<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- --------------------
Commission File Number: 001-13581
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NOBLE INTERNATIONAL, LTD.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-3139487
--------------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
20101 Hoover Rd., Detroit, MI 48205
-----------------------------------
(Address of principal executive offices)
(Zip Code)
(313) 245-5600
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(Registrant's telephone number, including area code)
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(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
--- ---
The number of shares of the registrant's common stock, $.001 par value,
outstanding as of June 30, 2000 was 7,115,279.
<PAGE> 2
NOBLE INTERNATIONAL, LTD.
FORM 10-Q INDEX
This report contains "forward looking statements" within the meaning of Section
27A of the Securities Act of 1933 and is subject to the safe harbor created by
that section. Statements regarding future operating performance, new programs
expected to be launched and other future prospects and developments are based
upon current expectations and involve certain risks and uncertainties that could
cause actual results and developments to differ materially. Potential risks and
uncertainties include such factors as demand for the company's products,
pricing, the company's growth strategy, including its ability to consummate and
successfully integrate future acquisitions, industry cyclicality and
seasonality, the company's ability to continuously improve production
technologies, activities of competitors and other risks detailed in the
company's Annual Report on Form 10-K for the year ended December 31, 1999 and
other filings with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION....................................................................................3
Item 1. Financial Statements.....................................................................................3
Consolidated Balance Sheets as of June 30, 2000
(unaudited) and December 31, 1999........................................................................3
Consolidated Statements of Earnings (unaudited) for the
Three Month and Six Month Periods Ended June 30, 2000 and 1999...........................................4
Consolidated Statements of Cash Flows (unaudited) for the
Six Month Periods Ended June 30, 2000 and 1999...........................................................5
Consolidated Statements of Comprehensive Income (unaudited)
for the Three Month and Six Month Periods Ended June 30, 2000 and 1999...................................6
Notes to Consolidated Interim Financial Statements.......................................................7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.............................................13
PART II - OTHER INFORMATION......................................................................................14
Item 1. Legal Proceedings......................................................................................14
Item 2. Changes in Securities and Use of Proceeds..............................................................14
Item 3. Defaults Upon Senior Securities........................................................................14
Item 4. Submission of Matters to a Vote of Security Holders....................................................14
Item 5. Other Information......................................................................................14
Item 6. Exhibits and Reports on Form 8-K.......................................................................14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE INTERNATIONAL, LTD.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 2000 1999
--------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 42 $ 685
Accounts receivable, trade 17,670 14,088
Inventories 6,004 6,919
Prepaid expenses and other assets 761 1,789
Income taxes currently refundable -- 1,438
Deferred income taxes 248 258
Net assets of discontinued operations 1,344 67,210
--------- ---------
Total Current Assets 26,069 92,387
PROPERTY, PLANT AND EQUIPMENT, NET 58,970 54,628
OTHER ASSETS
Goodwill 23,969 24,716
Covenants not to compete 882 981
Sundry 1,505 2,093
--------- ---------
Total Other Assets 26,356 27,790
--------- ---------
$ 111,395 $ 174,805
========= =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 515 $ 778
Current maturities of notes payable - related parties -- 5,000
Accounts payable 10,065 9,784
