UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT to SECTION 13 or 15(d) of the SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1999
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Commission file number: 1-3940
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NATIONAL-STANDARD COMPANY
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(Exact Name of Registrant as Specified in Its Charter)
Indiana 38-1493458
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(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
1618 Terminal Road, Niles, Michigan 49120
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (616) 683-8100
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Common stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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(Title of Class)
Indicate by check mark whether the 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. Yes X No___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the common shares held by non-affiliates of the
registrant on December 1, 1999, based on the closing price of the shares on the
American Stock Exchange and assuming that 54 percent of the shares were held by
non-affiliates, was approximately $12,565,133.
As of December 1, 1999, 5,727,696 shares of common stock, par value of $ .01,
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the annual Proxy Statement relating to the Annual Meeting of
Shareholders scheduled for January 27, 2000 are incorporated by reference into
Part III of this report.
The sequential page in this report where the Exhibit Index appears is page 42.
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PART I
ITEM 1. BUSINESS
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National-Standard Company, an Indiana corporation, and its subsidiaries (the
"Company") currently operate in the wire and engineered products segments.
As part of the Fiscal 1998 restructuring of the Company's wire manufacturing
capacity, it closed the manufacturing facility in Guelph, Ontario and relocated
that facility's bead and weld wire capacity to existing facilities in
Stillwater, Oklahoma and Niles, Michigan in Fiscal 1999. The Company also sold
the wire manufacturing facility in Kidderminster, United Kingdom in Fiscal 1999.
During the prior three years, the Company disposed of various business units and
product lines as described in the following report.
WIRE PRODUCTS SEGMENT
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The Company produces tire bead wire, welding wire, stainless steel spring and
specialty wire, and plated wire. Wire products are supplied to major markets
consisting of tire, spring, automotive component, electric component,
telecommunications, and fabricated metal products. These products are generally
sold directly to other manufacturers by Company salesmen. In addition, certain
classes of wire are sold through various types of distributors. Only two
products, high carbon steel wire and low carbon steel wire, each account for 10%
or more of total sales. High carbon and low carbon steel wire were,
respectively, 30% and 28% of total sales in 1999; 33% and 26% of total sales in
1998; and 33% and 25% of total sales in 1997.
The segment's major raw material -- steel -- is purchased in several forms from
domestic and foreign steel companies. Raw materials were readily available
during the year and no shortages are anticipated for the 2000 fiscal year. The
Company believes that its sources of supply of these materials are adequate for
its needs. The segment's major sources of energy needed in its operations are
natural gas, fuel oil and electrical power. In certain locations where the
Company believes its regular source of energy may be interrupted, it has made
plans for alternative energy sources.
The Company owns or is licensed under a number of patents covering various
products and processes. Although these have been of value in the growth of the
business and will continue to be of considerable value in its future growth, the
segment's success or growth has not generally been dependent upon any one patent
or group of related patents. The Company believes that the successful
manufacture and sale of its products generally depend more upon its
technological know-how and manufacturing skills. Seasonal activity has no
material effect on the segment's level of business or working capital
requirements, except for annual automotive model year changeover occurring
during the third fiscal quarter and customer holiday shutdowns occurring in the
first fiscal quarter.
The Company's wire products are generally highly competitive with those of a
number of other producers located both in the U.S. and in foreign countries. The
Company remains the leading U.S. producer of tire bead wire for the tire
industry. Bekaert Corporation, Delta Wire Corporation, KIS Wire, Amercord, Inc.,
and Insteel Industries, Inc. are the segment's major bead wire competitors. The
Company's major weld wire competitors are Lincoln Electric Company, ESAB Welding
and Cutting Products, and Illinois Tool Works, Inc. Competitive factors for all
of the segment's products are generally considered to be price, service and
product quality.
Approximately 37% of the segments sales are to the major tire and rubber
companies, i.e., Bridgestone/ Firestone, Inc., the Cooper Tire and Rubber
Company, the Dunlop Tire and Rubber Corporation (owned by Goodyear and
Sumitomo), General Tire (owned by Continental), the Goodyear Tire and Rubber
Company, and the Uniroyal-Goodrich Company (owned by Michelin). Generally,
business with these customers is on the basis of purchase orders without firm
commitments to purchase specific quantities. No other material
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part of the segment's business is dependent upon any single customer or very few
customers, the loss of which would have a material adverse effect upon the
segment.
Wire products are generally basic materials which do not require assembly,
production time is relatively short, and backlog is not significant.
During 1999, net restructuring and impairment costs were approximately $176,000.
The restructuring amount includes $899,000 of carrying value adjustments on
properties held for sale, including $759,000 related to Athenia Steel, $522,000
for impairment of assets held for future use, offset by gains on the disposition
of idle assets, and settlement of employee related restructuring costs of
$1,245,000.
During 1998, the Company recorded a charge of $6,004,000 to consolidate its
North America wire manufacturing by closing the Guelph, Ontario facility and
relocating certain equipment to the Stillwater, Oklahoma and Niles, Michigan
facilities. During 1999, cash outlays of approximately $2,135,000 were made
primarily for employee related, environmental and lease termination costs
related to the charge. The Company expects to incur cash outlays during 2000 of
approximately $500,000 primarily for employee related costs related to the 1998
charge. The Company also incurred approximately $1,000,000 of costs to relocate
certain equipment from Guelph to Stillwater and Niles during 1999. No additional
equipment relocation costs are expected in 2000.
During 1997, the Company recorded a charge of $8,966,000 for restructuring the
Company's operations in Kidderminster. The restructuring charge included
severance costs and estimated pension related costs. Cash outlays during 1997
included in the $8,966,000 restructuring charge were $1,335,000. Cash outlays
during 1998 were approximately $1,825,000. Cash outlays during 1999 were
approximately $430,000. No future cash outlays are expected in 2000 due to the
sale in 1999.
While the 1997 restructuring achieved the anticipated reduction in manufacturing
costs, declining selling prices more than offset the savings, and net operating
results in Kidderminster did not improve. The Company sold the Kidderminster
wire manufacturing operation in 1999. Proceeds from the sale were used to reduce
debt.
During 1999, the Company reached agreement to sell the Athenia Steel
manufacturing site located in Clifton, New Jersey, for $5,500,000.
National-Standard purchased the Athenia Steel Company in 1937. The Company
ceased operations at the 35-acre site in 1988. Following closure of the Athenia
operation, National-Standard demolished all site buildings and undertook an
extensive environmental remediation program under the direction of the New
Jersey Department of Environmental Protection ("NJDEP"). National-Standard
expects to complete its site remediation program within the next two years at an
estimated cost of $2,700,000.
Payment of the sales price is linked to completion of the various phases of the
Company's remediation program and notification from the NJDEP that no further
work is required.
Proceeds from the sale of the Clifton, New Jersey site will be used to complete
the site cleanup and to reduce Company debt. The Company recorded a charge of
approximately $434,000 in its fourth quarter ending September 30, 1999, to
adjust the carrying value of the property.
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Cash outlays related to the Clifton site in the past five years are shown in the
following table:
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1999 1998 1997 1996 1995
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Cash Outlays $256,000 $399,000 $222,000 $254,000 $304,000
The Company expects to spend $2,500,000 and $200,000 in 2000 and 2001,
respectively, on the project, such amount to be funded from the sale proceeds.
ENGINEERED PRODUCTS SEGMENT
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The Company produces wire cloth, nonwoven metal fiber materials, filters and
inflator housings for automotive air bag inflators, which are sold by Company
salesmen primarily to automotive air bag manufacturers.
The Company is the major supplier of air bag filtration materials in the U.S.
While the number of manufacturers in the Company's line of filtration materials
and housings is limited, the Company still regards the field as highly
competitive. In some cases, the segment's customers also manufacture products
for their own use similar to those produced by the segment. Competitive factors
for all of the segment's products are generally considered to be price, service
and product quality. The segment's largest customers are the major producers of
automotive air bag restraint systems, i.e., TRW and Autoliv, Inc. Generally,
business with these customers is on the basis of purchase orders without firm
commitments to purchase specific quantities. No other material part of the
segment's business is dependent upon any single customer or very few customers,
the loss of which would have a material adverse effect upon the Company. Air bag
inflator filters accounted for 16% of total sales in 1999, 1998 and 1997.
The segment's major raw material -- steel -- is purchased in several forms from
domestic and foreign steel companies. Raw materials were readily available
during the year and no shortages are anticipated for the 2000 fiscal year. The
Company believes that its sources of supply of these materials are adequate for
its needs. The segment's major source of energy needed in its operations is
electrical power. The Company believes it has reliable sources of energy for the
segment.
The Company owns a number of patents covering various segment products and
processes. Although these have been of value in the growth of the business and
will continue to be of considerable value in its future growth, the Company's
success or growth has not generally been dependent upon any one patent or group
of related patents. The Company believes that the successful manufacture and
sale of its products generally depend more upon its technological know-how and
manufacturing skills. Seasonal activity has no material effect on the segment's
level of business or working capital requirements, except for annual automotive
model year changeover occurring during the third fiscal quarter and customer
holiday shutdowns occurring in the first fiscal quarter.
Engineered products are generally basic materials or fabricated products which
require minor assembly, and production time is relatively short. There was a
backlog of approximately $32,304,000 and $33,450,000 at September 30, 1999 and
1998, respectively.
During 1998, the Company began the manufacture of air bag inflator housings in a
leased facility in Peterlee, United Kingdom. The Company invested approximately
$400,000 for equipment in the new facility.
Several air bag technology trends will affect the level of the Company's sales
in the Engineered Products segment. The change from an azide-based gas generant
to non-azide systems will cause filter constructions
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to change to filters that do less filtration and more heat absorption. This
change will eventually lead to the use of lower-cost, more commodity oriented
filtration materials than the precisely woven wire cloth required in the past.
The increased use of gas systems in passenger-side air bags will increase the
number of inflator housings used in the future. The Company will continue to
leverage the experience gained in supplying inflator housings as demand for
these products increases in the near term. The use of smart bag inflation
systems may lead to increased demand for pyrotechnic devices which may require
more filtration and increase the demand for filters.
The Company provided approximately $700,000 during 1998 to exit the manufacture
of non-air bag related wire cloth products manufactured in the Corbin, Kentucky
facility. Cash outlays related to the exit in 1999 were approximately
$1,157,000. No additional future cash outlays are expected.
During 1997, the Company closed the wire cloth weaving facility in Knoxville,
Tennessee, and relocated the capacity in the Company's existing facilities in
Corbin, Kentucky and Clearfield, Utah. The Knoxville facility opened in 1993.
ENVIRONMENTAL
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In addition to amounts spent in connection with the Clifton, New Jersey site,
the Company had cash outlays of approximately $2,683,000, $3,246,000, and
$2,211,000 during the 1999, 1998, and 1997 fiscal years on pollution control
equipment and related operational environmental projects and procedures at the
Company's ten plants. The largest annual cash outlays during 1999, 1998, and
1997 were $1,362,000, $2,216,000, and $2,083,000, respectively, related
primarily to environmental operational procedures, cleanup of existing
operations, and improvements of environmental systems in all three years.
Compliance with federal, state, and local environmental regulations which have
been enacted or adopted is estimated to require operational cash outlays of
approximately $5,100,000 during 2000, including cleanup for the Clifton, New
Jersey site. During 1999, 1998 and 1997, the Company provided $961,000,
$1,465,000, and $2,300,000, respectively, for the estimated cost of compliance
with environmental regulations and continuing modifications in operating
requirements. The 1997 provision related to equipment and plant stabilization
activities associated with the Kidderminster restructuring and normal
environmental operating expenses in both the United Kingdom and in North
America. The 1999 and 1998 environmental cost was primarily related to normal
environmental operating expenses in both the United Kingdom and in North
America. In addition to the amounts charged to earnings, $222,000, $636,000 and
$905,000 of costs were capitalized in the respective years. The Company's actual
environmental related cash outlays for 1999, 1998 and 1997 were $2,939,000,
$3,645,000, and $2,433,000, respectively, of which $256,000, $399,000, and
$222,000 were spent on the Clifton, New Jersey property. The Company does not
expect that existing regulations will have any material effect on its net
earnings or competitive position.
The Company was previously designated a potentially responsible party ("PRP") by
federal and state environmental protection agencies for eight actual or
potential Superfund or Resource Conservation and Recovery Act ("RCRA") Sites
(the "Sites"), including Clifton, New Jersey. In connection with its designation
as a PRP, the Company has completed or is undertaking all investigative work
required by the appropriate governmental agencies or by relevant statutes,
regulations, or local ordinances. The Company has resolved its liability for
three of the Superfund Sites by reaching settlements with the Environmental
Protection Agency ("EPA"). Company records indicate only de minimis or de
micromis involvement for a fourth Superfund Site. The Company has reviewed its
involvement and potential exposure for all the remaining Sites, and, based upon
all information currently available, has previously accrued $1,019,000 in prior
years (excluding Clifton, New Jersey) for its share of the estimated
investigation and remediation costs for the Sites. Additional reserves were not
needed in 1999. Additionally, the Company has undertaken environmental
investigation and cleanup projects at three of its plants under RCRA. One of
these RCRA
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projects was completed in 1999. These projects are subject to monitoring by
appropriate state environmental protection agencies. Significant portions of the
other two RCRA projects have been completed and state agencies are in the
process of reviewing reports submitted by the Company. The Company accrued
$1,482,000 in prior years and $178,000 in 1999 for these activities. The Company
does not believe that future costs for either the Sites or the RCRA cleanups
will have a materially adverse effect on the consolidated financial condition of
the Company or its consolidated results of operations.
GENERAL
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During the 1999 fiscal year, the Company spent approximately $1,027,000 on
research and development of new products and process alternatives compared to
$1,567,000 and $1,463,000 for the years ended Septem ber 30, 1998 and 1997,
respectively. These cash outlays were for Company sponsored activities.
During 1998, in conjunction with other restructuring activities, the Company
provided $780,000 to reduce support staff in North America by 41 employees. Cash
outlay during 1999 related to their reduction was approximately $780,000. No
further cash outlays related to their activity are expected.
At September 30, 1999, the Company employed 840 persons in its operations
throughout the world.
INTERNATIONAL OPERATIONS
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The Company has foreign subsidiaries in Canada and the United Kingdom. The
Canadian subsidiary ceased manufacturing at the Guelph, Ontario facility in
December 1998, following the 1998 restructuring plans. The Guelph land and
building are held for sale. The United Kingdom subsidiary sold the wire
manufactur ing facility in Kidderminster, United Kingdom during 1999. The
remaining United Kingdom facility in Peterlee currently operates in the
Engineered Products segment manufacturing tubular housings for the air bag
inflator market in Europe. The financial information about foreign and domestic
operations for the three years ended September 30, 1999 is included in Note 15
of Notes to Consolidated Financial Statements in Item 8, "Financial Statements
and Supplementary Data" section of this Report. Foreign operations are subject
to the usual risks of doing business abroad, such as possible devaluation of
currency, restrictions on the transfer of funds and, in certain parts of the
world, political instability.
Accounting principles dictate that results of operations for the Company's
international operations are translated into U.S. dollars in accordance with the
Statement of Financial Accounting Standards No. 52. A translation adjustment is
recorded as a separate component of shareholders' equity, "Cumulative
Translation Adjustment." The Cumulative Translation Adjustment account, at the
end of 1999, reflects a decrease of approximately $1,123,000 due primarily to
the sale of the Kidderminster facility. The rest of the change is due primarily
to the U.S. dollar's value against the British pound and Canadian dollar.
ITEM 2. PROPERTIES
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The Company conducts its domestic operations from facilities having an aggregate
floor space of approxi mately 1,226,000 square feet. The domestic total includes
principal facilities in Niles, Michigan (456,000 square feet); Stillwater,
Oklahoma (314,000 square feet); Corbin, Kentucky (225,000 square feet);
Mishawaka, Indiana (78,000 square feet); Knoxville, Tennessee (50,000 square
feet); Clearfield, Utah (53,000 square feet); Mesa, Arizona (36,000 square
feet), and Moses Lake, Washington (14,000 square feet). The Knoxville facility
was leased in 1993, and a renewal option was exercised extending the terms until
2003 with additional renewal options. The Clearfield facility was leased in 1993
and a renewal option was exercised extending the terms until 2003 with
additional renewal options. The Mesa facility was leased in
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1994, and a renewal option was exercised extending the terms until 2004 with
additional renewal options. The Moses Lake facility was leased in 1996.
The Company also operates from one leased facility in Peterlee, United Kingdom
(6,500 square feet).
The majority of the Company's plants are of modern construction and the
remaining older plants are well maintained and considered adequate for their
current use. Manufacturing of wire products is conducted at Niles, Michigan and
Stillwater, Oklahoma. Engineered products are manufactured in Corbin, Kentucky;
Mishawaka, Indiana; Clearfield, Utah; Mesa, Arizona; Moses Lake, Washington; and
Peterlee, United Kingdom. The Company's plants generally are operated on a
multishift basis and, while particular plants may be operating at capacity
levels, overall the Company's facilities are adequate to provide for a
significant increase in unit volume due to the each segment's ability to
redistribute production of similar products between segment facilities with
minimal cost or inconvenience.
ITEM 3. LEGAL PROCEEDINGS
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The Company is not involved in any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of security holders since the last annual
meeting held January 28, 1999.
