SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2000
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Commission File Number 0-23539
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LADISH CO., INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 31-1145953
- ---------------------------------- --------------------------------------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5481 South Packard Avenue, Cudahy, Wisconsin 53110
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(Address of principal executive offices) (Zip Code)
(414) 747-2611
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(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 31, 2000
- ----------------------------- ---------------------------------
Common Stock, $0.01 Par Value 13,401,134
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PART I - FINANCIAL INFORMATION
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LADISH CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
For the Three Months
Ended March 31,
-----------------------
2000 1999
---------- ----------
Net sales .........................................$ 54,852 $ 42,756
Cost of sales .......................................... 46,249 39,318
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Gross income on sales.......................... 8,603 3,438
Selling, general and administrative expenses............ 2,228 1,657
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Income from operations......................... 6,375 1,781
Other income (expense):
Interest expense................................... ( 444) ( 161)
Other, net......................................... 36 109
---------- ----------
Income before provision for income taxes....... 5,967 1,729
Provision for income taxes.............................. 1,074 260
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Net income....................................$ 4,893 $ 1,469
========== ==========
Basic earnings per share...............................$ 0.36 $ 0.11
Diluted earnings per share.............................$ 0.35 $ 0.10
Basic weighted average shares outstanding...............13,464,804 13,871,887
Diluted weighted average shares outstanding.............14,015,573 15,208,660
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LADISH CO., INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share and Per Share Data)
<CAPTION>
March 31, December 31,
Assets 2000 1999
------ ------------ -----------
Current assets:
<S> <C> <C>
Cash and cash equivalents...................................................$ 7,111 $ 1,008
Accounts receivable, less allowance of $340 and $300, respectively.......... 33,247 25,222
Inventories................................................................. 51,274 42,427
Prepaid expenses and other current assets................................... 361 238
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Total current assets.................................................... 91,993 68,895
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Property, plant and equipment:
Land and improvements....................................................... 5,722 3,855
Buildings and improvements.................................................. 16,712 15,912
Machinery and equipment..................................................... 126,525 120,526
Construction in progress.................................................... 9,705 5,562
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158,664 145,855
Less - accumulated depreciation............................................. ( 66,187) ( 62,648)
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Net property, plant and equipment....................................... 92,477 83,207
Other assets ................................................................... 18,030 7,481
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Total assets............................................................$ 202,500 $ 159,583
============ ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Senior debt.................................................................$ 26,600 $ 0
Accounts payable............................................................ 25,115 12,548
Accrued liabilities:
Pensions................................................................ 505 504
Postretirement benefits................................................. 5,551 5,551
Wages and salaries...................................................... 4,512 3,107
Taxes, other than income taxes.......................................... 323 227
Interest................................................................ 90 54
Profit sharing.......................................................... 371 958
Paid progress billings.................................................. 4,504 5,556
Other................................................................... 2,832 1,383
------------ -----------
Total current liabilities.......................................... 70,403 29,888
Long term liabilities:
Senior debt, less current portion........................................... 0 0
Pensions ................................................................... 12,843 14,692
Postretirement benefits..................................................... 40,278 40,929
Other noncurrent liabilities................................................ 606 607
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Total liabilities.................................................. 124,130 86,116
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Stockholders' equity:
Common stock - authorized 100,000,000, issued and outstanding 14,318,406
shares of $.01 par value as of March 31, 2000 and December 31, 1999....... 143 143
Additional paid-in capital.................................................. 81,272 80,293
Accumulated (deficit) retained earnings..................................... 3,134 ( 1,759)
Treasury stock, 917,272 shares and 770,672 shares of common stock
at cost as of March 31, 2000 and December 31, 1999, respectively.......... ( 6,179) ( 5,210)
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Total stockholders' equity......................................... 78,370 73,467
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Total liabilities and stockholders' equity.........................$ 202,500 $ 159,583
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LADISH CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<CAPTION>
For the Three Months
Ended March 31,
-------------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income..................................................................$ 4,893 $ 1,469
Adjustments to reconcile net income to net cash
provided from (used for) operating activities:
Depreciation............................................................ 3,538 2,952
Amortization............................................................ 208 76
Reduction in valuation allowance........................................ 1,007 223
Change in assets and liabilities:
Accounts receivable..................................................... ( 4,431) 7,371
Inventories............................................................. ( 3,642) ( 3,134)
Other assets............................................................ ( 226) ( 287)
Accounts payable and accrued liabilities................................ 10,785 ( 3,383)
Other liabilities....................................................... ( 2,501) ( 1,591)
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Net cash provided from operating activities........................ 9,631 3,696
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment.................................. ( 2,531) ( 3,453)
Proceeds from sale of property, plant and equipment......................... -- ( 1)
Acquisition of business..................................................... ( 26,600) ( 11,367)
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Net cash used for investing activities............................. ( 29,131) ( 14,821)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior debt................................................... 26,600 7,380
Repurchase of common stock.................................................. ( 969) ( 437)
Retirement of warrants...................................................... ( 28) --
Exercise of warrants........................................................ -- 210
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Net cash provided from (used for) financing activities............. 25,603 7,153
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................. 6,103 ( 3,972)
CASH AND CASH EQUIVALENTS, beginning of period................................... 1,008 5,517
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CASH AND CASH EQUIVALENTS, end of period.........................................$ 7,111 $ 1,545
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LADISH CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(1) Basis of Presentation
---------------------
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly its financial
position at March 31, 2000 and December 31, 1999 and its results of operations
and cash flows for the three months ended March 31, 2000 and March 31, 1999. All
adjustments are of a normal recurring nature.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with Article 10 of Regulation S-X and therefore do not include all
information and footnotes necessary for a fair presentation of the financial
position, results of operations and cash flow in conformity with generally
accepted accounting principles. In conjunction with its Form 10-K, the Company
filed audited consolidated financial statements which included all information
and footnotes necessary for a fair presentation of its financial position at
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended December
31, 1999, 1998 and 1997.
