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, 1997
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, 1997
Common Stock, $ .01 par value 5,271,539
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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $63,127 $66,016 $ 123,001 $ 126,547
Cost of sales 56,703 57,476 109,554 110,444
Gross profit 6,424 8,540 13,447 16,103
Selling and administrative expenses 5,971 5,748 11,349 11,084
UK restructuring 9,850 - 9,850 -
Operating profit (loss) (9,397) 2,792 (7,752) 5,019
Interest expense (1,064) (1,273) (2,113) (2,608)
Other income (expense), net (143) 92 (104) 3,714
Income (loss) (10,604) 1,611 (9,969) 6,125
Income taxes 83 101 (19) 271
Net income (loss) $(10,687) $ 1,510 $ (9,950) $ 5,854
Income (loss) per share $ (2.03) $ .28 $ (1.88) $ 1.09
Dividends per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
Average shares outstanding 5,272,000 5,374,709 5,291,854 5,379,684
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Balance Sheets
($000)
<TABLE>
<CAPTION>
Assets March 31, 1997 September 30, 1996
Current assets: (Unaudited)
<S> <C> <C> <C> <C>
Cash $ 607 $ 2,423
Receivables, net 24,962 24,532
Inventories:
Raw material $ 8,766 $ 7,573
Work-in-process 14,218 12,863
Finished goods 1,016 24,000 1,708 22,144
Prepaid expenses 2,854 3,283
Deferred tax asset 1,300 1,300
Other current assets - 200
Total current assets $ 53,723 $ 53,882
Property, plant and equipment $ 158,428 $ 155,870
Less accumulated depreciation 111,424 47,004 108,431 47,439
Other assets 13,733 13,367
$ 114,460 $ 114,688
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 24,411 $ 23,067
Employee compensation and benefits 3,480 2,021
Accrued pension 334 334
Other accrued expenses 14,627 7,765
Current accrued postretirement benefit cost 2,500 2,500
Notes payable under revolving credit agreement
expiring October 1997 (see Note 2) 17,989 18,443
Current portion of long-term debt 17,459 7,244
Total current liabilities $ 80,800 $ 61,374
Long-term debt 407 11,203
Other long-term liabilities 7,724 6,433
Accrued postretirement benefit cost 49,440 49,440
Stockholders equity:
Common stock $ .01 par value. Authorized
25,000,000 shares; issued 5,413,644 and
5,409,144 shares, respectively $ 27,720 $ 27,689
Retained deficit (46,947) (36,997)
$ (19,227) $ (9,308)
Less: Foreign currency translation adjustments 1,999 2,175
Unamortized value of restricted stock 83 73
Treasury stock, at cost, 142,105 and 86,609
shares, respectively 1,109 713
Excess of additional pension liability over
unrecognized prior service cost 1,493 (23,911) 1,493 (13,762)
$ 114,460 $ 114,688
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
1997 1996
<S> <C> <C>
Net cash provided by operating activities $ 4,929 $ 8,059
Investing Activities:
Capital expenditures (5,089) (3,391)
Net cash used for investing activities (5,089) (3,391)
Financing Activities:
Net borrowings (reduction) under revolving credit agreements 618 (4,309)
Principal payments under term loans (1,878) (1,414)
Stock option proceeds - 58
Other (396) (349)
Net cash used for financing activities (1,656) (6,014)
Net increase (decrease) in cash (1,816) (1,346)
Beginning cash 2,423 2,064
Ending cash $ 607 $ 718
Supplemental Disclosures:
Interest paid $ 2,017 $ 2,314
Income taxes paid $ 95 $ 176
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 presentation 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 1996 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 had
classified all amounts due under its revolving credit agreement as a current
liability at September 30, 1996. Debt under the revolving credit agreement
would have been classified as long-term debt at September 30, 1996 had the
EITF opinion not been issued.
3. The three- and six-month periods ended March 1997 per share data of $(2.03)
and $(1.88), respectively, includes $(1.87) per share and $(1.86) per share
related to the restructuring charge. The six-month period ended March 1996
per share data of $1.09 includes $0.66 per share related to the sale of
shares of the Allmerica Financial Corporation.
4. The results of operations for the six-month period ended March 31, 1997 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, 1997 decreased 4.4% over
the same period last year, while net sales for the six-month period ended
March 31, 1997 decreased 2.8% over the same period last year. Gross margin
percentages were 10.2% and 10.9%, respectively, for the current three- and six-
month periods compared to 12.9% and 12.7%, respectively, for the same periods
last year.