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PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
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MATTERS
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Common stock market prices, information on stock exchanges and number of
shareholders is included in Note 16 of Notes to Consolidated Financial
Statements in Item 8, "Financial Statements and Supplementary Data" section of
this Report (incorporated herein by this reference). No dividends were paid
during fiscal 1999 or 1998, nor during the portion of fiscal 2000 prior to
filing of this Report. Under current loan agreements, the Company is restricted
from paying any dividends. Future dividends will be based on the Company's
financial performance.
ITEM 6. SELECTED FINANCIAL DATA (In thousands, except per share and employee
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data)
The following selected financial data are derived from the consolidated
financial statements of the Company.
The data should be read in conjunction with the consolidated financial
statements, related notes and other financial information included herein.
Specifically, discussions regarding accounting changes, divestitures, and other
related information that affects the comparability of this data can be found in
Items 7, 8, and 14 herein.
<TABLE>
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1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
FOR THE YEAR:
Net sales $ 182,911 $ 225,495 $ 247,763 $ 248,554 $ 247,420
Operating profit (loss) $ 8,463 $ (3,579) $ (4,697) $ 8,871 $ 12,924
Net earnings (loss) $ 5,363 $ (6,699) $ (8,990) $ 8,852 $ 7,350
AT YEAR-END:
Shareholders' equity $ (19,363) $ (32,451) $ (23,163) $ (13,762) $ (21,475)
Net current assets (liabilities) $ (22,157) $ (27,798) $ (13,814) $ (7,492) $ 10,471
Total assets $ 97,841 $ 115,078 $ 113,185 $ 114,688 $ 116,099
Long-term debt $ 10,463 $ 14,029 $ 12,219 $ 11,203 $ 34,152
Ratio of current assets to
current liabilities .6 : 1.0 .6 : 1.0 .8 : 1.0 .9 : 1.0 1.2 : 1.0
Common shares outstanding 5,728 5,468 5,224 5,323 5,385
Basic average common shares outstand-
ing used in per share calculations 5,667 5,263 5,266 5,358 5,373
Diluted average common shares out-
standing used in per share calculation 5,770 5,263 5,269 5,369 5,507
Number of employees 840 1,284 1,406 1,495 1,403
PER COMMON SHARE:
Basic net earnings (loss) $ .95 $ (1.27) $ (1.71) $ 1.65 $ 1.37
Diluted net earnings (loss) $ .93 $ (1.27) $ (1.71) $ 1.65 $ 1.33
Dividends declared $ .00 $ .00 $ .00 $ .00 $ .00
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS (Dollars in thousands except share data)
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RESULTS OF OPERATIONS
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Net sales in 1999 declined by 18.9% from 1998 levels due primarily to the sale
of the Company's wire operation in Kidderminster, United Kingdom, combined with
sales declines in both the wire products segment and the engineered products
segment. The Company sold the Kidderminster operation during its second fiscal
quarter ended April 4, 1999. Sales from Kidderminster in 1999 up to the time of
the sale were $10,454 compared to annual sales of $27,546 and $35,500 in 1998
and 1997, respectively.
Net sales for 1998 of $225,495 were 9% below 1997 primarily due to lower sales
of low-margin air bag filtration materials. During 1997, sales declined .3%
primarily due to lower selling prices. Price declines in bead wire, air bag
filtration material, and for most Kidderminster products averaged 3% in 1999 and
1998, and 4% in 1997, totaling $6,200 in 1999, $7,000 in 1998 and $10,900 in
1997.
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Sales of domestic wire products decreased 10.3% in 1999 due primarily to lower
selling prices for bead wire and welding wire. Sales of welding wire also
declined due to the inability of the segment to integrate manufacturing capacity
from the closed Canadian facility. Delays in the start-up of relocated Canadian
equipment caused order lead times to extend, eventually leading to cancelled
orders. The Asian slowdown has caused customer sales of heavy equipment and
agricultural products to that region to decline, affecting the Company's sales
of welding wire to domestic equipment manufacturers. The weld wire product line
has also been affected by lower sales to U.S. agriculture equipment markets.
Weld wire sales decreased 7% from 1998, while bead wire sales declined 11.5%.
Sales of engineered products declined 18.6% in 1999 due to lower unit prices for
new air bag inflator filter constructions. Sales in 1998 declined 17% due to the
combined effect of lower prices and lower sales of certain lower-margin wire
cloth products.
Over the past several years, the Company's strategy has been to focus on a core
wire business and to develop the Engineered Products' air bag filtration
materials business. This strategy has led to the divestiture of the non-core
specialty wire business and all of its non-wire related businesses. During 1998,
the Company recorded a charge of $6,004 to consolidate its North America wire
manufacturing by closing the Guelph, Ontario facility and relocating certain
equipment to the Stillwater, Oklahoma and Niles, Michigan facilities. 1999 cash
outlays related to the charge were $2,135 primarily for employee termination
costs. The Company also incurred $1,000 of costs to relocate certain equipment
from Guelph to Stillwater and Niles during 1999. These costs were not included
in the 1998 charge in accordance with generally accepted accounting principles.
The Company further provided $1,480 to reduce support staff in North America by
41 employees and exit certain non-air bag related wire cloth product lines.
During 1997, the Company recorded a charge of $8,966 for restructuring the
Company's operations in Kidderminster. The restructuring charge included
severance costs and estimated pension related costs for 124 employees, reducing
the Kidderminster workforce from 345 to 221. Cash outlays during 1997 included
in the $8,966 restructuring charge were $1,335. Cash outlays during 1998 were
approximately $1,825, while outlays during 1999 were approxi mately $430. While
the Kidderminster restructuring achieved the anticipated reduction in
manufacturing costs, declining selling prices more than offset the savings, and
net operating results in Kidderminster did not improve. The Company sold the
Kidderminster wire manufacturing operation during the second quarter ended April
4, 1999.
Proceeds from the divestitures have been utilized to fund investment in the
remaining business and to reduce debt. Since September 30, 1994, debt has been
reduced $11,931 and capital expenditures for fixed assets have totaled $46,453.
During this period, weld wire sales have increased 26%. The effect of the
divestiture activities on the Company's sales and gross margins is shown in the
following table. Divested operations include the Kidderminster wire operations
and non-air bag wire cloth.
<TABLE>
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1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
NET SALES
- ---------
Remaining operations $ 170,735 $ 192,632 $ 205,546 $ 200,466 $ 201,913
Divested operations 12,176 32,863 42,217 48,088 45,507
------------ ----------- ----------- ----------- -----------
Total $ 182,911 $ 225,495 $ 247,763 $ 248,554 $ 247,420
=========== ========== =========== =========== ===========
GROSS PROFIT (LOSS)
- -------------------
Remaining operations $ 24,664 $ 29,407 $ 27,050 $ 30,339 $ 35,152
Divested operations (77) (1,105) (50) 1,782 2,176
------------- ------------ ------------ ----------- -----------
Total $ 24,587 $ 28,302 $ 27,000 $ 32,121 $ 37,328
=========== ========== =========== =========== ===========
GROSS PROFIT %
- --------------
Remaining operations 14.4% 15.3% 13.2% 15.1% 17.4%
------------ =========== =========== =========== ===========
Divested operations (.6%) (3.4%) (0.1%) 3.7% 4.8%
============= ------------ ============ =========== ===========
Total 13.4% 12.6% 10.9% 12.9% 15.1%
============ =========== =========== =========== ===========
</TABLE>
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Gross profit margins change due to several factors. For the Company, the most
significant factor is the level of sales and production. As production
increases, a relatively lower level of fixed costs is associated with each unit,
and the gross profit percentage increases. Similarly, as volume falls, fewer
units are available to cover the fixed costs of manufacturing and the profit
percentage decreases. In addition to volume, changes in product mix, selling
prices, and raw material costs also affect the gross margins. During 1999, gross
profit margins improved to 13.4% compared to 12.6% and 10.9% in 1998 and 1997
respectively. The improvement is due primarily to the restructuring activities
of the past three years and the reduced sales of certain lower margin wire cloth
air bag filtration products. During 1998, gross profit margins improved to 12.6%
compared to 10.9% in 1997. The improvement is due primarily to reduced sales of
low margin wire cloth air bag filtration materials.
During 1999, sales from international operations excluding Canada declined 45%
due to the divestiture of the Kidderminster wire operation. During 1998, sales
from international operations decreased 14% due primarily to the restructuring
of the Kidderminster operation in 1997. Reduced wire sales in 1998 were
partially offset by sales of air bag inflator housings from the Peterlee, United
Kingdom facility opened in 1998. The Peterlee facility was retained as a Company
facility following the sale of the Kidderminster wire operation. During 1997,
sales from international operations decreased 12% due primarily to the
restructur ing of the Kidderminster operation.
In recent years, the Company has not been able to raise prices in line with
inflation due to the effects of worldwide overcapacity in the Company's major
product lines and competitive pressure in the Company's automotive markets.
Since 1994, inflation as measured by the Consumer Price Index has risen 12%,
while average selling prices have declined 9%. Had selling prices increased 12%,
sales in 1999 would have been approximately $221,000.
During 1999, 1998 and 1997, the Company provided $961, $1,465, and $2,300,
respectively, for the estimated cost of compliance with environmental
regulations and continuing modifications in operating requirements. The majority
of the 1999 and 1998 environmental costs relate primarily to normal
environmental operating expenses in both the United Kingdom and North America.
The 1997 provision related to equipment and plant stabilization activities
associated with the Kidderminster restructuring and normal environmental
operating expenses in both the United Kingdom and in North America. In addition
to the amounts charged to earnings, $222, $636, and $905 of costs were
capitalized in the respective years. The Company's actual environmental related
cash outlays for 1999, 1998 and 1997 were $2,939, $3,645, and $2,433,
respectively, of which $256, $399, and $222 were spent on the Clifton, New
Jersey property.
The Company was previously designated a potentially responsible party ("PRP") by
federal and state environmental protection agencies for eight actual or
potential Superfund or Resource Conservation and Recovery Act ("RCRA") Sites
(the "Sites"), including Clifton, New Jersey. In connection with its designation
as a PRP, the Company has completed or is undertaking all investigative work
required by the appropriate governmental agencies or by relevant statutes,
regulations, or local ordinances. The Company has resolved its liability for
three of the Superfund Sites by reaching settlements with the Environmental
Protection Agency ("EPA"). Company records indicate only de minimis or de
micromis involvement for a fourth Superfund Site. The Company has reviewed its
involvement and potential exposure for all the remaining Sites, and, based upon
all information currently available, has previously accrued $1,019 in prior
years (excluding Clifton, New Jersey) for its share of the estimated
investigation and remediation costs for the Sites. Additional reserves were not
needed in 1999. Additionally, the Company has undertaken environmental
investigation and cleanup projects at three of its plants under RCRA. One of
these RCRA projects was completed in 1999. These projects are subject to
monitoring by appropriate state environmental protection agencies. Significant
portions of the other two RCRA projects have been completed and state agencies
are in the process of reviewing reports submitted by the Company. The Company
accrued $1,482
10
<PAGE>
in prior years and $178 in 1999 for these activities. The Company does not
believe that future costs for either the Sites or the RCRA cleanups will have a
materially adverse effect on the consolidated financial condition of the Company
or its consolidated results of operations.
The Company has reviewed its current environmental projects which are expected
to be completed in 2000 and all environmental regulations and acts to ensure
continuing compliance. In 2000, the Company expects to spend $2,500 on the
Clifton, New Jersey project. In 2001, the Company expects to spend $200 on the
project. These amounts have already been accrued for financial statement
purposes. Additionally, the Company expects to spend $2,564 on environmentally
related capital and operational projects, of which $650 will be charged against
2000 earnings.
In 1989, in response to expected market changes, the Company adopted a strategy
that included, among other things, the decision to exit non-strategic and/or
non-profitable businesses and to continually adapt general and administrative
cost levels to the changing business.
In 1999, 1998, 1997, 1996, and 1995, $176, $7,851, $9,188, $254, and $2,842,
respectively, the net cost of restructuring the Company in those years includes
the carrying amount adjustments on nonproductive facilities and idle equipment
of $522, $2,640, $1,208, $0, and $120, respectively; severance costs of the
salaried and hourly workforce; and a cumulative translation adjustment of $1,200
in 1998. In 1999, the Company recognized a gain of $600 upon the sale of the
Kidderminster wire operation. All of these are included in operating costs. The
1995 net cost of restructuring also included $1,400 for the Columbiana plant
environmental stabilization. The 1996 net cost of restructuring of $254 was
associated with costs related to the Clifton, New Jersey property. The 1997 net
cost of restructuring of $9,188 includes $8,966 related to the Kidderminster
restructuring, and $222 was associated with costs related to the Clifton, New
Jersey property.
The 1999 and 1998 net restructuring and impairment costs of $176 and $7,851
include $759 and $367 associated with the Clifton, New Jersey property. The
Company expects to incur approximately $2,500 of cash outflows related to the
Clifton property in 2000.
During 1999, the Company took action to limit future Company expense increases
in retiree health care through the use of limits on the maximum amount of annual
funding the Company will provide toward the average costs of retiree health
coverage. The net effect of plan changes and plan experience better than
actuarial assumptions reduced the net periodic postretirement benefit cost to
$26 in 1999, compared to $2,469 and $2,297 in 1998 and 1997, respectively. In
addition, as a result of the reduction in employment associated with the North
American restructuring, a curtailment gain of $737 was recognized in 1999.
The following summary shows the changing level of operating expense and
identifies operating expense directly attributable to divested operations and
amounts attributable to restructuring activities.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSE:
- ------------------
Remaining operations $ 15,091 $ 21,614 $ 19,937 $ 19,302 $ 17,986
Divested operations 857 2,416 2,572 3,694 3,576
Restructuring costs 176 7,851 9,188 254 2,842
----------- ----------- ----------- ----------- -----------
Total $ 16,124 $ 31,881 $ 31,697 $ 23,250 $ 24,404
=========== =========== =========== =========== ===========
AS A PERCENT OF SALES
- ---------------------
Remaining operations 8.8% 11.2% 9.7% 9.6% 8.9%
=========== =========== =========== =========== ===========
Divested operations 7.0% 7.4 % 6.1% 7.7% 7.9%
=========== =========== =========== =========== ===========
Total 8.8% 14.1% 12.8% 9.4% 9.9%
=========== =========== =========== =========== ===========
</TABLE>
11
<PAGE>
The net effect of all the above elements is seen in the Company's operating
profit (loss).
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING PROFIT (LOSS)
- -----------------------
Remaining operations $ 9,573 $ 7,793 $ 7,113 $ 11,037 $ 17,166
Divested operations (934) (3,521) (2,622) (1,912) (1,400)
Restructuring costs (176) (7,851) (9,188) (254) (2,842)
------------ ------------ ----------- ----------- -----------
Total $ 8,463 $ (3,579) $ (4,697) $ 8,871 $ 12,924
=========== ============ ============ =========== ===========
</TABLE>
Operating profit by Geographic Area is presented in Note 14 of Notes to
Consolidated Financial Statements in Item 8.
In 1999 and 1997 interest expense decreased due to lower interest rates and
lower average borrowings. Interest expense decreased in 1998 due primarily to
lower interest rates.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest expense $ 3,499 $ 3,751 $ 4,194 $ 4,838 $ 5,631
Average borrowings $ 35,390 $ 38,308 $ 36,080 $ 37,333 $ 41,567
Average interest rate 9.9% 9.8% 11.6% 12.5% 13.2%
</TABLE>
Other income in 1998 was primarily realized foreign currency exchange gains and
gain on sale of redundant equipment in the United Kingdom.
Other income in 1996 is primarily 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 in which the Company had
participated since 1946. In 1995, other income is primarily the Company's share
of profits in the joint venture.
In 1999, 1998 and 1997, income taxes as a percentage of pre-tax income vary from
the domestic statutory rate primarily due to state taxes and the Company's
utilization of net operating loss carryforwards and a net decrease in the
valuation allowance of $625, $174 and $247, respectively.
FINANCIAL CONDITION
- -------------------
In 1999, working capital increased $5,641 due primarily to the divestiture of
the Kidderminster wire operation and reduction in accrued expenses. In 1998,
working capital decreased $13,984 due primarily to the restructuring, an
increase in debt, and a decrease in inventories. In 1997, working capital
decreased $6,322 due primarily to the U.K. restructuring. During 1998, the
Company renewed its credit facility to October 1, 2001.
The Company has $2,346 of net deferred tax assets at September 30, 1999. At
September 30, 1999, the Company had $49,853 of deferred tax assets offset by
$43,010 of deferred tax valuation reserves and $4,497 of deferred tax
liabilities associated with prepaid pensions. At September 30, 1999, the
Company's accrued post-retirement benefit cost of $49,316 was made up of the
benefit obligation of $26,152, unrecognized prior service cost of $5,803, and
unrecognized net gains of $17,361.
During 1999, 1998, and 1997, the Company invested $30,173 in property, plant and
equipment. Approximately three quarters of this amount relates to the upgrade of
existing equipment and the purchase of new equipment in the wire products
segment. The remaining amount relates to the Company's commit ment to automotive
air bag inflator filters, filter media, and inflator housings. The Company's
total capital expenditures for 2000 are expected to be $7,300, primarily for
projects to add engineered products capacity and improve quality and operating
efficiencies. The Company expects that improved results of operations
12
<PAGE>
from restructuring activities will fund future expansion of working capital and
productive capacity. The Company is confident that adequate long- and short-term
financing will be available in the future.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current ratio .6 : 1.0 .6 : 1.0 .8 : 1.0 .9 : 1.0 1.2 : 1.0
Total debt to total capital, excluding
SFAS No. 106 adjustment 51.4% 65.9% 56.7% 49.1% 57.9%
Long-term debt to total capital, exclud-
ing SFAS No. 106 adjustment 17.0% 24.1% 18.4% 14.9% 48.1%
</TABLE>
The Company will continue to pursue cost reduction activities in both its
domestic and international operations, including personnel reductions and costs
associated with administering its employee benefit programs.