The results of operations for the three-month period ended March 31, 2000 are
not necessarily indicative of the results to be expected for the full year.
(2) Inventories
-----------
Inventories consisted of:
March 31, December 31,
2000 1999
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Raw material and supplies $ 16,520 $ 15,214
Work-in-process and finished goods 37,063 29,501
Less progress payments ( 2,309) ( 2,288)
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Total inventories $ 51,274 $ 42,427
========= =========
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(3) Interest and Income Tax Payments
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For the Three Months
Ended March 31,
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2000 1999
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Interest $ 402 $ 182
Income taxes 121 204
(4) Cash and Cash Equivalents
-------------------------
Cash in excess of daily requirements is invested in marketable securities
consisting of Commercial Paper and Repurchase Agreements which mature in three
months or less. Such investments are deemed to be cash equivalents for purposes
of the statement of cash flows.
(5) Revenue Recognition
-------------------
Revenue is recognized when products are shipped.
(6) Earnings Per Share
------------------
The incremental difference between basic weighted average shares outstanding and
diluted weighted average shares outstanding is due to the dilutive impact of
outstanding options and warrants.
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Page 8 of 11
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND
CHANGES IN FINANCIAL POSITION
RESULTS OF OPERATIONS
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First Quarter 2000 Compared to First Quarter 1999
- -------------------------------------------------
Net sales for the three months ended March 31, 2000 were $54.85 million compared
to $42.76 for the same period in 1999. The 28% increase in sales for the first
quarter of 2000 was primarily attributed to an improvement in the jet engine
market and the Company's acquisition of Pacific Cast Technologies, Inc. ("PCT").
See "Other Information.". The Company did benefit in the first quarter of 2000
due to reduced costs associated with manpower reductions and product mix. Gross
profit increased to 15.7% of sales in contrast to 8.0% of sales in the first
quarter of 1999 as a result of improved absorption of fixed costs by the
increased level of sales and the reduction in cost of goods due to the labor
dispute.
During the first quarter of 2000 the Company experienced a labor stoppage by the
largest union at the Company's Cudahy, Wisconsin facility. During the strike,
the Company continued to run operations and deliver products through the efforts
of the salaried personnel and other organized employees of Ladish. The strike
also had the effect of significantly reducing the Company's operating expenses
during the first quarter of 2000 and thereby positively contributed to the
earnings of the Company during this period. The strike was resolved in the month
of April 2000 and will have a lesser effect on second quarter results.
Selling, general and administrative expenses, as a percentage of sales, were
4.1% for the first quarter of 2000 compared to 3.9% for the same period in 1999.
The increase in SG&A expenses for the period was largely attributable to the PCT
acquisition.
Interest expense for the period was $0.444 million in contrast to $0.161 million
in 1999. The increase in interest expense was due to higher loan balances of
senior debt resulting from the PCT purchase. As of March 31, 2000, the Company's
senior debt had an interest rate equal to the LIBOR rate plus 0.75% per annum
(reduced from commercial paper plus 1.0% per annum as of March 31, 1999).
The $1.07 million provision for taxes for 2000 and $0.26 million for 1999
represent largely non-cash accounting charges. The reversal of valuation
allowances relating to pre-restructuring NOLs requires the Company to record a
tax provision and to reflect the offset as an addition to paid-in capital,
rather than as an offset to the provision for income taxes. The overall
effective rate differs substantially from the statutory tax rate due to the
reversal of valuation allowances relating to post-restructuring versus
pre-restructuring deferred tax assets. The Company intends to continue to use
its NOLs in the future to reduce actual payment of federal income taxes. The
future use of the NOLs is subject to certain statutory restrictions. See
"Liquidity and Capital Resources."
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Liquidity and Capital Resources
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As of July 1, 1999, the Company entered into a new credit facility (the
"Facility") with a syndicate of lenders. The Facility provides for borrowings of
up to $100 million subject to certain limitations. Borrowings under the Facility
are unsecured and will initially be structured as revolving loans with the
option of conversion into term loans. Borrowings under the Facility bear
interest at a rate of LIBOR plus 0.75% per annum. Proceeds from the Facility
were used to terminate the prior credit agreement on July 1, 1999. At March 31,
2000, approximately $36.1 million was available and undrawn under the Facility.
