<PAGE>
UNITED STATES SECURITIES and EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K / A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT to SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1993
OR
[ ] TRANSITION REPORT PURSUANT to SECTION 13 or 15(d) of the SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ________________
Commission file number: 1-3940
NATIONAL-STANDARD COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware 38-1493458
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1618 Terminal Road, Niles, Michigan 49120
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (616) 683-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the common shares held by non-affiliates of
the registrant on November 19, 1993, based on the closing price of the
shares on the New York Stock Exchange and assuming that 58 percent of the
shares were held by non-affiliates, was approximately $25,254,000.
As of November 19, 1993, 5,359,043 shares of common stock, par value of
$ .01, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the annual Proxy Statement relating to the Annual Meeting of
Stockholders scheduled for January 27, 1994 are incorporated by reference
into Part III of this report.
<PAGE>
PART I
ITEM 1. Business
National-Standard Company, a Delaware corporation, and its subsidiaries
(the "Company") have generally operated for more than the past five years
in two business segments: (i) wire and related products and (ii) machinery
and other products. As a result of divestitures prior to 1992, the Company
currently operates in only the wire and related products segment. The
financial information by industry segments for the three years ended Sep-
tember 30, 1993 is included in Note 13 of Notes to Consolidated Financial
Statements in Item 8, "Financial Statements and Supplementary Data" section
of this Report (incorporated herein by this reference).
In Fiscal Year 1993, there were no material changes to the Company's busi-
ness. During the past three years, the Company disposed of various business
units and product lines as described in the following report.
Wire and Related Products Segment
The Company produces tire bead wire, welding wire, wire cloth, hose rein-
forcing wire, stainless steel spring and specialty wire, plated wire, and
nonwoven metal fiber materials. These products are generally sold directly
to other manufacturers by Company salesmen. In addition, certain classes of
wire are sold through various types of distributors.
The Company also produces filters for automotive air bag inflators, which
are sold by Company salesmen to automotive air bag manufacturers.
In 1993, the Company sold the Telford Wire Division, Telford, England and
the Taydor Engineers business unit in Stourport, England. Proceeds of
$1,344,000 were used to reduce its United Kingdom borrowings.
In 1991, the Company sold the specialty wire product lines, including the
facility in Mount Joy, Pennsylvania and the product line in Los Angeles,
California. Proceeds of approximately $5,400,000 were used to reduce debt.
Wire and related products are supplied to major markets consisting of tire,
air bag filtration, spring, automotive component, electric component,
hydraulic hose, telecommunications, and fabricated metal products.
During 1990, the Company entered into a joint venture with Toyota Tsusho
America, Inc., and a group of Japanese wire weavers. The venture was estab-
lished to ensure that the Company would have sufficient quantities of
competitively priced woven wire cloth to maintain its position as a major
supplier of filtration materials and filters for the automotive air bag
market. During 1991, the venture was self-funding, requiring no cash
contributions from the Company. During 1992, the Company contributed cash
of $120,000 and equipment valued at $180,000 to the venture. No additional
investments were made in the venture during 1993. The venture will require
limited capital expenditures in the next fiscal year. Future requirements
will be dependent on market conditions.
The Company's wire products are generally highly competitive with a number
of other producers located both in the U.S. and in foreign countries. In
some cases, the Company's customers are also manufacturing products for
their own use similar to those produced by the Company. The Company re-
mains the leading U.S. producer of tire bead wire for the tire industry.
Bekaert Corporation, Delta Wire Corporation, and Amercord, Inc. are the
Company s major bead wire competitors. The Company is the major supplier
of air bag filtration materials in the U.S. While there are a limited
number of manufacturers in the Company's line of filtration materials, the
Company regards the field as highly competitive. Competitive factors for
all the Company s products are generally considered to be price, service
and product quality.
During 1993, the Company added air bag filter wire cloth weaving capacity
at new leased facilities in Knoxville, Tennessee and Clearfield, Utah. In
addition, certain air bag filtration products and manufacturing processes
were relocated from the Corbin, Kentucky facility to the new facilities.
<PAGE>
Although wire and related products are generally basic materials or fabri-
cated products which do not require assembly, production time is relatively
short and backlog is not significant; there was a backlog of approximately
$14,900,000 and $11,500,000 at September 30, 1993 and 1992, respectively.