YEAR 2000 DATE CONVERSION
- -------------------------
Many existing computer programs use only two digits to identify years. These
programs were designed without consideration for the effect of the upcoming
change in century, and if not corrected, could fail or create erroneous results
by or at the year 2000. Essentially all of the Company's information technology
based systems, as well as many non-information technology based systems, are
affected by the "Year 2000" issue. Technology based systems reside on
mainframes, servers, and personal computers in the U.S., and in the foreign
countries where the Company has operations. Specific systems include accounting,
payroll, financial reporting, product development, inventory tracking and
control, business planning, tax, accounts receivable, accounts payable,
purchasing, distribution, and numerous word processing and spreadsheet
applications. The Company utilizes life insurance, accounting and actuarial
systems that are also affected. Non-information technology based systems include
equipment and services containing imbedded microprocessors, such as building
management systems, manufacturing process control systems, clocks, and security
systems. All of the Company's businesses have relationships with numerous third
parties, including material suppliers, utility companies, transportation
companies, insurance companies, banks, governmental units, and brokerage firms,
that may be affected by the Year 2000 issue.
THE COMPANY'S STATE OF READINESS
Remediation plans have been established for all major systems potentially
affected by the Year 2000 issue. The primary phases and current status of the
plans for internal technology based systems are summarized as follows:
1. IDENTIFICATION OF ALL APPLICATIONS AND HARDWARE WITH POTENTIAL YEAR 2000
ISSUES. To the best of the Company's knowledge, this phase has been
completed.
2. FOR EACH ITEM IDENTIFIED, PERFORM AN ASSESSMENT TO DETERMINE AN APPROPRIATE
ACTION PLAN AND TIMETABLE FOR REMEDIATION OF EACH ITEM. A PLAN MAY CONSIST
OF REPLACEMENT, CODE REMEDIATION, UPGRADE OR ELIMINATION OF THE APPLICATION
AND INCLUDES RESOURCE REQUIREMENTS. This phase has been completed.
3. IMPLEMENTATION OF THE SPECIFIC ACTION PLAN. Specific action plans have been
completed for all known mission-critical systems.
4. TEST EACH APPLICATION UPON COMPLETION. Testing has been completed for all
systems.
13
<PAGE>
5. PLACE THE NEW PROCESS INTO PRODUCTION. Many applications and systems have
been put into production. These include servers, personal computers, and
various software programs. Applications and systems are put into production
once they have been tested. All affected applications and systems are in
production.
The Company identified all non-information technology based systems. Appropriate
remediation plans have been developed, implemented and tested.
Identification of areas of potential third party risk is complete, and plans
have been developed and implemented.
THE COSTS INVOLVED
The total cost to the Company of achieving Year 2000 compliance is not expected
to exceed $1,200 and will consist of the utilization of internal and external
resources. Spending to date totals approximately $850. Costs relating to Year
2000 compliance are included in the Information Systems budget. All costs
related to achieving Year 2000 compliance are based on management's best
estimates. There can be no guarantee that actual results will not differ from
estimates.
RISKS AND CONTINGENCY PLAN
The Company has evaluated the risks it would face in the event certain aspects
of its Year 2000 Remediation plan fail. It is also developing contingency plans
for all mission-critical processes. Under a "worse case" scenario, the Company's
manufacturing operations would be unable to build and deliver product due to
internal system failures and/or the inability of vendors to deliver raw
materials and components. Alternative suppliers are being identified and
inventory levels of certain key components may be temporarily increased. While
virtually all internal systems can be replaced with manual systems on a
temporary basis, the failure of any mission-critical system will have at least a
short-term negative effect on operations. The failure of national and worldwide
banking information systems or the loss of essential utilities services due to
the Year 2000 issue could result in the inability of many businesses, including
the Company, to conduct business. Risk assessment and contingency plans have
been completed.
FUTURE ACCOUNTING PRONOUNCEMENTS
- --------------------------------
The Financial Accounting Standards Board (FASB) has issued, or is considering, a
number of measures related to financial statement disclosure. These
pronouncements are not expected to impact the financial position, results of
operations or cash flows of the Company, when adopted.
SAFE HARBOR
- -----------
This Form 10-K contains certain forward-looking statements, including statements
regarding net earnings, trends in sales, expense and productive capacity levels,
the future availability of working capital, and the availability of long- and
short-term financing. Actual results could vary materially based upon a number
of factors, including, but not limited to, those set forth below. Additionally,
there are trends and factors beyond the Company's control which affect its
operations. In accordance with the provisions of the Private Securities
Litigation Reform Act of 1995, the following cautionary statements identify
important trends and factors that could cause actual results to differ
materially from those in any forward-looking statements contained in this Form
10-K. Such trends and factors include, but are not limited to, adverse changes
in general economic conditions, demand for Company products and industry
capacity, competitive products and pricing, obtaining manufacturing
efficiencies, availability of raw materials and sources of energy needed for
operations, and foreign currency fluctuations. Based upon changing conditions,
should any one or more
14
<PAGE>
of these risks or uncertainties materialize, or should any underlying assumption
prove incorrect, actual performance results may vary materially from those
described herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Company's primary market risk exposure is interest rate risk, primarily
related to the Company's interest bearing obligations. The Company does not
speculate on interest rates, but rather manages its portfolio of assets and
liabilities to mitigate the impact of interest rate fluctuations.
The table below presents principal amounts and related weighted average interest
rates by year of maturity for the Company's interest-bearing obligations (in
thousands).
<TABLE>
- --------------------------------------------------------------------------------------------------------
2004
2000 2001 2002 2003 and After
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revolving credit $ 17,438 - - - -
Average interest rate 7.8%
Revolving credit $ 264 - - - -
Average interest rate 12%
Promissory notes payable $ 3,522 $3,522 $6,941 - -
Average interest rate 8.0% 8.0% 8.0%
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Report of Independent Auditors, Consolidated Financial Statements and
Supplementary Schedule are set forth on pages 19 to 41 of this Report and are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
----------------------------------------------------------------
FINANCIAL DISCLOSURES
---------------------
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
IDENTIFICATION OF DIRECTORS
- ---------------------------
Information in respect of Directors as set forth under the caption "Election of
Directors" in the annual Proxy Statement relating to the Annual Meeting of
Shareholders scheduled for January 27, 2000 is incorporated herein by reference.
15
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (Furnished in accordance with Item 401(b)
of Regulation S-K, pursuant to General Instruction G(3) of Form 10-K)
The following table sets forth certain data concerning the Executive Officers of
the Registrant, all of whom are elected annually by the Board of Directors. Some
of the Officers of the Registrant also serve as Directors or Officers of the
subsidiaries.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
Name Age Present Position Date Assumed Present Position
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ronald B. Kalich 52 President and Chief Executive Officer 1999
William D. Grafer 54 Vice President, Finance 1987
David L. Lawrence 52 Treasurer, Assistant Secretary 1987
Timothy C. Wright 58 General Counsel and Secretary 1996
</TABLE>
All of the above-named officers of the Registrant have been employees of the
Company for more than five years except Messrs. Kalich and Wright.
Mr. Kalich joined the Company in 1999. Prior to joining the Company, Mr. Kalich
was President and CEO of Getz International, a unit of The Marmon Group, from
1993 to 1999. Prior to 1993, he held executive positions with Danaher
Corporation, Forstman Little & Company, and Cooper Industries, from 1972 to
1993.
Mr. Wright joined the Company in 1996. Mr. Wright operated his own practice,
Wright Associates, from 1993 to 1996 and also served as General Counsel for
CAPCO Automotive Products Corporation beginning in 1995. Prior to 1993, Mr.
Wright held senior in-house counsel positions with Uniroyal Technology
Corporation from 1989 to 1992 and Clark Equipment Company from 1979 to 1989.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information set forth under the caption "Organization and Remuneration of
the Board" and the information relating to Executive Officers' compensation in
the annual Proxy Statement relating to the Annual Meeting of Shareholders
scheduled for January 27, 2000 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------
The information set forth under the captions "Stock Ownership of Certain
Beneficial Owners and Management" and "Election of Directors" in the annual
Proxy Statement relating to the Annual Meeting of Shareholders scheduled for
January 27, 2000 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information set forth under the caption "Certain Contracts with Named
Executives" in the annual Proxy Statement relating to the Annual Meeting of
Shareholders scheduled for January 27, 2000 is incorporated herein by reference.
16
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. Financial Statements and Schedules
----------------------------------
The financial statements and schedule listed in the
accompanying Index to Consolidated Financial Statements and
Schedule are filed as part of this report.
2. Exhibits
--------
The exhibits listed in the accompanying Exhibit Index and
required by Item 601 of Regulation S-K (numbered in
accordance with Item 601 of Regulation S-K) are filed or
incorporated by reference as part of this Report.
(b) There were no reports on Form 8-K filed during the three months
ended September 30, 1999.
17
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, National-Standard Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NATIONAL-STANDARD COMPANY
/s/ Ronald B. Kalich
--------------------------------------------------
Ronald B. Kalich
President and Chief Executive Officer, Director
/s/ William D. Grafer
--------------------------------------------------
William D. Grafer
Vice President, Finance
(Principal Financial and Accounting Officer)
Dated: December 23, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
DAVID F. CRAIGMILE Chairman of the Board )
RANKO CUCUZ Director ) - By: /s/ Timothy C. Wright
ERNEST J. NAGY Director ) Timothy C. Wright
MICHAEL B. SAVITSKE Vice Chairman ) Attorney-in-Fact
CHARLES E. SCHROEDER Director )
DONALD R. SHELEY, JR. Director )
DONALD F. WALTER Director ) December 23, 1999
18
<PAGE>
NATIONAL-STANDARD COMPANY
<TABLE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Page Reference
in Report on
Form 10-K
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Consolidated Statements of Operations for the years ended September 30, 1999, 1998, 20
and 1997
Consolidated Statements of Comprehensive Income for the years ended 21
September 30, 1999, 1998, and 1997
Consolidated Statements of Shareholders' Equity for the years ended September 30, 22
1999, 1998, and 1997
Consolidated Balance Sheets at September 30, 1999 and 1998 23
Consolidated Statements of Cash Flows for the years ended September 30, 1999, 1998 24
and 1997
Notes to Consolidated Financial Statements 25-39
Report of Independent Auditors 40
Schedule:
II. Valuation and Qualifying Accounts (copy not included in Annual Report) 41
Schedules other than those listed above have been omitted from this Annual
Report because they are not required, are not applicable, or the required
information is included in the consolidated financial statements or the notes
thereto.
</TABLE>
19
<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Share Data)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Year Ended September 30
-----------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales............................................................... $ 182,911 $ 225,495 $ 247,763
Cost of sales .......................................................... 158,324 197,193 220,763
----------- ----------- -----------
Gross profit............................................................ 24,587 28,302 27,000
Selling and administrative expenses..................................... 15,948 24,030 22,509
Restructuring and impairments, net...................................... 176 7,851 9,188
----------- ----------- -----------
Operating profit (loss)........................................... 8,463 (3,579) (4,697)
Interest expense........................................................ (3,499) (3,751) (4,194)
Other income (expense), net............................................. (18) 790 34
------------ ----------- -----------
Income (loss) before income taxes................................. 4,946 (6,540) (8,857)
Income taxes............................................................ (417) 159 133
------------ ----------- -----------
Net income (loss)....................................................... $ 5,363 $ (6,699) $ (8,990)
=========== ============ ===========
Basic earnings (loss) per share......................................... $ .95 $ (1.27) $ (1.71)
=========== ============ -----------
Diluted earnings (loss) per share....................................... $ .93 $ (1.27) $ (1.71)
=========== ============ -----------
See accompanying notes to consolidated financial statements.
</TABLE>
20
<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Year Ended September 30
-----------------------
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss)....................................................... $ 5,363 $ (6,699) $ (8,990)
---------- ---------- ----------
Other comprehensive income (loss):
Minimum pension liability adjustment................................. 5,831 (4,571) (62)
Foreign currency translation adjustments............................. 1,123 914 329
----------- ----------- -----------
Other comprehensive income (loss).................................... 6,954 (3,657) 267
----------- ----------- -----------
Comprehensive income (loss)............................................. $ 12,317 $ (10,356) $ (8,723)
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
21
<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in Thousands except Share Data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Excess of
Unamortized Additional
Retained Cumulative Value of Pension
Common Earnings Translation Treasury Restricted Liability Over
Stock (Deficit) Adjustment Stock Stock Unrecognized
Prior
Service Cost
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996 $ 27,689 $(36,997) $(2,175) $ (713) $ (73) $ (1,493)
Restricted stock award activity 31 (17) (22)
Restricted stock amortization 42
Stock purchase (712)
Adjustment for foreign
currency translation 329
Adjustment of pension liability (62)
Net loss for 1997 (8,990)
- ------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1997 $ 27,720 $(45,987) $(1,846) $(1,442) $ (53) $ (1,555)
Restricted stock award activity 122 (129)
Restricted stock amortization 54
Issuance of warrants 193
Stock contribution to pension plan (472) 1,319
Stock issuance 33
Stock purchase (52)
Adjustment for foreign
currency translation 914
Adjustment of pension liability (4,571)
Net loss for 1998 (6,699)
- ------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 $ 27,441 (52,686) (932) (20) (128) (6,126)
Restricted stock award activity (32) 33
Restricted stock amortization 43
Stock contribution to pension plan 700
Stock issuance 30
Stock purchase (3)
Adjustment for foreign
currency translation 1,123
Adjustment of pension liability 5,831
Net income for 1999 5,363
- ------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 $ 28,171 $(47,323) $ 191 $ (55) $ (52) $ (295)
- ------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
22
<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands except Share Data)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
September 30
------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash............................................................................... $ 401 $ 251
Receivables, less allowance for doubtful accounts
($255 and $560, respectively).................................................. 16,590 24,272
Inventories........................................................................ 13,002 17,966
Deferred tax asset................................................................. - 1,721
Prepaids........................................................................... 1,853 2,347
------------ ------------
Total current assets............................................................... 31,846 46,557
Property, plant and equipment, net....................................................... 43,895 50,760
Other assets............................................................................. 22,100 17,761
------------ ------------
$ 97,841 $ 115,078
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable................................................................... $ 21,514 $ 28,097
Employee compensation and benefits................................................. 2,055 2,993
Accrued pension.................................................................... 478 1,062
Other accrued expenses............................................................. 6,332 15,491
Current accrued postretirement benefit cost........................................ 2,400 2,400
Notes payable to banks and current portion of long-term debt....................... 21,224 24,312
------------ ------------
Total current liabilities.......................................................... 54,003 74,355
------------ ------------
Other long-term liabilities.............................................................. 5,822 9,286
------------ ------------
Long-term debt........................................................................... 10,463 14,029
------------ ------------
Accrued postretirement benefit cost...................................................... 46,916 49,859
------------ ------------
Shareholders' equity:
Common stock - $.01 par value.
Authorized 25,000,000 shares; issued 5,735,740 and
5,470,740 shares, respectively............................................. 28,171 27,441
Preferred stock - $1.00 par value.
Authorized 600,000 shares; issued none........................................ - -
Retained earnings (deficit)........................................................ (47,323) (52,686)
Treasury stock, at cost; 8,044 and 2,669 shares, respectively...................... (55) (20)
Unamortized value of restricted stock.............................................. (52) (128)
Accumulated other comprehensive income:
Foreign currency translation adjustment....................................... 191 (932)
Minimum pension liability adjustment.......................................... (295) (6,126)
------------ ------------
(19,363) (32,451)
------------ ------------
$ 97,841 $ 115,078
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
23
<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands except Share Data)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Year Ended September 30
-----------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
- ---------------------
Net earnings (loss)..................................................... $ 5,363 $ (6,699) $ (8,990)
Non-cash charges to earnings:
Depreciation and amortization...................................... 8,441 8,695 8,225
Restructuring and impairments...................................... 522 7,484 4,504
Changes in short-term assets and liabilities, net of dispositions and
restructuring:
Receivables........................................................ 2,721 401 2
Inventories........................................................ 2,619 3,533 940
Deferred income taxes.............................................. (625) (174) (247)
Prepaids........................................................... 95 608 549
Accounts payable................................................... (1,362) 5,636 (321)
Employee compensation and benefits, accrued pension,
and other accrued expenses...................................... (6,757) 2,417 1,286
Currency translation effect on short-term assets and liabilities... 792 (765) 515
Changes in other long-term assets and liabilities....................... (4,904) (7,374) 1,118
----------- ----------- -----------
Net cash provided by operating activities.......................... 6,905 13,762 7,581
----------- ----------- -----------
INVESTING ACTIVITIES:
- ---------------------
Capital expenditures.................................................. (5,957) (15,069) (9,147)
Disposal of property, plant and equipment............................. 5,829 306 -
----------- ----------- -----------
Net cash used for investing activities............................. (128) (14,763) (9,147)
----------- ----------- -----------
FINANCING ACTIVITIES:
- ---------------------
Term loan advance..................................................... - 5,610 4,377
Net payments under revolving credit agreements........................ (2,862) (1,651) (4)
Principal payments under term loans................................... (3,792) (3,411) (3,782)
Purchases of treasury stock........................................... (3) (25) (719)
Stock option proceeds................................................. 30 - -
----------- ----------- -----------
Net cash provided by (used for) financing activities............... (6,627) 523 (128)
----------- ----------- -----------
Net (decrease) increase in cash.................................... 150 (478) (1,694)
Cash at beginning of year............................................. 251 729 2,423
----------- ----------- -----------
Cash at end of year................................................... $ 401 $ 251 $ 729
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
- -------------------------
Interest paid......................................................... $ 3,342 $ 3,756 $ 4,212
=========== =========== ===========
Cash paid for taxes, net of refunds received........................... $ (108) $ 115 $ 98
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
24
<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands except Share Data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
--------------------------------------------
NATURE OF OPERATIONS - The Company produces tire bead wire, welding wire,
wire cloth, stainless spring and specialty wire, plated wire, and nonwoven
metal fiber materials. The Company also produces filters and inflator
housings for automotive air bag inflators. These products are generally
sold directly to other manufacturers, principally tire manufacturers and
automotive air bag manufactur ers. Its major market includes the United
States, with other markets in Canada and Europe.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the Company and all of its subsidiaries ("Company"). Intercompany
accounts and transactions have been eliminated in the consolidated
financial statements. The Company's 50 percent investment in a domestic
joint venture is carried at equity in underlying net assets. The Company's
share of operations of this affiliated company is not material.