The balance of the borrowings under the Facility as of March 31, 2000 was $26.6
million.
On April 14, 2000 the Company and substantially the same group of lenders
entered into an amended and restated credit facility (the "New Facility"). The
New Facility is comprised of a $24 million term facility with a three-year
maturity and a $76 million revolving loan facility. The term facility bears
interest at a rate of LIBOR plus 1.25% and the revolving loan facility bears
interest at a rate of LIBOR plus 0.80%.
The Company has net operating loss ("NOL") carryforwards, which were generated
prior to a financial restructuring that was completed on April 30, 1993, as well
as NOL carryforwards that were generated in subsequent years. The total
remaining NOL carryforwards were approximately $50 million as of December 31,
1999. The NOL carryforwards expire gradually beginning in the year 2007 through
2010.
The Company's IPO created an ownership change as defined by the Internal Revenue
Service, ("IRS"). This ownership change generated an IRS imposed limitation on
the utilization of NOL carryforwards on future tax returns. The annual use of
the NOL carryforwards is limited to the lesser of the Company's taxable income
or the amount of the IRS imposed limitation. Approximately $12 million of the
NOL carryforwards is available for use annually. Approximately $2 million of the
$12 million annual limitation relates to a previous restriction on NOL
carryforwards generated prior to the financial restructuring.
Based on the limitations described above and certain other factors, a valuation
allowance has been recorded against the entire amount of the net deferred tax
assets. Any tax benefit that is realized in subsequent years from the reduction
of the valuation allowance established at or prior to the financial
restructuring will be recorded as an addition to paid-in capital. Any tax
benefit that is realized in subsequent years from the utilization of deferred
tax assets created after April 30, 1993, will be recorded as a reduction of
future income tax provisions.
Under the common stock repurchase program (the "Program") authorized by the
Company's Board of Directors, the Company repurchased 152,261 shares, or share
equivalents, of its common stock during the first quarter of 2000. As of March
31, 2000, the Company has repurchased 1,677,362 shares, or share equivalents, of
its common stock under the Program.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
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The Company believes that its exposure to market risk related to changes in
foreign currency exchange rates and trade accounts receivable is immaterial.
-------------------------
Any statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Legislation Reform Act of 1995, and involve risks and uncertainties. These
forward-looking statements include expectations, beliefs, plans, objectives,
future financial performance, estimates, projections, goals and forecasts.
Potential factors which could cause the Company's actual results of operations
to differ materially from those in the forward-looking statements include market
conditions and demand for the Company's products; competition; technologies; raw
material prices; interest rates and capital costs; taxes; unstable governments
and business conditions in emerging economies; and legal, regulatory and
environmental issues. Any forward-looking statement speaks only as of the date
on which such statement is made. The Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which such statement is made.
PART II - OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matter was submitted to the stockholders for a vote during the period covered
by this report.
Item 5. Other Information
- --------------------------
On January 14, 2000 the Company acquired substantially all of the assets and a
portion of the liabilities of the business formerly known as Wyman-Gordon
Titanium Castings, LLC for a purchase price of approximately $26.6 million,
subject to adjustment for change of asset value. The business, which will
operate independently as a wholly-owned subsidiary of the Company, is located in
Albany, Oregon and has been renamed PCT. The principle focus of PCT's business
is in the investment casting of titanium for jet engine and aerospace
applications.
Item 6. Reports on Form 8-K
- ---------------------------
(a) Exhibit 27. Financial Data Schedule.
(b) The Company filed a report on Form 8-K on March 1, 2000 with the Commission
disclosing the labor stoppage in Wisconsin; it was the only report on Form
8-K filed during the period covered by this report.
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Page 11 of 11
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.
LADISH CO., INC.
Date: April 28, 2000 By: /s/ WAYNE E. LARSEN
----------------- -----------------------------------
Wayne E. Larsen
Vice President Law/Finance
& Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF LADISH CO., INC. AS OF AND FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,111
<SECURITIES> 0
<RECEIVABLES> 33,587
<ALLOWANCES> 340
<INVENTORY> 51,274
<CURRENT-ASSETS> 91,993
<PP&E> 158,664
<DEPRECIATION> (66,187)
<TOTAL-ASSETS> 202,500
<CURRENT-LIABILITIES> 70,403
<BONDS> 0
0
0
<COMMON> 143
<OTHER-SE> 78,370
<TOTAL-LIABILITY-AND-EQUITY> 202,500
<SALES> 54,852
<TOTAL-REVENUES> 54,852
<CGS> 46,249
<TOTAL-COSTS> 2,228
<OTHER-EXPENSES> 36
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (444)
<INCOME-PRETAX> 5,967
<INCOME-TAX> 1,074
<INCOME-CONTINUING> 4,893
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,893
<EPS-BASIC> 0.36
<EPS-DILUTED> 0.35
</TABLE>
