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 January 2, 2000
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Commission file number 1-3940
---------------------------------------------
National-Standard Company
--------------------------
(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
------------------- -------------------------------------
Common Stock, $ .01 par value 5,788,549
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<PAGE>
Part I. FINANCIAL INFORMATION
---------------------
<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
($000, Except Per Share Amounts)
<CAPTION>
Three Months Ended
January 2, January 3,
2000 1999
---- ----
<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
----------- -----------
Income (loss) before income taxes (4,284) 512
Income taxes 40 0
----------- -----------
Net income (loss) $ (4,324) $ 512
=========== ===========
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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<PAGE>
National-Standard Company and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
-----------------------------------------------------------
($000)
Three Months Ended
January 2, January 3,
2000 1999
---- ----
Net income (loss) $(4,324) $ 512
------- -------
Other comprehensive income (loss):
Foreign currency translation adjustments (35) 93
------- -------
Other comprehensive income (loss) (35) 93
------- -------
Comprehensive income (loss) $(4,359) $ 605
======= =======
See accompanying notes to consolidated financial statements.
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<PAGE>
<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
($000)
<CAPTION>
Assets January 2, 2000 September 30, 1999
- ------ --------------- ------------------
(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
=========== ===========
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
----------- -----------
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 (51,647) (47,323)
----------- -----------
$ (23,443) $ (19,152)
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 (156) (191)
Minimum pension liability adjustment 295 (23,719) 295 (19,363)
----------- ----------- ----------- -------
$ 95,429 $ 97,841
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
($000)
<CAPTION>
Three Months Ended
January 2, January 3,
2000 1999
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 580 $ (297)
Investing Activities:
- --------------------
Capital expenditures (1,302) (1,245)
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Net cash used for investing activities (1,302) (1,245)
---------- ---------
Financing Activities:
- --------------------
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)
---------- ---------
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
========== =========
Supplemental Disclosures:
- ------------------------
Interest paid $ 821 $ 793
========== =========
Cash paid for taxes, net of refunds received $ (113) $ 2
=========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the financial
statements for the interim periods included herein have been made.
The accounting policies followed by the Company are set forth in Note 1
to the Company's 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.
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<PAGE>
NATIONAL-STANDARD COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
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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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
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
- -----------------------------
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 $6.0
million. The $6.0 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, $1.2 million to write off the Canadian cumulative translation
adjustment, 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
- ---------------------------------------------------
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
- ----------------------------------------------------------
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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<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 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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<PAGE>
Part II. OTHER INFORMATION
-----------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10)
(b) Foothill Debt Agreements
(vi) Amendment Number Six to Amended and Restated Loan and
Security Agreement
(27) Financial Data Schedule
(b) There were no reports on Form 8-K filed during the three months
ended January 2, 2000.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL-STANDARD COMPANY
-------------------------
Registrant
Date February 11, 2000 /s/ R. B. Kalich
---------------------------- ----------------
R. B. Kalich
President and Chief Executive Officer
Date February 11, 2000 /s/ M. K. Conn
---------------------------- --------------
M. K. Conn
Vice President, Finance & Administration
and Chief Financial Officer
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<PAGE>
AMENDMENT NUMBER SIX TO
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER SIX TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment") is entered into as of December 28, 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, that
certain Amendment Number Four to Amended and Restated Loan and
Security Agreement, dated as of [March 8, 1999], and that
certain Amendment Number Five to Loan and Security Agreement,
dated as of July 1, 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:
<PAGE>
"Applicable Percentage" means: (a) from the period
commencing on the Sixth Amendment Effective Date through and including
January 31, 2000, 50%; (b) from the period commencing on February 1,
2000 through and including February 28, 2000, 49%; (c) from the period
commencing on March 1, 2000 through and including March 31, 2000, 48%;
(d) from the period commencing on April 1, 2000 through and including
April 30, 2000, 47%; (e) from the period commencing on May 1, 2000
through and including May 31, 2000, 46%; (f) from the period commencing
on June 1, 2000 through and including June 30, 2000, 44%; (g) from the
period commencing on July 1, 2000 though and including July 31, 2000,
42%; and (h) from the period commencing on August 1, 2000 and at all
times thereafter, 40%.
