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/A
(Amendment No. 1)
For the period ended January 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 February 7, 2000
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Common Stock, $ .01 par value 5,788,549
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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
January 2, January 3,
2000 1999
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<S> <C> <C>
Net Sales $ 38,186 $ 52,574
Cost of sales 34,271 46,160
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Gross profit 3,915 6,414
Selling and administrative expenses 7,421 4,910
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Operating profit (loss) (3,506) 1,504
Interest expense (817) (1,009)
Other income 39 17
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Income (loss) before income taxes (4,284) 512
Income taxes 40 0
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Net income (loss) $ (4,324) $ 512
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Basic and diluted earnings (loss) per share $ (.75) $ .09
Dividends per share $ 0.00 $ 0.00
Basic and diluted weighted average shares outstanding 5,730,176 5,485,099
See accompanying notes to consolidated financial statements.
</TABLE>
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National-Standard Company and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
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($000)
Three Months Ended
January 2, January 3,
2000 1999
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Net income (loss) $ (4,324) $ 512
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Other comprehensive income (loss):
Foreign currency translation adjustments (35) 93
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Other comprehensive income (loss) (35) 93
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Comprehensive income (loss) $ (4,359) $ 605
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See accompanying notes to consolidated financial statements.
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<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000)
<CAPTION>
Assets January 2, 2000 September 30, 1999
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Restated Restated
(Unaudited)
<S> <C> <C> <C> <C>
Current assets:
Cash $ 212 $ 401
Receivables, net 16,282 16,590
Inventories:
Raw material $ 6,994 $ 6,601
Work-in-process 7,020 6,273
Finished goods 236 14,250 128 13,002
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Prepaid expenses 1,786 1,853
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Total current assets $ 32,530 $ 31,846
Property, plant and equipment $ 137,106 $ 135,997
Less accumulated depreciation 93,697 43,409 92,102 43,895
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Other assets 19,490 22,100
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$ 95,429 $ 97,841
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 21,710 $ 21,514
Employee compensation and benefits 1,536 2,055
Accrued pension 478 478
Other accrued expenses 8,036 6,332
Current accrued postretirement benefit cost 2,400 2,400
Notes payable to banks and current portion of
long-term debt 19,936 21,224
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Total current liabilities $ 54,096 $ 54,003
Long-term debt 12,289 10,463
Other long-term liabilities 5,847 5,822
Accrued postretirement benefit cost 46,916 46,916
Stockholders' equity:
Common stock-- $ .01 par value. Authorized
25,000,000 shares; issued 5,743,740 and 5,735,740
shares, respectively $ 28,204 $ 28,171
Retained deficit (50,447) (46,123)
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$ (22,243) $ (17,952)
Less: Unamortized value of restricted stock 77 52
Treasury stock, at cost, 9,222 and 8,044
shares, respectively 60 55
Other comprehensive income:
Foreign currency translation adjustments 1,044 1,009
Minimum pension liability adjustment 295 (23,719) 295 (19,363)
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$ 95,429 $ 97,841
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See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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($000)
<CAPTION>
Three Months Ended
January 2, January 3,
2000 1999
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<S> <C> <C>
Net cash provided by operating activities $ 580 $ (297)
Investing Activities:
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Capital expenditures (1,302) (1,245)
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Net cash used for investing activities (1,302) (1,245)
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Financing Activities:
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Term loan advance 3,000 --
Net borrowings (reduction) under revolving credit agreements (1,288) 2,640
Principal payments under term loans (1,174) (1,003)
Other (5) (4)
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Net cash provided by financing activities 533 1,633
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Net increase (decrease) in cash (189) 91
Beginning cash 401 251
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Ending cash $ 212 $ 342
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Supplemental Disclosures:
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Interest paid $ 821 $ 793
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Cash paid for taxes, net of refunds received $ (113) $ 2
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See accompanying notes to consolidated 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 three-month period ended January 2,
2000 are not necessarily indicative of the results to be expected for
the full year.