Machinery and Other Products Segment
Prior to 1992, the Company produced machinery for tire and hose manufactur-
ing. These products were sold by Company salesmen to the automotive tire
and hose manufacturing market. All current operations are considered part
of the Wire and Related Products Segment.
In 1991, the Company sold the tire drum and mold business in Hunfeld,
Germany and the machinery business located in Rome, New York. Proceeds of
approximately $6,100,000 were used to reduce debt.
During 1988, the Company closed its strip steel and flat wire facility
located in Clifton, New Jersey. During the past five years, the Company has
undertaken to obtain New Jersey approval to transfer title for the
property. Due to the environmental regulations in the State of New Jersey,
title to real estate cannot be passed without the Department of
Environmental Protection s written approval. This project has involved
demolition of the buildings and continuing remediation of environmental
problems from production wastes through use of an on-site landfill and
off-site disposal. The cash outlays related to the property, which have
been primarily environmental, were $282,000, $380,000, $3,027,000,
$712,000, and $3,028,000 in 1993, 1992, 1991, 1990, and 1989, respectively.
These cash outlays, up to the estimated realizable value of the property,
have been reported as other assets with the balance charged to operations.
In 1993, 1992, 1991 and 1990, the Company expensed $0, $333,000, $3,898,000
and $2,933,000, respectively, associated with the project. The Company
expects to spend $300,000 in 1994 on the project. Future cash outlays of
approximately $2,400,000 will be needed prior to sale of the property. The
Company intends to spend this amount in conjunction with or just prior to
the sale.
Environmental
In addition to amounts spent in connection with the Clifton, New Jersey
facility, the Company spent approximately $1,471,000 during the 1993 fiscal
year, and $2,524,000 during the 1992 fiscal year on pollution control
equipment and related operational environmental projects and procedures at
the Company's seven U.S. plants. The largest annual cash outlays during
1993 and 1992 were $607,000 and $597,000, respectively, at the Columbiana
facility, primarily for regular environmental operational procedures.
During 1992, a total of $596,000 was spent for waste water treatment
modifications and decommissioning of idle equipment at the Corbin, Kentucky
and Stillwater, Oklahoma facilities. Compliance with federal, state, and
local environmental regulations which have been enacted or adopted are
estimated to require capital and operational cash outlays of approximately
$2,804,000 during 1994. In 1993, additional environmental expense
provisions totaling $3,600,000 were recorded to (1) decomission hose wire
plating equipment and dispose of hazardous materials normally used in the
plating process, (2) provide for soil remediation at an unused fill site,
and (3) provide for the closure of waste water surface impoundments which
are no longer in use. The Company does not expect existing regulations
will have any material effect on its net earnings or competitive position.
The Company has previously been designated a potentially responsible party
(PRP) by the Environmental Protection Agency (EPA) for four actual or
potential superfund sites, all of which have in excess of twenty other
PRP's. The Company has completed or is undertaking all investigative work
requested or required by the appropriate governmental agencies or by
relevant statutes, regulations, or local ordinances at minimal out-of-
pocket costs. In one instance, the Company has no record of participation
at the site. In two instances, the Company's records indicate that it had
only de minimus involvement. The Company has reviewed its involvement at
the fourth site and has previously accrued $300,000 for its share of
estimated site remediation based upon all information currently available.
The Company does not believe future costs for these sites will have a
materially adverse effect on the consolidated financial condition of the
Company or its consolidated results of operations.
<PAGE>
General
The Company's major raw material steel is purchased in several forms
from domestic and foreign steel companies. Raw materials were readily
available during the year and no shortages are anticipated for the 1994
fiscal year. The Company also purchases a variety of component parts to use
in some of the products it manufactures. The Company believes that its
sources of supply of these materials are adequate for its needs. The
Company's major sources of energy needed in its operations are natural gas,
fuel oil and electrical power. In certain locations where the Company
believes its regular source of energy may be interrupted, it has made plans
for alternative fuels.
