<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
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FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
/ / Transition Report Pursuant to 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 001-01416
SAMES CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 36-0808480
- -------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9201 WEST BELMONT AVENUE, FRANKLIN PARK, ILLINOIS 60131
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(Address of principal executive offices)
Registrant's telephone number, including area code 847-737-5970
Indicate by check mark whether the registrant (l) 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
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The number of shares outstanding of each of the issuer's classes of common
stock, as of the close of the period covered by this report:
Class Outstanding March 31, 2000
- ------------------------------ --------------------------
Capital Stock, par value $1.00 2,930,337
<PAGE>
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
Form 10-Q Index
Part I. Financial Information
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Item 1. Summarized Financial Statements
Consolidated Balance Sheets
March 31, 2000 (unaudited), December 31, 1999 (unaudited) and
November 30, 1999 2
Consolidated Statements of Operations (unaudited)
Three months ended March 31, 2000 and three months ended
February 28, 1999 and one month ended December 31, 1999 3
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 2000 and three months ended
February 28, 1999 and one month ended December 31, 1999 4
Notes to Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Forward Looking Statements 13
Part II. Other Information
Item 1. Legal Proceedings 14-15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
-1-
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Company or group of companies
for which report is filed:
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 (Unaudited), December 31, 1999 (Unaudited) and November 30, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Mar 31, Dec 31, Nov 30,
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,738 4,006 6,171
Receivables, net 37,933 41,455 43,171
Inventories 14,131 15,444 15,584
Other current assets 3,464 3,387 4,386
Net assets of discontinued operations 345 1,246 1,301
-------------- --------------- -------------
Total current assets 59,611 65,538 70,613
Other noncurrent assets 3,001 3,028 3,038
Property, plant and equipment, at cost 10,865 11,002 10,938
Less accumulated depreciation 6,162 6,234 6,172
-------------- --------------- -------------
Net property, plant and equipment 4,703 4,768 4,766
-------------- --------------- -------------
$ 67,315 73,334 78,417
============== =============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, bank overdrafts
and current maturities of long-term debt $ 5,673 8,306 8,543
Accounts payable 25,278 26,911 27,881
Other current liabilities 7,903 8,346 10,980
-------------- --------------- -------------
Total current liabilities 38,854 43,563 47,404
Deferred compensation 6,311 6,394 6,426
Note payable, net of discount of $875, $942 and $964, respectively 2,863 3,182 3,500
Deferred income taxes 75 76 76
Long-term debt, less current maturities 2,652 2,762 2,767
-------------- --------------- -------------
Total liabilities 50,755 55,977 60,173
-------------- --------------- -------------
Stockholders' equity:
Capital stock, $1.00 par value. Authorized 12,000,000
shares; issued and outstanding 2,966,837 shares at
March 31, 2000, December 31, 1999 and 2,967 2,967 2,967
November 30, 1999, respectively
Additional paid-in capital 19,677 19,677 19,677
Accumulated deficit (2,968) (2,727) (2,069)
Accumulated other comprehensive loss:
Foreign currency translation adjustments (2,535) (2,042) (2,035)
-------------- --------------- -------------
17,141 17,875 18,540
Treasury stock, at cost, 36,500, 32,500 and 18,200 shares
at March 31, 2000, December 31, 1999 and
November 30, 1999, respectively (581) (518) (296)
-------------- --------------- -------------
Total stockholders' equity 16,560 17,357 18,244
-------------- --------------- -------------
$ 67,315 73,334 78,417
============== =============== =============
</TABLE>
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<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
For the three One month
months ended ended
------------------------------------- ----------------
Mar 31, Feb 28, Dec 31,
2000 1999 1999
----------------- ----------------- ----------------
<S> <C> <C> <C>
Net sales $ 22,614 17,776 5,023
Cost of goods sold 14,814 9,682 3,386
----------------- ----------------- ----------------
Gross profit 7,800 8,094 1,637
Selling, general and administrative expenses 6,489 6,688 1,904
Research and development costs 642 994 299
----------------- ----------------- ----------------
Operating income (loss) 669 412 (566)
----------------- ----------------- ----------------
Other expense (income):
Interest expense 263 351 69
Other expense (income), net 49 (530) (34)
----------------- ----------------- ----------------
312 (179) 35