"Lowest Adjusted Base Rate" means a rate: (a) with
respect to all Obligations, other than (i) undrawn L/Cs and L/C
Guarantees, and (ii) the Obligations evidenced by the Equipment/Real
Property Term Note and the New Equipment Term Note, equal to the
Reference Rate; and (b) with respect to the Obligations evidenced by
the Equipment/Real Property Term Note and the New Equipment Term Note,
equal to 0.25 percentage points above the Reference Rate.
"Sixth Amendment" means that certain Amendment Number
Six to Amended and Restated Loan and Security Agreement, dated as of
December 28, 1999, between Foothill and Borrower.
"Sixth Amendment Effective Date" means the date, if
ever, that all of the conditions set forth in Section 4 of the Sixth
Amendment shall be satisfied (or waived by Foothill in its sole
discretion).
"WIP Availability" means, as of any date of
determination, an amount equal to the result of: (i) $2,500,000; minus
(ii) the aggregate amount of revolver advances made pursuant to Section
2.1(a)(ii)(A)(1)(z).
(b) Section 1.1 of the Agreement hereby is amended further by
deleting the table appearing in the definition of "Adjusted Base Rate" appearing
in said Section in its entirety and inserting the following new table in lieu
thereof:
<TABLE>
<S> <C>
=================================================== ========================================================================
If the Interest Coverage Ratio for the four (4) Then, effective during the period commencing 45 days after the end of
fiscal quarter period then ended is: the Measurement Period then ended and ending 45 days after the end of
the next Measurement Period, the new Adjusted Base Rate shall equal:
=================================================== ========================================================================
from and after June 1, 2000, greater than the Lowest Adjusted Base Rate
4.80:1.00;
- --------------------------------------------------- ------------------------------------------------------------------------
2
<PAGE>
less than or equal to 4.80:1:00, and greater than the Minimum Adjusted Base Rate.
4.00:1.00;
- --------------------------------------------------- ------------------------------------------------------------------------
less than or equal to 4.00:1.00, and greater than the Base Rate.
or equal to 2.50:1.00;
- --------------------------------------------------- ------------------------------------------------------------------------
less than 2.50:1.00; the Maximum Adjusted Base Rate.
=================================================== ========================================================================
</TABLE>
(c) The following defined terms set forth in Section 1.1 of
the Agreement hereby are amended and restated in their entirety as follows:
"Eligible Accounts" means Eligible Domestic Accounts and
Eligible UK Foreign Accounts.
"New Equipment Term Loan Commitment" means $5,000,000.
"Maturity Date" means December 28, 2002.
(d) Section 1.1 of the Agreement hereby is amended by deleting
therefrom the following defined terms: Eligible Canadian Finished Goods
Inventory; Eligible Foreign Accounts; Eligible Canadian Inventory; Eligible
Canadian Raw Material Inventory; and Eligible Work-In-Process Inventory.
(e) The second sentence of Section 2.1(a) of the Loan
Agreement hereby is amended and restated in its entirety as follows:
For purposes of this Agreement, "Borrowing Base", as of any
date of determination, shall mean:
"(i) an amount equal to the sum of: (A) eighty-five
percent (85%) of the amount of Eligible Domestic Accounts; and
(B) the UK Borrowing Base Component; plus
(ii) an amount equal to the least of:
(A) the sum of:
(1) the sum of:
(x) 60% of the amount of
Eligible Domestic Finished Goods
Inventory,
(y) the Applicable Percentage
of the amount of Eligible
Domestic Raw Material Inventory,
and
3
<PAGE>
(z) the lesser of:
(I) the Applicable
Percentage of the amount of
Eligible Domestic Work-in-
Process Inventory; and
(II) WIP Availability; and
(B) the amount of credit availability
created by Section 2.1(a)(i) above; and
(C) $15,000,000; plus"
(f) Section 2.1(b) of the Loan Agreement hereby is amended and
restated in its entirety as follows:
"(b) Anything to the contrary in subsection (a) above
notwithstanding, Foothill may reduce its advance rates based upon
Eligible Domestic Accounts, Eligible Domestic Finished Goods Inventory,
Eligible Domestic Raw Material Inventory, or Eligible Work-In-Process
Inventory without declaring an Event of Default if it determines, in
its reasonable discretion, that there is a material impairment of the
prospect of repayment of all or any portion of the Obligations or a
material impairment of the value or priority of Foothill's security
interests in the Collateral."