The Company owns or is licensed under a number of patents covering various
products and processes. Although these have been of value in the growth of
the business and will continue to be of considerable value in its future
growth, the Company's success or growth has not generally been dependent
upon any one patent or group of related patents and it believes that the
successful manufacture and sale of its products generally depend more upon
its technological know-how and manufacturing skills. Seasonal activity has
no material effect on the Company's level of business or working capital
requirements. The Company's largest customers include some of the major
rubber companies, i.e., the Cooper Tire and Rubber Co., the Dunlop Tire and
Rubber Corporation (owned by Sumitomo), the Firestone Tire and Rubber
Company (owned by Bridgestone), Gates Rubber Company, General Tire (owned
by Continental), the Goodyear Tire and Rubber Company, the
Uniroyal-Goodrich Company (owned by Michelin), and the major producers of
automotive air bag restraint systems, i.e., Morton International and TRW.
The Goodyear Tire and Rubber Company accounted for approximately 20%, and
the ten largest customers, in the aggregate, accounted for approximately
57% of consolidated sales in the last fiscal year. Generally, business with
these customers is on the basis of purchase orders without firm commitments
to purchase specific quantities. No other material part of the Company's
business is dependent upon any single customer or very few customers, the
loss of which would have a material adverse effect upon the Company.
During the 1993 fiscal year, the Company spent approximately $982,000 on
research and development of new products and process alternatives compared
to $994,000 and $982,000 for the years ended September 30, 1992 and 1991,
respectively. These cash outlays are for Company sponsored activities.
Only two products, high carbon steel wire and low carbon steel wire, each
account for 10% or more of total sales. High carbon and low carbon steel
wire were, respectively, 51% and 20% of total sales in 1993; 51% and 21% of
total sales in 1992; and 57% and 18% of total sales in 1991.
During 1993, the Company experienced work stoppages by the United
Steelworkers of America at the Niles, Michigan; Corbin, Kentucky; and
Columbiana, Alabama plants. The Niles and Corbin strikes were settled
during 1993 with modified health care benefits similar to the health
benefits for salaried employees. The Columbiana plant has been on strike
since June 1, 1993. The plant operated during the remainder of 1993 and is
now operating with replacement workers and personnel from other Company
facilities. The Company continued to supply product during the work
stoppages. Additional costs including security services, additional wages,
and air freight were approximately $4,500,000 for the three work stoppages.
In addition, as a result of the work stoppage in Columbiana, the Company
discontinued hose wire plating in North America and wrote down the value of
its hose wire plating equipment by $909,000.
At September 30, 1993, the Company employed 1,248 persons in its operations
throughout the world.
During 1993, the Company elected early adoption of The Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 106,
"Accounting for Postretirement Benefits Other than Pensions." The one-time
transition obligation recognized at the time of adoption was $48,676,000.
As a result of this accounting change, the Company has a negative net worth
of $24,827,000.
<PAGE>
International Operations
The Company has foreign subsidiaries in Canada and the United Kingdom which
are similar to certain of the Company's domestic operations and with
generally the same markets. The financial information about foreign and
domestic operations for the three years ended September 30, 1993 is
included in Note 13 of Notes to Consolidated Financial Statements in Item
8, "Financial Statements and Supplementary Data" section of this Report
(incorporated herein by this reference). Foreign operations are subject to
the usual risks of doing business abroad, such as possible devaluation of
currency, restrictions on the transfer of funds and, in certain parts of
the world, political instability.
Accounting principles dictate that results of operations for the Company's
international operations are translated into U.S. dollars in accordance
with the Statement of Financial Accounting Standards No. 52. A translation
adjustment is recorded as a separate component of stockholders' equity,
"Cumulative Translation Adjustment." During 1993, the Cumulative
Translation Adjustment account increased by approximately $2,000,000 due to
the strengthening of the U.S. dollar against the British pound and the
Canadian dollar. The change in exchange rates does not have a materially
adverse effect on the cash flow of the international operations.
In October 1992, the Company sold its interest in its foreign affiliate in
India, receiving $693,000 in net proceeds, which was used to reduce debt.
A loss of $1,041,000 net of the 1992 equity in earnings of $165,000 was
recorded at September 30, 1992 in anticipation of this transaction. The
Company's equity in earnings of the Indian affiliate for fiscal year 1991
was $275,000. The Company's accounts reflect its share of these results at
the close of the fiscal year of this affiliate as other income.
