<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
-------------------------------------------------
Commission File Number 333-51355
----------------------------------------------------------
NUMATICS, INCORPORATED
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Michigan 38-2955710
--------------------------------------------------------------------------------
(State or other jurisdiction of Identification Number)
incorporation or organization) (I.R.S. Employer
1450 North Milford Road, Milford, Michigan 48357
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(248) 887-4111
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 _______
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock - 2,659,575 shares as of November 7, 2000
<PAGE>
INDEX
NUMATICS, INCORPORATED AND SUBSIDIARIES
Page No. Description
--------------------------------------------------------------------------------
1 PART I. FINANCIAL INFORMATION
1 Item 1 Consolidated Financial Statements (Unaudited)
4 Notes to Consolidated Financial Statements (Unaudited)
10 Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
12 Item 3 Quantitative and Qualitative Disclosures About Market
Risk
13 PART II. OTHER INFORMATION
13 Item 6 Exhibits and Reports on Form 8-K
13 Signatures
14 Exhibit 27 Financial Data Schedule
ii
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Numatics, Incorporated
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------- -------------------------------
2000 1999 2000 1999
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $36,596,534 $35,249,776 $113,300,074 $103,694,410
Costs and expenses:
Costs of products sold 22,897,103 22,178,135 70,249,923 64,597,935
Marketing, engineering, general and
administrative 8,401,621 7,817,142 25,801,756 23,588,063
Single business tax 103,500 121,190 332,200 388,250
----------- ----------- ------------ ------------
Operating income 5,194,310 5,133,309 16,916,195 15,120,162
Other expenses
Interest and other financing expenses 4,215,712 3,988,035 12,588,476 11,991,628
Other 600,921 (403,567) 1,644,098 936,557
----------- ----------- ------------ ------------
Income before income taxes 377,677 1,548,841 2,683,621 2,191,977
Income taxes 333,594 570,989 1,453,084 1,153,278
----------- ----------- ------------ ------------
Net income $ 44,083 $ 977,852 $ 1,230,537 $ 1,038,699
=========== =========== ============ ============
</TABLE>
See accompanying notes.
1
<PAGE>
Numatics, Incorporated
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
September 30 December 31
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 1,290,197 $ 1,552,063
Accounts receivable 26,173,552 23,964,195
Inventories 38,205,201 35,377,585
Other current assets 4,187,932 3,816,348
------------ ------------
Total current assets 69,856,882 64,710,191
Other assets:
Goodwill, net of accumulated amortization 5,465,727 6,123,496
Other intangible assets, net of accumulated amortization 4,548,523 5,217,320
Deferred income taxes 3,056,341 2,609,032
Investment in affiliates 2,192,646 2,294,454
Other 216,729 386,002
------------ ------------
15,479,966 16,630,304
Properties:
Land 1,354,907 1,489,357
Buildings and improvements 14,338,637 14,099,546
Machinery and equipment 51,318,462 48,190,493
------------ ------------
67,012,006 63,779,396
Less accumulated depreciation (34,310,412) (30,567,303)
------------ ------------
32,701,594 33,212,093
------------ ------------
$118,038,442 $114,552,588
============ ============
LIABILITIES AND ACCUMULATED DEFICIENCY
Current liabilities:
Accounts payable trade $ 7,765,564 $ 10,370,630
Accrued expenses 1,951,247 1,601,220
Accrued interest 5,730,203 2,966,874
Compensation and employee benefits 4,427,162 4,614,723
Income and single business tax 1,367,987 580,713
Current portion of long term debt 3,360,147 3,414,651
------------ ------------
Total current liabilities 24,602,310 23,548,811
Long term debt, less current portion 159,531,424 158,977,572
Deferred retirement benefits 5,959,464 5,173,025
Deferred income taxes - 63,594
Minority interest in subsidiaries (redeemable upon the
happening of certain events outside the control of
the Company: $593,228 in 2000 and $1,015,818
in 1999) 734,431 683,987
Common stock $.01 par value, 9,950,000 shares
authorized; 2,659,575 shares outstanding and
related additional paid in capital 4,602,151 4,602,151
Accumulated deficiency (76,982,721) (78,213,258)
Equity adjustment from foreign currency translation (408,617) (283,294)
------------ ------------
(72,789,187) (73,894,401)
------------ ------------
$118,038,442 $114,552,588
============ ============
</TABLE>
See accompanying notes.
