<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 September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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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
-----------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(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 September 30, 2000 was 6,902,629.
<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 or
services, 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> <C>
PART I - FINANCIAL INFORMATION................................................................................ 3
Item 1. Financial Statements................................................................................. 3
Consolidated Balance Sheets as of September 30, 2000
(unaudited) and December 31, 1999.................................................................... 3
Consolidated Statements of Earnings (unaudited) for the
Three Month and Nine Month Periods Ended September 30, 2000 and 1999................................ 4
Consolidated Statements of Cash Flows (unaudited) for the
Nine Month Period Ended September 30, 2000 and 1999.................................................. 5
Consolidated Statements of Comprehensive Income (unaudited)
for the Three Month and Nine Month Periods Ended September 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>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
------------------ ------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 509 $ 685
Accounts receivable, trade 21,514 14,088
Inventories 7,129 6,919
Prepaid expenses and other assets 1,727 1,789
Income taxes currently refundable - 1,438
Deferred income taxes 248 258
Net assets of discontinued operations - 67,210
------------------ ------------------
Total Current Assets 31,127 92,387
PROPERTY, PLANT AND EQUIPMENT, NET 59,751 54,628
OTHER ASSETS
Goodwill 49,657 24,716
Covenants not to compete 1,316 981
Sundry 1,818 2,093
------------------ ------------------
Total Other Assets 52,791 27,790
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$ 143,669 $ 174,805
================== ==================
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 530 $ 778
Current maturities of notes payable - related parties - 5,000
Accounts payable 10,655 9,784
Accrued liabilities 8,144 4,846
Income taxes payable 1,777 -
------------------ ------------------
Total Current Liabilities 21,106 20,408
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES 49,342 86,915
NOTES PAYABLE - RELATED PARTIES, EXCLUDING CURRENT MATURITIES - -
CONVERTIBLE SUBORDINATED DEBENTURES 16,252 21,536
JUNIOR SUBORDINATED NOTES 3,359 3,359
DEFERRED INCOME TAXES 2,458 2,221
PUTABLE COMMON STOCK 2,030
REDEEMABLE PREFERRED STOCK 438 513
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, $.001 par value, authorized 20,000,000
shares, issued and outstanding 7,241,698 and 6,902,629
shares in 1999 and 2000, respectively 23,922 27,993
Retained earnings 25,010 12,005
Accumulated comprehensive loss (369) (266)
------------------ ------------------
48,684 39,853
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$ 143,669 $ 174,805
================== ==================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
3
<PAGE> 4
NOBLE INTERNATIONAL, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
2000 1999
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<S> <C> <C>
Net sales $ 26,320 $ 20,645
Cost of goods sold 20,331 14,379
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Gross profit 5,989 6,266
Selling, general and
administrative expenses 4,640 3,472
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Operating profit 1,349 2,794
Other income (expense)
Interest income -- 4
Interest (expense) (764) (500)
Sundry, net 153 12
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(611) (484)
Earnings from continuing operations before income taxes
----------- -----------
and extraordinary item 738 2,310
Income tax expense 305 820
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Net earnings from continuing operations before extraordinary item 433 1,490
Preferred stock dividends 12 12
Net earnings from continuing operations on common shares
----------- -----------
before extraordinary item 421 1,478
Net earnings (loss) from discontinued operations -- (215)
Gain (loss) on sale of discontinued operations
(less income tax of $5,974 year to date and a credit of
$(688) for the quarter) (1,158) --
----------- -----------
Net earnings (loss) before extraordinary item (737) 1,263
Extraordinary item - gain (loss) from extinguishment of debt
(less income tax of $156 year to date
and a credit of $(47) for the quarter) 90 --
Net earnings (loss) on common shares $ (647) $ 1,263
=========== ===========
BASIC EARNINGS PER COMMON SHARE:
Earnings per common from continuing operations before extraordinary item $ 0.06 $ 0.21
----------- -----------
Earnings per common share - discontinued operations $ (0.16) $ (0.03)
----------- -----------
Extraordinary item - loss from extinguishment of debt $ 0.01 $ --
----------- -----------
Earnings per common share $ (0.09) $ (0.18)
