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 28, 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 August 3, 1998
Common Stock, $ .01 par value 5,235,412
Part I. FINANCIAL INFORMATION
<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
($000, Except Per Share Amounts)
<CAPTION>
Three Months Ended Nine Months Ended
June 28 June 29 June 28 June 29
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales $ 55,695 $ 64,701 $ 170,595 $ 187,702
Cost of sales 48,059 57,693 149,538 167,247
Gross profit 7,636 7,008 21,057 20,455
Selling and administrative expenses 6,539 5,674 18,081 17,023
UK restructuring - - - 9,850
Operating profit (loss) 1,097 1,334 2,976 (6,418)
Interest expense (971) (1,061) (2,949) (3,174)
Other income (expense), net 74 37 555 (67)
Income (loss) 200 310 582 (9,659)
Income taxes 1 46 50 27
Net income (loss) $ 199 $ 264 $ 532 $ (9,686)
Basic earnings per share $ 0.04 $ 0.05 $ 0.10 $ (1.83)
Diluted earnings per share $ 0.04 $ 0.05 $ 0.10 $ (1.83)
Dividends per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
Average shares outstanding 5,235,395 5,255,211 5,232,509 5,279,640
See accompanying notes to financial statements.
</TABLE>
<TABLE>
National-Standard Company and Subsidiaries
Consolidated Balance Sheets
($000)
<CAPTION>
Assets June 28, 1998 September 30, 1997
Current assets: (Unaudited)
<S> <C> <C> <C> <C>
Cash $ 3,235 $ 729
Receivables, net of reserves 23,253 24,653
Inventories:
Raw materials and supplies $ 11,622 $ 9,929
Work-in-process 10,188 11,174
Finished goods 1,059 22,869 810 21,913
Prepaid expenses 3,099 2,943
Deferred tax asset 1,721 1,547
Total current assets $ 54,177 $ 51,785
Property, plant and equipment $ 171,071 $ 161,941
Less accumulated depreciation 120,116 50,955 114,946 46,995
Other assets 16,385 14,405
Total assets $ 121,517 $ 113,185
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 31,295 $ 22,859
Employee compensation and benefits 4,076 2,580
Accrued pension 1,623 1,623
Other accrued expenses 8,702 10,739
Current accrued postretirement benefit cost 2,400 2,400
Notes payable to banks and current portion of
long-term debt 27,627 25,398
Total current liabilities $ 75,723 $ 65,599
Long-term debt 9,846 12,219
Other long-term liabilities 9,130 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 (45,455) (45,987)
$ (17,633) $ (18,267)
Less: Foreign currency translation adjustments 2,041 1,846
Unamortized value of restricted stock 143 53
Treasury stock, at cost, 178,232 and 189,676
shares, respectively 1,339 1,442
Excess of additional pension liability over
unrecognized prior service cost 1,555 (22,711) 1,555 (23,163)
Total liabilities and stockholders' equity $ 121,517 $ 113,185
See accompanying notes to financial statements.
</TABLE>
<TABLE>
National-Standard Company and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
($000)
<CAPTION>
Nine Months Ended
June 28 June 29
1998 1997
<S> <C> <C>
Net cash provided by operating activities $ 13,053 $ 8,547
Investing Activities:
Capital expenditures (10,499) (7,031)
Proceeds from sale of equipment 219 -
Net cash used for investing activities (10,280) (7,031)
Financing Activities:
Net borrowings under revolving credit agreements 2,252 493
Principal payments under term loans (2,493) (2,856)
Other (26) (721)
Net cash used for financing activities (267) (3,084)
Net increase (decrease) in cash 2,506 (1,568)
Beginning cash 729 2,423
Ending cash $ 3,235 $ 855
Supplemental Disclosures:
Interest paid $ 2,975 $ 3,054
Income taxes paid $ 54 $ 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 nine-month period ended June 1997 per share data of $(1.83) includes
$(1.86) per share related to the United Kingdom restructuring charge.
3. The results of operations for the nine months ended June 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 third quarter of 1998 decreased 13.9% over the same period
last year, while net sales for the nine months ended June 1998 decreased 9.1%
over the same period last year. Gross margin percentages were 13.7% and 12.3%,
respectively, for the current three- and nine-month periods compared to 10.8%
and 10.9%, respectively, for the same periods last year.
Gross margin percentages have improved steadily in 1998, increasing from 11.3%
in the first quarter, to 12.0% in the second quarter, to 13.7% in the third
quarter. Limiting sales of certain low margin wire cloth products, raw material
price reductions, cost reduction actions implemented in the second quarter, and
completion of the QS-9000 system implementation at most locations and the
reduction of associated expenses have all contributed to the improvement.
Sales of air bag inflator filtration products for the three- and nine-month
periods decreased approximately 30% and 19%, respectively, over the same periods
last year. Air bag product sales continue to decline due to the decision to
discontinue the sales of certain lower margin wire cloth mesh products. In the
third quarter, air bag inflator filtration products were impacted by the
slowdown in Asia and the decline in air bag system exports to Asia. The
Company's weld wire product lines, however, experienced a 3% and 7% increase for
the three- and nine-month 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 nine-month periods was $ .2 million or
$ .04 per share and $ .5 million or $.10 per share, respectively, compared to a
net income of $.3 million or $ .05 per share and a net loss of $9.7 million or
$1.83 per share for last year.
Last year's net loss includes a $9.9 million charge taken in the second quarter
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 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 $ .3 million for each of the
current three- and nine-month periods compared to losses of $.2 million and $1.6
million, excluding any restructuring charges, for the same period last year.
Interest expense of $1.0 million and $2.9 million, respectively, in the current
three- and nine-month periods decreased 8.5% and 7.1%, respectively, over the
same periods last year, due to lower interest rates.
Other income of $74 and $555 for the current three- and nine-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 decreased $ .2 million in the nine-month period.
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
Statements under Management's Discussion and Analysis of Financial Condition and
Results of Operations relating to funding of future growth and Year 2000 impact,
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 5. Other Information
Shareholders wishing to bring a proposal before the 1999 Annual Meeting
of Shareholders (but not include it in the Company's Proxy Statement)
must cause written notice of the proposal to be received by the Secretary
of the Company at the principal executive offices in Niles, Michigan by
no later than November 2, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) (b) A Form 8-K (Item 5) was filed on May 4, 1998
announcing the Company's second 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 August 11, 1998 /s/ M. B. Savitske
M. B. Savitske
President and Chief Executive Officer
Date August 11, 1998 /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 1998 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-30-1998
<PERIOD-END> JUN-28-1998
<CASH> 3,235
<SECURITIES> 0
<RECEIVABLES> 23,794
<ALLOWANCES> 541
<INVENTORY> 22,869
<CURRENT-ASSETS> 54,177
<PP&E> 171,071
<DEPRECIATION> 120,116
<TOTAL-ASSETS> 121,517
<CURRENT-LIABILITIES> 75,723
<BONDS> 0
0
0
<COMMON> 27,822
<OTHER-SE> (50,533)
<TOTAL-LIABILITY-AND-EQUITY> 121,517
<SALES> 170,595
<TOTAL-REVENUES> 170,595
<CGS> 149,538
<TOTAL-COSTS> 149,538
<OTHER-EXPENSES> (555)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,949
<INCOME-PRETAX> 582
<INCOME-TAX> 50
<INCOME-CONTINUING> 532
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 532
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