2
<PAGE>
Numatics, Incorporated
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
September 30
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating activities
Net income $ 1,230,537 $ 1,038,699
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 4,011,120 3,337,413
Amortization 1,030,440 923,688
Minority interest expense 50,444 141,507
Deferred taxes (488,512) (408,459)
Deferred retirement benefits 786,440 667,569
Unrealized foreign currency losses 1,430,901 698,765
Changes in operating assets and liabilities:
Trade receivables (2,826,522) (2,019,801)
Inventories (3,835,714) (1,577,010)
Other current assets 146,403 (399,133)
Accounts payable and accrued expenses 740,260 3,169,559
Compensation and employee benefits (167,433) (289,496)
Income and single business taxes 576,190 1,131,685
----------- -----------
Net cash provided by operating activities 2,684,554 6,414,986
Investing activities
Capital expenditures (4,033,711) (5,224,026)
Other investments 218,160 (408,486)
----------- -----------
Net cash used in investing activities (3,815,551) (5,632,512)
Financing activities
Proceeds from long-term borrowing 1,507,208 -
Debt repayments (447,518) (688,347)
Debt issuance costs - 63,235
----------- -----------
Net cash provided by (used in) financing activities 1,059,690 (625,112)
Effect of exchange rate changes on cash (190,559) (136,329)
----------- -----------
Net increase (decrease) in cash and equivalents (261,866) 21,033
Cash and equivalents at beginning of period 1,552,063 1,186,082
----------- -----------
Cash and equivalents at end of period $ 1,290,197 $ 1,207,115
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
NUMATICS, INCORPORATED
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Numatics, Incorporated annual report on Form
10-K for the year ended December 31, 1999.
The Financial Accounting Standards Board issued "Statements of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities." The Company plans to adopt this statement on January 1, 2001 with
no material effect on the Company's financial statements.
In December 1999, the SEC staff issued Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements. This bulletin has no effect on the
Company's financial statements.
2. COMPREHENSIVE INCOME
The components of comprehensive income for three-month and nine-month periods
ended September 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net earnings $ 44,083 $ 977,852 $1,230,537 $1,038,699
Foreign currency
translation adjustments (113,229) (47,639) (125,323) 336,867
---------- ---------- ---------- ----------
$ (69,146) $ 930,213 $1,105,214 $1,375,566
</TABLE>
4
<PAGE>
NUMATICS, INCORPORATED
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2000
The components of accumulated comprehensive income at September 30, 2000 and
December 31, 1999 are as follows:
9/30/2000 12/31/1999
---------- -----------
Foreign currency translation adjustments $ (408,617) $ (283,294)
========== ===========
3. SEGMENT AND GEOGRAPHIC INFORMATION
The Company reports its segments based on geographic area. The operating
segments' accounting policies are consistent with those described in Note 1.
Financial information, summarized by geographic area, is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales
North America $30,798,259 $30,350,822 $ 96,117,441 $ 87,798,087
International 5,798,275 4,898,954 17,182,633 15,896,323
------------ ------------ ------------ ------------
$36,596,534 $35,249,776 $113,300,074 $103,694,410
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Operating income (loss)
North America $ 4,855,186 $ 5,280,010 $ 15,977,074 $ 15,427,084
International 339,124 (146,701) 939,121 (306,922)
------------ ------------ ------------ ------------
$ 5,194,310 $ 5,133,309 $ 16,916,195 $ 15,120,162
</TABLE>
5
<PAGE>
NUMATICS, INCORPORATED
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2000
4. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
The $115 million of 9 5/8 % senior subordinated notes issued by Numatics,
Incorporated in 1998 are guaranteed by the Company's United States subsidiaries
in which it owns 100 % of the voting stock. Each of the Guarantor Subsidiaries
has fully and unconditionally guaranteed, on a joint and several basis, the
obligation to pay principal, premium, if any, and interest on the Notes.