Accrued liabilities 3,203 4,846
Income taxes payable 4,042 --
--------- ---------
Total Current Liabilities 17,825 20,408
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES 18,256 86,915
CONVERTIBLE SUBORDINATED DEBENTURES 16,475 21,536
JUNIOR SUBORDINATED NOTES 3,359 3,359
DEFERRED INCOME TAXES 2,458 2,221
REDEEMABLE PREFERRED STOCK 475 513
SHAREHOLDERS' EQUITY
Preferred stock, $100 par value, 10% cumulative,
authorized 150,000 shares -- --
Paid-in capital - warrants, $10 per common share exercise
price, 90,000 warrants outstanding 121 121
Common stock, $.001 par value, authorized 20,000,000
shares, issued and outstanding 7,241,698 and 7,115,279
shares in 1999 and 2000, respectively 26,565 27,993
Retained earnings 26,182 12,005
Accumulated comprehensive loss (321) (266)
--------- ---------
52,547 39,853
--------- ---------
$ 111,395 $ 174,805
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
<PAGE> 4
NOBLE INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2000 1999 2000 1999
-------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 23,271 $ 21,327 $ 48,335 $ 42,317
Cost of goods sold 16,118 13,847 33,131 27,121
----------- ----------- ----------- -----------
Gross profit 7,153 7,480 15,204 15,196
Selling, general and
administrative expenses 3,889 4,175 7,759 8,298
----------- ----------- ----------- -----------
Operating profit 3,264 3,305 7,445 6,898
Other income (expense)
Interest income -- -- 3 --
Interest (expense) (412) (334) (927) (866)
Sundry, net (27) (32) (17) 158
----------- ----------- ----------- -----------
(439) (366) (941) (708)
Earnings from continuing operations before income taxes
----------- ----------- ----------- -----------
and extraordinary item 2,825 2,939 6,504 6,190
Income tax expense 1,086 1,076 2,457 2,305
----------- ----------- ----------- -----------
Net earnings from continuing operations before
extraordinary item 1,739 1,863 4,047 3,885
Preferred stock dividends 13 18 27 35
Net earnings from continuing operations on common shares
----------- ----------- ----------- -----------
before extraordinary item 1,726 1,845 4,020 3,850
Net earnings (loss) from discontinued operations -- 446 (115) 1,251
Gain on sale of discontinued operations
(less income tax of $6,660) -- -- 11,200 --
----------- ----------- ----------- -----------
Net earnings before extraordinary item 1,726 2,291 15,105 5,101
Extraordinary item - loss from extinguishment of debt
(less income tax of $203) -- -- (394) --
Net earnings on common shares $ 1,726 $ 2,291 $ 14,711 $ 5,101
=========== =========== =========== ===========
BASIC EARNINGS PER COMMON SHARE:
Earnings per common from continuing operations
before extraordinary item $ 0.24 $ 0.26 $ 0.56 $ 0.54
----------- ----------- ----------- -----------
Earnings per common share - discontinued operations $ -- $ 0.06 $ 1.53 $ 0.17
----------- ----------- ----------- -----------
Extraordinary item - loss from extinguishment of debt $ -- $ -- $ (0.06) $ --
----------- ----------- ----------- -----------
Earnings per common share $ 0.24 $ 0.32 $ 2.03 $ 0.71
----------- ----------- ----------- -----------
Dividends declared and paid $ 0.075 $ -- $ 0.075 $ --
----------- ----------- ----------- -----------
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Net earnings from continuing operations and before
extraordinary item $ 1,726 $ 1,845 $ 4,020 $ 3,850
Proforma reduction in interest on convertible debentures 186 157 248 157
----------- ----------- ----------- -----------
Proforma net earnings from continuing operations before
extraordinary item 1,912 2,002 4,268 4,007
Net earnings (loss) from discontinued operations -- 446 (115) 1,251
Gain on sale of discontinued operations
(less income tax of $6,660) -- -- 11,200 --
----------- ----------- ----------- -----------
Proforma net earnings before extraordinary item 1,912 2,448 15,353 5,258
Extraordinary item - loss from extinguishment of debt
(less income tax of $203) -- -- (394) --
----------- ----------- ----------- -----------
Proforma net earnings on common shares assuming dilution $ 1,912 $ 2,448 $ 14,959 $ 5,258
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Earnings per common from continuing operations before
extraordinary item $ 0.23 $ 0.23 $ 0.52 $ 0.50
----------- ----------- ----------- -----------
Earnings per common share - discontinued operations $ -- $ 0.06 $ 1.35 $ 0.16
----------- ----------- ----------- -----------
Extraordinary item - loss from extinguishment of debt $ -- $ -- $ (0.05) $ --
----------- ----------- ----------- -----------