----------------- ----------------- ----------------
Income (loss) from continuing operations
before income taxes 357 591 (601)
Income tax expense (benefit) 114 (13) (81)
----------------- ----------------- ----------------
Income (loss) from continuing operations,
net of tax 243 604 (520)
Loss from discontinued operations, net of tax (484) (1,190) (138)
----------------- ----------------- ----------------
Net loss $ (241) (586) (658)
================= ================= ================
Income (loss) per share - basic
Continuing operations $ .08 .20 (.17)
Discontinued operations (.16) (.40) (.05)
----------------- ----------------- ----------------
Net loss $ (.08) (.20) (.22)
================= ================= ================
Income (loss) per share - diluted
Continuing operations $ .08 .20 (.17)
Discontinued operations (.16) (.40) (.05)
----------------- ----------------- ----------------
Net loss $ (.08) (.20) (.22)
================= ================= ================
Weighted average shares:
Basic 2,932 2,964 2,942
Effect of stock options 5 8 4
----------------- ----------------- ----------------
Diluted 2,937 2,972 2,946
================= ================= ================
</TABLE>
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<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
For the three One month
months ended ended
-------------------------------- ----------------
Mar 31, Feb 28, Dec 31,
2000 1999 1999
-------------- -------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Continuing operations:
Income (loss) from continuing operations, net of tax $ 243 604 (520)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 228 254 77
Deferred compensation, net of payments (84) (503) (32)
Other, net 8 188 227
Cash provided by (used in) changes in:
Receivables 1,557 12,361 1,644
Inventories 978 (1,760) 111
Other current assets (149) (499) (52)
Accounts payable (1,085) (3,310) (1,637)
Accrued expenses (158) (2,318) (1,308)
-------------- -------------- ----------------
Net cash provided (used) by operating activities 1,538 5,017 (1,490)
-------------- -------------- ----------------
Cash flows from investing activities:
Purchases of property, plant and equipment (305) (104) (85)
Other investments and assets (3) (28) 9
-------------- -------------- ----------------
Net cash used in investing activities (308) (132) (76)
-------------- -------------- ----------------
Cash flows from financing activities:
Net increase (decrease) in short term borrowings (2,085) (3,436) 74
Repurchase of capital stock (63) -- (222)
Principal payments on long-term debt 157 -- (300)
-------------- -------------- ----------------
Net cash provided (used) by financing activities (1,991) (3,436) (448)
-------------- -------------- ----------------
Net cash provided (used) by discontinued operations 501 (3,099) (154)
Effect of exchange rate changes on cash (8) (173) 3
-------------- -------------- ----------------
Net decrease in cash and cash equivalents (268) (1,823) (2,165)
Cash and cash equivalents at beginning of period 4,006 5,204 6,171
-------------- -------------- ----------------
Cash and cash equivalents at end of period $ 3,738 3,381 4,006
============== ============== ================
</TABLE>
-4-
<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000 (Unaudited), December 31, 1999 (Unaudited) and November 30, 1999
NOTE 1
The accompanying consolidated financial statements are unaudited, but in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments except where indicated, necessary for a fair presentation
of the results of operations and financial position for the periods presented.
Results of operations for any interim period are not necessarily indicative of
results for any other period or for the full year. These interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements contained in the Annual Report on Form 10-K for the year
ended November 30, 1999.
On January 31, 2000, the Board of Directors determined to change the Company's
fiscal year end from November 30 to December 31 to be effective for the year
beginning January 1, 2000. Accordingly, the Company is including the unaudited
financial information for the one month ended December 31, 1999 (the transition
period) in this quarterly report on Form 10-Q for the quarterly period ended
March 31, 2000. This new fiscal year will allow the Company to conform its
quarterly reporting periods to those predominantly used in its industry.
The Company has not presented financial statements for the three months ended
March 31, 1999 but has instead presented financial statements for the three
months ended February 28, 1999. Because the adoption of a new fiscal year
resulted in only a one month change in annual and quarterly financial
reporting periods, the Company believes that fiscal 2000 financial
information is sufficiently comparable to the corresponding fiscal 1999
financial information, as originally reported, in terms of seasonal and other
factors. Accordingly, the Company did not deem it practical nor could it
justify the additional cost to prepare and present financial statements for
the three months ended March 31, 1999.
