UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q -- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-Q
For the period ended April 2, 2000
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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 of (IRS Employer Identification No.)
incorporation or organization)
1618 Terminal Road, Niles, Michigan 49120
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(Address of principal executive offices) (Zip Code)
(616) 683-8100
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(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of Each Class Shares Outstanding at May 8, 2000
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Common Stock, $ .01 par value 5,788,569
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<PAGE>
Part I. FINANCIAL INFORMATION
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<TABLE>
National-Standard Company and Subsidiaries
Consolidated Statements of Operations (Unaudited)
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($000, Except Per Share Amounts)
<CAPTION>
Three Months Ended Six Months Ended
April 2, April 4, April 2, April 4,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net Sales $ 42,754 $ 50,049 $ 80,940 $ 102,623
Cost of sales 37,022 43,092 71,293 89,252
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Gross profit 5,732 6,957 9,647 13,371
Selling and administrative expenses 4,202 3,907 11,623 8,817
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Operating profit 1,530 3,050 (1,976) 4,554
Interest expense (784) (933) (1,601) (1,942)
Other income (expense), net 45 (136) 84 (119)
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Income before income taxes 791 1,981 (3,493) 2,493
Income taxes (214) (71) (174) (71)
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Net income $ 1,005 $ 2,052 $ (3,319) $ 2,564
============== =============== ============== ===============
Basic earnings per share $ 0.17 $ 0.36 $ (0.58) $ 0.46
Diluted earnings per share $ 0.17 $ 0.35 $ (0.58) $ 0.45
Dividends per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
Basic average shares outstanding 5,769,549 5,727,537 5,749,755 5,604,986
Diluted average shares outstanding 5,769,549 5,791,447 5,749,755 5,646,267
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
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($000)
<CAPTION>
THREE MONTHS ENDED Six Months Ended
APRIL 2, April 4, April 2, April 4,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net income (loss) $ 1,005 $ 2,052 $ (3,319) $ 2,564
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Other comprehensive income:
Foreign currency translation adjustments 75 915 40 1,008
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Other comprehensive income 75 915 40 1,008
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Comprehensive income (loss) $ 1,080 $ 2,967 $ (3,279) $ 3,572
SEe Accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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($000)
<CAPTION>
Assets April 2, 2000 September 30, 1999
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Current assets: (Unaudited)
<S> <C> <C> <C> <C>
Cash $ 540 $ 401
Receivables, net 20,988 16,590
Inventories:
Raw material $ 7,642 $ 6,601
Work-in process 6,596 6,273
Finished goods 205 14,443 128 13,002
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Prepaid expenses 1,788 1,853
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Total current assets $ 37,759 $ 31,846
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Property, plant and equipment $ 138,067 $ 135,997
Less accumulated depreciation 95,588 42,479 92,102 43,895
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Other assets 19,632 22,100
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$ 99,870 $ 97,841
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 23,047 $ 21,514
Employee compensation and benefits 1,385 2,055
Accrued pension 478 478
Other accrued expenses 6,777 6,332
Current accrued postretirement benefit cost 2,400 2,400
Notes payable to banks and current portion of
long-term debt 24,155 21,224
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Total current liabilities $ 58,242 $ 54,003
Long-term debt 11,409 10,463
Other long-term liabilities 5,791 5,822
Accrued postretirement benefit cost 46,916 46,916
Stockholders' equity
Common stock - $ .01 par value. Authorized
25,000,000 shares; issued 5,797,740 and
5,735,740 shares, respectively $ 28,346 $ 28,171
Retained deficit (49,442) (46,123)
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$ (21,096) $ (17,952)
Less: Unamortized value of restricted stock 68 52
Treasury stock, at cost, 9,191 and 8,044
shares, respectively 60 55
Other comprehensive income:
Foreign currency translation adjustments 969 1,009
Minimum pension liability adjustment 295 (22,488) 295 (19,363)
------------- -------------- ------------- -------------
$ 99,870 $ 97,841
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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($000)
<CAPTION>
Six Months Ended
April 2, April 4,
2000 1999
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<S> <C> <C>
Net cash provided by (used for) operating activities $ (1,533) $ 4,155
Investing Activities:
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Capital expenditures (2,200) (2,539)
Proceeds from sale of equipment 0 2,335
Proceeds from sale of united kingdom subsidiary 0 3,244
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Net cash provided by (used for) investing activities (2,200) 3,040
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Financing activities:
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Term loan advance 3,000 0
Net borrowings (payments) under revolving credit agreements 2,932 (2,946)
Principal payments under term loans (2,055) (2,031)
Other (5) 26
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Net cash provided by (used for) financing activities (3,872) (4,951)
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Net increase in cash 139 2,244
Beginning cash 401 251
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Ending cash $ 540 $ 2,495
Supplemental disclosures:
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Interest paid $ 1,610 $ 1,684
Income taxes paid $ 0 $ 7
See accompanying notes to financial statements.