Earnings per common share $ 0.23 $ 0.29 $ 1.82 $ 0.66
----------- ----------- ----------- -----------
Basic weighted average common shares outstanding 7,170,938 7,177,998 7,202,494 7,168,612
----------- ----------- ----------- -----------
Diluted weighted average common shares and equivalents 8,547,741 8,511,264 8,199,420 8,006,052
----------- ----------- ----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
4
<PAGE> 5
NOBLE INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings from continuing operations $ 3,653 $ 3,885
Adjustments to reconcile net earnings to
net cash provided by operations
Interest paid in kind 354 313
Depreciation of property, plant and equipment 2,711 2,193
Amortization of goodwill 1,058 1,005
Deferred income taxes 247 599
Changes in operating assets and liabilities, net of business acquisition
Increase in accounts receivable (2,292) (1,694)
Decrease (increase) in inventories 915 (355)
Decrease in prepaid expenses 1,028 116
Decrease in other assets 1,434 265
Increase (decrease) in accounts payable (257) 2,646
Increase in income taxes payable 1,945 69
Decrease in accrued liabilities (1,643) (1,315)
-------- --------
Net cash provided by continuing operations 9,153 7,727
Net cash used by discontinued operations (115) (13,878)
Net cash from sale of discontinued operations 80,689 --
-------- --------
Net cash provided (used) by operations 89,727 (6,151)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (7,053) (6,936)
-------- --------
Net cash (used in) investing activities (7,053) (6,936)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable - related parties (5,000) (1,111)
Capital lease payments (25) (162)
Net proceeds used for redemption of common stock (1,428) 181
Redemption of convertible subordinated debentures (5,688) --
Redemption of redeemable preferred stock -- (75)
Dividends paid (561) (35)
Redemption of preferred stock of subsidiary -- --
Payments on long-term debt (2,159) (366)
Net proceeds (repayments) on note payable to bank (68,456) 14,941
-------- --------
Net cash provided (used) by financing activities (83,317) 13,373
Effect of exchange rate changes on cash -- --
-------- --------
Net decrease in cash (643) 286
Cash at beginning of period 685 810
-------- --------
Cash at end of period $ 42 $ 1,096
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for:
Interest $ 1,107 $ 856
======== ========
Taxes $ 3,886 $ 1,461
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
5
<PAGE> 6
NOBLE INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings $ 1,726 $ 2,291 $ 14,711 $ 5,101
Other comprehensive loss,
equity adjustment from foreign currency translation (34) (82) (55) (21)
-------- -------- -------- --------
Comprehensive income $ 1,692 $ 2,209 $ 14,656 $ 5,080
======== ======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
6
<PAGE> 7
NOBLE INTERNATIONAL, LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited 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 Rule 10-01 of
Regulation S-X. Accordingly, the financial statements 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
considered necessary for a fair presentation have been included and such
adjustments are of a normal recurring nature.
The accompanying consolidated interim financial statements as of and for the six
months ended June 30, 2000 and for the period ended December 31, 1999, include
Noble International, Ltd. and its wholly-owned subsidiaries, Noble Component
Technologies, Inc. ("NCT"); Monroe Engineering Products, Inc. ("Monroe"), Cass
River Coating, Inc. (dba Vassar Industries, "Vassar"), Skandy Corp. ("Skandy"),
Utilase Production Process, Inc. ("UPP"), Noble Metal Forming, Inc. ("NMF"),
Noble Metal Processing, Inc. ("NMP"), Noble Land Holdings, Inc. ("Land
Holdings"), Noble Canada, Inc. ("Noble Canada"), Noble Canada Holdings Limited
("NCH"), Tiercon Plastics, Inc. ("TPI"), Noble Components & Systems, Inc.
("NCS"), Noble Technologies, Inc. ("NTI"), Noble Metal Processing Canada, Inc.
("NMPC"), Noble Canada II, Inc. ("Noble Canada II"), Tiercon Coatings, Inc.
("TCI"), Noble Metal Processing-Midwest, Inc. ("NMPW"), and Noble Canada
Holdings II Ltd. ("NCHII") and Tiercon Industries, Inc. ("Tiercon")
(collectively, "Noble" or the "Company"). On July 31, 1999 TPI, TCI and Noble
Canada II were amalgamated with and into Tiercon. Simultaneously, NCH, NCHII and
Noble Canada were amalgamated with and into Noble Canada. TPI and TCI continued
to operate as separate divisions of Tiercon. All significant intercompany
balances and transactions have been eliminated in consolidation.