REVENUE RECOGNITION - The Company's policy is to record sales when the
product is shipped.
TRANSLATION OF CURRENCIES - Exchange adjustments resulting from foreign
currency transactions are recognized currently in income. Adjustments
resulting from the translation of financial statements are reflected as a
separate component of shareholders' equity.
INVENTORIES - Inventories are stated at lower of cost or replacement
market. Cost for the material content of domestic steel inventories is
determined on the last-in, first-out (LIFO) method; the cost for other
inventories is determined on the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated
at cost less accumulated depreciation. Depreciation is computed on a
straight-line basis over the estimated useful lives of the related assets.
For tax purposes, depreciation has generally been computed on a
straight-line basis over prescribed lives. The following table depicts the
depreciable lives of major classes of the Company's depreciable assets:
Type of Asset Depreciable Life
------------- ----------------
Land Improvements........................ 10 - 15
Buildings................................ 10 - 33-1/3
Machinery and Equipment.................. 3 - 10
RESEARCH AND DEVELOPMENT - Research and development costs are expensed
currently. The Company expended $1,027, $1,567, and $1,463 in 1999, 1998
and 1997, respectively, on research and development activities.
EARNINGS PER SHARE - On October 1, 1997, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share."
SFAS No. 128 replaces the primary and fully diluted earnings per share
("EPS") computations with basic and diluted EPS. Basic EPS are computed by
dividing net earnings by the weighted average number of common shares
outstanding during the period. Diluted EPS are computed by dividing net
earnings by the weighted average number of common shares and dilutive
securities outstanding during the period. The number of potentially
dilutive shares, excluded from the diluted EPS calculation, for the years
ended September 30, 1999, 1998, and 1997 include stock options totaling
788,500, 449,250, and 403,250, and warrants totaling 100,000 in all three
years. Basic common shares used in calculating basic earnings per share
for 1999, 1998, and 1997 were 5,667,000, 5,263,000, and 5,266,000,
respectively. Dilutive common shares used in calculating diluted earnings
per share for 1999, 1998, and 1997 were 5,770,000, 5,263,000, and
5,269,000, respectively.
25
<PAGE>
STOCK-BASED COMPENSATION - On October 1, 1996, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," which permits entities to recognize the
compensation expense associated with the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 allows entities
to continue to apply the provisions of Accounting Principles Board (APB)
Opinion 25, "Accounting for Stock Issued to Employees," and provide pro
forma net income and earnings per share disclosures as if the fair value
method defined in SFAS No. 123 had been applied. The Company has elected
to apply the provisions of APB Opinion 25 and provide the pro forma
disclosures of SFAS No. 123.
PENSIONS AND OTHER POSTRETIREMENT BENEFITS - During 1999, the Company
adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," which revises disclosures about pensions and
postretirement plans. This statement did not change the measurement or
recognition of the Company's plans, but resulted in additional
disclosures.
STATEMENT OF CASH FLOWS - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
STATEMENT OF COMPREHENSIVE INCOME - On October 1, 1998, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for
reporting and display of comprehensive income and its components.
INCOME TAXES - Deferred income taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Deferred tax assets are recorded when
it is more likely than not that such tax benefits will be realized.
ENVIRONMENTAL CLEANUP MATTERS - The Company expenses environmental
expenditures related to existing conditions resulting from past or current
operations and from which no current or future benefit is discernible.
Expenditures that extend the life of the related property or mitigate or
prevent future environmental contamination are capitalized. The Company
determines its liability on a site-to-site basis and records a liability
at the time when it is probable and can be reasonably estimated. The
Company's estimated liability is reduced to reflect the anticipated
participation of other potentially responsible parties in those instances
where it is probable that such parties are legally responsible and
financially capable of paying their respective shares of the relevant
costs. The estimated liability of the Company is not discounted or reduced
for possible recoveries from insurance carriers. Refer to Note 10.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The fair value of the Company's
financial instruments, which consist of cash, receivables, accounts
payable, accrued expenses, notes payable and long-term debt, approximate
their carrying values.
SEGMENT REPORTING - During 1999, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 supersedes SFAS
No. 14 replacing the "industry segment" approach with the "manage ment"
approach. The management approach designates the internal organization
that is used by management for making operating decisions and assessing
performance as the source of the Company's reportable segments. SFAS No.
131 also requires disclosures about products and services, geographic
areas, and major customers. The adoption of SFAS did not affect results of
operations or financial position but did affect the disclosure of segment
information (see Note 15).
26
<PAGE>
RECLASSIFICATION - Certain 1998 and 1997 amounts in the Consolidated
Financial Statements have been reclassified to conform with 1999
presentation.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
Actual results could differ from those estimates.
2. INVENTORIES
-----------
<TABLE>
--------------------------------------------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods..................................................................... $ 128 $ 1,140
Work in process.................................................................... 6,273 6,772
Raw material (including certain partially processed materials)..................... 6,601 10,054
----------- -----------
$ 13,002 $ 17,966
=========== ===========
</TABLE>
The material content of domestic steel inventories amounting to $8,109 and
$11,727 at September 30, 1999 and 1998, respectively, is valued on a LIFO
basis. During 1999, LIFO inventory layers were reduced. The effect of this
reduction increased income by $135 during 1999. Had the FIFO method been
used, inventory would have been $2,719 and $3,594 higher than that
reported at September 30, 1999 and 1998, respectively.
3. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
<TABLE>
1999 1998
- ----------------------------------------------------------------------------------- ---------------- --------- -----------
<S> <C> <C>
Land $ 251 $ 317
Land improvements 2,092 2,170
Buildings 22,432 25,059
Machinery and equipment 104,156 132,804
Construction in progress 7,066 12,637
----------- -----------
135,997 172,987
Less accumulated depreciation 92,102 122,227
----------- -----------
$ 43,895 $ 50,760
=========== ===========
</TABLE>
4. RETIREMENT BENEFITS
-------------------
The Company and its subsidiaries have several pension plans covering
substantially all employees. The Company's policy for qualified plans is
to fund the net periodic pension cost accrued for each plan year, but not
more than the maximum deductible contribution nor less than the minimum
required con tribution.
The Company sold its wire manufacturing facility in Kidderminster, United
Kingdom during 1999. The employees at this facility were covered by a
pension plan. The following tables provide a reconciliation of benefit
obligations, plan assets, and funded status of the plans for remaining
Company plans, along with a reconciliation to previously disclosed fund
assets and benefit obligations due to the disposed United Kingdom
facility. In addition, during 1999 the Company changed its valuation date
for its pension plans from September 30 to June 30. The effect of this
change is reflected in the benefit obligations and plan assets
reconciliations.
27
<PAGE>
<TABLE>
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in benefit obligations
- -----------------------------
Benefit obligations, beginning of year......................................... $ 104,864 $ 93,375
Benefit obligation of disposed UK facility plan................................ (39,641) (32,082)
------------ -------------
Benefit obligations of remaining plans, beginning of year...................... $ 65,223 $ 61,293
Effect of change to June 30 measurement date................................... (780) -
Service cost................................................................... 1,080 977
Interest cost.................................................................. 4,496 4,481
Plan amendments................................................................ 885 -
Actuarial (gain) or loss....................................................... (4,799) 2,101
Benefits paid.................................................................. (4,852) (3,629)
------------ -------------
Benefit obligation of remaining plans, end of year............................. $ 61,253 $ 65,223
============ =============
- --------------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Change in plan assets
- ---------------------
Plan assets, beginning of year................................................. $ 104,066 $ 109,043
Fair value of plan assets of disposed UK facility plan......................... (46,075) (41,978)
------------ -------------
Fair value of plan assets of remaining plans, beginning of year................ $ 57,991 $ 67,065
Effect of change to June 30 measurement date................................... 7,165 -
Actual return on assets........................................................ 10,471 (5,825)
Company contributions.......................................................... 1,259 380
Benefits paid.................................................................. (4,852) (3,629)
------------ -------------
Fair value of plan assets of remaining plans, end of year...................... $ 72,034 $ 57,991
============ =============
- --------------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Funded status of the plans
- --------------------------
Benefit obligation (in excess of) less than fair value of assets............... $ 10,781 $ (7,232)
Amount contributed between measurement date and fiscal year end................ 316 -
Unrecognized net transition (asset) obligation................................. (126) 1,111
Unrecognized prior service cost................................................ 1,858 2,207
Unrecognized net (gain) or loss................................................ (2,661) 12,217
----------- -----------
Prepaid benefit cost........................................................... $ 10,168 $ 8,303
=========== ===========
Amounts recognized in the statement of financial position consist of:
- ---------------------------------------------------------------------
Prepaid pension cost........................................................... $ 12,853 $ 10,609
Accrued benefit liability...................................................... (2,685) (2,305)
Additional minimum liability................................................... (1,011) (7,362)
Intangible asset............................................................... 716 1,235
Accumulated other comprehensive income......................................... 295 6,126
----------- -----------
Prepaid benefit cost........................................................... $ 10,168 $ 8,303
=========== ===========
</TABLE>
The Company has several plans in which the accumulated benefit obligation
exceeds the fair value of plan assets. The accumulated benefit obligation
of these plans was $19,249 and $19,883 at September 30, 1999 and September
30, 1998, respectively. The fair value of plan assets for these plans was
$16,615 and $12,438 at September 30, 1999 and September 30, 1998,
respectively.
Net pension cost related to Company-sponsored plans included the following
components. The 1998 and 1997 components have been restated to reflect
remaining plans.
<TABLE>
-------------------------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs -- benefits earned during the year.................. $ 1,080 $ 977 $ 872
Interest cost on projected benefit obligation..................... 4,496 4,481 4,548
Expected return on plan assets.................................... (6,715) (6,767) (6,120)
Net amortization and deferral..................................... 322 175 155
Curtailment loss.................................................. 211 - -
----------- ----------- -----------
Net periodic pension expense (income)............................. $ (606) $ (1,134) $ (545)
=========== =========== ===========
</TABLE>
28
<PAGE>
The weighted average discount rate and rate of increase in future
compensation levels used in determining the 1999 actuarial present value
of the projected benefit obligation were 7.75% and 4.5%, respectively. The
1998 rates were 7.10% and 3.85%, respectively. The expected long-term rate
of return on assets was 10.50% in 1999 and 1998. As of September 30, 1999,
the plans own 1,963,175 shares of the Company's common stock.
The Company has an Employee Stock Ownership Plan (ESOP) for its eligible
domestic employees. The amount of Company contributions made to the ESOP
and charged to expense was $369 for 1999, $431 for 1998, and $427 for
1997.
5. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
-------------------------------------------
The Company provides certain health care and life insurance benefits for
eligible retirees. Eligible retirees include salaried retirees and certain
groups of collectively bargained retirees. The health care plan is
contributory, with all future retirees' and current salaried retirees'
contributions subject to an annual indexing. The Company funds the cost of
these benefits on a claims-paid basis.
The following is a reconciliation of the change in the accumulated
periodic post-retirement benefit obligation from October 1, 1997 through
September 30, 1999, and a reconciliation of the post-retirement benefit
obligation to the accrued amount at September 30, 1999 and 1998:
<TABLE>
--------------------------------------------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Benefit obligation, beginning of year.............................................. $ 40,242 $ 38,805
Effect of change to June 30 measurement date....................................... 42 -
Service cost....................................................................... 199 365
Interest cost...................................................................... 2,101 2,822
Plan amendments.................................................................... (5,212) -
Curtailment gain................................................................... (79) -
Actuarial gain..................................................................... (8,172) (24)
Benefits paid...................................................................... (2,969) (1,726)
----------- -----------
Benefit obligation, end of year.................................................... $ 26,152 $ 40,242
=========== ===========
Status of the plan, unfunded....................................................... $ 26,152 $ 40,242
Unrecognized prior service cost.................................................... 5,803 1,756
Unrecognized net gain.............................................................. 17,361 10,261
----------- -----------
Accrued post-retirement benefit cost............................................... $ 49,316 $ 52,259
=========== ===========
</TABLE>
The accrued postretirement benefit cost includes approximately $2,400 of
expected 1999 and 1998 payments that are included in the balance sheet as
a current liability.
Net periodic postretirement benefit cost included the following
c
omponents:
<TABLE>
--------------------------------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits attributed to service during the period.......... $ 199 $ 365 $ 304
Interest on accumulated postretirement benefit obligation................. 2,101 2,822 2,861
Net amortization and deferral............................................. (1,537) (718) (868)
Curtailment gain.......................................................... (737) - -
--------- --------- ---------
Total net periodic postretirement benefit cost............................ $ 26 $ 2,469 $ 2,297
========= ========= =========
</TABLE>
The 1999 curtailment gain relates to the 1998 restructuring and the
corresponding reduction in workforce.
29
<PAGE>
For measurement purposes, the annual rate of increase in the per capita
cost of covered health care benefits was assumed to be approximately 6.46%
for 1999; the rate was assumed to decrease gradually to 5% for 2001 and
remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. To
illustrate, increasing the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated
postretirement benefit obligation as of September 30, 1999 by $1,162 and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $96.
The 1999 and 1998 weighted-average discount rates used in determining the
accumulated post-retirement benefit obligation were 7.75% and 7.10%,
respectively. The weighted-average discount rates used in determining the
1999 and 1998 net periodic postretirement benefit cost were 7.10% and
7.50%, respectively.
The Company has previously announced it will take action to limit future
Company expense increases in retiree health care through the use of limits
on the maximum amount of annual funding the Company will provide toward
the average costs of retiree health coverage. These limits will be set at
a maximum of 3% annual increase in average cost for years through 2005.
The level of Company annual funding per retiree will be frozen at the
final 2005 levels.
6. OTHER ASSETS
------------
<TABLE>
-------------------------------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity in affiliates............................................................... $ 337 $ 500
Property held for sale............................................................. 3,878 3,551
Intangible pension asset........................................................... 716 1,235
Prepaid pension cost............................................................... 10,646 9,366
Other.............................................................................. 6,523 3,109
----------- -----------
$ 22,100 $ 17,761
=========== ===========
</TABLE>
The property held for sale includes the closed Columbiana, Alabama
facility, the closed Guelph, Ontario facility, and the Clifton, New Jersey
property.
During 1988, the Company closed its strip steel and flat wire facility
located in Clifton, New Jersey. Due to the environmental regulations in
the State of New Jersey, title to industrial real estate cannot be passed
without the New Jersey Department of Environmental Protection's written
approval. This project has involved demolition of the buildings and
continuing environmental remediation from production wastes through use of
an on-site landfill and off-site disposal. Cash outlays, primarily related
to the remediation, have been capitalized to the extent that, when added
to the estimated costs to complete the project, they do not exceed the
estimated realizable sale value of the property. In 1999, 1998 and 1997,
the Company expensed $759, $367, and $222, respectively, associated with
the project.
The other in 1999 includes a deferred tax asset of $2,346.
30
<PAGE>
7. DEBT
----
<TABLE>
--------------------------------------------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revolving credit arrangement expiring on October 1, 2001, interest at
prime plus .25% and LIBOR plus 2.25%, and prime plus .50%
and LIBOR plus 2.50% in 1999 and 1998, respectively............................ $ 17,438 $ 17,138
Revolving credit arrangement expiring on November 30, 1999,
interest at prime plus 4.0%.................................................... 264 -
Promissory notes payable in monthly installments with the balance due
October 1, 2001, interest at prime plus .50% and LIBOR plus 2.50%,
and
prime plus .75% and LIBOR plus 2.75% in 1999 and 1998, respectively............ 13,985 17,542
Capital lease....................................................................... - 112
Credit arrangement expired in January 1999, interest
at 10.50% in 1998.............................................................. - 124
Foreign subsidiary operating lines of credit with interest
at prime plus .50% in 1998..................................................... - 3,425
----------- -----------
31,687 38,341
Less short-term debt and current portion of long-term debt included
in current liabilities 21,224 24,312
----------- -----------
$ 10,463 $ 14,029
=========== ===========
</TABLE>
The prime rate used for calculating interest on September 30, 1999 and
1998 was 8.25%, while the LIBOR rates used on September 30, 1999 and 1998,
respectively, were 5.38% and 5.59%.