ITEM 2. Properties
The Company conducts its domestic operations from facilities having an
aggregate floor space of approximately 1,378,000 square feet. The domestic
total includes principal facilities in Niles, Michigan (456,000 square
feet); Stillwater, Oklahoma (314,000 square feet); Corbin, Kentucky
(225,000 square feet); Columbiana, Alabama (202,000 square feet);
Mishawaka, Indiana (78,000 square feet); Knoxville, Tennessee (50,000
square feet); and Clearfield, Utah (53,000 square feet). The Knoxville and
Clearfield facilities were leased in 1993 for five-year terms with renewal
options.
The Company also operates from principal facilities in England (260,000
square feet) and Canada (107,000 square feet).
The majority of the Company's plants are of modern construction and the
remaining older plants are well maintained and considered adequate for
their current use. Manufacturing of wire and wire related products is
conducted at all Company facilities. The Company's plants generally are
operated on a multishift basis and, while particular plants may be
operating at capacity levels, overall the Company's facilities are adequate
to provide for a significant increase in unit volume due to the Company's
ability to redistribute production of similar products between Company
facilities with minimal cost or inconvenience.
<PAGE>
PART II.
ITEM 6. Selected Financial Data (In thousands, except per share and
employee data)
The following selected financial data are derived from the consolidated
financial statements of the Company. The data should be read in conjunction
with the consolidated financial statements, related notes and other
financial information included herein. Specifically, discussions regarding
accounting changes, divestitures, and other related information that
affects the comparability of this data can be found in Items 7, 8, and 14
herein.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
For the Year:
Net sales $208,254 $215,133 $232,695 $271,726 $302,673
Operating profit (loss) $ (1,055) $ 44 $(15,783) $(11,256) $(11,085)
Net earnings (loss) before effect
of accounting change $ (4,701) $(5,885) $(22,885 $(19,871) $(12,443)
Net earnings (loss) $(53,377) $(5,885) $(22,885) $(19,871) $(12,443)
At Year-End:
Stockholders' equity $(24,827) $25,320 $ 29,237 $ 51,660 $ 66,471
Net current assets $ (39) $ 1,483 $ 4,740 $ 24,406 $ 33,967
Total assets $103,976 $113,939 $119,009 $161,323 $179,156
Long-term debt $ 24,100 $ 29,346 $ 37,338 $ 47,909 $ 45,958
Ratio of current assets to
current liabilities 1.0:1.0 1.0:1.0 1.1:1.0 1.4:1.0 1.6:1.0
Common shares outstanding 5,359 4,502 4,479 4,482 4,487
Average common shares outstanding used
in per share calculations 5,085 4,379 4,276 4,190 4,102
Number of employees 1,248 1,460 1,473 2,079 2,544
Per Common Share:
Earnings (loss) before effect
of accounting change $( .92) $ (1.34) $ (5.36) $ (4.74) $ (3.03)
Net earnings (loss) $(10.50) $ (1.34) $ (5.36) $ (4.74) $ (3.03)
Dividends declared $ .00 $ .00 $ .00 $ .00 $ .00
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Dollars in thousands except share data)
Results of Operations
Net sales for the year of $208,254 were 3.2% below 1992 and 10.5% below
1991 due to business units sold during 1992 and 1991. During 1993, the
Company experienced increased demand for its air bag materials and weld
wire product lines. 1993 sales in those product lines increased 51% and 11%,
respectively, over 1992. Sales of hose wire decreased 22% due to the work
stoppage in Columbiana, Alabama and subsequent discontinuation of hose wire
plating in North America. During 1992, sales for remaining operations
increased 6% due to increased sales of air bag filtration materials and
welding wire. Growth in both products is expected to continue for at least
the next several years.
<PAGE>
Over the past several years, the Company's strategy has been to focus on a
core wire business and to develop the air bag filtration and rechargeable
battery materials business. This strategy has led to the divestiture of the
non-core specialty wire business and all of its non-wire related
businesses. Proceeds from the divestitures have been utilized to fund
investment in the remaining business and to reduce debt. Since September
30, 1990, debt has been reduced $24,888 and the air bag filtration and
rechargeable battery materials sales have increased 75%. The effect of the
divestiture activities on the Company's sales and gross margins is shown in
the following table:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net Sales
Remaining operations $207,327 $207,209 $193,725 $204,521 $2 10,930
Divested operations 927 7,924 38,970 67,205 91,743
Total $208,254 $215,133 $232,695 $271,726 $ 302,673
Gross Profit
Remaining operations $ 24,096 $ 25,107 $ 18,168 $ 18,658 $ 21,005
Divested operations (91) 345 4,626 9,772 11,781
Total $ 24,005 $ 25,452 $ 22,794 $ 28,430 $ 32,786
Gross Profit %
Remaining operations 11.6 % 12.1% 9.4% 9.1% 10.0%
Divested operations (9.8)% 4.4% 11.9% 14.5% 12.8%
Total 11.5 % 11.8% 9.8% 10.5% 10.8%
</TABLE>
Gross profit margins change due to several factors. For the Company, the
most significant factor is the level of sales and production. As production
increases, a relatively lower level of fixed costs is associated with each
unit, and the gross profit percentage increases. Similarly, as volume
falls, fewer units are available to cover the fixed costs of manufacturing
and the profit percentage decreases. In addition to volume, changes in
product mix, selling prices, and costs also affect the gross margins.