Discontinued operations include all of the companies previously classified as
the Company's plastics and coatings industry segment (Noble Canada, Tiercon,
NCT, and Vassar). On December 24, 1999 the Company executed a definitive
agreement to sell these operations and the sale was completed on January 11,
2000 (Note B). Results of these operations are reported as discontinued
operations in the Consolidated Financial Statements for all periods presented.
The assets and liabilities of these operations have been reported in the
Consolidated Balance Sheet as net assets of discontinued operations.
Results for interim periods should not be considered indicative of results for a
full year. The year-end consolidated balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
During the six months ended June 30, 2000, the Company redeemed $5.688 million
of its 6% Convertible Subordinated Debentures. The unamortized portion of
issuance costs related to the redeemed debentures together with premium and
certain transaction costs were accordingly expensed and are reported as an
extraordinary item.
NOTE B - SALE OF PLASTICS AND COATINGS SEGMENT
On January 11, 2000 the Company completed the sale of all of the outstanding
capital stock of its subsidiary, Noble Canada, including Noble Canada's
wholly-owned subsidiary Tiercon (the sale of Noble Canada and Tiercon is
hereinafter referred to as the ("Tiercon Sale"). In addition, as part of the
7
<PAGE> 8
Tiercon Sale, the Company through its wholly owned subsidiary NCS, sold all of
the outstanding capital stock of NCS's wholly owned subsidiaries Vassar and NCT.
The sales price for Noble Canada, Vassar and NCT was approximately $83.270
million in cash, plus the conversion of 137,938 shares of the preferred stock of
Noble Canada into common stock of Noble Canada (the preferred shares of Noble
Canada were exchangeable into common stock of the Company). The Company retained
certain real property previously owned by Vassar, valued at approximately $.839
million, and $1.8 million of accounts receivable of Tiercon. In addition, the
aggregate sales price for the Tiercon Sale is subject to adjustment based on the
working capital of Tiercon, Vassar and NCT. Pursuant to terms of the agreement,
the final purchase price adjustment will be made subject to post closing
requirements.
NOTE C--INVENTORIES
Inventories at June 30, 2000 and December 31, 1999 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------ ------
<S> <C> <C>
Raw materials and purchased parts $1,374 $2,437
Work in process 825 649
Finished goods 2,335 2,607
Unbilled customer tooling 1,470 1,226
------ ------
$6,004 $6,919
</TABLE>
NOTE D--INDUSTRY SEGMENTS
The Company classifies its operating subsidiaries into two industry segments
based on types of products and services: metals processing (NMP, NMPC, NMPW,
NMF, UPP and Land Holdings) and distribution (Monroe). The metal processing
group provides a variety of laser welding, metal blanking, forming, slitting,
cutting and die construction products and services utilizing proprietary laser
weld and light die technology. The metal processing group sells direct to
automotive OEM's and Tier I suppliers. Monroe distributes tooling components.
Transactions between the metal processing and distribution segments are not
significant and have been eliminated. Interest expense is allocated to each
segment based on the segments actual borrowings from the corporate headquarters,
together with a partial allocation of corporate general and administrative
expenses. Revenues from external customers are identified geographically based
on the customer's shipping destination.