The following supplemental consolidating condensed financial statements present:
1. Consolidating condensed balance sheets as of September 30, 2000 and December
31, 1999, consolidating condensed statements of operations for the three and
nine month periods ended September 30, 2000 and 1999 and consolidating condensed
statements of cash flows for the nine months ended September 30, 2000 and 1999.
2. Numatics, Incorporated (the Parent), combined Guarantor Subsidiaries and
combined Non-Guarantor Subsidiaries (consisting of the Parent's foreign
subsidiaries).
3. Elimination entries necessary to consolidate the Parent and all of its
subsidiaries.
Management does not believe that separate financial statements of the Guarantor
Subsidiaries are material to investors. Therefore, separate financial
statements and other disclosures concerning the Guarantor Subsidiaries are not
presented.
6
<PAGE>
NUMATICS, INCORPORATED
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2000
4. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (continued)
BALANCE SHEET
September 30, 2000
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trade receivables $ 15,094,814 $2,474,697 $ 8,604,041 $ - $ 26,173,552
Inventories 22,507,006 4,674,050 12,237,145 (1,213,000) 38,205,201
Other 3,359,073 535,783 1,583,273 - 5,478,129
--------------------------------------------------------------------------
Total current assets 40,960,893 7,684,530 22,424,459 (1,213,000) 69,856,882
Goodwill, net of accumulated amortization 1,361,592 - 2,700,460 1,403,675 5,465,727
Other 20,882,378 40,573 696,897 (11,605,609) 10,014,239
Intercompany amounts 25,166,356 540,243 3,669,241 (29,375,840) -
Property, plant and equipment, net of
accumulated depreciation 27,148,846 1,108,348 4,444,400 - 32,701,594
--------------------------------------------------------------------------
$115,520,065 $9,373,694 $33,935,457 $(40,790,774) $118,038,442
==========================================================================
Accounts payable and accrued expenses $ 11,399,781 $1,099,587 $ 2,947,646 - $ 15,447,014
Compensation and employee benefits 2,988,846 157,256 1,281,060 - 4,427,162
Current portion of long-term debt 2,804,801 - 522,346 - 3,360,147
Other 707,154 (766) 661,599 - 1,367,987
--------------------------------------------------------------------------
Total current liabilities 17,900,582 1,256,077 5,445,651 - 24,602,310
Long-term debt less current portion 153,444,895 277,024 5,809,505 - 159,531,424
Other 5,959,464 - - 734,431 6,693,895
Intercompany amounts 11,424,487 4,429,812 13,521,541 (29,375,840) -
Accumulated earnings (deficiency) (73,209,363) 3,410,781 9,158,760 (12,149,365) (72,789,187)
--------------------------------------------------------------------------
$115,520,065 $9,373,694 $33,935,457 $(40,790,774) $118,038,442
==========================================================================
</TABLE>
BALANCE SHEET
December 31, 1999
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trade receivables $ 12,880,427 $2,837,294 $ 8,246,474 $ - $ 23,964,195
Inventories 19,558,547 4,752,589 12,404,449 (1,338,000) 35,377,585
Other 3,237,081 620,917 1,510,413 - 5,368,411
-------------------------------------------------------------------------
Total current assets 35,676,055 8,210,800 22,161,336 (1,338,000) 64,710,191
Goodwill, net of accumulated amortization 1,429,281 - 3,123,842 1,570,373 6,123,496
Other 19,611,630 40,172 178,188 (9,323,182) 10,506,808
Intercompany amounts 25,530,618 466,158 4,234,758 (30,231,534) -
Property, plant and equipment, net of
accumulated depreciation 27,343,326 959,693 4,909,074 - 33,212,093
-------------------------------------------------------------------------
$109,590,910 $9,676,823 $34,607,198 $(39,322,343) $114,552,588
-------------------------------------------------------------------------
Accounts payable and accrued expenses $ 10,313,402 $1,287,689 $ 3,337,633 - $ 14,938,724
Compensation and employee benefits 3,072,524 158,014 1,384,185 - 4,614,723
Current portion of long-term debt 2,843,227 - 571,424 - 3,414,651
Other 392,003 80,034 108,676 - 580,713
-------------------------------------------------------------------------
Total current liabilities 16,621,156 1,525,737 5,401,918 - 23,548,811
