UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-Q
For the period ended June 30, 1996
Commission file number 1-3940
National-Standard Company
(Exact name of registrant as specified in its charter)
Indiana 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)
(616) 683-8100
(Registrant's telephone number, including area code)
Indicate by check mark whether 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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of Each Class Shares Outstanding at August 1, 1996
Common Stock, $ .01 par value 5,333,772
Part I. FINANCIAL INFORMATION
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
($000, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $60,853 $59,907 $187,400 $185,166
Cost of sales 52,722 52,182 163,166 157,384
Gross profit 8,131 7,725 24,234 27,782
Selling and administrative expenses 5,624 5,393 16,708 17,763
Operating income 2,507 2,332 7,526 10,019
Interest expense (1,151) (1,412) (3,759) (4,218)
Other income, net 97 197 3,811 204
Income 1,453 1,117 7,578 6,005
Income taxes 84 65 355 234
Net income $ 1,369 $ 1,052 $ 7,223 $ 5,771
Income per share $ .26 $ .19 $ 1.35 $ 1.05
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Balance Sheets
($000)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Assets June 30, 1996 September 30, 1995
Current assets: (Unaudited)
Cash $ 1,163 $ 2,064
Receivables, net 24,964 26,071
Inventories:
Raw material $ 10,451 $ 9,946
Work-in-process 15,187 15,383
Finished goods 1,353 26,991 1,059 26,388
Prepaid expenses 3,883 4,000
Other current assets 201 350
Total current assets $ 57,202 $ 58,873
Property, plant and equipment $ 152,277 $ 147,034
Less accumulated depreciation 106,302 45,975 102,384 44,650
Other assets 13,137 12,576
$ 116,314 $ 116,099
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 25,845 $ 26,605
Employee compensation and benefits 2,592 3,319
Accrued pension 965 965
Other accrued expenses 6,918 7,813
Current accrued postretirement benefit cost 2,700 2,700
Notes payable under revolving credit agreement
expiring October 1997 (see Note 2) 18,248 -
Current portion of long-term debt 7,400 7,000
Total current liabilities $ 64,668 $ 48,402
Notes payable under revolving credit agreement
expiring October 1997 (see Note 2) - 20,658
Other long-term debt 11,344 13,494
Other long-term liabilities 6,247 6,365
Accrued postretirement benefit cost 48,655 48,655
Shareholders' equity:
Common stock $ .01 par value. Authorized
25,000,000 shares; issued 5,409,144 and
5,399,094 shares, respectively $ 27,688 $ 27,594
Retained deficit (38,626) (45,849)
$ (10,938) $ (18,255)
Less: Foreign currency translation adjustments 2,120 2,205
Unamortized value of restricted stock 87 85
Treasury stock, at cost, 75,372 and 14,076
shares, respectively 629 104
Excess of additional pension liability over
unrecognized prior service cost 826 (14,600) 826 (21,475)
$ 116,314 $ 116,099
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
($000)
<TABLE>
<CAPTION>
Nine Months Ended
June 30
1996 1995
<S> <C> <C>
Net cash provided by operating activities $ 9,757 $ 8,720
Investing Activities:
Capital expenditures (6,122) (7,167)
Net cash used for investing activities (6,122) (7,167)
Financing Activities:
Term loan advance 849 769
Net borrowings (reduction) under revolving credit agreements (2,687) (416)
Principal payments under term loans (2,231) (1,840)
Stock option proceeds 58 44
Other (525) (20)
Net cash used for financing activities (4,536) (1,463)
Net increase (decrease) in cash (901) 90
Beginning cash 2,064 378
Ending cash $ 1,163 $ 468
Supplemental Disclosures:
Interest paid $ 3,370 $ 3,749
Income taxes paid $ 267 $ 219
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Notes to Consolidated Financial Statements
1. In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the financial
statements for the interim periods included herein have been made.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements in the 1995 National-Standard Company
Form 10-K, Annual Report, and this report should be read in conjunction
therewith.
2. On November 16, 1995, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus opinion that borrowings
outstanding under a revolving credit agreement with requirements similar to
those in the Company's agreement that expires October 1, 1997 should be
classified as short-term obligations. Accordingly, the Company has
classified all amounts due under its revolving credit agreement as a current
liability at June 30, 1996. Amounts outstanding under this agreement were
classified as long-term debt at September 30, 1995. There have been no
changes in the terms of the Company's revolving credit agreement since
September 30, 1995. Debt under the revolving credit agreement would have
been classified as long-term debt at June 30, 1996 had the EITF opinion not
been issued.
3. The results of operations for the nine-month period ended June 30, 1996 are
not necessarily indicative of the results to be expected for the full year.