(g) Section 2.3(a) of the Loan Agreement hereby is amended and
restated in its entirety as follows:
"(a) Subject to the terms and conditions of this Agreement,
Foothill: (i) agreed to make the "Equipment Term Loan" (as defined in
the Existing Loan Agreement) to Borrower on the Old First Amendment
Closing Date, the "Real Property Term Loan" (as defined in the Existing
Loan Agreement) to Borrower on the Original Closing Date, and a term
loan to Borrower on the Closing Date; and (ii) has agreed to make an
additional term loan to Borrower on the Sixth Amendment Effective Date;
in the original aggregate principal amount of $14,200,000
(collectively, the "Equipment/Real Property Term Loan"), to be
evidenced by and repayable in accordance with the terms and conditions
of a consolidated, amended, and restated renewal promissory note in the
form of Exhibit E-1 (the "Equipment/Real Property Term Note"), dated as
of Sixth Amendment Effective Date, executed by Borrower in favor of
Foothill. All amounts evidenced by the Equipment/Real Property Term
Note shall constitute Obligations and shall be secured by the security
interests and liens granted by Borrower to Foothill in and to the
Collateral and Real Property. The Equipment/Real Property Term Loan
shall be repaid in accordance with Section 2.3(b)."
4
<PAGE>
(h) The last sentence of Section 2.3(c) of the Agreement
hereby is amended and restated in its entirety as follows:
"Anything contained in this Section 2.3(c) to the contrary
notwithstanding, Foothill shall have no obligation to make New
Equipment Term Loans hereunder to the extent they would cause the
outstanding New Equipment Term Loans to exceed the New Equipment Term
Loan Commitment."
(i) Section 3.6 of the Agreement hereby is amended and
restated in its entirety as follows:
"3.6 EARLY TERMINATION BY BORROWER. Borrower has the
option, at any time upon 90 days prior written notice to Foothill, to
terminate this Agreement by paying to Foothill, in cash the Obligations
(including an amount equal to the full amount of the L/Cs or L/C
Guarantees), together with a premium (the "Early Termination Premium")
equal to: (a) if such payment is made on or prior to December 15, 1999,
2.0% of the Maximum Amount; (b) if such payment is made during the
period commencing on December 15, 1999 and ending on December 15, 2001,
1.0% of the Maximum Amount; (c) if such payment is made during the
period commencing on December 16, 2001 and ending on June 15, 2002,
0.50% of the Maximum Amount; (d) if such payment is made thereafter,
zero."
(j) Exhibit E-1 to the Agreement hereby is amended and
restated in its entirety in the form of Exhibit E-1 attached hereto.
(k) Exhibit L-1 to the Agreement hereby is amended and
restated in its entirety in the form of Exhibit L-1 attached hereto.
2. Agreements. On the Sixth Amendment Effective Date, Borrower hereby
requests and Foothill hereby agrees to apply $3,000,000 of the proceeds of the
Equipment/Real Property Term Loan to reduce the aggregate balance of revolving
advances then outstanding as of such date.
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.
5
<PAGE>
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 the reaffirmation and consent
of Guarantor attached hereto as Exhibit A, duly executed and in full force and
effect.
(b) Foothill shall have received the Equipment/Real Property
Term Note, duly executed and in full force and effect
(c) Foothill shall have received an amendment fee of $30,000,
in cash or by wire transfer of immediately available funds.
(d) 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;
(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 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.
6
<PAGE>
5. 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.
6. 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) Upon the effectiveness of this Amendment, each reference
in the Loan Documents to Exhibit L-1 shall mean and refer to Exhibit L-1
attached hereto.
(d) Upon the effectiveness of this Amendment, each reference
in the Loan Documents to Exhibit E-1 shall mean and refer to Exhibit E-1
attached hereto.