Long-term debt less current portion 152,003,109 354,414 6,620,049 - 158,977,572
Other 5,173,025 - 63,595 683,986 5,920,606
Intercompany amounts 9,460,130 4,628,788 16,142,616 (30,231,534) -
Accumulated earnings (deficiency) (73,666,510) 3,167,884 6,379,020 (9,774,795) (73,894,401)
-------------------------------------------------------------------------
$109,590,910 $9,676,823 $34,607,198 $(39,322,343) $114,552,588
=========================================================================
</TABLE>
7
<PAGE>
NUMATICS, INCORPORATED
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2000
4. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (continued)
STATEMENT OF OPERATIONS
Three Months Ended September 30, 2000
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 26,235,086 $ 4,746,430 $ 12,676,018 $ (7,061,000) $ 36,596,534
Costs and expenses 22,047,199 4,725,032 11,649,427 (7,019,434) 31,402,224
----------------------------------------------------------------------
Operating income 4,187,887 21,398 1,026,591 (41,566) 5,194,310
Interest and other 4,330,655 3,246 801,887 14,439 5,150,227
----------------------------------------------------------------------
Net income (loss) $ (142,768) $ 18,152 $ 224,704 $ (56,005) $ 44,083
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
Three Months Ended September 30, 1999
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 25,588,272 $ 4,928,220 $ 11,751,284 $ (7,018,000) $ 35,249,776
Costs and expenses 21,271,950 4,385,115 11,369,730 (6,910,328) 30,116,467
---------------------------------------------------------------------
Operating income 4,316,322 543,105 381,554 (107,672) 5,133,309
Interest and other 3,852,929 226,479 14,679 61,370 4,155,457
---------------------------------------------------------------------
Net income $ 463,393 $ 316,626 $ 366,875 $ (169,042) $ 977,852
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2000
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 81,890,997 $ 14,594,971 $ 38,946,106 $ (22,132,000) $ 113,300,074
Costs and expenses 68,423,059 14,169,910 35,881,212 (22,090,302) 96,383,879
-----------------------------------------------------------------------
Operating income 13,467,938 425,061 3,064,894 (41,698) 16,916,195
Interest and other 13,019,544 182,161 2,433,509 50,444 15,685,658
-----------------------------------------------------------------------
Net income $ 448,394 $ 242,900 $ 631,385 $ (92,142) $ 1,230,537
=======================================================================
</TABLE>
STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 74,011,537 $ 14,034,862 $ 35,825,011 $ (20,177,000) $ 103,694,410
Costs and expenses 61,225,436 12,806,590 34,344,206 (19,801,984) 88,574,248
-----------------------------------------------------------------------
Operating income 12,786,101 1,228,272 1,480,805 (375,016) 15,120,162
Interest and other 12,122,247 483,053 1,334,656 141,507 14,081,463
-----------------------------------------------------------------------
Net income $ 663,854 $ 745,219 $ 146,149 $ (516,523) $ 1,038,699
=======================================================================
</TABLE>
8
<PAGE>
NUMATICS, INCORPORATED
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2000
4. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (continued)
STATEMENT OF CASH FLOWS
Nine Months ended September 30, 2000
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities $ 1,886,026 $ 523,132 $ 275,396 $ - $ 2,684,554
Cash flows from investing activities:
Capital expenditures (3,137,950) (355,838) (539,923) - (4,033,711)
Other investments 227,596 (400) (9,036) - 218,160
-----------------------------------------------------------------------
Net cash used in investing activities (2,910,354) (356,238) (548,959) - (3,815,551)
Cash flows from financing activities:
Proceeds from borrowing 1,529,901 - (22,693) - 1,507,208
Debt repayments (370,128) (77,390) - - (447,518)
Other (1) - (63,925) (126,633) (190,559)
-----------------------------------------------------------------------
Net cash provided by (used in) financing 1,159,772 (77,390) (86,618) (126,633) 869,131
activities
Intercompany accounts (220,961) (273,062) 367,390 126,633 -
-----------------------------------------------------------------------