The Company's operations by business segment for the six months ended June 30,
2000 follows (in thousands):
<TABLE>
<CAPTION>
METAL SEGMENT
PROCESSING DISTRIBUTION TOTALS
---------- ------------ ----------
<S> <C> <C> <C>
Revenues from external customers $ 46,162 $ 2,173 $ 48,335
Interest income - - -
Interest expense 2,924 61 2,985
Depreciation and amortization 3,331 146 3,477
Segment profit pre tax 5,104 504 5,608
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Segment assets 100,832 6,451 107,283
Expenditure for segment assets 7,053 29 7,082
</TABLE>
RECONCILIATION TO CONSOLIDATED AMOUNTS
<TABLE>
<S> <C>
EARNINGS
Total earnings for reportable segments $ 5,608
Unallocated corporate headquarters expense 896
--------
Earnings from continuing operations before income
taxes and extraordinary item $ 6,504
========
ASSETS
Total assets for reportable segments $107,283
Net assets of discontinued operations 1,344
Corporate headquarters 2,768
--------
Total consolidated assets $111,395
========
</TABLE>
OTHER SIGNIFICANT ITEMS
<TABLE>
<CAPTION>
SEGMENT CONSOLIDATED
TOTALS ADJUSTMENTS TOTALS
---------- ------------ -------------
<S> <C> <C> <C>
Interest expense $ 2,985 $ (2,058) $ 927
Expenditures for segment assets 7,082 (29) 7,053
Depreciation and amortization 3,477 292 3,769
</TABLE>
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
LONG-LIVED
REVENUES ASSETS
-------- ----------
<S> <C> <C>
United States $39,164 $80,762
Canada 9,123 2,177
Mexico 48 --
------- -------
Total $48,335 $82,939
======= =======
</TABLE>
The Company's operations by business segment for the six months ended June 30,
1999 follows (in thousands):
<TABLE>
<CAPTION>
METAL SEGMENT
PROCESSING DISTRIBUTION TOTALS
---------- ------------ ----------
<S> <C> <C> <C>
Revenues from external customers $ 40,254 $ 2,063 $ 42,317
Interest expense 2,373 103 2,476
Depreciation and amortization 2,848 142 2,990
Segment profit pre tax 5,043 522 5,565
Segment assets 87,109 6,764 93,873
Expenditure for segment assets 6,872 6 6,878
</TABLE>
9
<PAGE> 10
RECONCILIATION TO CONSOLIDATED AMOUNTS
<TABLE>
<S> <C>
EARNINGS
Total earnings for reportable segments $ 5,565
Unallocated corporate headquarters expense 625
--------
Earnings from continuing operations before income
taxes and extraordinary item $ 6,190
========
ASSETS
Total assets for reportable segments $ 93,873
Net assets of discontinued operations 58,644
Corporate headquarters 4,953
--------
Total consolidated assets $157,470
========
</TABLE>
OTHER SIGNIFICANT ITEMS
<TABLE>
<CAPTION>
SEGMENT CONSOLIDATED
TOTALS ADJUSTMENTS TOTALS
---------- ----------- ----------
<S> <C> <C> <C>
Interest expense $ 2,476 $ (1,610) $ 866
Expenditures for segment assets 6,878 58 6,936
Depreciation and amortization 2,990 208 3,198
</TABLE>
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
LONG-LIVED
REVENUES ASSETS
------------ ------------
<S> <C> <C>
United States $ 34,113 $ 70,686
Canada 7,126 2,217
Mexico 1,078
------------ -----------
Total $ 42,317 $ 72,903
============ ===========
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
NET SALES. Net sales for the three months ended June 30, 2000 increased
9.1% to $23.271 million from $21.327 million for the comparable quarter of 1999.
The increase in sales is substantially due to higher sales arising from
acquisition of the Jebco assets in August 1999 (the "Jebco Acquisition"). Net
sales for the six months ended June 30, 2000 increased 14.2% to $48.335 million
from $42.317 million for the comparable period of 1999. The increase in sales is
substantially due to higher laser welded blank sales at NMP, increased steel
processing at NMPW and sales arising from the Jebco Acquisition.
COST OF GOODS SOLD. As a percent of net sales, cost of goods sold for
the three month period ended June 30, 2000 increased to 69.3% as compared with
64.9% for the prior year period. As a percent of net sales, cost of goods sold
for the six month period ended June 30, 2000 increased to 68.5% as compared with
64.1% for the prior year period. The increase in cost of goods sold as a percent
of net sales for the three months and six months ended June 30, 2000 is
primarily due to higher material cost required to produce certain new business,
including sales arising from the Jebco Acquisition, and the inclusion of costs
for certain plant personnel previously reported in selling, general and
administrative expenses. The increase in cost of goods sold as a percent of net
sales for the three months ended June 30, 2000 was also impacted by certain
costs associated with the new metals Processing facility in Shelbyville,
Kentucky.
