financial Statements
VARLEN CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (Thousands of Dollars) Three Months Ended May 4, April 29, 1996 1995
Increase (Decrease) in Cash Cash flows from operating activities: Net earnings 4,822 6,156 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 2,896 2,923 Amortization 576 613 Deferred income taxes 17 (29) Change in assets and liabilities net of effects from purchased businesses: Accounts receivable, net (3,262) (5,381) Inventories (1,151) (131) Refundable income taxes --- 6 Other current assets 485 (866) Accounts payable 1,489 784 Accrued expenses (4,300) (2,486) Income taxes payable 3,066 3,622 Other noncurrent assets (128) 876 Other noncurrent liabilities 89 216 Total adjustments (223) 147 Net cash provided by operating activities 4,599 6,303 Cash flows from investing activities: Fixed asset expenditures (4,983) (6,637) Investments (478) --- Sale of business --- --- Disposals and other changes in property, plant and equipment (6) 48 Net cash used in investing activities (5,467) (6,589) Cash flows from financing activities: Proceeds from debt 26 468 Payments of debt (134) (19) Issuance of common stock under option plans 32 62 Cash received on stock subscriptions 78 77 Purchase of treasury stock (1,666) --- Cash dividends paid (530) (486) Net cash (used in)/provided by financing activities (2,194) 102 Effect of exchange rate changes on cash (58) 152 Net decrease in cash and short-term investments (3,120) (32) Cash and short-term investments at beginning of year 22,915 13,096 Cash and short-term investments at end of period 19,795 13,064 See Notes to Condensed Consolidated Financial Statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The unaudited condensed consolidated financial statements of Varlen Corporation (the "Company") included herein have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, all adjustments which are considered necessary for a fair presentation of the results for the interim periods presented and the balance sheet at May 4, 1996 have been made. These financial statements, which are condensed and do not include all disclosures included in annual 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. 2. Supplemental Cash Flow Information (in thousands):
May 4, April 29, 1996 1995 Cash paid during the year- to-date period for: Interest 108 201 Income taxes (net) 433 1,582
3. Business Segment Information (in thousands):
Quarter Ended May 4, 1996 April 29, 1995 Net sales: Transportation products 77,589 85,135 Analytical instruments 14,386 21,834 91,975 106,969 Operating profits*: Transportation products 8,941 10,738 Analytical instruments 2,034 2,843 10,975 13,581 *Before interest and general corporate expenses.
4. Stock Dividend: On May 29, 1996, the Company's Board of Directors declared a 10% stock dividend payable on July 15, 1996 to stockholders of record on July 1, 1996. The stock dividend increases the Company's common shares outstanding from approximately 5,243,000 to approximately 5,768,000 as of June 3, 1996. The earnings per share, weighted average number of shares outstanding and dividends per common share amounts for all periods of financial information contained herein reflect this stock dividend. 5. Divestitures: The Company plans to divest the laboratory equipment division of its Precision Scientific, Inc. subsidiary, a manufacturer of research laboratory appliances, subsequent to the first quarter of fiscal 1996. This division, which is being divested for strategic reasons, is included in the Company's Analytical Instruments business segment and had the following sales and operating profits:
Quarter Ended May 4, 1996 April 29, 1995 Net sales 4,643 5,622 Operating profits 643 576
The book value of the assets at May 4, 1996 that are to be disposed of is approximately $7.4 million. No loss is expected upon the disposition of this division. On July 18, 1995, the Company sold its National Metalwares, Inc. subsidiary, a maker of tubular steel components for manufacturers of consumer durables, to a private investment group for approximately $8.5 million in cash less selling costs. Net sales from this subsidiary for 1995 through the date of sale were approximately $11.0 million and were approximately $6.2 million in the first quarter of fiscal 1995. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED MAY 4, 1996 Overview The Company designs, manufactures and markets a diverse range of products in its transportation products and analytical instruments business segments. These products are marketed to the railroad, heavy-duty truck and trailer and automotive industries, as well as to the life sciences research and petroleum industries. The demand for the Company's products by many of these industries is affected by domestic as well as international economic conditions. The Company's manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing product demand the profitability of many of the Company's operations may change proportionately more than revenues of such operations. Results of Operations The Company's sales in the three months ended May 4, 1996, were $92.0 million, down $15.0 million or 14.0% from sales of $107.0 million in the comparable 1995 period. Sales declined in both segments. Net earnings for the first three months of 1996 declined 21.7% to $4.8 million from $6.2 million in the first quarter of 1995. Earnings per share were $.79 per share on a primary basis and $.60 on a fully diluted basis for the first quarter of 1996 compared to $1.01 per share on a primary basis and $.75 per share on a fully diluted basis in the first quarter of 1995. Per share amounts for 1995 have been restated to reflect a 10% stock dividend declared on May 29, 1996, payable July 15, 1996, to shareholders of record on July 1, 1996. Operating profit decreased in both segments and in the transportation segment declined proportionately more than sales decreased. On a business segment basis, revenues in the transportation products segment for the three months ended May 4, 1996, were $77.6 million, as compared to $85.1 million in the comparable prior year period. Sales declined in all business areas within this segment. Operating profit in the first three months of 1996 decreased 16.7% to $8.9 million (11.5% of segment sales) compared to $10.7 million (12.6% of segment sales) in the comparable 1995 period as profits increased at the automotive business but declined in the heavy-duty truck and railroad businesses. Heavy-duty truck and trailer industry sales were lower in the 1996 period as industry-wide sales declined. The Company's decline in sales was less than the industry decline due to stronger than industry production by the company's largest customer. During the first quarter of 1996, shipments were begun in limited quantities under a previously signed contract to provide components for a new customer truck model. An operating loss of $420,000 was incurred during the 1996 quarter at a facility that was in the start-up phase to support this new contract. Automotive industry sales were relatively level with the prior year's first quarter. However, sales at the Company's automotive components business declined due to the elimination of a selected low margin business in mid 1995 and a strike by this business' largest customer, General Motors, in the first quarter of 1996. Despite a reduction of operating income of approximately $425,000 as a result of this strike, earnings at this business improved in 1996 compared to the 1995 first quarter. Railroad industry demand as measured by new railcar builds, new locomotive builds and revenue ton miles decreased in the first quarter compared to the equivalent period in 1995. Railroad mergers and the General Motors strike, combined with poor winter weather and lower industrial production, appear to have caused the decrease. As a result of the industry conditions, sales declined at the company's railroad components business. Correspondingly, earnings declined on the lower sales levels as well as being negatively affected by approximately $250,000 of development and start-up costs related to new orders from the Chinese Rail Ministry for locomotive and railroad passenger car air conditioning units. On a selective basis, price increases were made in the transportation products segment which offset increases in certain material costs. Sales in the analytical instruments segment for the quarter ended May 4, 1996, decreased 34.1% to $14.4 million, compared to $21.8 million in the 1995 period. The bulk of the sales decrease resulted from the July 1995 sale of a business that generated $6.2 million of sales in the first quarter of 1995. However, sales in both remaining business areas in this segment were also lower as order patterns declined. Operating profit for the analytical instruments segment for the first three months of 1996 decreased to $2.0 million (14.1% of segment sales) compared to $2.8 million (13.0% of segment sales). Again, the greatest portion ($.6 million) of the decline resulted from the sale of the non-strategic business in July 1995. The remainder of the decline occurred in the petroleum instrumentation business. Despite lower operating profits, the operating profit margin percent increased. This resulted from the 1995 divestiture having a lower operating margin than the segment as a whole. During the quarter, the effects of foreign currency translation were not material. Consolidated gross margin increased slightly to 25.9% in the first quarter of 1996 from 25.6% in 1995. The transportation products segment declined in the first quarter of 1996 due in part to the start-up costs at the new truck components facility, the effect of the General Motors strike, and start-up costs on the Chinese air conditioner order. The gross margin increased