The weighted average interest rate for current debt approximates the 9.9%
and 9.8% average rates calculated for total debt in 1999 and 1998.
The existing debt agreements are collateralized by substantially all
assets and contain, among other things, provisions as to the maintenance
of working capital and net worth, restrictions on cash dividends,
redemptions of Company stock and incurrence of indebtedness. The revolving
credit arrangement provides for maximum borrowing levels based on a
percentage of qualified accounts receivable and inventory. During 1998,
the Company renewed its credit facility to October 1, 2001.
Aggregate maturities on long-term debt, based upon the credit agreements
for the two fiscal years subsequent to September 30, 2000, amount to
$3,522 in 2001 and $6,941 in 2002. There are no maturities extending
beyond 2002.
8. LEASES
------
Minimum rental commitments under noncancellable operating leases,
primarily machinery and equipment, in effect at September 30, 1999 were:
Operating
Leases
------
2000.................................... $ 2,218
2001.................................... 1,041
2002.................................... 903
2003.................................... 518
2004.................................... 321
Later years............................. 75
Operating lease rental expense was $2,697 in 1999, $2,503 in 1998, and
$3,212 in 1997. Capital lease payments were $38 in 1999, $90 in 1998, and
$571 in 1997.
31
<PAGE>
9. INCOME TAXES
------------
The domestic and foreign components of earnings (loss) before income taxes
are as follows:
<TABLE>
--------------------------------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic.......................................................... $ 82 $ 1,748 $ 163
Foreign........................................................... 4,864 (8,288) (9,020)
----------- ----------- -----------
$ $ 4,946(6,540) $ (8,857)
= = =========== ===========
The provisions for income taxes are as follows:
--------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------
Currently payable (recoverable):
Domestic..................................................... $ 55 $ 333 $ 380
Foreign...................................................... 153 - -
----------- ----------- -----------
208 333 380
Deferred:
Domestic..................................................... (625) (174) (247)
------------ ----------- -----------
$ bev $417) 159 $ 133
= =========== ===========
</TABLE>
At September 30, 1999, the Company had tax loss carryforwards of $40,400
in the United States. If not utilized to offset future taxable income,
$6,900 of the United States loss will expire in 2005, $12,300 in 2006,
$900 in 2008, $1,100 in 2009,$300 in 2012, $5,200 in 2018, and $13,700 in
2019.
At September 30, 1999, and after giving full effect to the 35% post-1986
investment tax credit reduction required by the Tax Reform Act of 1986,
the Company has total United States tax credit carryforwards of
approximately $1,400, which expire as follows: 2000, $700; 2001, $500;
2002, $100; and 2003, $100.
A reconciliation of differences between taxes computed at the federal
statutory rate and the actual tax provisions is as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
Actual % Actual % Actual %
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxes at federal statutory rate 1,731 35.0 (2,289) (35.0) $ (3,100) (35.0)
Valuation reserve adjustment (625) (12.6) (174) (2.7) (247) (2.8)
Losses with current benefit (1,739) (35.2) (1,023) (15.6) - -
Foreign 153 3.1 - - - -
Losses with no current benefit 164 3.3 3,346 51.1 3,191 36.0
State taxes (101) (2.0) 299 4.6 289 3.3
---------- -------- --------- ------- --------- ------
$ (417) (8.4) $ 159 2.4 $ 133 1.5
========== ======== ========= ======= ========= ======
</TABLE>
32
<PAGE>
The net deferred tax asset included the following components:
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Accrued postretirement benefits........................................ 19,726 20,903
Net operating loss carryforwards....................................... 16,164 13,422
Tax credit carryforwards............................................... 1,358 1,392
Environmental reserves................................................. 2,404 3,146
Fixed assets........................................................... 552 1,204
Inventory reserves..................................................... 835 1,455
Reserve against property held for sale................................. 4,842 4,539
Other.................................................................. 3,972 7,864
----------- -----------
49,853 53,925
Valuation allowance......................................................... (43,010) (47,583)
------------ -----------
6,843 6,342
Deferred tax liabilities - pension.......................................... (4,497) (4,621)
------------ -----------
Net deferred tax asset...................................................... $ 2,346 $ 1,721
=========== ===========
</TABLE>
During the year, the Company recognized a decrease in net deferred tax
assets over liabilities of $3,948. However, the Company decreased the
offsetting valuation allowance by $4,573. This resulted in a deferred
income tax benefit and a net increase to the deferred tax assets during
the year of $625.
In assessing the realizability of deferred tax assets, the Company
considers whether it is more likely than not that some portion or all of
the deferred tax assets will be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. This assessment was performed considering the scheduled
reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies. The Company has determined that it is more likely
than not that $2,346 of deferred tax assets will be realized. The
remaining valuation of $43,010 is maintained on deferred tax assets which
the Company has not determined to be more likely than not realizable at
this time. This valuation adjustment will be reviewed on a regular basis
and adjustments made as appropriate.
There are no undistributed earnings of foreign subsidiaries.
10. ENVIRONMENTAL
-------------
At September 30, 1999, the Company had recorded liabilities aggregating
$6.7 million for anticipated costs, including site studies, the design and
implementation of remediation plans, post-remediation monitoring and
related activities related to various environmental matters, primarily the
remediation of waste disposal sites, certain non-operating sites, and
properties sold by the Company. The amount of the Company's ultimate
liability in respect of these matters may be affected by the ultimate cost
of remediation. Refer to Environmental Cleanup Matters at Note 1.
11. RESTRUCTURING AND IMPAIRMENTS
-----------------------------
During 1999, net restructuring and impairment costs were approximately
$176,000. The restructuring amount includes $899,000 of carrying value
adjustments on properties held for sale, including $759,000 related to
Athenia Steel, $522,000 for impairment of assets held for future use,
offset by gains on the disposition of idle assets, and settlement of
employee related restructuring costs of $1,245,000.
33
<PAGE>
Clifton related costs accounted for $367 of the $7,851 restructuring and
impairment cost in 1998. The 1997 restructuring cost of $9,188 includes
$8,966 relating to the Kidderminster restructuring and $222 associated
with the Clifton, New Jersey property.
During 1998, the Company recorded a charge of $6,004 to consolidate its
North America wire manufacturing by closing the Guelph, Ontario facility
and relocating certain equipment to the Stillwater, Oklahoma and Niles,
Michigan facilities. This charge included $2,876 for severance and
benefits for the planned termination of 93 employees, $1,366 to write-down
idled equipment to estimated recoverable value, $1,200 to write off the
Canadian cumulative translation adjustment, and $562 of lease and
environmental project costs determined to have no future benefit as a
direct result of the Company's decision to close the Canadian facility.
Total 1999 cash outlays for Guelph were $2,135, consisting primarily of
cash outlays of $1,892 for the subsequent termination of the 93 employees
at Guelph. Severance and personnel related cash outlays during 2000 are
expected to be approximately $500.
As part of the 1998 restructuring, the Company also recorded a charge of
$1,480 for severance to reduce support staff in North America by 40
employees and for the termination of approximately 90 employees related to
the exit of certain non-airbag related wire product lines. In 1999, the
Company made cash outlays for severance and personnel costs of $1,410 for
the reduction of 41 support staff personnel and 87 personnel related to
the exit of certain product lines. No further liability relating to this
charge exists at September 30, 1999.
During 1997, the Company recorded a charge of $8,966 for restructuring the
Company's operations in Kidderminster. The restructuring charge included
severance costs and estimated pension related costs for 124 employees,
reducing the Kidderminster workforce from 345 to 221. The reductions saved
approximately $3,000 in annual salaries. The restructuring also provided
for the discontinuing of Kidderminster's manufacture and sales of
COPPERPLY wire and certain non-value added weld wire product lines in the
United Kingdom. Annual Kidderminster sales were reduced from approximately
$35,500 to approximately $27,500 as a result of these actions. In addition
to employee-related costs, the restructuring provision includes write-offs
of fixed assets related to the discontinued products and provision for
ongoing lease commitments for associated equipment and facilities. Cash
outlays during 1997 included in the $8,966 restructuring charge were
$1,335. Cash outlays during 1999 and 1998 were approximately $430 and
$1,825. The 1999 cash outlays were primarily for utility lease costs. Due
to the sale of Kidderminster in 1999, there will be no future cash outlays
associated with the 1997 restructuring.
12. OTHER INCOME (EXPENSE), NET
---------------------------
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Joint venture....................................... $ 37 $ - $ 50
Rent................................................ 198 257 258
Other............................................... (253) 533 (274)
----------- ----------- -----------
$ (18) $ 790 $ 34
============ =========== ===========
</TABLE>
In 1999, the $(253) other is primarily foreign exchange losses. In 1998,
the $533 other is primarily the gain on disposition of idle assets and
foreign exchange gains. In 1997, the $(274) other is primarily foreign
exchange losses.
34
<PAGE>
13. LITIGATION
----------
The Company is involved in certain legal actions and claims arising in the
ordinary course of business. After taking into consideration legal
counsel's evaluation of such actions, management is of the opinion that
their outcome will not have a material effect on the Company's
consolidated financial statements.
14. STOCK OPTION PLANS
------------------
During 1997, the Stock Option Plan for Nonemployee Directors (the
"Directors' Plan") was approved. The Directors' Plan grants options to
purchase 2,000 shares of Common Stock on the first business day after the
date of each Annual Meeting of Shareholders to each nonemployee director
then a member of the Board of Directors. In 1997, 12,000 options were
granted at an exercise price of $8.50. In 1998, 14,000 options were
granted at an exercise price of $5.8125. In 1999, 14,000 options were
granted at an exercise price of $3.9375.
During 1993, the National-Standard Stock Option Plan (the "1993 Plan") was
approved. The 1993 Plan allows the Governance Committee of the Board of
Directors, which consists of three members who are not executive employees
of the Company, to select employees who will be granted options to
purchase shares of common stock at the fair market value on the date of
grant. Under the 1993 Plan, 450,000 shares are the maximum amount
available to be issued upon the exercise of options, and the term of each
option is ten years from the date of the grant. During 1998, an additional
450,000 shares were made available for future grants under the 1993 Plan.
During 1999 and 1998, 458,000 and 42,000 options, respectively, were
granted to key management employees. The exercise price is $2.9375 for all
options granted in 1999, except for 2,000 shares which have an exercise
price of $3.375. The exercise price is $5.75 for those granted in 1998.
All stock options outstanding at September 30, 1999 are currently
exercisable.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans. Had compensation cost for the plans
been determined consistent with SFAS No. 123, the Company's net income
(loss) available to common shareholders and net income (loss) per common
share would have been the pro forma amounts indicated below:
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
September 30,
-------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss)
As reported..................................................... $ 5,363 $ (6,699) $ (8,990)
Pro forma....................................................... $ 4,926 $ (6,789) $ (9,137)
Income (loss) per share
Basic as reported............................................... $ .95 $ (1.27) $ (1.71)
Diluted as reported............................................. $ .93 $ (1.27) $ (1.71)
Basic pro forma................................................. $ .87 $ (1.28) $ (1.74)
Diluted pro forma............................................... $ .85 $ (1.28) $ (1.74)
</TABLE>
For purposes of calculating the compensation cost consistent with SFAS No.
123, the fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in fiscal 1999, 1998, and
1997: dividend yield of 0%; expected volatility of 30%; risk free interest
rates ranging from 4.63% to 6.62%; and expected lives ranging from 4.5
years to 4.7 years.
35
<PAGE>
The status of the stock option plans which provide for the purchase of the
Company's common stock is summarized as follows:
<TABLE>
Options Weighted Average
Outstanding and Weighted Average Fair Value of
Exercisable Exercise Price Options Granted
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, September 30, 1996.................... 350,500 $ 9.05
Transactions during 1997:
Options granted............................. 55,000 7.33
Options cancelled........................... (2,250) 10.63
----------- -----------
............................................ 403,250 $ 8.80 $ 2.67
Transactions during 1998:
Options granted............................. 56,000 5.77
Options cancelled........................... (10,000) 7.76
----------- -----------
............................................ 449,250 8.44 $ 2.06
Transactions during 1999:
Options granted............................. 472,000 2.97
Options cancelled........................... (122,750) 7.57
Options exercised........................... (10,000) 2.94
------------ -----------
Balance, September 30, 1999 788,500 $ 5.37 $ .98
=========== ===========
</TABLE>
The following table summarizes information about stock options outstanding
at September 30, 1999:
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
Options Outstanding and Exercisable
-----------------------------------
Weighted- Weighted-
Average Average
Number Remaining Exercise
Range of Exercise Prices of Shares Contractual Life Price
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$10.625................................. 60,000 5.50 years $10.625
$ 7.00 - 8.625................... 245,000 4.39 years $ 8.38
$ 5.75 - 5.8125.................. 39,500 8.23 years $ 5.77
$ 2.9375 - 3.9375.................... 444,000 9.01 years $ 2.97
</TABLE>
A Restricted Stock Award Program ("Plan") was established in 1989. The
Plan provides for grants of shares of common stock to selected employees,
subject to forfeiture if employment terminates prior to the end of the
prescribed restricted period. Such stock shall be made available from
authorized and unissued shares of common stock or treasury stock of the
Company. However, the maximum number of shares that may be issued at any
time under the Plan is 250,000. At September 30, 1999, certain employees
held 23,675 shares of restricted common stock of the Company. Awards for
17,000 of these shares were granted in 1998. During 1999, 11,275 shares
were vested or forfeited. The amount of compensation represented by the
grant of restricted stock is amortized over a four-year vesting period.
36
<PAGE>
15. SEGMENT INFORMATION
-------------------
In 1999, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 131 "Disclosures about Segments of an Enterprise and Related
Information." The Company's reportable segments are based upon the nature
of products within the Company. The products comprising the reportable
segments are managed separately and have differing technology and
marketing strategies. Management evaluates performance for both segments
based upon operating earnings before interest and income taxes.
The Company currently operates in two segments: the Wire Products segment,
and the Engineered Products segment. The Wire Products segment
manufactures and sells various types of wire, including tire bead wire,
welding wire, and plated and cored wires. These wire products are
primarily used by customers in the manufacture of their products. The
Engineered Products segment manufactures and sells products constructed
from wire and other materials. Significant product offerings in this
segment include non-woven metal fiber materials, wire cloth, and filters
and inflator housings for the automotive air bag inflator market.
The following is a summary of the Company's reportable segment
information. The information for 1998 and 1997 has been restated from the
prior year's presentation in order to conform to the 1999 presentation.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
Wire Engineered Eliminations
1999 Products Products & Corporate Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $135,330 $55,794 $(8,213) $182,911
Operating profit (loss) 17,680 6,543 (15,760) 8,463
Total assets 52,310 22,379 23,152 97,841
Depreciation and amortization 4,164 3,320 957 8,441
Capital expenditures 4,601 628 728 5,957
- -------------------------------------------------------------------------------------------------------------------------
Wire Engineered Eliminations
1998 Products Products & Corporate Total
- -------------------------------------------------------------------------------------------------------------------------
Net sales $166,963 $68,103 $(9,571) $225,495
Restructuring expenses 6,004 700 1,147 7,851
Operating profit (loss) 5,459 7,540 (16,578) (3,579)
Total assets 61,887 30,447 22,744 115,078
Depreciation and amortization 4,394 3,607 694 8,695
Capital expenditures 14,356 604 109 15,069
- -------------------------------------------------------------------------------------------------------------------------
Wire Engineered Eliminations
1997 Products Products & Corporate Total
- -------------------------------------------------------------------------------------------------------------------------
Net sales $176,026 $117,758 $(46,021) $247,763
Restructuring expenses 9,188 - - 9,188
Operating profit (loss) 9,349 4,135 (18,181) (4,697)
Depreciation and amortization 4,367 3,412 446 8,225
Capital expenditures 5,286 2,768 1,093 9,147
</TABLE>
37
<PAGE>
Reconciling information between reportable segments and the Company's
consolidated totals is shown in the following table:
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
Year Ending September 30,
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total operating profit (loss) for reportable segments $ 8,463 $ (3,579) $ (4,697)
Interest expense (3,499) (3,751) (4,194)
Other income, net (18) 790 34
-------------- --------------- --------------
Income (loss) before income taxes 4,946 (6,540) (8,857)
Income taxes (417) 159 133
-------------- --------------- --------------
Net income (loss) $ 5,363 $ (6,699) $ (8,990)
============== =============== ==============
</TABLE>
The Company operates its business segments primarily in two geographic
areas - United States and Europe. Due to its nature and relative
immateriality, the operation in Canada has been combined with the
operations in Europe and the combined total reported as foreign
operations.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
Year Ending September 30,
Net sales 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $169,357 $187,921 $240,311
Foreign operations 21,767 47,145 53,473
Eliminations (8,213) (9,571) (46,021)
-------------- --------------- --------------
Total $182,911 $225,495 $247,763
============== =============== ==============
- -------------------------------------------------------------------------------------------------------------------------
Year Ending September 30,
Assets 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
United States $ 67,821 $ 70,826 $ 73,256
Foreign operations 2,879 18,786 18,614
Corporate 27,141 25,466 21,315
-------------- --------------- --------------
Total $ 97,841 $115,078 $113,185
============== =============== ==============
</TABLE>
Sales to unaffiliated customer which individually totaled 10% or more of
consolidated sales include sales to three customers of $24,491, $18,803,
and $15,298 in 1999; $32,661, $22,423, and $18,092 in 1998; and $38,188,
$29,111, and $26,769 in 1997, respectively.