NOTE 2
On September 15, 1999 the Company announced a share repurchase program
authorizing the Company to repurchase up to 150,000 shares of its outstanding
Capital Stock. The shares will be repurchased from time to time in the open
market as market conditions warrant. Under the terms of the repurchase
program, the shares may be reissued to employees under the Company's stock
option and employee stock purchase plans. Through March 31, 2000, the Company
repurchased a total of 36,500 shares at a cost of $.6 million.
NOTE 3
As part of the original sale agreement with Illinois Tool Works (ITW), dated
August 31, 1998, the Company assigned and transferred to ITW all of the accounts
receivable related to the "Binks Business". The agreement required the Company
to repurchase such accounts receivable which were not collected within 180 days.
On September 23, 1999, the Company agreed to repurchase certain receivables for
approximately $1.0 million, which was paid to ITW on September 28, 1999. Through
March 31, 2000, the Company had collected approximately $.7 million of the
accounts receivable. It is anticipated that any future collections below or
above the paid amount will be either charged or credited to loss from
discontinued operations.
The receivables repurchased from ITW and transferred back to the Company
include a receivable from Haden Drysys International Limited ("Haden"), a
United Kingdom corporation, in the amount of Pounds 434,885. On March 10,
2000, Haden filed an arbitration claim in the International Court of
Arbitration of the International Chamber of Commerce in the United Kingdom
against Binks Limited ("Binks UK"), a former subsidiary of the Company that
was sold to ITW as part of the sale of the Binks Business, in the amount of
Pounds 3,000,000. The claim alleges that Binks UK breached its agreements
with Haden relating to automotive paint shop equipment for an automobile
plant. Pursuant to the original sale agreement with ITW, the Company has
agreed to indemnify ITW with respect to the claim and to assume the defense
of the claim on behalf of ITW. On April 13, 2000, the Company filed an answer
denying the claim and a counterclaim seeking to collect the receivable.
-5-
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SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000 (Unaudited), December 31, 1999 (Unaudited) and November 30, 1999
NOTE 4
The Company has certain contingent liabilities resulting from litigation and
claims incident to the ordinary course of business. Management believes that
the probable resolution of such contingencies will not materially affect the
financial position or results of operations of the Company. For information
relating to other legal matters involving the Company, reference is made to
"Item 3 - Legal Proceedings" in the Company's Annual Report on Form 10-K for
the year ended November 30, 1999 and to "Part II, Item 1 - Legal Proceedings"
in this report.
NOTE 5
Comprehensive loss for the three months ended March 31, 2000 and February 28,
1999 consisted of the following (in thousands):
<TABLE>
<CAPTION>
Three months Three months One month
ended March 31, ended February 28, ended December 31,
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Net loss $ (241) (586) (658)
Other comprehensive loss:
Foreign currency translation adjustments (493) (569) (7)
------ ------ ----
Comprehensive loss $ (734) (1,155) (665)
====== ====== ====
</TABLE>
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<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000 (Unaudited), December 31, 1999 (Unaudited) and November 30, 1999
NOTE 6
The Company operates in one segment, the manufacture and distribution of
electrostatic spray finishing and coating application equipment. The Company's
products are sold to customers in North America, South America, Europe, Asia,
Africa, and Australia.
The table below presents the Company's consolidated continuing operations by
country: United States; France; and Japan. Sales are presented by originating
area. Interarea transfers comprise transactions among the Company and its
subsidiaries in different geographic areas; these transfers are eliminated in
consolidation.
<TABLE>
<CAPTION>
THREE MONTHS ENDED ONE MONTH ENDED
MARCH 31, FEBRUARY 28, DECEMBER, 31
2000 1999 1999
------------ ------------- ----------------
<S> <C> <C> <C>
Sales to unaffiliated customers (includes exports):
United States $ 6,043 5,390 1,666
France 14,939 10,798 3,060
Japan 1,632 1,589 297
Interarea transfers from:
France 2,899 3,841 818
Eliminations (2,899) (3,841) (818)
------------ ------------- ----------------
Total $ 22,614 17,777 5,023
============ ============= ================
Operating income (loss):
United States $ (92) (244) (88)
France 763 722 (401)
Japan (2) (66) (77)
------------ ------------- ----------------
Total $ 669 412 (566)
============ ============= ================
Identifiable assets of continuing operations:
United States $ 21,608 21,941 22,833
France 40,276 38,216 44,134
Japan 5,086 5,139 5,121
------------ ------------- ----------------
Total $ 66,970 65,296 72,088
============ ============= ================
</TABLE>
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<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIGNIFICANT DEVELOPMENTS
On February 28, 2000 the Company announced the formation of a strategic alliance
with JBI, L.P., based in Osseo, WI, a leading manufacturer of paint spray
booths. JBI will manufacture the Sames' line of powder booths, including
ProTouch and SoftTouch powder booths and will also support the growth of Sames'
distributor network in North America.