Although it would appear that prior to 1992 the divested businesses were
more profitable than the remaining operations, these businesses increas-
ingly required substantially higher selling and administrative expense and
significant levels of working capital that, even considering the higher
gross margins, resulted in lower net returns. The margin effect of
divesting these businesses is shown in the table above. The effect of the
increased selling and administrative costs of the divested businesses is
reflected in the divested operations line in the table on page 10.
During 1993, the Company experienced work stoppages by the United
Steelworkers of America at the Niles, Michigan; Corbin, Kentucky; and
Columbiana, Alabama plants. The Niles and Corbin strikes were settled
during 1993 with modified health care benefits similar to the health
benefits for salaried employees. The Columbiana plant has been on strike
since June 1, 1993. The plant operated during the remainder of 1993 and
is now operating with replacement workers and personnel from other Company
facilities. The Company continued to supply product during the work stop-
pages. Additional costs including security services, additional wages, and
air freight were approximately $4,500 for the three work stoppages. In
addition, as a result of the work stoppage in Columbiana, the Company
discontinued hose wire plating in North America and wrote down the value of
its hose wire plating equipment by $909.
During 1992, margins improved based upon the higher sales of the Company's
core wire products and its air bag filtration materials business. In 1991,
margins declined due to lower levels of wire sales, partially offset by
better utilization within the Fibrex product line.
The political changes that occurred in the Eastern Bloc countries had a
negative effect on business activity, and a general slowdown in the
Company's Western European markets caused a 9% decline in volume of major
product lines. This decline caused capacity in international operations to
be under-utilized in 1992 and 1991. During 1993, sales to other worldwide
markets from international operations increased 8%, resulting in better
capacity utilization and improved operating results noted in Note 13 of
Notes to Consolidated Financial Statements in Item 8.
In recent years, the Company has not been able to raise prices in line with
inflation and rising raw material costs due to the effects of worldwide
overcapacity in the Company's major product lines. Since 1988, inflation as
measured by the Consumer Price Index has risen 21% while average selling
prices have risen only 10%. Had selling prices increased 21%, sales in
1993 would have been approximately $231,000.
<PAGE>
In 1993, the Company sold the Telford Wire Division and Taydor Engineers
business units in England. Proceeds of $1,344 were used to reduce its
United Kingdom borrowings.
In 1991, the Company sold the Rome, New York; Hunfeld, Germany; and Mount
Joy, Pennsylvania facilities, the Jewel Wire product line and the specialty
product lines serviced from its Los Angeles, California warehouse. Proceeds
of $11,500 from the 1991 sales were used to reduce debt. In 1990, the
Company sold the COPPERPLY(R) and ARCHON II(R) product lines; the
Strandflex product line and facility in Oriskany, New York; the Uitenhage,
South Africa and Perth, Scotland facilities; and the Medical Products
business unit in Gainesville, Florida. Proceeds of $9,900 from the 1990
sales were used for capital expenditures in the remaining businesses.
In 1991, the Company consumed LIFO inventory quantities carried at lower
costs prevailing in earlier years as compared with the cost of 1991
purchases, the effect of which reduced the loss by approximately $1,555.
In 1993, additional environmental expense provisions totaling $3,600 were
recorded to: (1) decommission hose wire plating equipment and dispose of
hazardous materials normally used in the plating process, (2) provide for
soil remediation at an unused fill site, and (3) provide for the closure of
waste water surface impoundments which are no longer in use.