GROSS PROFIT. The Company's gross profit decreased by 4.4% to $7.153
million for the three months ended June 30, 2000 from $7.480 million for the
comparable period of 1999. For the six months ended June 30, 2000, the Company's
gross profit increased by .1% to $15.204 million from $15.196 million for the
comparable period of 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $.286 million, or 6.9% for the three month
period ended June 30, 2000 as compared to the comparable period of 1999. For the
six months ended June 30, 2000, selling, general and administrative expenses
decreased by $.539 million, or 6.5% for the six month period ended June 30, 2000
as compared to the comparable period of 1999. The decrease in selling, general
and administrative expenses was due primarily to reductions in overhead expenses
and the reclassification of costs for certain plant personnel to cost of goods
sold for the three months and six months ended June 30, 2000.
OPERATING PROFIT. As a result of the foregoing factors, operating
profit decreased sllightly to $3.264 million for the three months ended June 30,
2000 compared with $3.305 million in the prior period, a decrease of 1.2%.
Operating profit increased to $7.445 million for the six months ended June 30,
2000 compared with $6.898 million in the prior period, a increase of 7.9%.
INTEREST EXPENSE. Interest expense for the three months ended June 30,
2000 increased to $.412 million from $.334 million for the comparable quarter of
the prior year. Interest expense for the six months ended June 30, 2000
increased to $.927 million from $.866 million for the comparable period of the
prior year. The increase in interest expense reflects increases in lending rates
by the Federal Reserve and borrowing for capital expansion.
NET EARNINGS. As a result of the foregoing factors, net earnings from
continuing operations before extraordinary item decreased by $.124 million to
$1.739 million for the three months ended June 30, 2000 from earnings of $1.863
million for the prior period. Net earnings from continuing operations before
extraordinary item increased by $.162 million to $4.047 million for the six
months ended June 30, 2000 from earnings of $3.885 million for the prior period.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash requirements have historically been satisfied
through a combination of cash flow from operations, equipment financing, bank
financing and loans from stockholders. The Company's working capital needs and
capital equipment requirements have increased as a result of the growth of the
Company and are expected to continue to increase as a result of anticipated
growth. The anticipated increase in required working capital and capital
equipment requirements are expected to be met from the cash flow from
operations, equipment financing and revolving credit borrowings. As of June 30,
2000, the Company had working capital of approximately $8.244 million. Working
capital at June 30, 2000, included $1.344 million net assets of discontinued
operations and $4.042 million of income taxes payable, most of which is related
to sale of the discontinued operations. Total debt includes all borrowing
related to both continuing and discontinued operations.
The Company generated cash flow from continuing operations of $9.153
million for the six months ended June 30, 2000. Net cash provided from
continuing operations was primarily the result of net earnings and depreciation
and amortization and lower inventories, prepaid expenses, other assets, income
taxes currently payable, partially offset by higher accounts receivable, lower
accrued liabilities and accounts payable. The Company used cash in discontinued
operations of $.115 million prior to the Tiercon Sale on January 11, 2000 for
the six months ended June 30, 2000. The Company generated cash of $80.689
million during the six months ended June 30, 2000, net of related cash expenses,
from the Tiercon Sale. Cash used in investing activities of $7.053 million for
the six months ended June 30, 2000 was for purchase of property, plant and
equipment. The Company used cash in financing activities of $83.317 million for
the six months ended June 30, 2000. Proceeds from the Tiercon Sale were used to
reduce amounts borrowed under the Company's secured revolving credit facility
(the "Credit Facility") with Comerica Bank, N.A. The Company repaid a $5.000
million term note payable to the Chief Executive Officer of the Company,
redeemed $5.688 million of 6% Convertible Subordinated Debentures and
repurchased $1.428 million of its common shares. The Company declared a dividend
of $.075 per common share with a record date of June 15, 2000, which was paid on
June 30, 2000. Expenditures for property, plant and equipment were primarily to
fund equipment purchases for NMP's new facility in Shelbyville, Kentucky which
was substantially completed by June 2000.