(e) This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
(f) 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]
7
<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:________________________
S-1
<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
Six to Amended and Restated Loan and Security Agreement, dated as of December
28, 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:________________________
A-1
<PAGE>
EXHIBIT L-1
-----------
LIBOR SUPPLEMENT TO LOAN AND SECURITY AGREEMENT
This LIBOR Supplement ("Supplement") is a supplement to the
Amended and Restated Loan and Security Agreement between National-Standard
Company, an Indiana corporation ("Borrower") and Foothill Capital Corporation
("Foothill"), dated as of September 17, 1997 (as amended, restated, modified, or
supplemented from time to time (including as of the date hereof), the
"Agreement"). This Supplement is: (a) hereby incorporated into the Agreement;
(b) made a part thereof; and (c) subject to the other terms, conditions,
covenants and warranties thereof. All terms (including capitalized terms) used
herein shall have the meanings ascribed to them respectively in the Agreement,
unless otherwise defined in this Supplement.
1. Definitions. The following terms shall have the
meanings set forth below:
"Adjusted Net LIBOR Rate" means, as of any date of
determination, the Regular Adjusted Net LIBOR Rate (or, after the first
adjustment to the Regular Adjusted Net LIBOR Rate as set forth below, the
Adjusted Net LIBOR Rate) in effect immediately prior to such date of
determination, as adjusted pursuant to the table set forth below according to
the Interest Coverage Ratio of Borrower for the four (4) fiscal quarter period
then ended:
<TABLE>
<S> <C>
==============================================================================================================================
If the Interest Coverage Ratio for the four (4) Then, effective during the period commencing 45 days after the end of
fiscal quarter period then ended is: the Measurement Period then ended and ending 45 days after the end of
the next Measurement Period, the new Adjusted Net LIBOR Rate shall
equal:
=================================================== =========================================================================
from and after June 1, 2000, greater than the Lowest Adjusted Net LIBOR Rate
4.80:1.00;
- --------------------------------------------------- -------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------- -------------------------------------------------------------------------
less than or equal to 4.80:1.00, and greater than the Minimum Adjusted Net LIBOR Rate.
4.00:1.00;
- --------------------------------------------------- -------------------------------------------------------------------------
less than or equal to 4.00:1.00, and greater than the then extant Adjusted Net LIBOR Rate.
or equal to 2.50:1.00;
- --------------------------------------------------- -------------------------------------------------------------------------
less than 2.50:1.00; the Maximum Adjusted Net LIBOR Rate.
==============================================================================================================================
</TABLE>
"Business Day" means a day on which banks in California
are open for the transaction of business.
"Business Day in London" means a day which is a Business Day
and a day on which banks in London, England are open for the transaction of
banking business.
"Funding Losses" has the meaning set forth in Section 3(b)
hereof.
"Interest Period" means, with respect to that portion of the
Loans bearing interest at the Adjusted Net LIBOR Rate, a period of one month
duration; provided, however, that: (a) if any Interest Period would otherwise
end on a day which shall not be a Business Day in London, such Interest Period
shall be extended to the next succeeding Business Day in London, subject to
clauses (c)-(e) below; (b) interest shall accrue from and including the first
day of each Interest Period to, but excluding, the day on which any Interest
Period expires; (c) any Interest Period which would otherwise end on a day which
is not a Business Day in London shall be extended to the next succeeding
Business Day in London unless such Business Day in London falls in another
calendar month, in which case such Interest Period shall on the next preceding
Business Day in London; (d) with respect to an Interest Period which begins on
the last Business Day in London of a calendar month ( or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period), the Interest Period shall end on the last Business Day in
London of the calendar month which is one month after the date on which the
Interest Period began, as applicable and (e) Borrower may not elect an Interest
Period which will end after the Maturity Date.
"LIBOR Deadline" has the meaning set forth in Section 3(a)
hereof.
"LIBOR Option" has the meaning set forth in Section 2 hereof.
"Loan" or "Loans" means Borrower's advances or term loans made
by Foothill in Dollar denominations to Borrower under Sections 2.1 or 2.3 of the
Agreement.
"Lowest Adjusted Net LIBOR Rate" means a rate: (a) with
respect to all Obligations other than (i) undrawn L/Cs and L/C Guarantees, and
(ii) the Obligations evidenced by the Equipment/Real Property Term Note and the
New Equipment Term
4
<PAGE>
Note, equal to 2.0 percentage points above the Net LIBOR Rate; and (b) with
respect to the Obligations evidenced by the Equipment/Real Property Term Note
and the New Equipment Term Note, equal to 2.25 percentage points above the Net
LIBOR Rate.
"Maturity Date" means, at the time of selection of an Interest
Period, the last day of the then current term of the Agreement.