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Dividends declared and paid $ 0.150 $ --
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EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Net earnings from continuing operations and before extraordinary item $ 421 $ 1,478
Proforma reduction in interest on convertible debentures -- 245
----------- -----------
Proforma net earnings from continuing operations before extraordinary item 421 1,723
Net earnings (loss) from discontinued operations -- (215)
Gain on sale of discontinued operations (less income tax of $6,660) (1,158) --
----------- -----------
Proforma net earnings before extraordinary item (737) 1,508
Extraordinary item - loss from extinguishment of debt (less income tax of $203) 90 --
----------- -----------
Proforma net earnings on common shares assuming dilution $ (647) $ 1,508
=========== ===========
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Earnings per common from continuing operations before extraordinary item $ 0.06 $ 0.21
----------- -----------
Earnings per common share - discontinued operations $ (0.16) $ (0.03)
----------- -----------
Extraordinary item - gain (loss) from extinguishment of debt $ 0.01 $ --
----------- -----------
Earnings per common share $ (0.09) $ (0.18)
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Basic weighted average common shares outstanding 7,128,866 7,203,003
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Diluted weighted average common shares and equivalents 7,223,501 8,990,564
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</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
2000 1999
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<S> <C> <C>
Net sales $ 74,655 $ 62,962
Cost of goods sold 53,462 41,500
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Gross profit 21,193 21,462
Selling, general and
administrative expenses 12,399 11,770
----------- -----------
Operating profit 8,794 9,692
Other income (expense)
Interest income 3 4
Interest (expense) (1,691) (1,366)
Sundry, net 136 170
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(1,552) (1,192)
Earnings from continuing operations before income taxes
----------- -----------
and extraordinary item 7,242 8,500
Income tax expense 2,762 3,125
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Net earnings from continuing operations before extraordinary item 4,480 5,375
Preferred stock dividends 39 47
Net earnings from continuing operations on common shares
----------- -----------
before extraordinary item 4,441 5,328
Net earnings (loss) from discontinued operations (115) 1,036
Gain (loss) on sale of discontinued operations
(less income tax of $5,974 year to date and a credit of
$(688) for the quarter) 10,042 --
----------- -----------
Net earnings (loss) before extraordinary item 14,368 6,364
Extraordinary item - gain (loss) from extinguishment of debt
(less income tax of $156 year to date
and a credit of $(47) for the quarter) (304) --
Net earnings (loss) on common shares $ 14,064 $ 6,364
=========== ===========
BASIC EARNINGS PER COMMON SHARE:
Earnings per common from continuing operations before extraordinary item $ 0.62 $ 0.74
----------- -----------
Earnings per common share - discontinued operations $ 1.38 $ 0.14
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Extraordinary item - loss from extinguishment of debt $ (0.04) $ --
----------- -----------
Earnings per common share $ 1.96 $ 0.88
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Dividends declared and paid $ 0.075 $ --
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EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Net earnings from continuing operations and before extraordinary item $ 4,441 $ 5,328
Proforma reduction in interest on convertible debentures -- 402
----------- -----------
Proforma net earnings from continuing operations before extraordinary item 4,441 5,730
Net earnings (loss) from discontinued operations (115) 1,036
Gain on sale of discontinued operations (less income tax of $6,660) 10,042 --
----------- -----------
Proforma net earnings before extraordinary item 14,368 6,766
Extraordinary item - loss from extinguishment of debt (less income tax of $203) (304) --
----------- -----------
Proforma net earnings on common shares assuming dilution $ 14,064 $ 6,766
=========== ===========
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Earnings per common from continuing operations before extraordinary item $ 0.61 $ 0.69
----------- -----------
Earnings per common share - discontinued operations $ 1.35 $ 0.13
----------- -----------
Extraordinary item - gain (loss) from extinguishment of debt $ (0.04) $ --
----------- -----------
Earnings per common share $ 1.92 $ 0.82
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Basic weighted average common shares outstanding 7,177,772 7,180,202
----------- -----------
Diluted weighted average common shares and equivalents 7,327,368 8,291,555
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</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>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS (USES) FROM OPERATING ACTIVITIES
Net earnings from continuing operations $ 4,176 $ 5,375