Accounts receivable from unaffiliated customer which totaled 10% or more
of the consolidated receivables include receivables from three customers
of $2,326, $1,065, and $1,021 at September 30, 1999 and of $3,363, $1,036,
and $898 at September 30, 1998, respectively.
38
<PAGE>
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1999
- ------------------
Net Sales........................ $ 52,574 $ 50,049 $ 41,632 $ 38,656
Gross profit..................... 6,414 6,957 5,643 5,573
Earnings:
Net........................... 512 2,052 2,360 439
Per share:
Basic.................... 0.09 0.36 0.41 0.08
Diluted.................. 0.09 0.35 0.40 0.07
Common stock:
Market Price
High...................... 3-15/16 4-1/8 6-7/16 5-7/8
Low....................... 2-1/2 3 2-7/8 2-3/8
SEPTEMBER 30, 1998
- ------------------
Net Sales........................ $ 56,941 $ 57,959 $ 55,695 $ 54,900
Gross profit..................... 6,453 6,968 7,636 7,245
Earnings:
Net........................... 206 127 199 (7,231)
Per share:
Basic..................... 0.04 0.02 0.04 (1.35)
Diluted................... 0.04 0.02 0.04 (1.35)
Common stock:
Market Price
High...................... 8-1/16 6-7/8 6-1/8 5
Low....................... 5-1/8 5-5/16 4-13/16 3-1/16
</TABLE>
Common stock market prices are as reported in The Wall Street Journal. Common
stock is traded on the American Stock Exchange.
At September 30, 1999, there were 964 shareholders.
39
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
National-Standard Company:
We have audited the consolidated financial statements of National-Standard
Company and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of National-Standard
Company and subsidiaries as of September 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended September 30, 1999, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG LLP
Chicago, Illinois
November 10, 1999
40
<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
<TABLE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended September 30, 1999, 1998, and 1997
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
(In thousands)
Allowance for Doubtful Accounts:
<S> <C> <C> <C>
Balance at Beginning of Period..................................... $ 560 $ 382 $ 380
Additions Charged to Costs and Expenses......................... - 180 11
Recoveries of Accounts Previously Written Off................... - - 1
Deductions...................................................... (305) (2) (10)
--------- ---------- ---------
BALANCE AT END OF PERIOD............................................. $ 255 $ 560 $ 382
======== ========= =========
</TABLE>
41
<PAGE>
NATIONAL-STANDARD COMPANY
INDEX TO EXHIBITS
EXHIBIT
- -------
(3)(i) Articles of Incorporation (incorporated by reference to Exhibit (3)(i)
to Registrant's Annual Report on Form 10-K for 1994, filed December 14,
1994).
(3)(ii) By-Laws (incorporated by reference to Exhibit (3)(ii) to Registrant's
Annual Report on Form 10-K for 1994, filed December 14, 1994).
(10) Material Contracts.
(a) Management Contracts and Remunerative Plans.
(i) National-Standard Company Restricted Stock Award Plan
(incorporated by reference to Exhibit (10)(a) to Registrant's
Quarterly Report on Form 10-Q for the first quarter of 1989
filed January 30, 1989).
(ii) National-Standard Company Supplemental Retirement Plan
(incorporated by reference to Exhibit (10)(a)(ii) to
Registrant's Annual Report on Form 10-K for 1991, filed January
31, 1992).
(iii) National-Standard Spouse's Benefit Plan for Salaried Employees
(incorporated by reference to Exhibit (10)(a)(iii) to
Registrant's Annual Report on Form 10-K for 1991, filed January
31, 1992).
(iv) Form of Amended and Restated Supplemental Compensation
Agreements (incorporated by reference to Exhibit (10)(a)(iv) to
Registrant's Annual Report on Form 10-K for 1997, filed December
12, 1997).
(v) Deferred Compensation Plan (incorporated by reference to Exhibit
(10)(ii) to Registrant's Quarterly Report on Form 10-Q for the
first quarter of 1996 filed February 8, 1996).
(vi) National-Standard Stock Option Plan (incorporated by reference
to Exhibit A to Registrant's annual Proxy Statement relating to
the Annual Meeting of Shareholders held May 19, 1993, filed
April 15, 1993).
(vii) National-Standard Company Targeted Retirement Benefit Plan
(incorporated by reference to Exhibit (10)(i) to Registrant's
Quarterly Report on Form 10-Q for the first quarter of 1996
filed February 8, 1996).
(viii) National-Standard Company Directors' Deferred Fee Plan
(incorporated by reference to Exhibit (10)(a)(viii) to
Registrant's Annual Report on Form 10-K for 1996 filed December
12, 1996).
(ix) National-Standard Company Stock Option Plan for Non-Employee
Directors (incorporated by reference to Exhibit (10)(i) to
registrant's Quarterly Report on Form 10-Q for the first quarter
of 1997 filed February 10, 1997).
(x) National-Standard Company Bonus Plan (incorporated by reference
to Exhibit (10)(i) to Registrant's Quarterly Report on Form 10-Q
for the first quarter of 1998 filed February 12, 1998).
(xi) Employment Agreements for Mr. Kalich and Mr. Savitske
(incorporated by reference to Registrant's Annual Proxy
Statement relating to the Annual Meeting of Shareholders to be
held January 27, 2000, filed December 23, 1999).
42
<PAGE>
(b) Foothill Debt Agreements
(i) Amended and Restated Loan and Security Agreement by and between
National-Standard Company and Foothill Capital Corporation dated
as of September 17, 1997 (incorporated by reference to Exhibit
(10)(b) to Registrant's Annual Report on Form 10-K for 1997,
filed December 12, 1997).
(ii) Amendment Number Two to Amended and Restated Loan and Security
Agreement (incorpo rated by reference to Exhibit (10)(b) to
Registrant's Annual Report on Form 10-K for 1998, filed December
18, 1998).
(iii) Amendment Number Three to Amended and Restated Loan and Security
Agreement.
(iv) Amendment Number Four to Amended and Restated Loan and Security
Agreement.
(v) Amendment Number Five to Amended and Restated Loan and Security
Agreement.
(21) Subsidiaries of National-Standard Company.
(23) Consent of KPMG LLP.
(24) Powers of Attorney.
(27) Financial Data Schedule.
43
AMENDMENT NUMBER THREE TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER THREE TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment") is entered into as of February 19, 1999,
by and between Foothill Capital Corporation, a California corporation
("Foothill"), on the one hand, and National-Standard Company, an Indiana
corporation ("Borrower"), with reference to the following facts:
A. Foothill and Borrower heretofore have entered into that
certain Amended and Restated Loan and Security Agreement,
dated as of September 17, 1997, as amended by that certain
Amendment Number One to Amended and Restated Loan and Security
Agreement, dated as of June 30, 1998, and that certain
Amendment Number Two to Amended and Restated Loan and Security
Agreement, dated as of September 30, 1998 (as so modified and
as otherwise heretofore modified or supplemented from time to
time, the "Agreement");
B. Borrower has requested Foothill to amend the Agreement to,
among other things, amend the net worth covenant, all as set
forth in this Amendment;
C. Foothill is willing to so amend the Agreement in
accordance with the terms and conditions hereof; and
D. All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Agreement, as
amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Foothill and Borrower hereby agree as follows:
1. Amendments to the Agreement.
a. Section 1.1 of the Agreement hereby is
amended by adding the following new defined terms in alphabetical order:
"Third Amendment" means that certain Amendment Number
Three to Amended and Restated Loan and Security Agreement, dated as of
February 19, 1999, between Foothill and Borrower.
"Third Amendment Effective Date" means the date, if
ever, that all of the conditions set forth in Section 5 of the Third
Amendment shall be satisfied (or waived by Foothill in its sole
discretion).
44
<PAGE>
b. Section 6.13(a) of the Agreement hereby
is amended and restated in its entirety as follows:
(a) Net Worth. A consolidated net worth, determined
in accordance with GAAP, of Borrower and its Subsidiaries for each of
the following periods, measured as of the last day of such period, of
not less than the amount shown below for the period corresponding
thereto:
=======================================================================
Period: Net Worth:
------- ----------
the 3 month period ending on or about ($31,500,000)
December 31, 1998
-----------------------------------------------------------------------
the 3 month period ending on or about March ($35,000,000)
31, 1999
-----------------------------------------------------------------------
the 3 month period ending on or about June ($34,000,000)
30, 1999
-----------------------------------------------------------------------
the 3 month period ending on or about ($33,000,000)
September 30, 1999
-----------------------------------------------------------------------
the 3 month period ending on or about ($33,000,000)
December 31, 1999
the 3 month period ending on or about March ($32,000,000)
31, 2000
-----------------------------------------------------------------------
the 3 month period ending on or about June ($31,000,000)
30, 2000
-----------------------------------------------------------------------
the 3 month period ending on or about ($30,000,000)
September 30, 2000, and ending on or about
-----------------------------------------------------------------------
each December 31st, March 31st, June 30th,
and September 30th thereafter
==========================================================================
2. [Intentionally Omitted]
3. Representations and Warranties. Borrower hereby represents
and warrants to Foothill that (a) the execution, delivery, and performance of
this Amendment and of the Agreement, as amended by this Amendment, are within
its corporate powers, have been duly authorized by all necessary corporate
action, and are not in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court, or
45
<PAGE>
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) this Amendment and the Agreement, as amended
by this Amendment, constitute Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms.
4. Conditions Precedent to Amendment. The satisfaction of each
of the following, unless waived or deferred by Foothill in its sole discretion,
shall constitute conditions precedent to the effectiveness of this Amendment:
a. Foothill shall have received payment of
an amendment fee in the amount of $5,000, which shall be fully earned,
non-refundable, and due and payable concurrently with the execution and
delivery of this Amendment (regardless of whether all conditions herein are
satisfied or paid);
b. Foothill shall have received the
reaffirmation and consent of Guarantor attached hereto as Exhibit A, duly
executed and delivered by an authorized official of each entity thereof;
c. Foothill shall have received a certificate
from the Secretary of Borrower attesting to the incumbency and signatures of
authorized officers of Borrower and to the resolutions of Borrower's Board
of Directors authorizing its execution and delivery of this Amendment and the
other Loan Documents to which it is a party and contemplated in this Amendment
and the performance of this Amendment, the Agreement as amended by this
Amendment, and such other Loan Documents, and authorizing specific officers of
Borrower to execute and deliver the same;
d. Foothill shall have received all required
consents of Foothill's participants in the Obligations to Foothill's execution,
delivery, and performance of this Amendment, in each case duly executed, in full
force and effect, and in form and substance satisfactory to Foothill;
e. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
f. No Event of Default or event which with the giving
of notice or passage of time would constitute an Event of Default shall have
occurred and be continuing on the date hereof, nor shall result from the
consummation of the transactions contemplated herein;
46
<PAGE>
g. No injunction, writ, restraining order,
or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein shall have been issued
and remain in force by any governmental authority against Borrower, Foothill,
or any of their Affiliates; and
h. All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have
been delivered or executed or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
5. [Intentionally Omitted]
6. Effect on Agreement. The Agreement, as amended hereby,
shall be and remain in full force and effect in accordance with its respective
terms and hereby is ratified and confirmed in all respects. The execution,
delivery, and performance of this Amendment shall not operate as a waiver of or,
except as expressly set forth herein, as an amendment, of any right, power, or
remedy of Foothill under the Agreement, as in effect prior to the date hereof.
7. Miscellaneous.
a. Upon the effectiveness of this Amendment,
each reference in the Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Agreement shall mean and
efer to the Agreement as amended by this Amendment.
b. Upon the effectiveness of this Amendment,
each reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Agreement shall
mean and refer to the Agreement as amended by this Amendment.
c. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
d. This Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Amendment by
signing any such counterpart. Delivery of an executed counterpart of this
Amendment by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Amendment. Any party delivering an
executed counterpart of this Amendment by telefacsimile also shall deliver an
original executed counterpart of this Amendment but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Amendment.
[remainder of page intentionally left blank]
47
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By____________________________
Title:________________________
NATIONAL-STANDARD COMPANY, an Indiana corporation
By____________________________
Title:________________________
48
<PAGE>
EXHIBIT A
---------
Reaffirmation and Consent
All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in that certain Amendment Number
Three to Amended and Restated Loan and Security Agreement, dated as of February
19, 1999 (the "Amendment"). The undersigned hereby jointly and severally (a)
represent and warrant to Foothill that the execution, delivery, and performance
of this Reaffirmation and Consent are within each of their corporate or
organizational powers, have been duly authorized by all necessary corporate or
other organizational action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which either of them is a party or
by which any of their properties may be bound or affected; (b) consents to the
amendment of the Agreement by the Amendment; (c) acknowledges and reaffirms its
obligations owing to Foothill under its respective guaranty and each of the
other Loan Documents to which it is party; and (d) agrees that each of the
guaranties and the other Loan Documents to which they are parties is and shall
remain in full force and effect. Although the undersigned have been informed of
the matters set forth herein and have acknowledged and agreed to same, they
understand that Foothill has no obligation to inform it of such matters in the
future or to seek its acknowledgement or agreement to future amendments, and
nothing herein shall create such a duty.
NATIONAL-STANDARD COMPANY OF CANADA, LIMITED,
a Canadian corporation
By ___________________________
Title:________________________
NATIONAL-STANDARD COMPANY, LTD., a company
organized under the laws of England
By ___________________________
Title:________________________
49
AMENDMENT NUMBER FOUR TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER FOUR TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment") is entered into as of March 8, 1999, by
and between Foothill Capital Corporation, a California corporation ("Foothill"),
on the one hand, and National-Standard Company, an Indiana corporation
("Borrower"), with reference to the following facts:
A. Foothill and Borrower heretofore have entered into that
certain Amended and Restated Loan and Security Agreement,
dated as of September 17, 1997, as amended by that certain
Amendment Number One to Amended and Restated Loan and Security
Agreement, dated as of June 30, 1998, that certain Amendment
Number Two to Amended and Restated Loan and Security
Agreement, dated as of September 30, 1998, and that certain
Amendment Number Three to Amended and Restated Loan and
Security Agreement, dated as of February 19, 1999 (as so
modified and as otherwise heretofore modified or supplemented
from time to time, the "Agreement");
B. Borrower has requested Foothill to amend the Agreement, as set
forth in this Amendment;
C. Foothill is willing to so amend the Agreement in accordance
with the terms and conditions hereof; and
D. Unless the context requires otherwise, all capitalized terms
used herein and not defined herein shall have the meanings
ascribed to them in the Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Foothill and Borrower hereby agree as follows:
1. Amendments to the Agreement.
a. Section 1.1 of the Agreement hereby is amended by adding the
following new defined terms in alphabetical order:
"Fourth Amendment" means that certain Amendment Number Four to
Amended and Restated Loan and Security Agreement, dated as of March 8,
1999, between Foothill and Borrower.
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<PAGE>
"Fourth Amendment Effective Date" means the date, if ever,
that all of the conditions set forth in Section 4 of the Third
Amendment shall be satisfied (or waived by Foothill in its sole
discretion).
"NS Peterlee" means National-Standard (Peterlee) Limited, a
company incorporated under the laws of England (registered number
3676371).
"NS Peterlee Conditions" means, collectively, each of the
conditions set forth in Section 5 of the Fourth Amendment.
"NS Peterlee Conditions Date" means the first date, if ever,
that all NS Peterlee Conditions have been fully satisfied.
"NS Peterlee Guaranty/Debenture" means a Guarantee and
Debenture executed by NS Peterlee in favor of Foothill and governed by
the laws of England, in form (including in registerable form) and
substance satisfactory to Foothill and its English counsel, pursuant to
which NS Peterlee guarantees the payment and performance of all
Obligations of Borrower to Foothill and grants fixed and floating
charges in favor of Foothill on all property and assets of NS Peterlee
to secure all present and future Obligations of NS Peterlee to
Foothill.
"NS Peterlee Subordination Agreement" means a written
subordination agreement entered into between Borrower and Foothill, and
acknowledged and consented to by NS Peterlee, and governed by the laws
of California, in form and substance satisfactory to Foothill and its
California counsel, pursuant to which the payment of all present and
future obligations of NS Peterlee to Borrower is expressly subordinated
to the payment and performance of present and future Obligations of NS
Peterlee to Foothill, and pursuant to which Borrower agrees that the
present and future obligations of NS Peterlee to Borrower shall be and
remain unsecured, evidenced by book account entries, and not evidenced
by a promissory note or negotiable instrument.
"NSC-UK Purchaser" means 68 VSQ Limited, a company
incorporated under the laws of England (registered number 3668640).
"NSC-UK Share Purchase Agreement" means that certain Share
Transfer Agreement for the Acquisition of the Entire Issued Share
Capital of National-Standard Company Limited, dated as of March 12,
1999, between Borrower and NSC-UK Purchaser.
"UK Share Pledge Agreement" means a Share Pledge Agreement,
executed by Borrower in favor of Foothill and governed by the laws of
51
<PAGE>
England, in form (including in registerable form) and substance
satisfactory to Foothill and its English counsel, pursuant to which
Borrower pledges to Foothill all of the issued share capital of NS
Peterlee.
b. The following defined terms set forth in Section 1.1 of the
Agreement hereby are amended and restated in their entirety to read,
respectively, as follows:
"Borrowing Base" has the meaning set forth in Section 2.1(a).
For purposes of this definition, (a) any amount that is denominated in
a currency other than Dollars shall be valued in Dollars based on the
applicable Exchange Rate for such currency as of the date one day prior
to the date of determination, and (b) any amount that is denominated in
Dollars shall be valued in Dollars.