During 1993 and 1992, the Company provided $4,651 and $2,828, respectively,
for the estimated cost of compliance with environmental regulations and
continuing modifications in operating requirements. Included in the figure
for 1992 was $333 related to the Athenia Steel property in Clifton, New
Jersey. The majority of these provisions were made in the Company's fourth
quarter of each year as a result of an expansion of clean-up operations and
changes in estimated costs to complete. In addition to the amounts charged
to earnings, $142 and $669 of costs were capitalized in the respective
years. The Company's actual environmental related cash outlays for 1993 and
1992 were $1,753 and $2,904, respectively, of which $282 and $380 were
spent on the Clifton, New Jersey property.
The Company has previously been designated a potentially responsible party
(PRP) by the Environmental Protection Agency (EPA) for four actual or
potential superfund sites, all of which have in excess of twenty other
PRP's. The Company has completed or is undertaking all investigative work
requested or required by the appropriate governmental agencies or by
relevant statutes, regulations, or local ordinances at minimal out-of-
pocket costs. In one instance, the Company has no record of participation
at the site. In two instances, the Company's records indicate that it had
only de minimus involvement. The Company has reviewed its involvement at
the fourth site and has previously accrued $300,000 for its share of
estimated site remediation based upon all information currently available.
The Company does not believe future costs for these sites will have a
materially adverse effect on the consolidated financial condition of the
Company or its consolidated results of operations.
The Company has reviewed its current projects which are expected to be
completed in 1994 and all environmental regulations and acts to ensure
continuing compliance. In 1994, the Company expects to spend $300 on the
Clifton, New Jersey project. Future cash outlays of approximately $2,400
will be needed prior to sale of the property. These amounts have already
been accrued for financial statement purposes. Additionally, the Company
expects to spend $2,804 on environmentally related capital and operational
projects, of which $1,464 will be charged against 1994 earnings.
In 1989, in response to expected market changes, the Company adopted a
strategy that included, among other things, the decision to exit non-
strategic and/or non-profitable businesses and to continually adapt general
and administrative cost levels to the changing business.
In 1993, 1992 and 1991, $1,165, $2,677, and $12,777, respectively, the net
cost of restructuring the Company in those years, including net loss on
sale of fixed assets and product lines of $196, $1,451, and $6,164,
respectively; the write-off of nonproductive facilities and obsolete
inventory of $909, $681, and $5,720, respectively; severance costs of the
salaried and hourly workforce; and provision for transferring manufacturing
of certain product lines between plants, is included in selling and
administrative costs. The Company will incur no further cash outflows
related to the restructuring.
<PAGE>
The following summary shows the changing level of selling and
administrative expense and identifies selling and administrative expense
directly attributable to divested operations and amounts attributable to
restructuring activities.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Selling and Administrative
Expense:
Remaining operations $23,774 $21,970 $ 20,813 $ 26,395 $27,340
Divested operations 121 761 4,987 7,732 8,843
Restructuring costs 1,165 2,677 12,777 5,559 7,688
Total $25,060 $25,408 $ 38,577 $ 39,686 $43,871
As a Percent of Sales
Remaining operations 11.5% 10.6% 10.7% 12.7% 12.7%
Divested operations 13.1% 9.0% 13.6% 12.2% 10.0%
Total 12.0% 11.8% 16.6% 14.6% 14.5%
The net effect of all the above elements is seen in the Company's operating
profit (loss).
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Operating Profit (Loss)
Remaining operations $ 322 $ 2,739 $(2,968) $(7,204) $ (5,652)
Divested operations (212) (18) (38) 1,507 2,255
Restructuring costs (1,165) (2,677) (12,777) (5,559) (7,688)
Total $(1,055) $ 44 $(15,783) $(11,256) $(11,085)
</TABLE>
Operating profit by Industry Segment and Geographic Area is presented in
Note 13 of Notes to Consolidated Financial Statements in Item 8.
Interest expense, including capitalized interest, continued to decrease in
1993 due to the effects of lower average borrowings and lower interest
rates as shown below.
1993 1992 1991 1990 1989
Interest expense $ 3,742 $ 4,990 $ 6,653 $ 6,366 $ 5,854
Capitalized interest $ 100 $ 50 $ 166 $ 700 $ 450
Average borrowings $37,240 $45,743 $ 56,760 $ 58,293 $55,867
Average interest rate 10.3% 11.0% 12.0% 12.1% 11.3%
Other expense in 1992 consists primarily of the $1,041 charge to earnings
associated with the sale of the Company's interest in its Indian affiliate.