</TABLE>
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NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1. In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the financial
statements for the interim periods included herein have been made.
The accounting policies followed by the Company are set forth in Note 1
to the Company's consolidated financial statements in the 1999
National-Standard Company Form 10-K, Annual Report, and this report
should be read in conjunction therewith.
2. The results of operations for the six-month period ended April 2, 2000
are not necessarily indicative of the results to be expected for the
full year.
3. As a result of an Amendment to the 1999 National-Standard Company Form
10-K filed March 20, 2000, the retained deficit and foreign currency
translation adjustment has changed as compared to that which was
previously filed in the Consolidated Balance Sheet found in this report.
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<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
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Net sales for the second quarter of fiscal year 2000 decreased 14.6% from the
same period last year, while net sales for the six months ended March 2000
decreased 21.1% from the same period last year. Gross profit percentages were
13.4% and 11.9%, respectively, for the current three- and six-month periods
compared to 13.9% and 13.0%, respectively, for the same periods last year.
Sales for the second quarter of fiscal year 2000 were $42.8 million, compared to
$50.0 million for the same period last year, while sales for the six-month
period ended April 2, 2000 were $80.9 million, compared to $102.6 million in the
first half of fiscal year 1999. Included in last year's sales for the three- and
six-month periods are $4.4 million and $10.5 million from the Company's former
Kidderminster, United Kingdom facility, and $0.4 million and $1.7 million from
the divested non-air bag wire cloth product line sold in 1999. Sales in the
second quarter of this year increased $4.6 million over the first quarter. Sales
of engineered products and weld wire account for 91% of the sales increase in
the second quarter.
Sales of engineered products for the three- and six-month periods decreased
approximately 9.5% and 19.4% from last year, excluding the divested product
lines. The decline is due primarily to lower unit prices for new air bag
inflator filter constructions. Sales of wire products declined 4.0% and 6.7%
over the same time periods last year. The wire declines were largely
attributable to lower selling prices and weld wire sales lost due to the closure
of the Canadian facility last year. Several major initiatives were put in place
to not only recover lost sales in weld wire, but also generate new business.
During the first half of this year, the Company began adding new marketing staff
to better serve its customers. Additionally, in this past quarter, the Company
began to build weld wire inventory to further improve delivery performance and
transition to shipments from newly created warehouse stock in existing
National-Standard facilities.
Net income for the second quarter of fiscal year 2000 was $1.0 million or 17
cents per diluted share versus a net income of $2.1 million or 35 cents per
diluted share for the same period last year. The $1.1 million decrease in income
from last year's second quarter is largely attributable to a combination of
lower than planned sales volumes and lower selling prices.
For the first six months of fiscal year 2000, the Company had a net loss of $3.3
million or 58 cents per diluted share versus a net income of $2.6 million or 45
cents per diluted share in the same period last year. This year's results
include a $1.3 million charge to realign organizational responsibilities and a
$1.5 million charge to reserve for the uncollectibility of a note receivable
from the Company's former facility in Kidderminster, United Kingdom. Both
charges were taken in the first quarter. Included in last year's net income was
a $0.6 million net loss on the March 12, 1999 sale of the Kidderminster
operation.
Net income in the second quarter of this year increased $2.5 million over the
first quarter excluding the $2.8 million charge taken in the first quarter. As a
result of the realignments in the first quarter, the Company believes that it
should continue to see improvement from operations over the remainder of the
year.
Interest expense of $0.8 million and $1.6 million in the current three- and
six-month period decreased 16% and 18% from the same periods last year due
primarily to a lower level of borrowings this year compared to last year.
The Company remains in a tax operating loss carryforward position in the United
States and Canada.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
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Total borrowings increased $3.9 million during the six-month period, due
primarily to fund working capital requirements.
The Company's credit facility provides for up to $55.0 million in revolving
credit facilities, term loans and a line of credit for future capital
expenditures. During the first quarter of fiscal 2000, the Company renewed its
credit facility, originally entered into in 1994, to December 28, 2002. The
loans are fully secured by the Company's assets.