Net increase (decrease) in cash (85,517) (183,558) 7,209 - (261,866)
Cash and equivalents at beginning of year 116,240 531,357 904,466 - 1,552,063
-----------------------------------------------------------------------
Cash and equivalents at end of period $ 30,723 $ 347,799 $ 911,675 $ - $ 1,290,197
=======================================================================
</TABLE>
STATEMENT OF CASH FLOWS
Nine Months ended September 30, 1999
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating $ 5,790,127 $ 343,301 $ 281,558 $ - $ 6,414,986
activities
Cash flows from investing activities:
Capital expenditures (4,219,069) (324,784) (680,173) - (5,224,026)
Other investments (490,984) 73,416 9,082 - (408,486)
-----------------------------------------------------------------------
Net cash used in investing activities (4,710,053) (251,368) (671,091) - (5,632,512)
Cash flows from financing activities:
Debt repayments (760,290) - 71,943 - (688,347)
Debt issuance costs - - 63,235 - 63,235
Other - - (19,134) (117,195) (136,329)
-----------------------------------------------------------------------
Net cash provided by (used in) financing (760,290) - 116,044 (761,441)
activities (117,195)
Intercompany accounts (274,056) 27,465 129,396 117,195 -
-----------------------------------------------------------------------
Net increase (decrease) in cash 45,728 119,398 (144,093) - 21,033
Cash and equivalents at beginning of year 111,493 133,587 941,002 - 1,186,082
-----------------------------------------------------------------------
Cash and equivalents at end of period $ 157,221 $ 252,985 $ 796,909 $ - $ 1,207,115
=======================================================================
</TABLE>
9
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Three Months Ended September 30, 2000 Compared With Three Months Ended
September 30, 1999
Net Sales. Net sales of $36.6 million for the three months ended September 30,
2000 were 3.8% higher than the $35.2 million in the same period of 1999. Net
sales of traditional valve products increased 3.3% or $0.6 million while net
sales of cylinder products increased 14.4% or $0.7 million and other sales
remained constant. North American sales increased 1.5% or $0.4 million and
international sales increased 18.4% or $0.9 million.
Gross Profit. Gross profit was $13.7 million, or 37.4% of net sales, for the
three months ended September 30, 2000 compared with $13.1 million, or 37.1% of
net sales, in the same period of 1999. This increase resulted from volume
efficiencies on the increased sales.
Marketing, Engineering, General and Administrative. Marketing, engineering,
general and administrative expenses were $8.4 million for the three months ended
September 30, 2000, $0.6 million higher than the same period in 1999. The
implementation of a new enterprise-wide computer system at the U.S. Valves and
FRL divisions in the first quarter, 2000 accounted for the majority of the
increase. Incremental ongoing costs related to this implementation were
approximately $0.3 million per quarter. Additionally, the Company incurred
approximately $0.1 million in one-time costs related to the implementation and
enhancements to the system this quarter.
Operating Income. Operating income for the three months ended September 30,
2000 was $5.2 million compared to $5.1 million in the same period in 1999. This
$0.1 million increase was primarily due to the increased sales for the period,
offset by higher marketing, engineering, general and administrative expenses.
Operating income in North America decreased $0.4 million, or 8.0%, and the
international segment's operating income increased $0.5 million.
Interest and Other Financing Expenses. Interest expense increased $0.2 million
to $4.2 million in the third quarter of 2000 from $4.0 million in 1999 as a
result of the general increase in interest rates.
Other Expense. Other expense of $0.6 million for the three months ended
September 30, 2000 was attributable to unrealized foreign exchange losses which
resulted from the strengthening of the U.S. dollar against major foreign
currencies, compared to an unrealized foreign exchange gain of $0.4 million for
the three months ended September 30, 1999.