This strategy is exemplified by the distributor agreement signed on February 17,
2000 with Dove Equipment Co., Inc. based in Peoria, IL. Dove is an existing
distributor for JBI and a leading industrial distributor in North America for
liquid electrostatic and powder systems. Dove will represent the full Sames
general industry product line in Illinois, Wisconsin, Iowa and Mexico.
JBI will also provide the turnkey installation of the new Sames Customer
Demonstration Facility in Livonia, MI. The new facility will allow current and
prospective customers to evaluate the performance capabilities of Sames liquid
electrostatic and powder coating equipment and systems.
On September 15, 1999 the Company announced a share repurchase program
authorizing the Company to repurchase up to 150,000 shares of its outstanding
Capital Stock. The shares will be repurchased from time to time in the open
market as market conditions warrant. Under the terms of the repurchase program,
the shares may be reissued to employees under the Company's stock option and
employee stock purchase plans. Through March 31, 2000, the Company repurchased a
total of 36,500 shares at a cost of $.6 million.
On April 25, 2000, the Sames stockholders approved the adoption of the Sames
Employee Stock Purchase Plan, effective January 1, 2000, pursuant to which
employees of the Company have the opportunity to acquire shares of the capital
stock of the Company at a 15% discount. The purpose of the Plan is to advance
the interests of the Company and its stockholders by providing employees of the
Company and certain designated subsidiaries with an opportunity to acquire an
ownership interest in the Company. With respect to employees who reside in the
United States, the Plan is intended to qualify as an employee stock purchase
plan under Section 423 of the Internal Revenue Code.
On January 31, 2000, the Board of Directors determined to change the Company's
fiscal year end from November 30 to December 31 to be effective for the year
beginning January 1, 2000. Accordingly, the Company is including the unaudited
financial information for the one month ended December 31, 1999 (the transition
period) in this quarterly report on Form 10-Q for the quarterly period ended
March 31, 2000. This new fiscal year will allow the Company to conform its
quarterly reporting periods to those predominantly used in its industry.
The Company has not presented financial statements for the three months ended
March 31, 1999 but has instead presented financial statements for the three
months ended February 28, 1999. Because the adoption of a new fiscal year
resulted in only a one month change in annual and quarterly financial
reporting periods, the Company believes that fiscal 2000 financial
information is sufficiently comparable to the corresponding fiscal 1999
financial information, as originally reported, in terms of seasonal and other
factors. Accordingly, the Company did not deem it practical nor could it
justify the additional cost to prepare and present financial statements for
the three months ended March 31, 1999.
On April 25, 2000, the Company elected Arnold H. Dratt, its President and CEO,
to the position of Chairman of the Board of Directors. Mr. Dratt succeeded Dr.
Wayne Edwards, who will remain a director. Philippe Vuillerme, the managing
director of the Company's largest subsidiary, Sames S.A., was promoted to Chief
Operating Officer. Mr. Vuillerme is also a director of the Company.
As part of the original sale agreement with Illinois Tool Works (ITW), dated
August 31, 1998, the Company assigned and transferred to ITW all of the accounts
receivable related to the "Binks Business". The agreement required the Company
to repurchase such accounts receivable which were not collected within 180 days.
On September 23, 1999 the Company agreed to repurchase certain receivables for
approximately $1.0 million, which was paid to ITW on September 28, 1999. Through
March 31, 2000, the Company had collected approximately $.7 million of the
accounts receivable. It is anticipated that any future collections below or
above the paid amount will be either charged or credited to loss from
discontinued operations.
- 8 -
<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)
SIGNIFICANT DEVELOPMENTS (CONTINUED)
The Board of Directors approved a change in the Company's listing stock symbol
from BIN to SGT, effective May 22, 2000. As shorthand for "Sames Global
Technology", the symbol was chosen to underline the core strengths of Sames in
high technology electrostatic finishing on a global basis.
RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended March 31, 2000 ("First Quarter 2000") were
$22.6 million compared to $17.8 million for the three months ended February 28,
1999 ("First Quarter 1999"), an increase of $4.8 million, or 27%. Sames, S.A.
experienced the majority of the sales increase or $4.1 million. The significant
backlog at Sames S.A. in the previous year end in large automotive installations
gave rise to significant improvement in First Quarter 2000 sales over the prior
year. In fiscal 1999, the sales mix of Sames S.A. was more heavily weighted
toward lower volume, higher margin standard equipment and spare part sales.
GROSS PROFIT
Gross profit of $7.8 million for the First Quarter 2000 decreased $.3
million, or 3.6% from the comparable 1999 period. Gross profit was 34.5% of
net sales for First Quarter 2000 compared to 45.5% for the First Quarter
1999. The decrease in the First Quarter 2000 was primarily due to the
reduction in volume of higher margin standard and spare part sales from the
First Quarter 1999.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative ("SG&A") expense was $6.5 million for the
First Quarter 2000 compared to $6.7 million for the First Quarter 1999. SG&A
expense as a percentage of net sales was 28.7% for the First Quarter 2000 and
37.6 % for the comparable First Quarter 1999.
These decreases are the result of management's cost control programs and
emphasis on profitability.
RESEARCH AND DEVELOPMENT
Research and development ("R&D") expense was $.7 million for the First
Quarter 2000 compared with $1.0 million for the First Quarter 1999. The
Company is continually engaged in experimental work on various paint and
powder coating systems. The Company believes that a strong commitment to
research and development is necessary to drive long-term growth.
- 9 -
<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)
INTEREST EXPENSE
Interest expense was $.3 million for the First Quarter 2000 compared with $.4
million for the First Quarter 1999. Interest expense decreased in the three
months ended March 31, 2000 primarily due to decreased borrowing levels
achieved from improved operational cashflows by Sames, S.A. and Sames North
America.
OTHER EXPENSE (INCOME) - NET
Other expense was approximately $.1 million for the First Quarter 2000 compared
with other income of $.5 million in the First Quarter 1999. The majority of the
variance in other income between the periods was attributable to foreign
currency transaction gains, principally by Sames North America, that arose due
to the weakening French Franc in the First Quarter 1999.
INCOME TAXES
The Company recorded an income tax expense of $.1 million in the First
Quarter 2000 versus an insignificant provision for the First Quarter 1999.
The consolidated relationship of income tax expense and pretax income or loss
was a function of the Company's geographical mix of pretax profitability,
and, generally, the utilization of available domestic net operating loss
carryforwards.
LOSS FROM DISCONTINUED OPERATIONS -
NET OF TAX
Loss from discontinued operations, net of tax, decreased from $1.2 million ($.40
loss per diluted share) in the First Quarter 1999 to $.5 million ($.16 loss per
diluted share) in the First Quarter 2000 principally due to the loss from the
sale of the Canadian operation in the First Quarter 1999.
NET INCOME (LOSS)
As a result of all of the factors above, the Company recorded a net loss of $.2
million ($.08 loss per diluted share) and $.6 million ($.20 loss per diluted
share) in the First Quarter 2000 and in the First Quarter 1999, respectively.
- 10 -
<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations are the primary source of the Company's liquidity.
Short-term funds are also provided for current operations through lines of
credit and overdraft facilities. At March 31, 2000, the Company had aggregate
credit facilities of approximately $17.8 million, borrowings under these
facilities of $7.6 million, and amounts available under these facilities of
$10.2 million.
In the three months ended March 31, 2000, the Company generated cash flow of
$1.5 million from operating activities primarily due to a significant
reduction in accounts receivable and inventory and offset by a decrease of
accounts payable from the period ended December 31, 1999. The Company
increased capital spending levels to $.3 million in the First Quarter 2000.
During First Quarter 2000 the Company paid down short-term borrowing levels by
approximately $2.1 million.
Overall, cash and cash equivalents decreased in First Quarter 2000 by $.3
million.
Based upon the current level of operations, the Company believes that its
cash flow from operations together with the available borrowing capacity
under it credit agreements will be adequate to meet its presently anticipated
requirements for working capital and accrued liabilities, capital
expenditures, interest payments, and scheduled principal payments. There can
be no assurance, however, that the Company's business will continue to
generate cash flow at or above current levels.