The amount of the Credit Facility was $105 million at December 31,
1999, subsequently amended to a $50 million facility following the Tiercon Sale
and use of $86.0 million cash proceeds to repay borrowings outstanding under the
Credit Facility. The Credit Facility expires in May 2002, is secured by the
assets of Noble and its subsidiaries and provides for the issuance of up to $5
million in standby or documentary letters of credit. The Credit Facility may be
utilized for general corporate purposes, including working capital and
acquisition financing, and provides the Company with borrowing options for
multi-currency loans. Borrowing options include a eurocurrency rate or a base
rate. Advances under the Credit Facility during the three months ended June 30,
2000 bore interest at the rate of approximately 8.4% per annum. The Credit
Facility is subject to customary financial and other covenants including, but
not limited to, limitations on payment of dividends, limitations on
consolidations, mergers, and sales of assets, and bank approval on acquisitions
over $25 million. The Company is in compliance with the terms of the Credit
Facility.
The liquidity provided by the Company's credit facilities, combined
with cash flow from operations and the Tiercon Sale, is expected to be
sufficient to meet the Company's currently anticipated working capital and
capital expenditure needs for at least 12 months. There can be no assurance,
however, that such funds will not be expended prior thereto due to changes in
economic conditions or other unforeseen circumstances, requiring the Company to
obtain additional financing prior to the end of such 12 month period. In
addition, the Company regularly reviews, as part of its business strategy,
future growth through opportunistic acquisitions which may involve the
expenditure of significant funds. Depending upon the nature, size and timing of
future acquisitions, if any, the Company may be required
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to obtain additional debt or equity financing in connection with such future
acquisitions. There can be no assurance, however, that additional financing will
be available to the Company, when and if needed, on acceptable terms or at all.
INFLATION
Inflation generally affects the Company by increasing the interest
expense of floating rate indebtedness and by increasing the cost of labor,
equipment and raw materials. The Company does not believe that inflation has had
a material effect on its business over the past two years.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to the impact of foreign currency fluctuations.
International revenues from the Company's foreign subsidiaries were
approximately 19% of the total revenues for the six months ended June 30, 2000.
The Company's primary foreign currency exposure is the Canadian Dollar. The
Company manages its exposures to foreign currency assets and earnings primarily
by funding certain foreign currency denominated assets with liabilities in the
same currency and, as such, certain exposures are naturally offset.
A portion of the Company's assets are based in its foreign operations
and are translated into U.S. Dollars at foreign currency exchange rates in
effect as of the end of each period, with the effect of such translation
reflected as a separate component of shareholders' equity. Accordingly, the
Company's consolidated shareholders' equity will fluctuate depending on the
weakening or strengthening of the U.S. Dollar against the respective foreign
currency.
The Company's financial results are affected by changes in U.S. and
foreign interest rates. The Company does not hold financial instruments that are
subject to market risk (interest rate risk and foreign exchange risk).
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Inapplicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During February 2000, the Company redeemed $5.688 million of its 6%
Convertible Subordinated Debentures (the "Debentures"), financed with proceeds
from the Company's Credit Facility. The Debentures were sold in July 1998 as
part of the Company's private offering of $20.76 million in principal amount of
Debentures pursuant to Regulation S under the Securities Act of 1933 as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of Stockholders was held on May 5, 2000.
The Company has a staggered Board of Directors, Daniel W. Sampson, Jonathan P.
Rye and Richard K. Mastain were elected to the Company's Board of Directors.
Each of the nominees was an incumbent director. Of the 7,219,698 shares issued,
outstanding and entitled to vote at the Annual Meeting, 6,007,538 shares were
voted in favor of Messrs. Sampson, Rye and Mastain and 291,800 shares were voted
against each.
The ratification of Grant Thornton LLP as independent public
accountants of the Company was also approved, with 6,260,587 shares voted for
approval and 38,750 shares voted against.
ITEM 5. OTHER INFORMATION
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27.1 Financial Data Schedule
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.
NOBLE INTERNATIONAL, LTD.
Dated: August 14, 2000 By:/s/ Daniel W. Sampson
-------------------------
Daniel W. Sampson,
Chief Financial Officer
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
--------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