10
<PAGE>
Net Income. Due to the factors discussed above, net income decreased $0.9
million, to near break-even during the three months ended September 30, 2000
from $1.0 million in the third quarter of 1999.
Nine Months Ended September 30, 2000 Compared With Nine Months Ended
September 30, 1999
Net Sales. Net sales of $113.3 million for the nine months ended September 30,
2000 were 9.3% higher than the $103.7 million in the same period of 1999
principally due to the rebound of the pneumatic market and product and market
expansions. Net sales of traditional valve products increased 4.8% or $2.8
million while net sales of other products increased 9.7% or $3.0 million and
cylinder sales increased 26.4% or $3.8 million. North American sales increased
9.5% or $8.3 million and international sales increased 8.1% or $1.3 million.
Gross Profit. Gross profit was $43.1 million, or 38.0% of net sales, for the
nine months ended September 30, 2000 compared with $39.1 million, or 37.7% of
net sales, in the same period of 1999. Efficiencies related to the increased
sales level contributed to this improvement in gross margin.
Marketing, Engineering, General and Administrative. Marketing, engineering,
general and administrative expenses were $25.8 million for the nine months ended
September 30, 2000, $2.2 million higher than the $23.6 million in the same
period of 1999. This increase was primarily attributable to expanded marketing
programs, professional fees, and costs associated with the implementation of a
new enterprise-wide computer system at the U.S. Valves and FRL divisions in the
first quarter, 2000. Incremental ongoing costs related to the computer system
were $1.0 million while incremental one-time costs for implementation and
enhancements to the system were $0.6 million
Operating Income. Operating income for the nine months ended September 30, 2000
was $16.9 million compared to $15.1 million in the same period in 1999. This
$1.8 million increase was primarily due to the increased sales levels.
Operating income in North America increased $0.6 million, or 3.6%, while the
international segment's operating income increased $1.2 million.
Interest and Other Financing Expenses. Interest expense increased $0.6 million
to $12.6 million in the first nine months of 2000 from $12.0 million in 1999 as
a result of the general increase in interest rates.
Other Expense. Other expense of $1.6 million for the nine months ended
September 30, 2000 was attributable to unrealized foreign exchange losses, which
resulted from the strengthening of the U.S. dollar against major foreign
currencies, compared to $0.9 million in the nine months ended September 30,
1999.
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Net Income. Due to the factors discussed above, net income increased $0.2
million, to $1.2 million during the nine months ended September 30, 2000 from
$1.0 million in the first nine months of 1999.
Liquidity and Capital Resources
Historically, the Company has utilized cash from operations and borrowings under
its credit facilities to satisfy its operating and capital needs and to service
its indebtedness.
Working capital was $45.3 million at September 30, 2000 compared to $41.2
million at December 31, 1999. The increase was primarily attributable to a $2.2
million increase in accounts receivable and a $2.8 million increase in
inventories, offset by a $0.8 million increase in the liability for income and
single business tax. Total assets were $118.0 million at September 30, 2000
compared to $114.6 million at December 31, 1999. This increase was mainly due
to the changes in accounts receivable and inventory mentioned above.
Total debt outstanding was $162.8 million at September 30, 2000 compared to
$162.4 million at December 31, 1999. This increase was used primarily to fund
the increases in the Company's working capital. The Company estimates that the
borrowing base limitations would have limited the Company's revolving credit
availability to approximately $34.4 million as of September 30, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the information that would be provided
under Item 305 of Regulation S-K from the end of the preceding fiscal year to
September 30, 2000.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Description
------- -----------
10.8.1 Numatics, Incorporated Incentive Plan adopted June 29, 2000 **
61,000 shares offered at $17.50, 4 year vesting
10.8.2 Form of Stock Transfer Agreement referred to in Incentive Plan **
27 Financial Data Schedule
** Indicates contract or compensatory plan or arrangement with one
or more Numatics executive officers and/or directors
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the three months
ended September 30, 2000.
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.
NUMATICS, INCORPORATED
By: /s/ Robert P. Robeson
---------------------------------
Robert P. Robeson
Vice President, Treasurer and
Chief Financial Officer
Date: November 7, 2000
------------------------------
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