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 December 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 January 31, 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
December 31
1996 1995
<S> <C> <C>
Net Sales $ 59,874 $ 60,531
Cost of sales 52,851 52,968
Gross profit 7,023 7,563
Selling and administrative expenses 5,378 5,336
Operating profit 1,645 2,227
Interest expense (1,049) (1,335)
Other income 39 3,622
Income before income taxes 635 4,514
Income taxes (102) 170
Net income $ 737 $ 4,344
Income (loss) per share $ .14 $ .81
Dividends per share $ 0.00 $ 0.00
Average shares outstanding 5,313,080 5,384,606
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Balance Sheets
($000)
<TABLE>
<CAPTION>
Assets December 31, 1996 September 30, 1996
Current assets: (Unaudited)
<S> <C> <C> <C> <C>
Cash $ 1,323 $ 2,423
Receivables, net 27,140 24,532
Inventories:
Raw material $ 7,358 $ 7,573
Work-in-process 14,684 12,863
Finished goods 1,426 23,468 1,708 22,144
Prepaid expenses 3,303 3,283
Deferred tax asset 1,524 1,300
Other current assets 200 200
Total current assets $ 56,958 $ 53,882
Property, plant and equipment $ 158,620 $ 155,870
Less accumulated depreciation 110,586 48,034 108,431 47,439
Other assets 13,161 13,367
$ 118,153 $ 114,688
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 24,821 $ 23,067
Employee compensation and benefits 3,469 2,021
Accrued pension 334 334
Other accrued expenses 8,607 7,765
Current accrued postretirement benefit cost 2,500 2,500
Notes payable under revolving credit agreement
expiring October 1997 (see Note 2) 16,393 18,443
Current portion of long-term debt 18,334 7,244
Total current liabilities $ 74,458 $ 61,374
Long-term debt 515 11,203
Other long-term liabilities 6,757 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 (36,260) (36,997)
$ (8,540) $ (9,308)
Less: Foreign currency translation adjustments 1,952 2,175
Unamortized value of restricted stock 94 73
Treasury stock, at cost, 117,905 and 86,609
shares, respectively 938 713
Excess of additional pension liability over
unrecognized prior service cost 1,493 (13,017) 1,493 (13,762)
$ 118,153 $ 114,688
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
($000)
<TABLE>
<CAPTION>
Three Months Ended
December 31
1996 1995
<S> <C> <C>
Net cash provided by operating activities $ 3,406 $ 4,447
Investing Activities:
Capital expenditures (2,196) (1,217)
Net cash used for investing activities (2,196) (1,217)
Financing Activities:
Net borrowings (reduction) under revolving credit agreements
(1,150) (4,027)
Principal payments under term loans (935) (707)
Other (225) (150)
Net cash used for financing activities (2,310) (4,884)
Net increase (decrease) in cash (1,100) (1,654)
Beginning cash 2,423 2,064
Ending cash $ 1,323 $ 410
Supplemental Disclosures:
Interest paid $ 977 $ 1,171
Income taxes paid $ 22 $ 1
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 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 results of operations for the three-month period ended December 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 months ended December 31, 1996 decreased 1.1% over the
same period last year. Gross margin percentages were 11.7% for the current
three-month period compared to 12.5% for the same period last year.
Sales of air bag inflator filtration products decreased approximately 16% from
the first quarter last year, while the Company's weld wire product lines
experienced a 17% increase over the same time period. Air bag product sales
declined due to the combined effect of lower prices and a shift in market share
between major air bag manufacturers resulting in lower value product sales for
the Company. Operating profit was $1.6 million compared to $2.2 million for the
same period last year, resulting from automotive pricing pressures continuing to
push selling prices down.
Net income for the quarter was $ .7 million or 14 cents per share versus $4.3
million or 81 cents per share for the same period last year. Last year's net
income includes approximately $3.5 million or 66 cents 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.
Operations in the United Kingdom lost $ .3 million in the current three-month
period compared to breakeven for the same period last year on sales that were $
.5 million below last year.
Interest expense of $1.0 million in the current three-month period decreased
21.4% over the same period last year, due to a lower level of average borrowings
and lower interest rates.
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, as well as a
decrease in the net deferred tax asset valuation reserve.
Liquidity and Capital Resources
Total borrowings decreased $2.1 million during the quarter, 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 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 market demand for our products.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Material Contracts
(i) National-Standard Company Stock Option Plan for Non-Employee
Directors.
