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Varlen reports record third quarter sales, operating profit.

NAPERVILLE, Ill.--(BUSINESS WIRE)--Nov. 25, 1996--Varlen Corp. (NASDAQ:VRLN) posted record sales and operating profit in the third quarter on the strength of its newly acquired Brenco railcar bearing subsidiary and the automotive products business, but higher interest expense from acquiring Brenco reduced net income from the same period a year ago.

"Though net income did decline in the third quarter, we're seeing once again that the strength of our core businesses can help us to endure the periods of weaker demand in certain of our served markets," said Richard L. Wellek, Varlen president and chief executive officer.

Net income for the quarter ended Nov. 2, 1996, was $4.1 million, or 53 cents per share on a fully diluted basis, compared with $5.2 million, or 64 cents per fully diluted share in the year-ago quarter. Sales were $119.9 million in the third quarter vs. $94.2 million in the third quarter of 1995.

For the year-to-date period, Varlen sales were $302.9 million compared to $298.9 million in the first three quarters of 1995. Net income for 1996 year-to-date was $14.9 million, or $1.86 per fully diluted share, compared to $16.3 million, or $1.99 per fully diluted share for the first three quarters of 1995. During the second quarter of 1996, a non-core laboratory appliance business was sold, resulting in a $2.1 million or 23 cents per fully diluted share after-tax gain.

Automotive products maintained its momentum with record results in the quarter, gaining in both sales and operating profit over the same period a year ago while the rest of the market was relatively flat. This was achieved despite work disruptions experienced at General Motors in Canada and the United States.

The huge jump in Varlen sales came from Brenco, which contributed to Varlen's quarterly results for an entire quarter for the first time since it was acquired at the end of the 1996 second quarter. On Nov. 8, 1996, Varlen sold Brenco's Rail Link Inc. unit to Genesee and Wyoming for $9 million and additional proceeds based on future performance. This sale will not have any impact on net income. The proceeds from divesting of Rail Link, a non-core business involved in railroad switching and related services, were used to reduce Varlen's outstanding debt.

"The purchase of Brenco was the largest acquisition Varlen has ever made and is a major strategic step forward for the company," Wellek said. "Brenco is a leading North American manufacturer and reconditioner of specialized tapered roller bearings for the railroad industry. They have also developed a patented component for use in automotive transmissions. Brenco's large share of the North American railroad market positions us to take advantage of opportunities in international markets."

Elsewhere in railroad products, performance in the 1996 quarter was below prior year levels due to customer deferred shipments and programs delayed into 1997. In addition, high costs associated with international sales were a drag on earnings.

In heavy-duty truck/trailer, production of the Freightliner Century class model has increased slower than Varlen had hoped. However, Varlen's relationship with this leading manufacturer, which is gaining market share, should provide further growth in 1997 as Varlen's average content per vehicle has increased. Despite this factor and overall industry conditions, Varlen's heavy-duty truck/trailer sales declined only 5 percent in the 1996 third quarter compared to 1995.

Sales and earnings declined during the quarter in the analytical instruments segment due to the delayed introduction of new products and the sale of the laboratory appliance business.

Varlen, headquartered in Naperville, Ill., is a leading manufacturer of precision engineered transportation products for the railroad, heavy-duty truck/trailer and automotive industries as well as petroleum analyzers. The common stock is traded in the NASDAQ stock market under the symbol VRLN. The company's 6-1/2 percent convertible subordinated debentures are traded on the NASDAQ SmallCap Market under the symbol VRLNG.

More information on Varlen can be found on the Chlopak, Leonard, Schechter site on the World Wide Web at -0-
 (In Thousands, Except Per Share Amounts)

 For The Third Quarter For The Nine Months
 Ended Ended
 11/2/96 10/28/95 11/2/96 10/28/95

 Net sales $ 119,898 $ 94,209 $ 302,898 $ 298,931
 Gross profit 28,245 23,685 74,521 75,121
 Selling, general
 and administrative
 expenses 17,737 13,365 46,084 42,803
 Gain on sale of
 business --- --- 3,730 ---
 Interest expense,
 net 3,107 1,066 5,586 3,458
 Income taxes 3,264 4,017 11,722 12,554
 Net earnings 4,137 5,217 14,859 16,306
 Primary earnings
 per share(a) $ .69 $ .84 $ 2.46 $2.65
Fully diluted earnings
 per share(a) $ .53 $ .64 $1.86 $1.99
Weighted average
 number of shares
 Primary 6,009 6,185 6,038 6,133
 Fully diluted 9,064 9,250 9,092 9,218

 (a) 1995 amounts have been restated for a 10 percent stock

 (In Thousands)

 For The Third Quarter For The Nine Months
 Ended Ended
 11/2/96 10/28/95 11/2/96 10/28/95
 Net Sales:
 Transportation products $ 110,097 $ 79,268 $ 267,290 $ 243,237
 Analytical instruments 9,801 14,941 35,608 55,694
 $ 119,898 $ 94,209 $ 302,898 $ 298,931
 Operating Profits(b)
 Transportation products $ 10,867 $ 9,532 $ 28,374 $ 29,821
 Analytical instruments 1,420 2,517 8,265 7,066
 $ 12,287 $ 12,049 $ 36,639 $ 36,887

(b) Before interest and general corporate expenses.

CONTACT: Varlen Corp.

Richard L. Wellek, President and CEO or

Richard A. Nunemaker, Vice President and CFO,

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Publication:Business Wire
Date:Nov 25, 1996
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