"Maximum Adjusted Net LIBOR Rate" means a rate: (a) with
respect to all Obligations other than (i) undrawn L/Cs and L/C Guarantees, and
(ii) the Obligations evidenced by the Equipment/Real Property Term Note and the
New Equipment Term Note, equal to 2.75 percentage points above the Net LIBOR
Rate; and (b) with respect to the Obligations evidenced by the Equipment/Real
Property Term Note and the New Equipment Term Note, 3.00 percentage points above
the Net LIBOR Rate.
"Minimum Adjusted Net LIBOR Rate" means a rate: (a) with
respect to all Obligations other than (i) undrawn L/Cs and L/C Guarantees, and
(ii) the Obligations evidenced by the Equipment/Real Property Term Note and the
New Equipment Term Note, equal to 2.25 percentage points above the Net LIBOR
Rate; and (b) with respect to the Obligations evidenced by the Equipment/Real
Property Term Note and the New Equipment Term Note, equal to 2.50 percentage
points above the Net LIBOR Rate.
"Net LIBOR Rate" means, for any Interest Period, the rate per
annum (rounded upwards, if necessary, the next 1/16 of 1%) determined pursuant
to the following formula:
Net = LIBOR Rate
LIBOR Rate 1 - Reserve Percentage
For purposes hereof, "LIBOR Rate" means the one month London
Interbank Offered Rate set in London two (2) Business Days in London prior to
the commencement of each Interest Period as published in The Wall Street
Journal.
"Regular Adjusted Net LIBOR Rate" means a rate: (a) with
respect to all Obligations other than (i) undrawn L/Cs and L/C Guarantees, and
(iii) the Obligations evidenced by the Equipment/Real Property Term Note and the
New Equipment Term Note, equal to 2.50 percentage points above the Net LIBOR
Rate; and (b) with respect to the Obligations evidenced by the Equipment/Real
Property Term Note and the New Equipment Term Note, equal to 2.75 percentage
points above the Net LIBOR Rate.
"Reserve Percentage" means, on any day, that percentage
(expressed as a decimal) prescribed by the Board of Governors of the Federal
Reserve System (or any successor or any other banking authority to which federal
or state chartered banks are subject, including any board or governmental or
administrative agency of the United States or any other jurisdiction to which
banks are subject), for determining the reserve requirement (including without
limitation any basic, supplemental, marginal or emergency
5
<PAGE>
reserves) which is or would be applicable to deposits of United States Dollars
in a non-United States or an international banking office of a bank used to fund
a loan subject to an Net LIBOR Rate or any loan made with the proceeds of such
deposit. The Net LIBOR Rate shall be adjusted on and as of the effective day of
any change in the Reserve Percentage.
2. Interest and Interest Payment Dates. In lieu of having
interest charged at the rate set forth in Section 2.5(a)(i) of the Agreement,
Borrower shall have the option (the "LIBOR Option") to have interest on a
portion of its Loans be charged at the Adjusted Net LIBOR Rate. Interest on that
portion of the Loans bearing interest at the Adjusted Net LIBOR Rate ("Adjusted
Net LIBOR Rate Loans") shall be payable on the last day of each month and on the
last day of each Interest Period and may, at Foothill's option, be charged
directly to Borrower's loan account maintained by Foothill. Interest at the
Adjusted Net LIBOR Rate shall be calculated for each month (or portion thereof)
based on the number of days elapsed and a year of three hundred sixty (360)
days. On and after the date of any Event of Default or termination or
non-renewal of the Agreement, interest on all outstanding Adjusted Net LIBOR
Rate Loans shall accrue at the rate set forth in Section 2.5(b)(i)(z) of the
Agreement from the date of such Event of Default or termination or non-renewal
until the end of the Interest Period, and all such interest accruing hereunder
shall thereafter be payable on demand. Upon expiration of the Interest Period,
or earlier at Foothill's option following an Event of Default or termination or
non-renewal of the Agreement, and until Borrower's subsequent permitted
exercise, if any, of the LIBOR Option, all Loans shall accrue interest in
accordance with Section 2.5(b)(i)(y) of the Agreement. In no event shall charges
constituting interest, payable by Borrower under this Supplement, exceed the
rate permitted under any applicable law or regulation, and if any part or
provision of this Supplement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.