(ii) Form of Amended and Restated Supplemental Compensation
Agreement.
(27) Financial Data Schedule
(b) A Form 8-K (Item 5) was filed on November 21, 1996 regarding
earnings for fiscal year ending September 30, 1996.
A second 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 third 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.
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 February 10, 1997 /s/ M. B. Savitske
M. B. Savitske
President and Chief Executive Officer
Date February 10, 1997 /s/ W. D. Grafer
W. D. Grafer
Vice President, Finance
Exhibit 10(i)
NATIONAL-STANDARD COMPANY
STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
1. PURPOSE. The purpose of the National-Standard Company Stock Option Plan
for Nonemployee Directors (the "Plan") is to encourage directors who are not
officers or full-time employees of National-Standard Company (the "Company") or
any of its subsidiaries ("Nonemployee Directors") to become shareholders in the
Company, thereby giving them a stake in the growth and profitability of the
Company, to enable them to represent the viewpoint of the shareholders of the
Company more effectively and to encourage them to continue serving as directors.
2. SHARES RESERVED. There is hereby reserved for issuance under the Plan an
aggregate of 250,000 shares of Common Stock which may be newly issued or
treasury shares. If there is a lapse, expiration, termination, or cancellation
of any option granted under this Plan, all unissued shares subject to the option
may again be used for new options granted under this Plan.
3. GRANT OF OPTIONS. Each person who remains or becomes a Nonemployee
Director of the Company on the date of the 1997 Annual Meeting of Shareholders
shall be granted an option to purchase 2,000 shares of Common Stock on the first
business day after the date of the 1997 Annual Meeting of Shareholders. Each
person who remains or becomes a Nonemployee Director after the date of the 1997
Annual Meeting of Shareholders shall be granted an option to purchase 2,000
shares of Common Stock on the first business day after the date of the next
succeeding Annual Meeting of Shareholders.
Each Nonemployee Director who is granted an initial option to purchase
2,000 shares of Common Stock hereunder shall be granted an option to purchase
2,000 shares of Common Stock on the first business day after the date of each
succeeding Annual Meeting of Shareholders on which the Nonemployee Director is a
member of the Board.
4. OPTION PRICE. The option price for each option granted to Nonemployee
Directors shall be equal to the closing price of the shares subject to option as
reported on the New York Stock Exchange Composite Transactions list on the date
of option grant.
5. EXERCISE OF OPTIONS. Shares shall be issued to the participant pursuant to
the exercise of an option only upon receipt by the Company from the participant
of written notice of exercise, specifying the number of shares with respect to
which the option is being exercised. Payment for the shares shall be (a) in
cash, (b) by delivery of shares (or certification of ownership) of Common Stock
previously owned by the optionee or by a combination of (a) and (b), in an
amount or having a combined market value equal to the aggregate purchase price
for the shares subject to the option being exercised. Previously owned shares
acquired in a prior exercise of a stock option granted under this Plan shall not
be accepted in full or partial payment for shares purchased upon the exercise of
an option unless the previously owned shares have been held by the participant
for at least six months.
6. TERM OF THE OPTIONS. Each option granted hereunder shall be exercisable
for not more than ten years from the date it is granted.
7. NONTRANSFERABILITY. Any option granted under this Plan shall not be
transferable other than by will or the laws of descent and distribution and
shall be exercisable during the Nonemployee Director's lifetime only by the
director or the director's guardian or legal representative. If a director dies
during the option period, any option granted to the director may be exercised by
his or her estate or the person to whom the option passes by will or the laws of
descent and distribution. Notwithstanding the foregoing, a Nonemployee Director
may transfer any option granted hereunder to members of the director's immediate
family or trusts or family partnerships for the benefit of such persons, subject
to such terms and conditions as may be established by the Board of Directors.
8. RETIREMENT OR TERMINATION OF SERVICE OF PARTICIPANT. Upon the retirement
or termination of service of a participant, all options previously granted to
the participant must be exercised within a three-year period following the date
of retirement or termination of service, but in no event later than ten years
from the date of grant of the options.
9. TOTAL DISABILITY OF PARTICIPANT. Upon the total disability of a
participant, all options previously granted to the participant must be exercised
within a three-year period following the date the participant becomes totally
disabled, but in no event later than ten years from the date of grant of the
options.