QUARTERLY FLUCTUATIONS
The Company has experienced significant quarterly fluctuations in operating
results and anticipates that those fluctuations will continue. The fluctuations
have been caused by periodic changes in the components of the Company's sales
mix. In particular, the Company's sales of large automotive installations can
fluctuate substantially and they generally result in relatively lower gross
profit margins. Sales of standard products and spare parts typically generate
relatively higher gross profit margins. The Company therefore believes that
quarter-to-quarter comparisons of its results are not necessarily meaningful and
should not be relied upon as indications of future performance.
CONVERSION TO THE EURO
On January 1, 1999, eleven European Union member states adopted the euro as
their common national currency. From that date until January 1, 2002, either the
euro or a participating country's present currency will be accepted as legal
tender. Beginning on January 1, 2002, euro-denominated bills and coins will be
issued, and by July 1, 2002, only euro currency will be used.
The Company will is evaluating the strategic, financial, legal, and systems
issues related to the various phases of transition to the Euro currency.
While the Company does not believe the ultimate costs of conversion will be
material to its results of operations, cash flow, or financial position,
efforts will be made to address customer and business needs on a timely basis
and anticipate and prevent any complications.
-11-
<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A substantial portion of the Company's non-U.S. transactions is denominated
in French francs. Although Sames, S.A. is not typically subject to
significant foreign exchange transaction gains or losses, its financial
statements are translated into U.S. dollars as part of the Company's
consolidated financial reporting. Fluctuations in the French franc/U.S.
dollar exchange rate therefore will affect the Company's consolidated balance
sheets and statements of operations. At March 31, 2000, the French franc had
depreciated by approximately 4.5% compared to December 31, 1999. However, the
average French franc/U.S. dollar exchange rate decreased approximately 17% in
the three months ended March 31, 2000 compared to the First Quarter 1999
period. The Company also has operations in Japan and Sweden, where
transactions are denominated in Japanese yen and Swedish krona.
In the three months ended March 31, 2000, the net change in the cumulative
foreign currency translation adjustment account, which is a component of
stockholders' equity, was an unrealized loss of $.5 million. An unrealized
foreign currency translation loss of $.6 million was recorded in the three
months ended February 28, 1999.
Foreign currency exchange transactions have not typically resulted in
significant periodic gains or losses, although Sames North America recorded a
gain of approximately $.1 million during the three months ended March 31,
2000. The gain was recorded due to the combination of a significant
intercompany payable to Sames, S.A., denominated in French francs, and the
depreciation of the French franc relative to the U.S. dollar during the
period. The Company generally does not use derivative financial instruments
to manage currency exchange risks and no such instruments were outstanding at
March 31, 2000.
- 12 -
<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORWARD-LOOKING STATEMENTS
Statements regarding the Company's future plans and expectations, operating
performance, product development and distribution and strategic alternatives and
alliances, and effects of the euro conversion constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, and are subject
to the safe harbor created thereby. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations reflected in such forward-looking
statements will prove to be correct. The Company's ability to predict results or
the actual effect of future plans or strategies is inherently uncertain.
Important factors that could cause actual results to differ materially from the
Company's expectations include, without limitation, adverse changes in the
economy or overall market generally, increased competition relating to the
Company's products and services both within the United States and globally,
lower than expected sales of the Company's products and services, the Company's
inability to successfully implement manufacturing assembly and cost-reduction
programs, adverse results of the testing of the Company's products and
validation programs or the failure of such products or programs to gain wide
market acceptance, the inability of the Company to enter into or secure new or
anticipated strategic alliances, continuing losses resulting from discontinued
operations relating to the resolution and conclusion of the matters relating to
the sale of the Binks business, fluctuation in the sales revenues caused in part
by currency fluctuations and translations, uncertainty relating to economic and
political conditions in the countries and international markets in which the
Company operates and competes, and changes in accounting principles, policies
and guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements.
-13-
<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As of September 23, 1999, the Company reached agreement with ITW to
resolve its outstanding dispute relating to the purchase price adjustment
associated with the sale to ITW, effective September 30, 1998 of certain assets,
operations and subsidiaries that included specific standard or non-electrostatic
products comprising the Binks Business. Under the terms of the settlement, the
Company agreed to pay ITW approximately $6.1 million in sixteen quarterly
installments, without interest, of $385,458 each, which commenced on September
30, 1999 and end June 30, 2003.