This charge represents the cumulative decline in the value of the Company's
investment in this operation due to the effects of foreign exchange rates,
and $599 of the 1992 loss was previously reported as an adjustment to
stockholders' equity.
In 1993 and 1992, income taxes as a percentage of pre-tax loss vary from
the domestic statutory rate primarily due to the Company's inability to
to record a tax benefit on losses, and the 1992 difference in book and tax
loss on sale of the Company's Indian affiliate.
The operating loss tax benefits of $18,496 and $1,332 in 1993 and 1992,
respectively, can be used to reduce future income tax expense.
<PAGE>
Financial Condition
The Company experienced net losses of $53,377, $5,885, and $22,885 in
1993, 1992, and 1991 primarily due to changes in accounting, restructuring
charges, and environmental provisions. Working capital decreased $1,522 and
$3,257 in 1993 and 1992, respectively, due to the net losses and increased
reserves associated with restructuring activities and environmental
projects, as well as the reclassification of certain debt to current. Net
cash from operations was $9,070, $6,057, and $2,762, respectively, due
primarily to the $10,046 increase in Accounts Payable and the $7,920
reduction in Receivables. Of the 1993, 1992, and 1991 cash flow from
operations of $17,889, $10,826 was invested in property, plant, and
equipment, and $7,063 was used for debt reduction. During 1993, the
Company continued its plan to exit non-profitable and non-strategic product
lines and subsidiaries. In accordance with this plan, certain facilities
and product lines were sold in 1993, 1992, and 1991, and the proceeds of
$13,512 were used for additional debt reduction. During 1993, the Company
sold the Telford Wire Division, using the proceeds to reduce debt. In
October 1992, the Company sold its interest in the Indian affiliate and the
Taydor Engineers business unit, using the proceeds to reduce debt. During
1993, 1992, and 1991, the Company reduced its debt by $24,888. During
1993, 1992 and 1991, the Company invested $10,826 in property, plant and
equipment. Approximately one-third of this amount relates to the Company's
commitment to automotive air bag inflator filters and filter media and
fiber material for rechargeable battery electrodes. The Company expects to
make investments for inflator filters and filter media in 1994 based upon
increased demand for air bag inflators in 1995 model year automobiles. The
Company's total capital expenditures for 1994 are expected to be $3,900,
primarily for projects to add filtration material capacity and improve
quality and operating efficiencies. All debt financing sources available
to the Company are fully utilized. While divestiture activities and debt
reductions have affected the Company's cash flow in recent years, it
expects that improved results of operations from restructuring activities
will fund future expansion of working capital and productive capacity.
With the completion of the restructuring activities, the Company is
confident that adequate long- and short-term financing will be available.
1993 1992 1991 1990 1989
Current ratio 1.0:1.0 1.0:1.0 1.1:1.0 1.4:1.0 1.6:1.0
Total debt to total capital, excluding
SFAS No. 106 adjustment 57.4% 62.9% 61.3% 54.8% 47.6%
Long-term debt to total capital
excluding SFAS No. 106 adjustment 41.8% 43.0% 49.5% 41.9% 36.2%
Due to the operating results, including restructuring charges and
environmental provisions, the Company was not in compliance with net income
financial covenants with its lenders. As these special situations arose
during 1993 and 1992, the Company's lenders periodically suspended the
effectiveness of the covenants. The Company's lenders have amended and
extended the Company's credit agreements until October 1, 1994. The
amended agreements require maintenance of minimum net income levels through
October 1, 1994, as well as compliance with certain other conditions and
provide for maximum borrowing levels based on a percentage of qualified
accounts receivable and inventory. The Company anticipates compliance with
the covenants in the future.
The Company will continue to pursue cost reduction activities in both its
domestic and international operations, including personnel reductions and
costs associated with administering its employee benefit programs.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, National-Standard Company has duly caused this
amendment to Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
NATIONAL-STANDARD COMPANY
/s/ M. B. Savitske
Michael B. Savitske
President and Chief Executive Officer,
Director
/s/ W. D. Grafer
William D. Grafer
Vice President, Finance
(Principal Financial and Accounting
Officer)
Dated: September 21, 1994
