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, 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 August 6, 1997
Common Stock, $ .01 par value 5,224,911
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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $ 64,701 $ 60,853 $ 187,702 $ 187,400
Cost of sales 57,693 52,722 167,247 163,166
Gross profit 7,008 8,131 20,455 24,234
Selling and administrative expenses 5,674 5,624 17,023 16,708
UK restructuring - - 9,850 -
Operating profit (loss) 1,334 2,507 (6,418) 7,526
Interest expense (1,061) (1,151) (3,174) (3,759)
Other income (expense), net 37 97 (67) 3,811
Income (loss) 310 1,453 (9,659) 7,578
Income taxes 46 84 27 355
Net income (loss) $ 264 $ 1,369 $ (9,686) $ 7,223
Income (loss) per share $ .05 $ .26 $ (1.83) $ 1.35
Dividends per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
Average shares outstanding 5,255,211 5,338,164 5,279,640 5,365,895
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Balance Sheets
($000)
<TABLE>
<CAPTION>
Assets June 30, 1997 September 30, 1996
Current assets: (Unaudited)
<S> <C> <C> <C> <C>
Cash $ 855 $ 2,423
Receivables, net 25,242 24,532
Inventories:
Raw material $ 9,462 $ 7,573
Work-in-process 12,720 12,863
Finished goods 733 22,915 1,708 22,144
Prepaid expenses 2,866 3,283
Deferred tax asset 1,300 1,300
Other current assets - 200
Total current assets $ 53,178 $ 53,882
Property, plant and equipment $ 160,703 $ 155,870
Less accumulated depreciation 113,680 47,023 108,431 47,439
Other assets 13,878 13,367
$ 114,079 $ 114,688
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 26,015 $ 23,067
Employee compensation and benefits 3,689 2,021
Accrued pension 334 334
Other accrued expenses 13,696 7,765
Current accrued postretirement benefit cost 2,500 2,500
Notes payable under revolving credit agreement
expiring October 1997 (see Note 2) 18,903 18,443
Current portion of long-term debt 15,635 7,244
Total current liabilities $ 80,772 $ 61,374
Long-term debt 256 11,203
Other long-term liabilities 7,821 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 (46,683) (36,997)
$ (18,963) $ (9,308)
Less: Foreign currency translation adjustments 2,248 2,175
Unamortized value of restricted stock 72 73
Treasury stock, at cost, 188,733 and 86,609
shares, respectively 1,434 713
Excess of additional pension liability over
unrecognized prior service cost 1,493 (24,210) 1,493 (13,762)
$ 114,079 $ 114,688
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
1997 1996
<S> <C> <C>
Net cash provided by operating activities $ 8,547 $ 9,757
Investing Activities:
Capital expenditures (7,031) (6,122)
Net cash used for investing activities (7,031) (6,122)
Financing Activities:
Term loan advance - 849
Net borrowings (reduction) under revolving credit agreements 493 (2,687)
Principal payments under term loans (2,856) (2,231)
Stock option proceeds - 58
Other (721) (525)
Net cash used for financing activities (3,084) (4,536)
Net increase (decrease) in cash (1,568) (901)
Beginning cash 2,423 2,064
Ending cash $ 855 $ 1,163
Supplemental Disclosures:
Interest paid $ 3,054 $ 3,370
Income taxes paid $ 95 $ 267
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.
. The nine-month period ended June 1997 per share data of $(1.83) includes
$(1.86) per share related to the United Kingdom restructuring charge. The
nine-month period ended June 1996 per share data of $1.35 includes $0.66 per
share related to the sale of shares of the Allmerica Financial Corporation.
4. The results of operations for the nine-month period ended June 30, 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 June 30, 1997 increased 6.3% over the
same period last year, while net sales for the nine-month period ended June 30,
1997 increased .2% over the same period last year. Gross margin percentages
were 10.8% and 10.9%, respectively, for the current three- and nine-month
periods compared to 13.4% and 12.9%, respectively, for the same periods last
year, due to continued pricing pressure in most domestic and international
markets.
Sales of air bag inflator filtration products for the three-month period
increased approximately 19%, due to the continued ramp-up of the Moses Lake,
Washington facility as well as new filter fabrication capacity in the
Clearfield, Utah location. The Company's weld wire product lines have
experienced a 4% and 11% increase over the same three- and nine-month periods
last year. Currently, sales in this product line are capacity constrained as
additional capacity is being installed in the Niles facility.
Net income for the current three-month period was $ .3 million or $ .05 per
share while a net loss for the current nine-month period was $9.7 million or
$1.83 per share, compared to net income of $1.4 million or $ .26 per share and
$7.2 million or $1.35 per share for the comparable periods last year. This
year's net loss includes a $9.9 million, or $1.86 per share, charge taken in the
second quarter for restructuring the company's operations in the United Kingdom,
while last year's net income included approximately $3.5 million or $ .66 per
share in the first quarter 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 rationalization of the UK operations continues as planned. Losses in the UK
were $ .2 million this quarter, compared to $ .2 million last year and $1.4
million in the first six months this year. The announced Knoxville plant
closure is also progressing as planned to its August completion. The profit
improvement from both of these actions should begin to be realized in 1998.
Interest expense of $1.1 million and $3.2 million, respectively, in the current
three- and nine-month periods decreased 7.8% and 15.6%, 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.
National-Standard Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
Total borrowings decreased $2.4 million in the nine-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 is in negotiation with its existing lender and 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 April 24, 1997 regarding fiscal
year 1997 second quarter earnings.
A second Form 8-K (Item 5) was filed on April 30, 1997 regarding
an announcement to delay the formation of a Korean joint venture
company.
A third Form 8-K (Item 5) was filed on June 10, 1997 announcing
the closing of the Company's Knoxville, Tennessee plant.
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 12, 1997
/s/M.B. Savitske
M. B. Savitske
President and Chief Executive Officer
Date August 12, 1997
/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 1997 third 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> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 855
<SECURITIES> 0
<RECEIVABLES> 25,661
<ALLOWANCES> 419
<INVENTORY> 22,915
<CURRENT-ASSETS> 53,178
<PP&E> 160,703
<DEPRECIATION> 113,680
<TOTAL-ASSETS> 114,079
<CURRENT-LIABILITIES> 80,772
<BONDS> 0
0
0
<COMMON> 27,720
<OTHER-SE> (51,930)
<TOTAL-LIABILITY-AND-EQUITY> 114,079
<SALES> 187,702
<TOTAL-REVENUES> 187,702
<CGS> 167,247
<TOTAL-COSTS> 167,247
<OTHER-EXPENSES> 67
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,174
<INCOME-PRETAX> (9,659)
<INCOME-TAX> 27
<INCOME-CONTINUING> (9,686)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,686)
<EPS-PRIMARY> (1.83)
<EPS-DILUTED> (1.83)
</TABLE>