Adjustments to reconcile net earnings to
net cash provided by operations
Interest paid in kind 836 981
Depreciation of property, plant and equipment 4,141 3,400
Amortization of goodwill 1,437 1,390
Deferred income taxes 247 565
Changes in operating assets and liabilities, net of business acquisition
Decrease (increase) in accounts receivable (3,371) (3,915)
Decrease (increase) in inventories (210) (1,667)
Decrease (increase) in prepaid expenses 82 (252)
Decrease (increase) in other assets (872) (2,050)
Increase (decrease) in accounts payable (1,025) 3,005
Increase (decrease) in income taxes payable 1,928 479
Increase (decrease) in accrued liabilities (1,062) (1,788)
-------- --------
Net cash provided by continuing operations 6,307 5,523
Net cash used by discontinued operations (115) (17,801)
Net cash from sale of discontinued operations 79,127 --
-------- --------
Net cash provided (used) by operations 85,319 (12,278)
CASH FLOWS (USES) FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (8,793) (10,532)
Acquisitions of businesses, net of cash acquired (21,988) (4,168)
-------- --------
Net cash (used in) investing activities (30,781) (14,700)
CASH FLOWS (USES) FROM FINANCING ACTIVITIES
Repayments of notes payable - related parties (5,000) (1,361)
Capital lease payments 315 (162)
Redemption of common stock (4,071) 161
Redemption of convertible subordinated debentures (6,225)
Redemption of redeemable preferred stock (150)
Dividends paid (1,098) (47)
Redemption of preferred stock of subsidiary (75)
Payments on long-term debt (611) (616)
Net proceeds (repayments) on note payable to bank (37,518) 29,819
-------- --------
Net cash provided (used) by financing activities (54,283) 27,644
Effect of exchange rate changes on cash -- --
-------- --------
Net Increase in cash 255 666
Cash at beginning of period 254 810
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Cash at end of period $ 509 $ 1,476
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for:
Interest $ 1,875 $ 5,433
======== ========
Taxes $ 4,633 $ 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 AND (LOSS)
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net earnings (loss) $ (647) $ 1,263 $14,064 $ 6,364
Other comprehensive income (loss) (48) 131 (103) 110
equity adjustment from foreign currency translation
------------ ------------- ------------ ------------
Comprehensive income $ (695) $ 1,394 $13,961 $ 6,474
</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 nine months ended September 30, 2000 and as of 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"), Tiercon Industries, Inc. ("Tiercon"), Noble
Holdings, Ltd. ("NHL"), Dedicated Services, Inc. ("DSI"), Assured Transportation
and Delivery, Inc. ("ATD"), and Central Transportation and Delivery, Inc.
("CTD"), (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 nine months ended September 30, 2000, the Company redeemed $6.2
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
7
<PAGE> 8
Canada and Tiercon is hereinafter referred to as the ("Tiercon Sale"). In
addition, as part of the 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 $79.1 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 $0.8
million, and $1.8 million of accounts receivable of Tiercon.
NOTE C - ACQUISITIONS
On July 20, 2000 the Company, through its wholly owned subsidiary, NHL completed
the purchase of all of the outstanding stock of DSI for $20.9 million in cash
and 140,000 shares of the Company's common stock. DSI is a Texas based provider
of logistics and package delivery services to the automotive industry.
On September 6, 2000 the Company, through its wholly owned subsidiary, NHL,
completed the purchase of all the outstanding stock of ATD and CTD for $8.9
million in cash less assumed liabilities which will be determined post closing.
ATD is a California based company and CTD is a Delaware based company. Both
companies provide logistics and package delivery services to a variety of
industries.
The acquisitions of DSI and ATD/CTD are collectively referred to as the
("Logistics Acquisitions"). These acquistions have been accounted for using
the purchase method. Preliminary basis goodwill of $25.4 million has been
recorded and will be amortized over 20 years.
NOTE D--INVENTORIES
Inventories at September 30, 2000 and December 31, 1999 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials and purchased parts $2,099 $2,437
Work in process 581 649
Finished goods 2,755 2,607
Unbilled customer tooling 1,694 1,226
------ ------
$7,129 $6,919
</TABLE>
NOTE E--INDUSTRY SEGMENTS
The Company classifies its operating subsidiaries into three industry segments
based on types of products and services: metals processing (NMP, NMPC, NMPW,
NMF, UPP and Land Holdings), distribution (Monroe) and logistic's group (ATD,
CTD and DSI). 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. The logistics group
8
<PAGE> 9
provides customized, time sensitive delivery services to a variety of retail,
medical and service businesses, including automobile dealerships and
reprographics to a variety of logistics and package delivery services to a
variety of industries.