4. Earnings Per Share - Earnings per share are based on the average number of
shares of common stock outstanding during the year plus common stock
equivalents for the dilutive effect of shares of common stock issuable upon
the exercise of certain stock options. The average number of shares of
common stock outstanding for the three- and nine-month periods ended June
30, 1996 were 5,338,164 and 5,365,895, respectively. Common shares and
common stock equivalents used in calculating earnings per share for the
three- and nine-month periods ended June 30, 1995 were 5,535,537 and
5,490,031, respectively.
National-Standard Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net sales for the three-month period ended June 30, 1996 increased 1.6% over the
same period last year, while net sales for the nine-month period ended June 30,
1996 increased 1.2% over the same period last year. Gross margin percentages
were 13.4% and 12.9%, respectively, for the current three- and nine-month
periods compared to 12.9% and 15.0%, respectively, for the same periods last
year.
Sales of air bag inflator filtration products for the three- and nine-month
periods increased approximately 3% and 7%, respectively, over the same periods
last year. The Company's weld wire product lines experienced a 2% increase for
the three-month period and a 7% decrease for the nine-month period over the same
period last year. Operating income for the three- and nine-month periods was
$2.5 million and $7.5 million, respectively, compared to $2.3 million and $10.0
million, respectively, for the same periods last year, resulting from a slowdown
in the automotive industries and sales of lower margin products. Net income for
the nine-month period ended June 30, 1996 was $7.2 million or $1.35 per share
versus $5.8 million or $1.05 per share for the same period last year. This
year's net income includes approximately $3.5 million from the sale of shares of
Allmerica Financial Corporation, which the company received as a result of the
demutualization of the State Mutual Life Assurance Company of America, in which
the Company had participated since 1946.
During the second quarter, the City of Stillwater, Oklahoma and the Company
announced that they had reached a settlement of their lawsuits pending in
Federal Court in Oklahoma City. The suits, which began in May 1995, concerned
operations at the Company's Stillwater plant, compliance with a City-issued
wastewater discharge permit, and the shutdown of the Company's plant last April.
Each side claimed that it had been damaged by the other's actions.
As part of the settlement, the Company paid $1.6 million to the City.
Substantially all costs and expenses related to the action with the City of
Stillwater have now been either accrued or paid. Net income during the current
three- and nine-month periods was adversely affected by $0.1 million and
$0.9 million, respectively, for legal expenses and settlement costs.
As a result of the settlement, the Company and the City have established an
ongoing dialogue in order to avoid a recurrence of the events which led to the
lawsuits.
Operations in the United Kingdom had a loss of $0.2 million and $0.5 million in
the current three- and nine-month periods compared to a loss of $0.2 million and
$1.4 million for the same periods last year. In the nine-month period, the
United Kingdom has increased weld wire sales 25% over 1995. Weld sales are
expected to continue at the higher level in the fourth quarter of the year.
Interest expense of $1.2 million and $3.8 million, respectively, in the current
three- and nine-month periods decreased 18.5% and 10.9%, respectively, over the
same periods last year, due to the combined effect of lower interest rates and a
lower level of average borrowings.
The Company remains in an operating loss carryforward position in the United
States, Canada, and the United Kingdom. Income tax expense on current income
was substantially offset by a portion of these carryforwards.
Liquidity and Capital Resources
Total borrowings decreased $4.1 million in the nine-month period, due primarily
to the sale of the Allmerica Financial Corporation shares and cash flow from
operations.
During 1994, the Company entered into a long-term financing arrangement, which
was modified in September 1995, to provide up to $51.0 million in revolving
credit facilities, term loans and a line of credit for future capital
expenditures. The loans mature in October 1997 and are fully secured by the
Company's assets.
The Company believes that adequate funding is in place to satisfy future demands
for its products.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) There were no reports on Form 8-K filed for the three months ended
June 30, 1996.
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.
NATIONAL-STANDARD COMPANY
Registrant
Date August 9, 1996
/s/ M. B. Savitske
M. B. Savitske
President and Chief Executive Officer
Date August 9, 1996
/s/ W. D. Grafer
W. D. Grafer
Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains third quarter summary financial information extracted
from National-Standard Company 1996 third quarter Form 10-Q and is qualified in
its entirety be reference to such Form 10-Q filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,163
<SECURITIES> 0
<RECEIVABLES> 25,396
<ALLOWANCES> 432
<INVENTORY> 26,991
<CURRENT-ASSETS> 57,202
<PP&E> 152,277
<DEPRECIATION> 106,302
<TOTAL-ASSETS> 116,314
<CURRENT-LIABILITIES> 64,668
<BONDS> 0
0
0
<COMMON> 27,688
<OTHER-SE> (42,288)
<TOTAL-LIABILITY-AND-EQUITY> 116,314
<SALES> 187,400
<TOTAL-REVENUES> 187,400
<CGS> 163,166
<TOTAL-COSTS> 163,166
<OTHER-EXPENSES> (3,811)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,759
<INCOME-PRETAX> 7,578
<INCOME-TAX> 355
<INCOME-CONTINUING> 7,223
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,223
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
</TABLE>