at the analytical instruments business as a result of the 1995 sale of a low margin business. Selling, general and administrative expenses of $14.3 million or 15.5% of sales in the first three months of 1996 compared to $15.3 million or 14.3% of sales in the prior year's comparable period. In both business segments, these expenses as a dollar amount decreased while increasing as a percentage of sales. Corporate expenses were relatively level on a dollar amount basis and correspondingly increased as a percentage of sales. Gross interest expense for the quarter ended May 4, 1996, was $1.3 million which equated to the prior year's comparable period. Interest income increased $.1 million in the first quarter of 1996 as a result of higher cash and investment balances. Income taxes were provided at an effective rate during the 1996 quarter of 43.2% compared to 43.5% in the comparable 1995 period. The higher than statutory federal rate reflects non- deductible goodwill amortization, higher taxes on foreign operations and state income taxes. Capital Resources and Liquidity During the three-month period ended May 4, 1996, the Company generated $4.6 million of cash from operating activities. As of May 4, 1996, the Company's working capital was $67.8 million, its total assets were $234.1 million, its total debt was $73.5 million and its stockholders' equity was $101.4 million. Investing activities during the three-month period ended May 4, 1996, included capital expenditures of $5.0 million. These capital expenditures were primarily for machinery and equipment to support new products and to improve operating efficiency. Through May 4, 1996, the Company had purchased 110,000 shares of its treasury stock for $2.6 million under an authorization from the board of directors for up to 500,000 shares of common stock. To support its investing activities, the Company has an $80 million revolving credit agreement which expires on December 6, 1998. This credit facility is expected to be used by the Company principally as a source of acquisition financing. At May 4, 1996, the Company had no debt outstanding under this credit facility. The company believes that internally generated funds will be sufficient to satisfy its anticipated working capital needs, capital expenditures and scheduled debt repayments. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders on May 29, 1996, the stockholders voted on one item. The item voted on and the results of the voting were as follows:
For Withheld 1. Elect a Board of Directors: Ernest H. Lorch 4,127,632 90,679 Richard L. Wellek 4,127,614 90,697 Rudolph Grua 4,212,159 6,152 L. William Miles 4,212,159 6,152 Joseph J. Ross 4,212,159 90,679 Greg A. Rosenbaum 4,127,632 6,152 Theodore A. Ruppert 4,212,159 6,152 Total number of shares eligible to be voted at the Annual Meeting of Stockholders 5,306,466
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. Varlen Corporation (Registrant) June 12, 1996 By: /s/ Richard A. Nunemaker Richard A. Nunemaker Vice President, Finance and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) EXHIBIT INDEX Exhibit No. Page No. 11 Computation of Per Share Earnings 13 27 Financial Data Schedule 14 EX-11 2 VARLEN CORPORATION AND SUBSIDIARIES Exhibit 11 Computation of Per Share Earnings Unaudited (Thousands, Except Per Share Amounts) Three Months Ended Primary Earnings Per Share: 5/4/96 4/29/95
Net earnings 4,822 6,156 Computation of the Weighted Average Number of Shares Outstanding as Used in the Primary Earnings Per Share Computation: Weighted average number of shares outstanding 5,853 5,890 Shares assumed issued under the treasury stock method 242 211 Weighted average number of shares outstanding, as adjusted 6,095 6,101 Primary Earnings Per Share: 0.79 1.01 Fully Diluted Earnings Per Share: Reconciliation of net earnings per the condensed consolidated financial statements to the amount used for the fully diluted computation: Net earnings 4,822 6,156 Add interest on 6.5% convertible subordinated debentures, net of income tax effects 703 659 Net earnings, as adjusted 5,525 6,815 Computation of the Weighted Average Number of Shares Outstanding as Used in the Fully Diluted Earnings Per Share Computation: Weighted average number of shares outstanding 5,853 5,890 Shares assumed issued under the treasury stock method 252 222 Shares issuable from assumed exercise of 6.5% convertible subordinated debentures 3,054 3,054 Weighted average number of shares outstanding, as adjusted 9,159 9,166 Fully Diluted Earnings Per Share: 0.60 0.75
EX-27 3
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FIRST QUARTER 1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q. 3-MOS JAN-31-1996 MAY-04-1996 19795 0 46412 0 37480 112008 141946 70341 234123 44201 73403 0 0 541 100858 234123 91975 91975 68178 68178 0 0 1297 8490 3668 4822 0 0 0 4822 .79 .60
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