Transactions between the metal processing, distribution and logistics 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 nine months ended September
30, 2000 follows (in thousands):
<TABLE>
<CAPTION>
METAL SEGMENT
PROCESSING DISTRIBUTION LOGISTICS TOTALS
---------- ------------ --------- ------
<S> <C> <C> <C> <C>
Revenues from external customers $ 64,056 $ 3,196 $ 7,403 74,655
Interest income - - - -
Interest expense 4,396 83 424 4,903
Depreciation and amortization 5,042 224 266 5,532
Segment profit pre tax 5,191 719 (132) 5,778
Segment assets 102,871 6,511 32,019 141,401
Expenditure for segment assets 8,795 35 (7) 8,823
</TABLE>
RECONCILIATION TO CONSOLIDATED AMOUNTS
<TABLE>
<S> <C>
EARNINGS
Total earnings for reportable segments $ 5,778
Unallocated corporate headquarters expense 1,464
--------
Earnings from continuing operations before income
taxes and extraordinary item $ 7,242
========
ASSETS
Total assets for reportable segments $141,401
Net assets of discontinued operations 0
Corporate headquarters 2,268
--------
Total consolidated assets $143,669
========
</TABLE>
OTHER SIGNIFICANT ITEMS
<TABLE>
<CAPTION>
SEGMENT CONSOLIDATED
TOTALS ADJUSTMENTS TOTALS
---------- ----------- ------------
<S> <C> <C> <C>
Interest expense $ 4,903 $ (3,212) $ 1,691
Expenditures for segment assets 8,823 (30) 8,793
Depreciation and amortization 5,532 46 5,578
</TABLE>
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
LONG-LIVED
REVENUES ASSETS
---------- ----------
<S> <C> <C>
United States $ 32,369 $ 106,211
Canada 11,703 3,197
Mexico 30,583 -
------------ ------------
Total $ 74,655 $ 109,408
============ ============
</TABLE>
9
<PAGE> 10
The Company's operations by business segment for the Nine months ended September
30, 1999 follows (in thousands):
<TABLE>
<CAPTION>
METAL SEGMENT
PROCESSING DISTRIBUTION LOGISTICS TOTALS
---------- ------------ --------- ------
<S> <C> <C> <C> <C>
Revenues from external customers $ 59,880 $ 3,082 $ 0 $ 62,962
Interest income 4 0 0 4
Interest expense 3,787 146 0 3,933
Depreciation and amortization 4,266 214 0 4,480
Segment profit pre tax 6,484 819 0 7,303
Segment assets 96,681 6,717 0 103,398
Expenditure for segment assets 10,469 31 0 10,500
</TABLE>
RECONCILIATION TO CONSOLIDATED AMOUNTS
<TABLE>
<S> <C>
EARNINGS
Total earnings for reportable segments $ 7,303
Unallocated corporate headquarters expense 1,197
--------
Earnings from continuing operations before income
taxes and extraordinary item $ 8,500
========
ASSETS
Total assets for reportable segments $103,398
Net assets of discontinued operations 65,921
Corporate headquarters 4,878
--------
Total consolidated assets $174,197
========
</TABLE>
OTHER SIGNIFICANT ITEMS
<TABLE>
<CAPTION>
SEGMENT CONSOLIDATED
TOTALS ADJUSTMENTS TOTALS
---------- ----------- ----------
<S> <C> <C> <C>
Interest expense $ 3,933 (2,567) 1,366
Expenditures for segment assets 10,500 32 10,532
Depreciation and amortization 4,480 310 4,790
</TABLE>
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
LONG-LIVED
REVENUES ASSETS
------------ -----------
<S> <C> <C>
United States $ 51,489 $ 76,979
Canada 10,481 2,132
Mexico 965 0
Europe/Other 27 0
------------ -----------
Total $ 62,962 $ 79,111
============ ===========
</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 September 30, 2000
increased 27.5% to $26.3 million from $20.7 million for the comparable quarter
of 1999. The increase in sales is substantially due to higher sales arising from
the Logistics Acquisitions. Net sales for the nine months ended September 30,
2000 increased 18.6% to $74.7 million from $63.0 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 Logistics Acquisitions.
COST OF GOODS SOLD. As a percent of net sales, cost of goods sold for
the three month period ended September 30, 2000 increased to 77.2% as compared
with 69.6% for the prior year period. As a percent of net sales, cost of goods
sold for the nine month period ended September 30, 2000 increased to 71.6% as
compared with 65.9% for the prior year period. The increase in cost of goods
sold as a percent of net sales for the three months and nine months ended
September 30, 2000 is primarily due to higher material cost required to produce
certain new business 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
and nine months ended September 30, 2000 were 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 $6.0
million for the three months ended September 30, 2000 from $6.3 million for the
comparable period of 1999. For the nine months ended September 30, 2000, the
Company's gross profit decreased by 1.3% to $21.2 million from $21.5 million for
the comparable period of 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $1.2 million, or 33.6%, for the three month
period ended September 30, 2000 as compared to the comparable period of 1999.