Sales of air bag inflator filtration products for the three- and six-month
periods decreased approximately 14% and 15%, respectively, over the same periods
last year. The Company's weld wire product lines, however, experienced a 12%
and 14% increase over the same time periods. Air bag product sales continue to
decline due to the combined effect of lower prices and a shift in market
conditions between major air bag manufacturers, resulting in lower air bag
product sales for the Company. Operating losses for the three- and six-month
periods were $9.4 million and $7.8 million, respectively, compared to operating
income of $2.8 million and $5.0 million, respectively, for the same periods last
year.
The second quarter results include a $9.9 million charge for restructuring the
Company's operations in the United Kingdom. This restructuring charge includes
$3.0 million in severance costs and estimated pension curtailment costs in
addition to discontinuing the U.K. manufacture and sales of COPPERPLY wire and
certain non-value added weld wire products in the U.K, thus reducing annual U.K.
sales from $37.0 million to approximately $30.0 million. The resulting
reduction in the U.K. work force of 124 employees will save approximately $3.0
million in annual salaries. The restructuring also includes a $2.6 million
provision for the write-off of inventory and fixed assets related to the
discontinued products, $1.7 million for ongoing lease commitments for associated
equipment and facilities, $1.8 million for environmental costs and $ .8 million
in other miscellaneous costs. Cash outlays during the next twelve months
included in the $9.9 million are expected to be $2.7 million. Cash outlays
expected beyond the next twelve months are approximately $3.0 million.
Net losses for the current three- and six-month periods were $10.7 million or
$2.03 per share and $10.0 million or $1.88 per share, respectively, compared to
a net income of $1.5 million or $ .28 per share and $5.9 million or $1.09 per
share for last year. This year's net income includes the $9.9 million UK
restructuring charge, while last year's net income includes approximately $3.5
million or $ .66 per share 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.
The U.K. results without the restructuring charges were a loss of $1.1 million
and $1.4 million in the current three- and six-month periods. Prior to this
restructuring, the U.K. Company has lost $5.3 million since 1993. Without the
restructuring, the Company would expect these losses to continue.
North American results continue to be positive with a net income of $ .2 million
and $1.3 million, respectively, for the current three- and six-month periods.
Prior year six-month North American net income was $2.6 million. Cost reduction
activities in all business units and strong weld wire sales have generated a
$2.2 million increase in net income. However, the operations continue to be
under significant price pressure in the tire bead wire and air bag filtration
materials markets. As a result, pricing for all North American business units
is off $3.8 million during the first six months. Interest expense in North
America decreased approximately $ .3 million during the same period.
National-Standard Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (Continued)
Interest expense of $1.1 million and $2.1 million, respectively, in the current
three- and six-month periods decreased 16.4% and 19.0%, 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 $1.3 million in the six-month period, due primarily
to 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, which are fully secured by the Company's assets,
mature in October 1997.
The Company believes adequate funding will be available 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) A Form 8-K (Item 5) was filed on January 2, 1997 regarding the
announcement to continue the program to repurchase some of the
Company's common stock.
A second Form 8-K (Item 5) was filed on January 2, 1997 regarding a
Letter of Intent with Korea Sangsa Co., Ltd. to form a joint venture
company in Korea.
A third Form 8-K (Item 5) was filed on January 24, 1997 regarding
Fiscal Year 1997 first quarter earnings.
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 9, 1997 /s/ M. B. Savitske
M. B. Savitske
President and Chief Executive Officer
Date May 9, 1997 /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 1997 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-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 607
<SECURITIES> 0
<RECEIVABLES> 25,366
<ALLOWANCES> 404
<INVENTORY> 24,000
<CURRENT-ASSETS> 53,723
<PP&E> 158,428
<DEPRECIATION> 111,424
<TOTAL-ASSETS> 114,460
<CURRENT-LIABILITIES> 80,800
<BONDS> 0
0
0
<COMMON> 27,720
<OTHER-SE> (51,631)
<TOTAL-LIABILITY-AND-EQUITY> 114,460
<SALES> 123,001
<TOTAL-REVENUES> 123,001
<CGS> 109,554
<TOTAL-COSTS> 109,554
<OTHER-EXPENSES> 104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,113
<INCOME-PRETAX> (9,969)
<INCOME-TAX> (19)
<INCOME-CONTINUING> (9,950)
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<NET-INCOME> (9,950)
<EPS-PRIMARY> (1.88)
<EPS-DILUTED> (1.88)
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