3. LIBOR Election.
(a) Borrower may, at any time prior to an Event of Default or
termination or non-renewal of the Agreement, exercise the LIBOR Option by
notifying Foothill prior to 3:00 p.m. (Boston time) at least three (3) Business
Days in London prior to the commencement of the proposed Interest Period (the
"LIBOR Deadline"). Notice of Borrower's election of the LIBOR Option for a
permitted portion of the Loans and an Interest Period pursuant to the Section 3
shall be made by delivery to Foothill of an LIBOR Notice in the form of Exhibit
1 hereto via facsimile teletransmission received by Foothill before the LIBOR
Deadline, or by telephonic notice received by Foothill before the LIBOR Deadline
(to be confirmed by facsimile teletransmission to Foothill of the LIBOR Notice
to be received by Foothill prior to 5:00 p.m. (Boston time) on the same day;
provided, however, that Borrower's failure to deliver such confirming LIBOR
Notice shall not affect the applicability of such rate if Borrower's election is
implemented by Foothill.
6
<PAGE>
(b) Each LIBOR Notice pursuant to this Section 3 shall be
irrevocable and binding on Borrower. In connection with the Adjusted Net LIBOR
Rate Loan, Borrower shall indemnify Foothill against any loss, cost or expense
incurred by Foothill as a result of any failure to fulfill, on or before the
date specified in the LIBOR Notice, the applicable conditions set forth herein
or the termination prior to the end of an Interest Period of the applicability
of interest at the Adjusted Net LIBOR Rate, as provided hereunder, including,
without limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired or committed to be acquired by Foothill or its participants
to fund the requested Adjusted Net LIBOR Rate Loans which, as a result of such
failure, are not so employed on such date (such losses, costs, and expenses,
collectively "Funding Losses").
(c) Borrower shall have not more than three (3) Interest
Periods in existence at any given time. Borrower may only exercise the LIBOR
Option for Adjusted Net LIBOR Rate Loans of at least Five Million Dollars
($5,000,000) and integral multiples of One Million Dollars ($1,000,000) in
excess thereof. The maximum amount of Adjusted Net LIBOR Rate Loans at any given
time shall not exceed eighty percent (80%) of the projected average daily
balance of the Loans for the Interest Period in question as determined by
Foothill, based upon information furnished by Borrower, but without creating any
obligation on Foothill's part to make any Loans available other than on the
terms and conditions set forth in the Agreement.
4. Prepayments.
(a) Borrower may elect to prepay any Adjusted Net LIBOR Rate
Loans only on the last day of the applicable Interest Period, provided, that in
the event of the prepayment of any such Loans, including any automatic
prepayment through the required application by Foothill of proceeds of Accounts
and other Collateral received by Foothill, on a date other that the last day of
an Interest Period for any reason, including, without limitation, acceleration
pursuant to Section 4(b) hereof or pursuant to the Agreement, Borrower shall
indemnify Foothill for Funding Losses which may arise in connection with such
payment. Notwithstanding anything to the contrary contained herein, if the
outstanding Loans are reduced below the balance of the outstanding Adjusted Net
LIBOR Rate Loans by virtue of automatic prepayment from proceeds of Accounts and
other collateral, then Foothill will automatically make an advance to Borrower
so that the outstanding Loans will equal the outstanding Adjusted Net LIBOR Rate
Loans so long as Borrower has sufficient borrowing availability under the
formulas set forth in the Agreement and subject to the reserves and applicable
sublimits thereunder.
(b) In the event that the aggregate amount with respect to
which the Borrower has exercised the LIBOR Option exceeds eighty percent (80%)
of the amount of Loans actually outstanding at any time, then, in addition to
all other rights and remedies of Foothill, Foothill may, at its option, require
that such Adjusted Net LIBOR Rate Loans cease to accrue interest at the Adjusted
Net LIBOR Rate. In such event, the Adjusted Net
7
<PAGE>
LIBOR Rate Loans will bear interest as provided in Section 2.5(a)(i) or
2.5(b)(i)(y), as the case may be, of the Agreement, and Borrower shall indemnify
Foothill for Funding Losses which may arise in connection with the termination
of applicability of interest at the Adjusted Net LIBOR Rate.