For the nine months ended September 30, 2000, selling, general and
administrative expenses increased by $0.6 million, or 5.3%, as compared to the
comparable period of 1999. The increase in selling, general and administrative
expenses was due primarily to the Logistics Acquisitions partially offset by the
reclassification of expenses to cost of goods sold for the three months and nine
months ended September 30, 2000.
OPERATING PROFIT. As a result of the foregoing factors, operating
profit decreased to $1.3 million for the three months ended September 30, 2000
compared with $2.8 million in the prior year period, a decrease of 51.7%.
Operating profit decreased to $8.8 million for the nine months ended September
30, 2000 compared with $9.7 million in the prior year period, a decrease of
9.3%.
INTEREST EXPENSE. Interest expense for the three months ended September
30, 2000 increased to $0.8 million from $.0.5 million for the comparable quarter
of the prior year. Interest expense for the nine months ended September 30, 2000
increased to $1.7 million from $1.4 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.
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NET EARNINGS. As a result of the foregoing factors, net earnings from
continuing operations before extraordinary item decreased by $1.1 million to
$0.4 million for the three months ended September 30, 2000 from earnings of $1.5
million for the prior year period. Net earnings from continuing operations
before extraordinary item decreased by $0.9 million to $4.4 million for the nine
months ended September 30, 2000 from earnings of $5.3 million for the prior year
period.
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 September
30, 2000, the Company had working capital of approximately $10.0 million.
The Company generated cash flow from continuing operations of $6.3
million for the nine months ended September 30, 2000. Net cash provided from
continuing operations was primarily the result of net earnings, depreciation and
amortization and increased income taxes payable, partially offset by higher
accounts receivable, inventories, prepaid expenses, other assets, lower accrued
liabilities, income taxes payable and accounts payable. The Company used cash in
discontinued operations of $0.1 million prior to the Tiercon Sale on January 11,
2000 for the nine months ended September 30, 2000. The Company generated cash of
$79.1 million during the nine months ended September 30, 2000, net of related
cash expenses, from the Tiercon Sale. Cash used in investing activities of $30.8
million for the nine months ended September 30, 2000 was for the Logistics
Acquisitions and the purchase of property, plant and equipment. The Company used
cash in financing activities of $54.3 million for the nine months ended
September 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 $5.0 million term note
payable to the Chief Executive Officer of the Company, redeemed $6.2 million of
6% Convertible Subordinated Debentures and repurchased $4.1 million of its
common shares. The Company declared a quarterly dividend of $.075 per common
share with record dates of June 15, 2000 and September 15, 2000, which were paid
on June 30, 2000 and September 30, 2000, respectively. Expenditures for
property, plant and equipment were primarily to fund equipment purchases for
NMP's new facility in Shelbyville, Kentucky which was substantially completed in
September 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 was amended in October 2000 and increased
to $55 million. The Company is currently negotiating an increase in its Credit
Facility of up to $20 million for potential acquisitions and working capital
needs. 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 September 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.
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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 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 16% of the total revenues for the nine months ended September 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 the nine months ended September 30, 2000 the Company has
redeemed $6.2 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. In addition, during the nine months
ended September 30, 2000, the Company purchased $4.1 million of its common
stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable
ITEM 5. OTHER INFORMATION
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports of Form 8-K. The following current reports on Form 8-K were
filed during the third quarter of 2000.
(i) Report on Form 8-K filed on August 7, 2000, concerning the
acquisition of all of the issued and outstanding stock of
Dedicated Services, Inc., by the Company's wholly owned
subsidiary, Noble Holdings, Ltd.
(ii) Report on Form 8-K filed on September 21, 2000 concerning
the acquisition of all of the issued and outstanding stock
of Assured Transportation and Delivery, Inc., and Central
Transportation and Delivery, Inc., by the Company's wholly
owned subsidiary, Noble Holdings, Ltd.
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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: November 14, 2000 By:/s/ David V. Harper
------------------------------------------
David V. Harper
Vice President and Chief Financial Officer
<PAGE> 16
Exhibit Index
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<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
27 Financial Data Schedule
</TABLE>