"Eligible UK Foreign Account" means any Account of NS
Peterlee: (a) that does not qualify as an Eligible Domestic Account
solely because of one or more of the following three reasons: (x) such
Account is an Account of NS Peterlee rather than of Borrower; (y) such
Account is payable other than in Dollars; or (z) such Account is
excluded from "Eligible Domestic Accounts" by virtue of the exclusion
contained in clause (d) of such definition; and (b) with respect to
which one or more of the following is applicable: (i) both (A) the
Account Debtor is a resident of the United States of America, England,
Scotland, Wales, Northern Ireland, or the Republic of Ireland, and (B)
the obligations of the Account Debtor thereunder are payable in the
official currency of one or more of the United States of America,
England, Scotland, Wales, Northern Ireland, or the Republic of Ireland;
(ii) such Account is supported by one or more letters of credit
satisfactory to Foothill in its sole discretion which letters of credit
have been assigned and delivered to Foothill in a manner acceptable to
Foothill in its sole discretion; (iii) such Account is supported by
credit insurance satisfactory to Foothill in its sole discretion which
credit insurance has been assigned to Foothill by means of an
assignment satisfactory to Foothill in its sole discretion; or (iv)
such Account otherwise has been determined by Foothill to be acceptable
to Foothill as an Eligible UK Foreign Account in Foothill's sole
discretion.
"Guarantor" means Canadian Guarantor and NS Peterlee, and each
of them, and any one or more of them, jointly and severally, and their
successors and permitted assigns.
"Guaranty" means the Canadian Guaranty and the NS Peterlee
Guaranty/Debenture, collectively and individually.
"Loan Documents" means this Agreement, the Lockbox Agreements,
the Mortgages, the Patent Collateral Assignment, the Trademark Security
Agreement, the Copyright Security Agreement, the Stock Pledge
Agreement, the Equipment/Real Property Term Note, the New Equipment
Term Note, any other note or notes executed by Borrower and payable to
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<PAGE>
Foothill, the Canadian Guaranty, the Security Agreement, the NS
Peterlee/Debenture, the NS Peterlee Subordination Agreement, the UK
Share Pledge Agreement, the Warrant, the Reaffirmation Agreement, and
any other agreement entered into in connection with this Agreement.
"Relevant Closing Date" means, with respect to Borrower and
Canadian Guarantor, the Original Closing Date, and, with respect to NS
Peterlee, the NS Peterlee Conditions Date.
"UK Borrowing Base Component" means, as of any date of
determination, an amount equal to: (a) if and so long as each of the NS
Peterlee Conditions is and remains fully satisfied, the lower of (i)
eighty-five percent (85%) of the amount of Eligible UK Foreign
Accounts, and (ii) One Million Dollars ($1,000,000); and (b) at all
other times, zero (-0-).
"UK Collateral" means all property and assets of NS Peterlee
subject to charges in favor of Foothill pursuant to the NS Peterlee.
"UK Lockbox Bank" means Midland or such other bank in England
that is mutually acceptable to NS Peterlee, Borrower, and Foothill,
with which a Lockbox Account is maintained, and that is a party to the
UK Lockbox Agreement.
"UK Lockbox Agreement" means an agreement among Foothill, the
UK Lockbox Bank, and NS Peterlee, in form and substance satisfactory to
each of them, with respect to the establishment and maintenance of a
Lockbox Account for Foothill with respect to NS Peterlee.
c. Section 1.1 of the Agreement hereby is amended by deleting therefrom
the following defined terms: Midland Bank Payoff Amount; Midland Bank Payoff
Letter; NSC-UK Guaranty/Debenture; NSC-UK Subordination Agreement; NSPFTL;
NSPFTL Intercreditor Agreement; Old Fourth Amendment Closing Date; Old Fourth
Amendment Closing Date Midland Bank Disbursement Instruction Letter; Original
Closing Date UK Investment Amount; Pound Advance Supplement; Pound Advances.
d. Section 2.1(e) of the Agreement hereby is deleted in its entirety.
e. Section 2.5(a) of the Agreement hereby is amended and restated in
its entirety as follows:
(a) Interest Rate.
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<PAGE>
(i) Adjusted Base Rate. All Obligations,
except for undrawn L/Cs and L/C Guarantees, shall bear interest, on
the average Daily Balance, at the then extant Adjusted Base Rate.
(ii) Adjusted Net LIBOR Rate. With
respect to all Obligations other than undrawn L/Cs and L/C Guarantees
and in lieu of having interest charged a the Adjusted Base Rate,
Borrower shall have the "LIBOR Option", as defined in, and subject to
the terms and conditions of, the LIBOR Supplement, which by this
reference hereby is incorporated herein in full and made a part
hereof.
f. Section 2.5(b) of the Agreement hereby is amended and restated in
its entirety as follows:
(b) Default Rate. (i) All Obligations, except for
undrawn L/Cs and L/C Guarantees, shall bear interest, from and after
the occurrence and during the continuance of an Event of Default, at a
rate equal to three (3.00) percentage points above (x) the then extant
Adjusted Base Rate, or (y) in the case of any "Adjusted Net LIBOR Rate
Loan" (as defined in the LIBOR Supplement), the then extant "Adjusted
Net LIBOR Rate" (as defined in the LIBOR Supplement), or (z)
[intentionally omitted]. (ii) From and after the occurrence and during
the continuance of an Event of Default, the fee provided in Section
2.2(d) shall be increased to a fee equal to four percent (4.00%) per
annum times the average Daily Balance of the undrawn L/Cs and L/C
Guarantees that were outstanding during the immediately preceding
month.
g. Section 5.7 of the Agreement hereby is amended and restated in its
entirety as follows:
5.7 Due Organization and Qualification; Subsidiaries. Borrower
is duly organized and existing and in good standing under the laws of
the state of its incorporation and qualified and licensed to do
business in, and in good standing in, any state where the failure to be
so licensed or qualified could reasonably be expected to have a
material adverse effect on the business, operations, condition
(financial or otherwise), finances, or prospects of Borrower or on the
value of the Collateral or the Real Property to Foothill. Borrower has
no subsidiaries other than Canadian Guarantor, National-Standard Export
Corp., and NS Peterlee.
h. Section 7.14 of the Agreement hereby is amended and restated in its
entirety as follows:
7.14 Investments. Directly or indirectly make or acquire any
beneficial interest in (including stock, partnership interest, or other
securities of), or make any loan, advance, or capital contribution to,
any Person; provided, however that the foregoing shall not prohibit:
(a) the maintenance of Borrower's existing beneficial interests in, or
54
<PAGE>
loans, advances, or capital contributions to, the Joint Venture, which
as of the November 12, 1996 do not exceed Three Hundred Thousand
Dollars ($300,000); (b) the making or acquisition of additional
beneficial interests in, or the making of additional loans, advances,
or capital contributions to, the Joint Venture; provided, however, that
the aggregate amount of all such investments made by Borrower during
the term of this Agreement shall not exceed Six Hundred Thousand
Dollars ($600,000) at any one time outstanding; provided, however,
that, if the amount of Borrower's investments in the Joint Venture and
guaranties on it behalf would, after giving effect to any proposed
investment or guaranty, exceed Two Million Dollars ($2,000,000) then,
before making such additional investment or guaranty, Borrower shall
grant security interests to Foothill, pursuant to agreements in form
and substance satisfactory to Foothill, in all of Borrower's
investments (including, if applicable, the investment to be acquired)
in the Joint Venture; (c) the maintenance of Borrower's existing
beneficial interests in, or loans, advances, or capital contributions
to, NS Peterlee, which as of the Fourth Amendment Effective Date do not
exceed $469,000; and (d) the making or acquisition of additional
beneficial interests in, or the making of additional loans, advances,
or capital contributions to, NS Peterlee; provided, however, that (i)
the aggregate outstanding amount of all such investments (including
loans, advances, and capital contributions) made by Borrower in NS
Peterlee, whether as of the Fourth Amendment Effective Date or during
the term of this Agreement, shall not at any time exceed $250,000, and
(ii) all claims of Borrower against NS Peterlee with respect to any
such investments shall be unsecured, shall be evidenced by book
entries, shall not be evidenced by promissory notes or negotiable
instruments, and shall be subordinated to the Obligations of NS
Peterlee to Foothill pursuant to the NS Peterlee Subordination
Agreement.
i. Section 7.17 of the Agreement hereby is amended and restated in its
entirety as follows:
7.17 Use of Proceeds. Use the proceeds of the advances made
hereunder for any purpose other than: (a) to pay transactional costs
and expenses incurred in connection with this Agreement; (b) consistent
with the terms and conditions hereof, for its lawful and permitted
corporate purposes.
j. Exhibit P-2 (Form of Pound Advance Supplement) of the Agreement
hereby is deleted from the Agreement.
2. Limited Consent; Release of Certain Liens. Initially effective upon the
Fourth Amendment Effective Date, Foothill hereby:
a. consents to the sale by Borrower to NSC-UK Purchaser of all of the
issued share capital of NSC-UK in accordance with the terms and conditions of
55
<PAGE>
the NSC-UK Share Purchase Agreement, which sale shall be free and clear of
Foothill's Liens thereon (provided that Foothill's Liens shall be, and shall
continue to be, attached to all proceeds thereof). Such consent is specific in
time and in intent and does not constitute, nor should it be construed as
constituting, except to the extent expressly set forth herein, a waiver or
modification of any term of, or right, power, or privilege under, the Agreement,
the other Loan Documents, or any agreement, contract, indenture, document, or
instrument mentioned therein.
b. releases, without recourse to, or representation or warranty by,
Foothill, its Liens on all of the issued share capital of NSC-UK and all of the
assets of NSC-UK (other than such assets transferred by NSC-UK to NS Peterlee).
3. Representations and Warranties. Borrower hereby represents and warrants to
Foothill that (a) the execution, delivery, and performance of this Amendment and
of the Agreement, as amended by this Amendment, are within its corporate powers,
have been duly authorized by all necessary corporate action, and are not in
contravention of any law, rule, or regulation, or any order, judgment, decree,
writ, injunction, or award of any arbitrator, court, or governmental authority,
or of the terms of its charter or bylaws, or of any contract or undertaking to
which it is a party or by which any of its properties may be bound or affected,
and (b) this Amendment and the Agreement, as amended by this Amendment,
constitute Borrower's legal, valid, and binding obligation, enforceable against
Borrower in accordance with its terms.
4. Conditions Precedent to Amendment. The satisfaction of each of the following,
unless waived or deferred by Foothill in its sole discretion, shall constitute
conditions precedent to the effectiveness of this Amendment:
a. Foothill shall have received each of the following documents,
duly executed, and each such document shall be in full force
and effect:
i) an indemnification agreement, in form and substance
satisfactory to Foothill, by The Bank of New York in
favor of Foothill relative to the Lockbox Account
maintained pursuant to the UK Lockbox Agreement (as
such term is defined in the Agreement without giving
effect to this Amendment) with Midland;
ii) the reaffirmation and consent of Guarantor attached
hereto as Exhibit A;
b. Foothill shall have received not less than $3,425,000 in
immediately available funds via wire-transfer by NSC-UK
Purchaser or Borrower to the following account of Foothill for
the account of Borrower:
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<PAGE>
FOOTHILL CAPITAL CORPORATION:
The Chase Manhattan Bank
New York, NY
ABA 021000021
Credit: Foothill Capital Corporation
Account: 323-266193
Re: National-Standard Company
c. Foothill shall have received a certificate from the Secretary
of Borrower attesting to the incumbency and signatures of
authorized officers of Borrower and to the resolutions of
Borrower's Board of Directors authorizing its execution and
delivery of this Amendment and the other Loan Documents to
which it is a party and contemplated in this Amendment and the
performance of this Amendment, the Agreement as amended by
this Amendment, and such other Loan Documents, and authorizing
specific officers of Borrower to execute and deliver the same;
d. Foothill shall have received true, correct, and complete
copies of the NSC-UK Purchase Agreement and all material
agreements, instruments, and documents executed and delivered
in connection therewith (including relative to the Peterlee
Hive Across (as such term is defined in the NSC-UK Purchase
Agreement)), certified by a director of Borrower, and all such
documents shall be in form and substance satisfactory to
Foothill and its counsel;
e. Foothill shall have received all required consents of
Foothill's participants in the Obligations to Foothill's
execution, delivery, and performance of this Amendment, in
each case duly executed, in full force and effect, and in form
and substance satisfactory to Foothill;
f. The representations and warranties in this Amendment, the
Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as
of the date hereof, as though made on such date (except to the
extent that such representations and warranties relate solely
to an earlier date);
g. No Event of Default or event which with the giving of notice
or passage of time would constitute an Event of Default shall
have occurred and be continuing on the date hereof, nor shall
result from the consummation of the transactions contemplated
herein;
h. No injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the consummation
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<PAGE>
of the transactions contemplated herein shall have been issued
and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates; and
i. All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been
delivered or executed or recorded and shall be in form and
substance satisfactory to Foothill and its counsel.
5. Condition Subsequent. As conditions subsequent hereunder, Borrower shall
perform or cause to be performed each of the following on a timely basis, and
the failure by Borrower to perform or cause to be performed any of the following
conditions shall constitute an Event of Default:
a. Within 30 days following the Fourth Amendment Effective Date,
Foothill shall have received each of the following documents,
duly executed, and each such document from and after such
receipt shall be in full force and effect:
i) the NS Peterlee Guaranty/Debenture;
ii) the NS Peterlee Subordination Agreement;
iii) the UK Share Pledge Agreement;
iv) the UK Lockbox Agreement; and
v) amendments of or supplements to such other Loan
Documents (including the Stock Pledge Agreement),
financing statements (including a UCC-1 Financing
Statement listing Canadian Guarantor as debtor and
Foothill as secured party and to be filed with the
appropriate filing office in Oklahoma; it being
understood and agreed that, notwithstanding anything
in the Agreement or the other Loan Documents to the
contrary, no revolving advances may be made against
Eligible Canadian Inventory located in the United
States unless and until Foothill has received
searches reflecting the filing of its financing
statements with the applicable filing offices
relative to such locations), fixture filings, and
landlord waivers or bailee agreements, as Foothill
may require, in each case, in form and substance
satisfactory to Foothill;
b. Concurrently with the execution and delivery of the UK Share
Pledge Agreement and the amendment of or supplement to the
Stock Pledge Agreement, and in any event within 30 days
following the Fourth Amendment Effective Date, Foothill shall
have received originals of all share certificates evidencing
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<PAGE>
all of the issued share capital of NS Peterlee, together with
stock powers, duly executed in blank relative thereto;
c. Within 30 days following the Fourth Amendment Effective Date,
Foothill shall have received: (i) a certificate from an
authorized official of NS Peterlee attesting to the incumbency
and signatures of authorized officials of NS Peterlee and to
the resolutions of NS Peterlee's Board of Directors
authorizing its execution and delivery of the Loan Documents
to which it is a party and the performance of such Loan
Documents, and authorizing specific officials of NS Peterlee
to execute and deliver the same; and (ii) if and to the extent
the same was not delivered under Section 4(c) above, a
certificate from the Secretary of Borrower attesting to the
incumbency and signatures of authorized officers of Borrower
and to the resolutions of Borrower's Board of Directors
authorizing its execution and delivery of the Loan Documents
described in Section 5(a) above to which it is a party and
contemplated in this Amendment and the performance of such
Loan Documents, and authorizing specific officers of Borrower
to execute and deliver the same; and
d. Within 30 days following the Fourth Amendment Effective Date,
Foothill shall have received true, correct, and complete
copies of NS Peterlee's By-laws and Articles or Certificate of
Incorporation (or British equivalent), as amended, modified,
or supplemented to the Fourth Amendment Effective Date,
certified by a director of NS Peterlee.
6. Effect on Agreement. The Agreement, as amended hereby, shall be and remain in
full force and effect in accordance with its respective terms and hereby is
ratified and confirmed in all respects. The execution, delivery, and performance
of this Amendment shall not operate as a waiver of or, except as expressly set
forth herein, as an amendment, of any right, power, or remedy of Foothill under
the Agreement, as in effect prior to the date hereof.
7. Miscellaneous.
a. Upon the effectiveness of this Amendment, each reference in
the Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Agreement
shall mean and refer to the Agreement as amended by this
Amendment.
b. Upon the effectiveness of this Amendment, each reference in
the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the
Agreement shall mean and refer to the Agreement as amended by
this Amendment.
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c. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
d. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this
Amendment by signing any such counterpart. Delivery of an
executed counterpart of this Amendment by telefacsimile shall
be equally as effective as delivery of an original executed
counterpart of this Amendment. Any party delivering an
executed counterpart of this Amendment by telefacsimile also
shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Amendment.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By____________________________
Title:________________________
NATIONAL-STANDARD COMPANY, an Indiana corporation
By____________________________
Title:________________________
61
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EXHIBIT A
---------
Reaffirmation and Consent
All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in that certain Amendment Number
Four to Amended and Restated Loan and Security Agreement, dated as of March 8,
1999 (the "Amendment"). The undersigned hereby jointly and severally (a)
represent and warrant to Foothill that the execution, delivery, and performance
of this Reaffirmation and Consent (and, in the case of NS Peterlee, of all Loan
Documents to which it is party, including the NS Peterlee Guaranty/Debenture)
are within each of their corporate or organizational powers, have been duly
authorized by all necessary corporate or other organizational action, and are
not in contravention of any law, rule, or regulation, or any order, judgment,
decree, writ, injunction, or award of any arbitrator, court, or governmental
authority, or of the terms of its charter or bylaws, or of any contract or
undertaking to which either of them is a party or by which any of their
properties may be bound or affected; (b) consents to the amendment of the
Agreement by the Amendment; (c) acknowledges and reaffirms its obligations owing
to Foothill under its respective guaranty and each of the other Loan Documents
to which it is party; and (d) agrees that each of the guaranties and the other
Loan Documents to which they are parties is and shall remain in full force and
effect. Although the undersigned have been informed of the matters set forth
herein and have acknowledged and agreed to same, they understand that Foothill
has no obligation to inform it of such matters in the future or to seek its
acknowledgement or agreement to future amendments, and nothing herein shall
create such a duty.
