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, 1998
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, 1998
Common Stock, $ .01 par value 5,235,412
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
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales $ 57,959 $ 63,127 $ 114,900 $ 123,001
Cost of sales 50,991 56,703 101,479 109,554
Gross profit 6,968 6,424 13,421 13,447
Selling and administrative expenses 6,014 5,971 11,542 11,349
UK restructuring - 9,850 - 9,850
Operating profit (loss) 954 (9,397) 1,879 (7,752)
Interest expense (974) (1,064) (1,978) (2,113)
Other income (expense), net 122 (143) 481 (104)
Income (loss) 102 (10,604) 382 (9,969)
Income taxes (25) 83 49 (19)
Net income (loss) $ 127 $ (10,687) $ 333 $ (9,950)
Basic earnings per share $ 0.02$ (2.03) $ 0.06$ (1.88)
Diluted earnings per share $ 0.02$ (2.03) $ 0.06$ (1.88)
Dividends per share $ 0.00$ 0.00 $ 0.00$ 0.00
Average shares outstanding 5,233,542 5,272,000 5,231,066 5,291,854
See accompanying notes to financial statements.
</TABLE>
National-Standard Company and Subsidiaries
Consolidated Balance Sheets
($000)
<TABLE>
<CAPTION>
Assets March 31, 1998 September 30, 1997
Current assets: (Unaudited)
<S> <C> <C> <C> <C>
Cash $ 3,239 $ 729
Receivables, net 26,343 24,653
Inventories:
Raw material $ 9,909 $ 9,929
Work-in-process 11,075 11,174
Finished goods 877 21,861 810 21,913
Prepaid expenses 3,391 2,943
Deferred tax asset 1,647 1,547
Total current assets $ 56,481 $ 51,785
Property, plant and equipment $ 168,538 $ 161,941
Less accumulated depreciation 119,760 48,778 114,946 46,995
Other assets 15,913 14,405
$ 121,172 $ 113,185
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 29,592 $ 22,859
Employee compensation and benefits 3,834 2,580
Accrued pension 1,623 1,623
Other accrued expenses 9,813 10,739
Current accrued postretirement benefit cost 2,400 2,400
Notes payable to banks and current portion of
long-term debt 27,588 25,398
Total current liabilities $ 74,850 $ 65,599
Long-term debt 10,620 12,219
Other long-term liabilities 9,159 9,001
Accrued postretirement benefit cost 49,529 49,529
Stockholders' equity:
Common stock $ .01 par value. Authorized
25,000,000 shares; issued 5,413,644 shares $ 27,822 $ 27,720
Retained deficit (45,654) (45,987)
$ (17,832) $ (18,267)
Less: Foreign currency translation adjustments 2,101 1,846
Unamortized value of restricted stock 159 53
Treasury stock, at cost, 178,333 and 189,676
shares, respectively 1,339 1,442
Excess of additional pension liability over
unrecognized prior service cost 1,555 (22,986) 1,555 (23,163)
$ 121,172 $ 113,185
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
1998 1997
<S> <C> <C>
Net cash provided by operating activities $ 7,877 $ 4,929
Investing Activities:
Capital expenditures (5,774) (5,089)
Net cash used for investing activities (5,774) (5,089)
Financing Activities:
Net borrowings under revolving credit agreements 2,095 618
Principal payments under term loans (1,662) (1,878)
Other (26) (396)
Net cash used for financing activities 407 (1,656)
Net increase (decrease) in cash 2,510 (1,816)
Beginning cash 729 2,423
Ending cash $ 3,239 $ 607
Supplemental Disclosures:
Interest paid $ 1,983 $ 2,017
Income taxes paid $ 6 $ 95
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 1997 National-Standard Company
Form 10-K, Annual Report, and this report should be read in conjunction
therewith.
2. 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.
