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 March 31, 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 May 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 Six Months Ended
March 31 March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $66,016 $66,654 $ 126,547 $ 125,259
Cost of sales 57,476 54,988 110,444 105,202
Gross profit 8,540 11,666 16,103 20,057
Selling and administrative expenses 5,748 7,255 11,084 12,370
Operating income 2,792 4,411 5,019 7,687
Interest expense (1,273) (1,431) (2,608) (2,806)
Other income (expense), net 92 (28) 3,714 7
Income 1,611 2,952 6,125 4,888
Income taxes 101 160 271 169
Net income $ 1,510 $ 2,792 $ 5,854 $ 4,719
Income per share $ .28 $ .52 $ 1.09 $ .88
Dividends per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
Average shares outstanding 5,374,709 5,369,310 5,379,684 5,367,978
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Balance Sheets
($000)
<TABLE>
<CAPTION>
Assets March 31, 1996 September 30, 1995
Current assets: (Unaudited)
<S> <C> <C> <C> <C>
Cash $ 718 $ 2,064
Receivables, net 25,677 26,071
Inventories:
Raw material $ 12,250 $ 9,946
Work-in-process 16,146 15,383
Finished goods 1,617 30,013 1,059 26,388
Prepaid expenses 3,668 4,000
Other current assets 304 350
Total current assets $60,380 $58,873
Property, plant and equipment $149,246 $147,034
Less accumulated depreciation 104,409 44,837 102,384 44,650
Other assets 12,595 12,576
$117,812 $116,099
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 28,404 $26,605
Employee compensation and benefits 2,903 3,319
Accrued pension 965 965
Other accrued expenses 8,716 7,813
Current accrued postretirement benefit cost 2,700 2,700
Notes payable under revolving credit agreement
expiring October 1997 (see Note 2) 16,214 -
Current portion of long-term debt 6,974 7,000
Total current liabilities $ 66,876 $48,402
Notes payable under revolving credit agreement
expiring October 1997 (see Note 2) - 20,658
Other long-term debt 12,081 13,494
Other long-term liabilities 6,043 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 (39,995) (45,849)
$(12,307) $(18,255)
Less:
Foreign currency translation
adjustments 2,160 2,205
Unamortized value of restricted
stock 97 85
Treasury stock, at cost, 52,372
and 14,076 shares,
respectively 453 104
Excess of additional pension
liability over unrecognized
prior service cost 826 (15,843) 826 (21,475)
$117,812 $116,099
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
($000)
<TABLE>
<CAPTION>
Six Months Ended
March 31
1996 1995
<S> <C> <C>
Net cash provided by operating activities $ 8,059 $ 7,424
Investing Activities:
Capital expenditures (3,391) (4,997)
Net cash used for investing activities (3,391) (4,997)
Financing Activities:
Term loan advance - 769
Net borrowings (reduction) under revolving
credit agreements (4,309) (249)
Principal payments under term loans (1,414) (2,486)
Stock option proceeds 58 -
Other (349) (20)
Net cash used for financing activities (6,014) (1,986)
Net increase (decrease) in cash (1,346) 441
Beginning cash 2,064 378
Ending cash $ 718 $ 819
Supplemental Disclosures:
Interest paid $ 2,314 $ 2,329
Income taxes paid $ 176 $ 109
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 March 31, 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 March 31, 1996 had the EITF opinion not
been issued.
3. The results of operations for the six-month period ended March 31, 1996 are
not necessarily indicative of the results to be expected for the full year.
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 March 31, 1996 decreased 1.0% over
the same period last year, while net sales for the six-month period ended March
31, 1996 increased 1.0% over the same period last year. Gross margin
percentages were 12.9% and 12.7%, respectively, for the current three- and six-
month periods compared to 17.5% and 16.0%, respectively, for the same periods
last year.
Sales of air bag inflator filtration products for the three- and six-month
periods increased approximately 4% and 8%, respectively, over the same periods
last year. The Company's weld wire product lines, however, experienced an 11%
decline over the same time periods. Operating income for the three- and six-
month periods were $2.8 million and $5.0 million, respectively, compared to $4.4
million and $7.7 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 six-month period ended March 31, 1996 was $5.9
million or $1.09 per share versus $4.7 million or $0.88 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 National-
Standard 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, National-Standard has agreed to pay $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 six-month periods was adversely affected by $0.2 million and
$0.8 million, respectively, for legal expenses and settlement costs.
Both the City and National-Standard believe their settlement represents a
significant step forward in their relationship. Both parties are committed to
continuing their dialogue and to striving to avoid any recurrence of the events
of last April. Both the City and the Company believe that the citizens of
Stillwater and the employees and customers of National-Standard will benefit
from the resolution of these disputes and their continued cooperation.
Operations in the United Kingdom had a loss of $0.3 million in each of the
current three- and six-month periods compared to a loss of $0.9 million and $1.2
million for the same periods last year. The United Kingdom is experiencing
increased demand for its products and continued improvement is expected in the
second half of the year.
Interest expense of $1.3 million and $2.6 million, respectively, in the current
three- and six-month periods decreased 11.0% and 7.1%, 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 $5.7 million in the six-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 adequate funding is in place to fund future growth and meet
the growing demand for our 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
March 31, 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 May 10, 1996 /s/ M. B. Savitske
M. B. Savitske
President and Chief Executive Officer
Date May 10, 1996 /s/ W. D. Grafer
W. D. Grafer
Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains second quarter summary financial information extracted
from National-Standard Company 1996 second quarter Form 10-Q and is qualified in
its entirety by reference to such Form 10-Q filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 718
<SECURITIES> 0
<RECEIVABLES> 26,097
<ALLOWANCES> 420
<INVENTORY> 30,013
<CURRENT-ASSETS> 60,380
<PP&E> 149,246
<DEPRECIATION> 104,409
<TOTAL-ASSETS> 117,812
<CURRENT-LIABILITIES> 66,876
<BONDS> 0
27,668
0
<COMMON> 0
<OTHER-SE> (43,531)
<TOTAL-LIABILITY-AND-EQUITY> 117,812
<SALES> 126,547
<TOTAL-REVENUES> 126,547
<CGS> 110,444
<TOTAL-COSTS> 110,444
<OTHER-EXPENSES> (3,714)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,608
<INCOME-PRETAX> 6,125
<INCOME-TAX> 271
<INCOME-CONTINUING> 5,854
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,854
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