The Company believes adequate funding is in place to fund future growth and meet
the market demand for our products.
During the second quarter of fiscal 2000, the Company contributed 54,000 shares
of National-Standard common stock to the National-Standard Pension Master Trust.
The action brings the total shares outstanding to 5,788,549. The Pension Master
Trust holds 2,017,175 shares of National-Standard common stock.
RESTRUCTURING AND IMPAIRMENTS
- -----------------------------
The Company's consolidation of its North American wire manufacturing operations
that had begun during 1998 continued in 1999. In fiscal year 1998, the Company
closed its Guelph, Ontario facility and relocated certain equipment to the
Stillwater, Oklahoma and Niles, Michigan facilities incurring a restructuring
charge of $4.8 million. The $4.8 million charge included $2.9 million for
benefits relating to the termination of 93 employees, $1.4 million for a
write-down of idled equipment, and $0.5 million of lease and environmental
project costs which have no future benefit as a result of the Guelph closure. In
fiscal 1999, the Company incurred $2.1 million of cash outlays relating to the
Guelph closure, $1.9 million of which related to the employee terminations. The
remaining liability at the end of fiscal 1999 was approximately $0.7 million.
Cash outlays and non-cash adjustments of $0.3 million during the first six
months of fiscal year 2000 reduced the liability at the end of March 2000 to
approximately $0.4 million.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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There have been no material changes in the Company's market risk during the
three-month period ended April 2, 2000. For additional information, refer to
Item 7A in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.
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<PAGE>
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
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Statements under Management's Discussion and Analysis of Financial Condition and
Results of Operations relating to initiatives to recover lost sales and generate
new business, building and use of warehouse stock, improvements expected from
realigned operations, adequate funding for future growth and to meet market
demands, and the other statements in this Form 10-Q which are not historical
facts, are forward looking statements. These forward looking statements involve
risks and uncertainties that could render them materially different, including,
but not limited to, changes in economic conditions, changes in interest rates on
the Company's term loans and credit lines, the impact of competitive pricing and
products, industry overcapacity, and availability and cost of raw materials. The
Company does not intend to update these forward looking statements.
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<PAGE>
Part II. OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Registrant was on
January 27, 2000.
(b) Not applicable.
(c) 1. Set forth below is the tabulation of the votes on each
nominee for election as a director to serve until the
annual meeting in 2003.
NAME FOR WITHHOLD AUTHORITY
Michael B. Savitske 4,688,344 658,712
Charles E. Schroeder 4,711,088 635,968
2. The allocation of additional shares to the Company's
1993 Stock Option Plan was approved as follows:
FOR AGAINST WITHHELD
3,240,693 716,266 35,201
3. The granting of an option to purchase 150,000 shares of
the Company's common stock to Ronald B. Kalich, the
Company's President and Chief Executive Officer, was
approved as follows:
FOR AGAINST WITHHELD
3,303,495 679,407 25,047
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) There were no reports on form 8-K filed during the three months
ended April 2, 2000.
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<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL-STANDARD COMPANY
-------------------------
Registrant
Date May 12, 2000 /s/ R. B. Kalich
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R. B. Kalich
President and Chief Executive Officer
Date May 12, 2000 /s/ M. K. Conn
---------------------- ------------------------------------------
M. K. Conn
Vice President, Finance and Administration
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains second quarter summary financial information extracted
from National-Standard Company 2000 second quarter Form 10Q and is qualified in
its entirety by reference to such Form 10Q filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> APR-02-2000
<CASH> 540
<SECURITIES> 0
<RECEIVABLES> 21,242
<ALLOWANCES> 254
<INVENTORY> 14,443
<CURRENT-ASSETS> 37,759
<PP&E> 138,067
<DEPRECIATION> 95,588
<TOTAL-ASSETS> 99,870
<CURRENT-LIABILITIES> 58,242
<BONDS> 0
0
0
<COMMON> 28,346
<OTHER-SE> (50,834)
<TOTAL-LIABILITY-AND-EQUITY> 99,870
<SALES> 80,940
<TOTAL-REVENUES> 80,940
<CGS> 71,293
<TOTAL-COSTS> 71,293
<OTHER-EXPENSES> (84)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,601
<INCOME-PRETAX> (3,493)
<INCOME-TAX> (174)
<INCOME-CONTINUING> (3,319)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,319)
<EPS-BASIC> (.58)
<EPS-DILUTED> (.58)
</TABLE>