As part of the original sale agreement to ITW, the Company assigned
and transferred to ITW all of the accounts receivable related to the Binks
Business. The sale agreement also provided for indemnification of ITW with
respect to such accounts receivable not collected within 180 days of the date of
the agreement. The Company and ITW have resolved disputes which arose regarding
these receivables. As a result, the Company paid approximately $1.0 million to
ITW on September 28, 1999 and ITW transferred back to the Company accounts
receivable in the aggregate amount of approximately $3.7 million. As of March
31, 2000, the Company had collected $.7 million of the accounts receivable. It
is anticipated that any future collections below or above the paid amount will
be either charged to or credited to loss from discontinued operations.
The receivables repurchased from ITW and transferred back to the
Company include a receivable from Haden Drysys International Limited ("Haden"),
a United Kingdom corporation, in the amount of Pounds 434,885. On March 10,
2000, Haden filed an arbitration claim in the International Court of Arbitration
of the International Chamber of Commerce in the United Kingdom against Binks
Limited ("Binks UK"), a former subsidiary of the Company that was sold to ITW as
part of the sale of the Binks Business, in the amount of Pounds 3,000,000. The
claim alleges that Binks UK breached its agreements with Haden relating to
automotive paint shop equipment for an automobile plant. Pursuant to the
original sale agreement with ITW, the Company has agreed to indemnify ITW with
respect to the claim and to assume the defense of the claim on behalf of ITW. On
April 13, 2000, the Company filed an answer denying the claim and a counterclaim
seeking to collect the receivable.
In October 1997, Robert Hashima, the former branch manager of Binks
Japan Limited, filed a lawsuit against the Company, claiming that he is entitled
to receive 145 million yen (approximately US$1.2 million) plus interest under
his retirement policy. The Company is responding vigorously to Mr. Hashima's
claim and in June 1998, the Company filed a counterclaim for damages in the
amount of 172 million yen (approximately US$1.4 million) for various wrongdoings
on the part of Mr. Hashima. The case is pending in Tokyo, Japan.
On February 24, 1997, Chester Baranowski, the former President of
Binks Canada, brought suit against the Company seeking US $4.55 million claiming
wrongful dismissal, breach of contract and non-payment of certain salary and
employee benefits. The Company has denied all substantive allegations and filed
a counterclaim on November 28, 1997 against Baranowski for breach of fiduciary
duty and conspiracy with Burke B. Roche to injure the Company. The case went to
trial in the Superior Court of Justice at Toronto, Canada and reasons for
judgement was issued January 12, 2000. Both parties have filed notices of
appeal.
On May 28, 1999, Burke B. Roche, former Chairman and CEO of the
Company, brought suit against the Company seeking a judgment in the amount of
all payments alleged to be due him under a retirement contract, presently
approximately $277,500, and that the court direct the Company to make remaining
installment payments allegedly due. Mr. Roche claims that payments of
approximately $18,500 per month are due for at least 76 more months or until
June, 2006, and payments in this amount are due for an additional 60 months
thereafter, so long as Mr. Roche is living when each such monthly payment is
due. The Company is vigorously defending these claims and has filed a
counterclaim seeking damages in an amount to be determined alleging various
breaches of fiduciary duty by Mr. Roche. On May 2, 2000, the Company amended its
counterclaim to exclude alleged breach of contract by Mr. Roche.
For all legal matters discussed above, after consulting with
counsel, the Company has determined that it is not possible at this time to
estimate the amount of damages, if any, that may ultimately be incurred.
-14-
<PAGE>
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
PART II - OTHER INFORMATION (CONTINUED)
Item 1. Legal Proceedings (continued)
See Note 4 to Consolidated Financial Statements for the period ended March 31,
2000 (Unaudited) contained herein.
Items 2. 3.
4. and 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
- Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
(1) Form 8-K dated January 31, 2000, filed with the
SEC on February 10, 2000.
Item 8. Change in fiscal year.
- On January 31, 2000 the Company determined to change
its fiscal year-end from November 30 to December 31.
-15-
<PAGE>
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.
SAMES CORPORATION
/s/ Arnold H. Dratt
- -------------------
Arnold H. Dratt - Chairman, President and Chief Executive Officer
Principal Executive Officer
/s/ Ronald A. Koltz
- -------------------
Vice President - Controller Corporate Accounting
Principal Accounting and Financial Officer
Date May 15, 2000
-16-
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