5. Special Provisions Applicable to Net LIBOR Rate.
(a) The Net LIBOR Rate may be automatically adjusted by
Foothill on a prospective basis to take into account the additional or increased
cost to Foothill of maintaining any necessary reserves for Eurodollar deposits
or increased costs due to change in applicable law occurring subsequent to the
commencement of the then applicable Interest Period, including but not limited
to changes in tax laws (except changes of general applicability in corporate
income tax laws) and changes in the reserve requirements imposed by the Board of
Governors of the Federal Reserve System (or any successor), excluding the
Reserve Percentage, that increase or would increase the costs of funding loans
bearing interest at the Adjusted Net LIBOR Rate. Foothill shall give Borrower
notice of such a determination and adjustment and Borrower may, by notice to
Foothill: (i) require Foothill to furnish to Borrower a statement setting forth
the basis for adjusting such Net LIBOR Rate and the method for determining the
amount of such adjustment; and/or (ii) repay the Adjusted Net LIBOR Rate Loans,
or portions thereof, with respect to which such adjustment is made, as
appropriate.
(b) In the event that any change in circumstances or any law,
regulation, treaty or directive, or any change therein or in the interpretation
of application thereof, shall at any time after the date hereof, in the
reasonable opinion of Foothill, make it unlawful or impractical for Foothill to
fund or maintain an Adjusted Net LIBOR Loan or to continue such funding or
maintaining, or to determine or charge interest rates at the Adjusted Net LIBOR
Rate, Foothill shall give notice of such circumstances to the Borrower and (i)
in the case of any Adjusted Net LIBOR Rate Loans which are outstanding, the date
specified in Foothill's notice shall be deemed to be the last day of the
Interest Period of such Adjusted Net LIBOR Rate Loans, and interest upon the
Adjusted Net LIBOR Loans then outstanding shall thereafter accrue as provided in
Section 2.5(a)(i) or 2.5(b)(i)(y), as the case may be, of the Agreement, and
(ii) Foothill shall not be obligated to permit Borrower to elect the LIBOR
Option as to any Loans until Foothill determines that it would no longer be
unlawful or impractical to do so.
6. No Requirement of Matched Funding. Notwithstanding anything
to the contrary contained in this Supplement, neither Foothill nor any
participant is required to actually acquire United States dollar deposits on the
London Interbank Market to fund or otherwise match fund any Loans as to which
interest accrues at the Adjusted Net LIBOR Rate. Provisions of Section 4 of the
Supplement shall apply as if Foothill and/or its participants had match funded
any Loans as to which interest is accruing at the Adjusted Net LIBOR Rate by
acquiring United States dollar deposits in the London Interbank Market for each
Interest Period in the amount of the Adjusted Net LIBOR Rate Loans.
8
<PAGE>
Funding Losses of Foothill under this Supplement shall include the aggregate
Funding Losses of Foothill and its participants in the Adjusted Net LIBOR Rate
Loans.
IN WITNESS WHEREOF, this Supplement has been executed as of
December 28, 1999.
NATIONAL-STANDARD COMPANY, an Indiana
corporation
By________________________________
Title______________________________
FOOTHILL CAPITAL CORPORATION, a California
corporation
By________________________________
Title______________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains first quarter summary financial information extracted
from National-Standard Company 2000 first quarter Form 10-Q and is qualified in
its entirety by reference to such Form 10-Q filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> JAN-02-2000
<CASH> 212
<SECURITIES> 0
<RECEIVABLES> 16,537
<ALLOWANCES> 255
<INVENTORY> 12,250
<CURRENT-ASSETS> 32,530
<PP&E> 137,106
<DEPRECIATION> 93,697
<TOTAL-ASSETS> 95,429
<CURRENT-LIABILITIES> 54,096
<BONDS> 0
0
0
<COMMON> 28,204
<OTHER-SE> (51,923)
<TOTAL-LIABILITY-AND-EQUITY> 95,429
<SALES> 38,186
<TOTAL-REVENUES> 38,186
<CGS> 34,271
<TOTAL-COSTS> 34,271
<OTHER-EXPENSES> (39)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 817
<INCOME-PRETAX> (4,284)
<INCOME-TAX> 40
<INCOME-CONTINUING> (4,324)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,324)
<EPS-BASIC> (.75)
<EPS-DILUTED> (.75)
</TABLE>