NATIONAL-STANDARD COMPANY OF CANADA, LIMITED,
a Canadian corporation
By ___________________________
Title:________________________
NATIONAL-STANDARD (PETERLEE) LIMITED,
a company organized under the laws of England
By ___________________________
Title:________________________
62
AMENDMENT NUMBER FIVE TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER FIVE TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment") is entered into as of July 1, 1999, by and
between Foothill Capital Corporation, a California corporation ("Foothill"), on
the one hand, and National-Standard Company, an Indiana corporation
("Borrower"), with reference to the following facts:
A. Foothill and Borrower heretofore have entered into that
certain Amended and Restated Loan and Security Agreement,
dated as of September 17, 1997, as amended by that certain
Amendment Number One to Amended and Restated Loan and Security
Agreement, dated as of June 30, 1998, that certain Amendment
Number Two to Amended and Restated Loan and Security
Agreement, dated as of September 30, 1998, that certain
Amendment Number Three to Amended and Restated Loan and
Security Agreement, dated as of February 19, 1999, and that
certain Amendment Number Four to Amended and Restated Loan and
Security Agreement, dated as of [March 8, 1999], (as so
modified and as otherwise heretofore modified or supplemented
from time to time, the "Agreement");
B. Borrower has requested Foothill to amend the Agreement, as set
forth in this Amendment;
C. Foothill is willing to so amend the Agreement in accordance
with the terms and conditions hereof; and
D. Unless the context requires otherwise, all capitalized terms
used herein and not defined herein shall have the meanings
ascribed to them in the Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Foothill and Borrower hereby agree as follows:
1. Amendments to the Agreement.
(a) Section 1.1 of the Agreement hereby is amended by adding the following
new defined terms in alphabetical order:
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"Fifth Amendment" means that certain Amendment Number
Five to Amended and Restated Loan and Security Agreement,
dated as of July 1, 1999, between Foothill and Borrower.
"Fifth Amendment Effective Date" means the date, if
ever, that all of the conditions set forth in Section 4 of the
Fifth Amendment shall be satisfied (or waived by Foothill in
its sole discretion).
"Permitted Overadvance Obligations" means, as of any
date of determination thereof, Obligations attributable to the
Permitted Overadvance Maximum Amount, the amount of such
Obligations being equal to the lesser of (a) the Permitted
Overadvance Amount, or (b) the result of (i) the total
Obligations, minus (ii) the lesser of (A) the Borrowing Base,
or (B) an amount equal to Borrower's and Guarantor's aggregate
cash collection with respect to Account for the immediately
preceding ninety (90) day period, in each case, as of such
date of determination.
"Permitted Overadvance Maximum Amount" means (a)
during the period commencing on July 1, 1999, and ending on
September 15, 1999, $1,500,000, and (b) at all other times,
$0.
(b) The first sentence of Section 2.1(a) of the Agreement hereby is amended
and restated in its entirety as follows:
Subject to the terms and conditions of this Agreement,
Foothill agrees to make revolving advances to Borrower in an
amount not to exceed the sum of (i) the Permitted Overadvance
Maximum Amount, plus, (ii) the lesser of (A) the Borrowing
Base, or (B) an amount equal to Borrower's and Guarantor's
aggregate cash collections with respect to Accounts for the
immediately preceding ninety (90) day period.
(c) The first sentence of Section 2.2(a) of the Agreement hereby is amended
and restated in its entirety as follows:
Subject to the terms and conditions of this Agreement,
Foothill agrees to issue commercial or standby letters of
credit for the account of Borrower (each, an "L/C") or to
issue standby letters of credit or guarantees of payment (each
such letter of credit or guaranty, an "L/C Guaranty") with
respect to commercial or standby letters of credit issued by
another Person for the account of Borrower in an aggregate
face amount not to exceed the lesser of: (i) the Borrowing
Base plus the Permitted Overadvance Amount less the amount of
advances outstanding pursuant to Section 2.1, and (ii) Four
Million Dollars ($4,000,000).
64
<PAGE>
(d) Section 2.5(a) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:
(a) Interest Rate.
(i) Adjusted Base Rate. All Obligations, except for
Permitted Overadvance Obligations and undrawn L/Cs and L/C
Guarantees, shall bear interest, on the average Daily Balance
thereof, at the then extant Adjusted Base Rate.
(ii) Adjusted Net LIBOR Rate. With respect to all
Obligations other than Permitted Overadvance Obligations and
undrawn L/Cs and L/C Guarantees and in lieu of having interest
charged at the Adjusted Base Rate, Borrower shall have the
"LIBOR Option", as defined in, and subject to the terms and
conditions of, the LIBOR Supplement, which by this reference
hereby is incorporated herein in full and made a part hereof.
(iii) Permitted Overadvance Obligations. The
Permitted Overadvance Obligations shall bear interest, on the
average Daily Balance thereof, at a per annum rate equal of
four percentage points above the then extant Base Rate.
(e) Section 2.5(b) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:
(b) Default Rate. (i) All Obligations, except for
Permitted Overadvance Obligations and undrawn L/Cs and L/C
Guarantees, shall bear interest, from and after the occurrence
and during the continuance of an Event of Default, at a rate
equal to three (3.00) percentage points above (x) the then
extant Adjusted Base Rate, or (y) in the case of any "Adjusted
Net LIBOR Rate Loan" (as defined in the LIBOR Supplement), the
then extant "Adjusted Net LIBOR Rate" (as defined in the LIBOR
Supplement), or (z) [intentionally omitted]. (ii) From and
after the occurrence and during the continuance of an Event of
Default, the fee provided in Section 2.2(d) shall be increased
to a fee equal to four percent (4.00%) per annum times the
average Daily Balance of the undrawn L/Cs and L/C Guarantees
that were outstanding during the immediately preceding month.
(iii) All Permitted Overadvance Obligations shall bear
interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to seven
(7.00) percentage points above the then extant Base Rate.
65
<PAGE>
2. Representations and Warranties. Borrower hereby represents and warrants to
Foothill that (a) the execution, delivery, and performance of this Amendment and
of the Agreement, as amended by this Amendment, are within its corporate powers,
have been duly authorized by all necessary corporate action, and are not in
contravention of any law, rule, or regulation, or any order, judgment, decree,
writ, injunction, or award of any arbitrator, court, or governmental authority,
or of the terms of its charter or bylaws, or of any contract or undertaking to
which it is a party or by which any of its properties may be bound or affected,
and (b) this Amendment and the Agreement, as amended by this Amendment,
constitute Borrower's legal, valid, and binding obligation, enforceable against
Borrower in accordance with its terms.
3. Conditions Precedent to Amendment. The satisfaction of each of the following,
unless waived or deferred by Foothill in its sole discretion, shall constitute
conditions precedent to the effectiveness of this Amendment: (a) Foothill shall
have received each of the following documents, duly executed, and each such
document shall be in full force and effect:
(1) the reaffirmation and consent of Guarantor attached hereto as Exhibit A;
(b) Foothill shall have received an amendment fee of $17,500.00.
(c) Foothill shall have received a certificate from the Secretary of Borrower
attesting to the incumbency and signatures of authorized officers of Borrower
and to the resolutions of Borrower's Board of Directors authorizing its
execution and delivery of this Amendment and the other Loan Documents to which
it is a party and contemplated in this Amendment and the performance of this
Amendment, the Agreement as amended by this Amendment, and such other Loan
Documents, and authorizing specific officers of Borrower to execute and deliver
the same;
(d) Foothill shall have received all required consents of Foothill's
participants in the Obligations to Foothill's execution, delivery, and
performance of this Amendment, in each case duly executed, in full force and
effect, and in form and substance satisfactory to Foothill; (e) The
representations and warranties in this Amendment, the Agreement as amended by
this Amendment, and the other Loan Documents shall be true and correct in all
respects on and as of the date hereof, as though made on such date (except to
the extent that such representations and warranties relate solely to an earlier
date);
(f) No Event of Default or event which with the giving of notice or passage of
time would constitute an Event of Default shall have occurred and be continuing
66
<PAGE>
on the date hereof, nor shall result from the consummation of the transactions
contemplated herein;
(g) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
governmental authority against Borrower, Foothill, or any of their Affiliates;
and
(h) All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
4. Effect on Agreement.
The Agreement, as amended hereby, shall be and remain in full force and effect
in accordance with its respective terms and hereby is ratified and confirmed in
all respects. The execution, delivery, and performance of this Amendment shall
not operate as a waiver of or, except as expressly set forth herein, as an
amendment, of any right, power, or remedy of Foothill under the Agreement, as in
effect prior to the date hereof.
5. Miscellaneous.
(a) Upon the effectiveness of this Amendment, each reference in the Agreement to
"this Agreement", "hereunder", "herein", "hereof" or words of like import
referring to the Agreement shall mean and refer to the Agreement as amended by
this Amendment.
(b) Upon the effectiveness of this Amendment, each reference in the Loan
Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or words
of like import referring to the Agreement shall mean and refer to the Agreement
as amended by this Amendment.
(c) This Amendment shall be governed by and construed in accordance with the
laws of the State of California.
(d) This Amendment may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment by signing any such counterpart.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
[remainder of page intentionally left blank]
67
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By____________________________
Title:________________________
NATIONAL-STANDARD COMPANY, an Indiana corporation
By____________________________
Title:________________________
68
<PAGE>
EXHIBIT A
---------
Reaffirmation and Consent
All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in that certain Amendment Number
Five to Amended and Restated Loan and Security Agreement, dated as of July 1,
1999 (the "Amendment"). The undersigned hereby jointly and severally (a)
represent and warrant to Foothill that the execution, delivery, and performance
of this Reaffirmation and Consent are within each of their corporate or
organizational powers, have been duly authorized by all necessary corporate or
other organizational action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which either of them is a party or
by which any of their properties may be bound or affected; (b) consents to the
amendment of the Agreement by the Amendment; (c) acknowledges and reaffirms its
obligations owing to Foothill under its respective guaranty and each of the
other Loan Documents to which it is party; and (d) agrees that each of the
guaranties and the other Loan Documents to which they are parties is and shall
remain in full force and effect. Although the undersigned have been informed of
the matters set forth herein and have acknowledged and agreed to same, they
understand that Foothill has no obligation to inform it of such matters in the
future or to seek its acknowledgement or agreement to future amendments, and
nothing herein shall create such a duty.
NATIONAL-STANDARD COMPANY OF CANADA,
LIMITED, a Canadian corporation
By ___________________________
Title:________________________
NATIONAL-STANDARD (PETERLEE) LIMITED,
a company organized under the
laws of England
By ___________________________
Title:________________________
69
NATIONAL-STANDARD COMPANY
EXHIBIT 21
PARENTS AND SUBSIDIARIES
- ------------------------
The Registrant has no parent.
All subsidiaries of the Registrant, National-Standard Company, an Indiana
corporation, listed below are included in the consolidated financial statements.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
State or Country in which % of Voting
Owned Incorporated or Organized Securities
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National-Standard Export Company Delaware 100%
National-Standard Company of Canada, Limited Canada 100
National-Standard Company, Limited United Kingdom 100
National-Standard (Peterlee), Limited United Kingdom 100
</TABLE>
A domestic affiliate, 50% owned, is not considered significant and is not named
above. Financial results of this affiliate are included in the consolidated
financial statements on an equity basis.
70
EXHIBIT 23
The Board of Directors
National-Standard Company:
We consent to incorporation by reference in the registration statements (Nos.
2-71276 and 33-68926) on Form S-8 of National-Standard Company of our report
dated November 10, 1999, relating to the consolidated balance sheets of
National-Standard Company and subsidiaries as of September 30, 1999 and 1998,
and the related consolidated statements of operations, comprehensive income,
shareholders' equity and cash flows for each of the years in the three-year
period ended September 30, 1999, and the related schedule, which report appears
in the September 30, 1999 annual report on Form 10-K of National-Standard
Company.
KPMG LLP
Chicago, Illinois
December 22, 1999
71
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a director of NATIONAL-STANDARD COMPANY (the "Company"),
does hereby constitute and appoint TIMOTHY C. WRIGHT his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, to sign the Company's Form 10-K Annual
Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended September 30, 1999, and any amendments thereto and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign the 10-K on behalf of the undersigned and to
make such filing, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Date: November 17, 1999
/s/ David F. Craigmile L.S.
---------------------------
David F. Craigmile
72
<PAGE>
POWER OF ATTORNEY
The undersigned, a director of NATIONAL-STANDARD COMPANY (the "Company"),
does hereby constitute and appoint TIMOTHY C. WRIGHT his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, to sign the Company's Form 10-K Annual
Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended September 30, 1999, and any amendments thereto and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign the 10-K on behalf of the undersigned and to
make such filing, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Date: November 17, 1999
/s/ Ranko Cucuz L.S.
--------------------
Ranko Cucuz
73
<PAGE>
POWER OF ATTORNEY
The undersigned, a director of NATIONAL-STANDARD COMPANY (the "Company"),
does hereby constitute and appoint TIMOTHY C. WRIGHT his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, to sign the Company's Form 10-K Annual
Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended September 30, 1999, and any amendments thereto and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign the 10-K on behalf of the undersigned and to
make such filing, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Date: November 17, 1999
/s/ Ronald B. Kalich L.S.
-------------------------
Ronald B. Kalich
74
<PAGE>
POWER OF ATTORNEY
The undersigned, a director of NATIONAL-STANDARD COMPANY (the "Company"),
does hereby constitute and appoint TIMOTHY C. WRIGHT his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, to sign the Company's Form 10-K Annual
Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended September 30, 1999, and any amendments thereto and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign the 10-K on behalf of the undersigned and to
make such filing, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Date: November 17, 1999
/s/ Ernest J. Nagy L.S.
-----------------------
Ernest J. Nagy
75
<PAGE>
POWER OF ATTORNEY
The undersigned, a director of NATIONAL-STANDARD COMPANY (the "Company"),
does hereby constitute and appoint TIMOTHY C. WRIGHT his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, to sign the Company's Form 10-K Annual
Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended September 30, 1999, and any amendments thereto and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign the 10-K on behalf of the undersigned and to
make such filing, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Date: November 17, 1999
/s/ Michael B. Savitske L.S.
----------------------------
Michael B. Savitske
76
<PAGE>
POWER OF ATTORNEY
The undersigned, a director of NATIONAL-STANDARD COMPANY (the "Company"),
does hereby constitute and appoint TIMOTHY C. WRIGHT his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, to sign the Company's Form 10-K Annual
Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended September 30, 1999, and any amendments thereto and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign the 10-K on behalf of the undersigned and to
make such filing, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Date: November 17, 1999
/s/ Charles E. Schroeder L.S.
-----------------------------
Charles E. Schroeder
77
<PAGE>
POWER OF ATTORNEY
The undersigned, a director of NATIONAL-STANDARD COMPANY (the "Company"),
does hereby constitute and appoint TIMOTHY C. WRIGHT his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, to sign the Company's Form 10-K Annual
Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended September 30, 1999, and any amendments thereto and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign the 10-K on behalf of the undersigned and to
make such filing, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Date: November 17, 1999
/s/ Donald R. Sheley, Jr. L.S.
------------------------------
Donald R. Sheley, Jr.
78
<PAGE>
POWER OF ATTORNEY
The undersigned, a director of NATIONAL-STANDARD COMPANY (the "Company"),
does hereby constitute and appoint TIMOTHY C. WRIGHT his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, to sign the Company's Form 10-K Annual
Report pursuant to Section 13 of the Securities Exchange Act of 1934 for the
fiscal year ended September 30, 1999, and any amendments thereto and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto the attorney-in-fact
full power and authority to sign the 10-K on behalf of the undersigned and to
make such filing, as fully to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and confirming all that the
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Date: November 17, 1999
/s/ Donald F. Walter L.S.
-------------------------
Donald F. Walter
79
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains annual summary financial information extrcted from
National-Standard Company 1999 Form 10-K and is qualified in its entirety by
reference to such Form 10-K filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 401
<SECURITIES> 0
<RECEIVABLES> 16,845
<ALLOWANCES> 255
<INVENTORY> 13,002
<CURRENT-ASSETS> 31,846
<PP&E> 135,997
<DEPRECIATION> 92,102
<TOTAL-ASSETS> 97,841
<CURRENT-LIABILITIES> 54,003
<BONDS> 0
0
0
<COMMON> 28,171
<OTHER-SE> (47,534)
<TOTAL-LIABILITY-AND-EQUITY> 97,841
<SALES> 182,911
<TOTAL-REVENUES> 182,911
<CGS> 158,324
<TOTAL-COSTS> 158,324
<OTHER-EXPENSES> 18
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,499
<INCOME-PRETAX> 4,946
<INCOME-TAX> (417)
<INCOME-CONTINUING> 5,363
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,363
<EPS-BASIC> .95
<EPS-DILUTED> .93
</TABLE>