3. As requested by the staff of the Securities and Exchange Commission, the
Company has restated its Consolidated Financial Statements for the year
ended September 30, 1999 and 1998 by reducing the 1998 restructuring
charge and increasing the foreign currency translation adjustment by
$1.2 million. The restatement resulted in a decrease in the retained
deficit and an increase in the foreign currency translation adjustments
of $1.2 million for the periods ended January 2, 2000 and September 30,
1999.
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NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
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Net sales for the first quarter of Fiscal 2000 decreased 27.4% over the same
period last year. Gross margin percentages were 10.3% for the current
three-month period compared to 12.2% for the same period last year.
Sales for the first quarter of fiscal year 2000 were $38.2 million, compared to
$52.6 million for the same period last year. Last year's sales include $6.1
million from the Kidderminster, United Kingdom operation which was sold in March
of 1999 and $1.3 million of sales from the non-air bag wire cloth product lines
which were sold in February of 1999. Excluding the $6.1 million of sales from
Kidderminster and the $1.3 million of non-air bag wire cloth, sales declined
$7.0 million or 15.4% from last year.
Sales of wire products declined 9.5% in the first quarter from last year due
primarily to lower selling prices, the inability to recover weld wire sales lost
last year due to the closure of the Canadian facility, and inventory adjustments
taken by several customers over the holidays.
Sales of engineered products declined 28.6% from last year, excluding the
divested product lines. The reason for the decline is primarily due to lower
unit prices for new air bag inflator filter constructions and extended shutdowns
taken by several customers over the holidays.
The gross margin percentage decrease from the same three-month period last year
is largely attributable to the decrease in sales volume and price this year as
well as a slight increase in cost. The increase in cost from the same period
last year is primarily related to the ramp-up of new products in the Engineered
Products Division.
Net losses for the quarter were $4.3 million or 75 cents per share versus a net
income of $ .5 million or 9 cents per share last year. The $4.8 million decrease
in income from last year reflects $2.8 million of non-recurring charges taken in
the first quarter this year, along with softer than expected sales as previously
discussed.
During the first quarter, the Company recorded a $1.3 million charge for
severance and pension charges related to a realignment of organizational
responsibilities. In conjunction, several new executive appointments were made
as well as other management realignments within the business units.
Additionally, the Company recorded a $1.5 million charge to reserve for the
likely uncollectibility of notes receivable from the March 1999 sale of its
former facility in Kidderminster, United Kingdom. In early January 2000, the
Company learned that those operations had been placed in receivership but are
continuing to operate while a buyer is sought. The Company will be monitoring
this situation to see that its intellectual property, manufacturing processes,
and technical information licensed as part of the original sale are protected to
the extent possible.
Interest expense of $ .8 million in the current three-month period decreased 19%
from the same three-month period last year due primarily to a lower level of
borrowings.
The Company remains in an operating loss carryforward position in the United
States and Canada.
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LIQUIDITY AND CAPITAL RESOURCES
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Total borrowings increased $ .5 million during the quarter, 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.
The total number of shares of National-Standard Common Stock outstanding on
January 2, 2000 were 5,734,518. The Pension Master Trust holds 1,963,175 shares
of National-Standard common stock, 34% of the total shares outstanding.
RESTRUCTURING AND IMPAIRMENTS
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The Company's consolidation of its North American wire manufacturing operations
that had begun during 1998 continued in 1999. In 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 $ .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 termination. The liability at the end
of Fiscal 1999 was approximately $ .7 million. Cash outlays of $ .1 million
during the first quarter reduced the liability at the end of the quarter to
approximately $ .6 million.
IMPACT OF THE YEAR 2000 ON THE COMPANY'S OPERATIONS
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Although there can be no assurance that there will be no problems related to the
Year 2000 (Y2K), as of the date of this filing Y2K has not resulted in any
disruption or interruption of the Company's manufacturing facilities,
information systems, or relationships with suppliers or customers. The total
costs associated with its Y2K readiness program were not material to the
Company's financial position or results from operations.
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 January 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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"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 protection of intellectual property,
manufacturing processes, and technical information licensed to Kidderminster,
adequate funding for future growth, 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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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 March 10, 2000 /s/ R. B. Kalich
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R. B. Kalich
President and Chief Executive Officer
Date March 10, 2000 /s/ M. K. Conn
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M. K. Conn
Vice President, Finance and Administration
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