10. DEATH OF PARTICIPANT. Upon the death of a participant, all options
previously granted to the participant must be exercised by the legal
representative of the deceased participant's estate within a one-year period
following the date of the participant's death, but in no event later than ten
years from the date of grant of the options.
11. ADMINISTRATION. This Plan is intended to be self-governing and requires no
discretionary action by any administrative body. All grants of options to
Nonemployee Directors under the Plan shall be automatic and nondiscretionary and
shall be made strictly in accordance with the terms of the Plan. To the extent,
if any, that questions of interpretation arise, they shall be resolved by the
entire Board of Directors.
12. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued shares of
Common Stock without new consideration to it (such as by stock dividends, stock
splits, or similar transactions), the total number of shares reserved for
issuance under this Plan and the number of shares covered by each outstanding
option shall be adjusted so that the aggregate consideration payable to the
Company and the value of each option shall not be changed.
(b) In the case of any merger, consolidation, or combination of the Company
with or into another corporation, other than a merger, consolidation or
combination in which the Company is the continuing corporation and which does
not result in the outstanding Common Stock being converted into or exchanged for
different securities, cash, or other property, or any combination thereof (an
"Acquisition"), any Nonemployee Director to whom an option has been granted
under the Plan shall have the right during the remaining term of such option, to
receive upon exercise thereof the Acquisition Consideration (as defined below)
receivable upon such Acquisition by a holder of the number of shares of Common
Stock which might have been obtained upon exercise of such option or portion
thereof, as the case may be, immediately prior to such Acquisition. The term
"Acquisition Consideration" shall mean the kind and amount of shares of the
surviving or new corporation, cash, securities, evidence of indebtedness, other
property, or any combination thereof receivable in respect of one share of
Common Stock of the Company upon consummation of an Acquisition.
13. REGISTRATION AND LEGAL COMPLIANCE. The grant of any option under the
Plan may also be subject to other provisions as counsel to the Company deems
appropriate, including, without limitation, provisions to comply with federal
and state securities laws and stock exchange requirements. The Company shall
not be required to issue or deliver any certificate for Common Stock purchased
upon the exercise of any option granted under this Plan prior to the admission
of such shares to listing on any stock exchange on which Common Stock of the
Company may at that time be listed. If the Company shall be advised by its
counsel that the shares deliverable upon exercise of an option are required to
be registered under the Securities Act of 1933, as amended (the "Act") or any
state securities law or that delivery of such shares must be accompanied or
preceded by a prospectus meeting the requirements of such Act, the Company will
use its best efforts to effect such registration or provide such prospectus not
later than a reasonable time following each exercise of such option, but
delivery of shares by the Company may be deferred until such registration is
effective or such prospectus is available.
14. AMENDMENT, SUSPENSION, AND TERMINATION OF PLAN. The Board of Directors
may suspend or terminate the Plan at any time and may amend it from time to time
in such respects as the Board of Directors may deem advisable in order that any
grants thereunder shall conform to or otherwise reflect any change in applicable
laws or regulations or to permit the Company or the Nonemployee Directors to
enjoy the benefits of any change in applicable laws or regulations; provided,
however, if any law, regulation, agreement or exchange on which the Company's
common stock is traded requires shareholder approval for an amendment to become
effective, no amendment shall become effective unless approved by vote of the
Company's shareholders. No such amendment, suspension, or termination shall
impair the rights of Nonemployee Directors under any outstanding options.
15. SHAREHOLDER APPROVAL. This Plan was adopted by the Board of Directors of
the Company on November 20, 1996. The Plan shall be null and void if
shareholder approval is not obtained at the 1997 Annual Meeting of Shareholders.
Exhibit 10(ii)
[FORM OF] AMENDED AND RESTATED SUPPLEMENTAL
COMPENSATION AGREEMENT
THIS AGREEMENT made and entered into as of the first day of October, 1996,
between National Standard Company, an Indiana corporation (the "Company"), and
_________________ ("Employee").
WHEREAS, there have been a series of unexpected takeovers of U.S.