3. The results of operations for the six-month period ended March 31, 1998 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, 1998 decreased 8.2% over
the same period last year, while net sales for the six-month period ended March
31, 1998 decreased 6.6% over the same period last year. Gross margin
percentages were 12.0% and 11.7%, respectively, for the current three- and six-
month periods compared to 10.2% and 10.9%, respectively, for the same periods
last year.
Sales of air bag inflator filtration products for the three- and six-month
periods decreased approximately 15% and 12%, respectively, over the same periods
last year. Air bag product sales continue to decline due to a decision to
discontinue the sales of certain lower margin wire cloth mesh products. The
Company's weld wire product lines, however, experienced a 5% and 9% increase
over the same time periods; while rubber reinforcement products decreased 8%
over the same periods last year due to lower selling prices.
Net income for the current three- and six-month periods was $ .1 million or
$ .02 per share and $ .3 million or $.06 per share, respectively, compared to a
net loss of $10.7 million or $2.03 per share and $10.0 million or $1.88 per
share for last year.
Last year's second quarter results include a $9.9 million charge for
restructuring the Company's operations in the United Kingdom. This
restructuring charge included $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 of 124 employees in the U.K. work force saves
approximately $3.0 million in annual salaries. The restructuring also included
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.
Operations in the United Kingdom had a net loss of $ .2 million for the current
three-month period and is breakeven for the current six-month period compared to
losses of $1.1 million and $1.4 million, excluding any restructuring charges,
for the same period last year.
Interest expense of $1.0 million and $2.0 million, respectively, in the current
three- and six-month periods decreased 8.5% and 6.4%, respectively, over the
same periods last year, due to lower interest rates.
Other income of $122 and $481 for the current three- and six-month periods is
primarily the gain on disposition of idle assets and foreign exchange gains.
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 increased $ .4 million in the six-month period, due primarily
to fund an increase in capital spending.
During 1994, the Company entered into a long-term financing arrangement, which
was modified in September 1997, to provide up to $55.0 million in revolving
credit facilities, term loans and a line of credit for future capital
expenditures. The loans mature in October 2000 and are fully secured by the
Company's assets.
The Company believes adequate funding will be available to fund future growth
and meet the growing demand for our products.
YEAR 2000
The Company has undertaken a Year 2000 program to assess and then to resolve any
issues relating to this matter. The Company is currently in the process of
upgrading its business systems to Year 2000 compliant software. The Company
does not believe that the costs directly associated with its Year 2000 program
will have a material impact on its consolidated financial position or results of
operations. Further, the Company does not expect any significant disruption in
operations should any of its customers or suppliers fail to achieve Year 2000
compliance.
"SAFE HARBOR" STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The statements under Management's Discussion and Analysis of Financial Condition
and Results of Operations, and the other statements in this Form 10-Q which are
not historical facts, are forward looking statements. These forward looking
statements involve risks and uncertainties that could render them materially
different, including, but not limited to, changes in economic conditions, the
impact of competitive pricing and products. The Company does not intend to
update these forward looking statements.
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 22, 1998 announcing the
Company's first quarter results.
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 11, 1998
/s/ M.B. Savitske
M. B. Savitske
President and Chief Executive Officer
Date May 11, 1998
/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 1998 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-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,239
<SECURITIES> 0
<RECEIVABLES> 26,752
<ALLOWANCES> 409
<INVENTORY> 21,861
<CURRENT-ASSETS> 56,481
<PP&E> 168,538
<DEPRECIATION> 119,760
<TOTAL-ASSETS> 121,172
<CURRENT-LIABILITIES> 74,850
<BONDS> 0
0
0
<COMMON> 27,822
<OTHER-SE> (50,808)
<TOTAL-LIABILITY-AND-EQUITY> 121,172
<SALES> 114,900
<TOTAL-REVENUES> 114,900
<CGS> 101,479
<TOTAL-COSTS> 101,479
<OTHER-EXPENSES> (481)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,978
<INCOME-PRETAX> 382
<INCOME-TAX> 49
<INCOME-CONTINUING> 333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 333
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