corporations, in a number of cases by corporations located outside the U.S. and
current conditions may contribute to the continuation or acceleration of this
trend;
WHEREAS, the possibility of sudden takeovers by previously unknown and
possibly foreign purchasers can contribute to uncertainty of employment and also
loss of valuable managers of the Company to the detriment of the Company and its
shareholders; and
WHEREAS, the Company is desirous of providing the Employee with
supplemental compensation should the Employee be terminated as the result of a
change of ownership or takeover of the Company;
NOW THEREFORE, in consideration of the premises and the mutual promises
herein contained, it is agreed as follows;
(1) In the event that the Company, during the employment period,
makes any substantial change in the Employee's employment conditions,
authority or job responsibilities which materially restricts his
ability to perform the functions of Vice President of Finance of the
Company during a two year period immediately following
(i) the acquisition by any person or entity [other than
any "employee stock ownership plan" or any "defined benefit
plan" (as defined under the Internal Revenue Code)
maintained by the Company] of 40% or more of the combined
voting power of the Company's outstanding securities or (ii)
a change in the membership of a majority of the Board of
Directors following the acquisition by any person or entity
[other than any "employee stock ownership plan" or any
"defined benefit plan" (as defined under the Internal
Revenue Code) maintained by the Company] of 20% or more of
the combined voting power of the Company's outstanding
securities the Employee may, by written notice, notify the
Company that the change or changes constitutes a termination
by the Company without cause. Upon such notice, the
employment period shall be considered terminated thirty (30)
days after the notice.
(2) Upon termination of the Employee, the Company shall provide
as a severance benefit to the Employee as liquidated damages for
breach by the Company of its otherwise applicable obligations
hereunder, the sum of (i) through (iii) set forth below.
(i) A benefit payment equal to the Employee's then
current base monthly salary which benefit will be paid
monthly for a period of twenty four (24) months.
(ii) Continuation of term life insurance and medical
and health insurance for the 24 month period as set forth in
Paragraph (2) (i) above.
(iii) A full distribution of all of the Employee's and
the Company matching contributions under the Employee Stock
Savings Plan computed as if the Employee had attained 100%
vesting at the time of termination.
Benefits provided to the Employee under the provisions
of this Paragraph (2) shall be offset by normal termination
benefits otherwise provided by the Company to such Employee.
(3) The Employee agrees that without the consent of the Company
he will not at any time after the termination date (except as required
by law) disclose to any person confidential information concerning the
Company or any of the Company's trade secrets.
(4) The Employee shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment
or otherwise. However, the benefits provided to Employee under the
provisions of Paragraphs (2)(i) shall immediately cease if Employee
should secure other employment at a salary equal to, or greater than,
the monthly benefit payment described in Paragraph (2)(i) above.
(5) In the event the Employee shall file suit or take any other
legal action to enforce any of his rights under this Agreement and
shall be successful, the Employee shall be entitled to recover from
the Company reasonable attorneys' fees and other reasonable costs
incurred by the Employee in connection therewith. If, however, legal
action is brought by the Employee to enforce any of his rights under
this Agreement and the litigation is dismissed on a motion for summary
judgment or for failure to state a cause of action, the Employee will
be obligated to pay the Company's legal fees incurred in connection
with defending that litigation.
(6) This Agreement shall be binding upon and its benefits shall
accrue to the heirs, successors and assigns of the parties hereto.
(7) This Agreement shall terminate on September 30, 1999,
provided that such termination shall not reduce or invalidate any
rights or obligations accrued prior to the termination date of this
Agreement.
(8) This Agreement terminates and replaces all prior
agreements relating to the subject matter hereof.
(9) This Agreement may be executed in two counterparts, both of
which shall be deemed an original, but which together shall constitute
one instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Employee
and the Company's officer thereunto duly authorized as of the day and year first
above written.
NATIONAL STANDARD COMPANY EMPLOYEE
By:__________________________ ____________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains first quarter summary financial information extracted
from National-Standard Company's 1997 first 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,323
<SECURITIES> 0
<RECEIVABLES> 27,536
<ALLOWANCES> 396
<INVENTORY> 23,468
<CURRENT-ASSETS> 56,958
<PP&E> 158,620
<DEPRECIATION> 110,586
<TOTAL-ASSETS> 118,153
<CURRENT-LIABILITIES> 74,458
<BONDS> 0
0
0
<COMMON> 27,720
<OTHER-SE> (40,737)
<TOTAL-LIABILITY-AND-EQUITY> 118,153
<SALES> 59,874
<TOTAL-REVENUES> 59,874
<CGS> 52,851
<TOTAL-COSTS> 52,851
<OTHER-EXPENSES> (39)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,049
<INCOME-PRETAX> 635
<INCOME-TAX> (102)
<INCOME-CONTINUING> 737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 737
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
