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 June 30, 2000
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Commission File Number 0-23539
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LADISH CO., INC.
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(Exact name of registrant as specified in its charter)
Wisconsin 31-1145953
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(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 June 30, 2000
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Common Stock, $0.01 Par Value 12,896,868
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PART I - FINANCIAL INFORMATION
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<TABLE>
LADISH CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
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2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales .........................................$ 57,414 $ 44,771 $ 112,266 $ 87,527
Cost of sales ......................................... 49,041 39,756 95,290 79,074
----------- ----------- ----------- -----------
Gross income on sales......................... 8,373 5,015 16,976 8,453
Selling, general and administrative expenses........... 2,716 1,922 4,944 3,579
----------- ----------- ----------- -----------
Income from operations........................ 5,657 3,093 12,032 4,874
Other income (expense):
Interest expense.................................. (530) (181) (974) (342)
Other, net........................................ 50 61 86 170
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Income before provision for income taxes...... 5,177 2,973 11,144 4,702
Provision for income taxes............................. 932 445 2,006 705
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Net income....................................$ 4,245 $ 2,528 $ 9,138 $ 3,997
=========== =========== =========== ===========
Basic earnings per share...............................$ 0.33 $ 0.18 $ 0.69 $ 0.29
Diluted earnings per share.............................$ 0.31 $ 0.18 $ 0.66 $ 0.27
Basic weighted average shares outstanding.............. 13,035,403 13,681,544 13,250,103 13,776,189
Diluted weighted average shares outstanding............ 13,675,514 14,401,338 13,845,543 14,804,473
</TABLE>
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<TABLE>
LADISH CO., INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share and Per Share Data)
<CAPTION>
June 30, December 31,
Assets 2000 1999
------ ------------ -----------
Current assets:
<S> <C> <C>
Cash and cash equivalents.........................................................$ 899 $ 1,008
Accounts receivable, less allowance of $340 and $300, respectively................ 35,879 25,222
Inventories....................................................................... 54,122 42,427
Prepaid expenses and other current assets......................................... 528 238
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Total current assets.......................................................... 91,428 68,895
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Property, plant and equipment:
Land and improvements............................................................. 5,784 3,855
Buildings and improvements........................................................ 17,040 15,912
Machinery and equipment........................................................... 128,684 120,526
Construction in progress.......................................................... 9,523 5,562
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161,031 145,855
Less - accumulated depreciation................................................... (69,820) (62,648)
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Net property, plant and equipment............................................. 91,211 83,207
Other assets ........................................................................ 16,591 7,481
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Total assets..................................................................$ 199,230 $ 159,583
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Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Senior debt.......................................................................$ 8,000 $ 0
Accounts payable.................................................................. 25,446 12,548
Accrued liabilities:
Pensions...................................................................... 481 504
Postretirement benefits....................................................... 5,551 5,551
Wages and salaries............................................................ 5,037 3,107
Taxes, other than income taxes................................................ 212 227
Interest...................................................................... 248 54
Profit sharing................................................................ 1,385 958
Paid progress billings........................................................ 5,043 5,556
Other......................................................................... 2,829 1,383
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Total current liabilities................................................ 54,232 29,888
Long term liabilities:
Senior debt, less current portion................................................. 14,000 0
Pensions ......................................................................... 11,014 14,692
Postretirement benefits........................................................... 39,698 40,929
Other noncurrent liabilities...................................................... 605 607
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Total liabilities........................................................ 119,549 86,116
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Stockholders' equity:
Common stock-authorized 100,000,000, issued and outstanding 14,318,406 shares
of $.01 par value as of June 30, 2000 and December 31, 1999..................... 143 143
Additional paid-in capital........................................................ 82,152 80,293
(Accumulated deficit) retained earnings........................................... 7,379 (1,759)
Treasury stock, 1,421,538 shares and 770,672 shares of common stock
at cost as of June 30, 2000 and December 31, 1999, respectively................. (9,993) (5,210)
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Total stockholders' equity............................................... 79,681 73,467
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Total liabilities and stockholders' equity...............................$ 199,230 $ 159,583
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</TABLE>
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<TABLE>
LADISH CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<CAPTION>
For the Six Months
Ended June 30,
-------------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income........................................................................$ 9,138 $ 3,997
Adjustments to reconcile net income to net cash
provided from (used for) operating activities:
Depreciation.................................................................. 7,180 5,933
Amortization.................................................................. 404 189
Reduction in valuation allowance.............................................. 1,887 599
Change in assets and liabilities:
Accounts receivable........................................................... (7,063) 11,766
Inventories................................................................... (6,490) (3,271)
Other assets.................................................................. (486) (460)
Accounts payable and accrued liabilities...................................... 13,209 (4,224)
Other liabilities............................................................. (4,911) (3,310)
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Net cash provided from operating activities.............................. 12,868 11,219
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment........................................ (4,917) (4,635)
Proceeds from sale of property, plant and equipment............................... 1 10
Acquisition of business........................................................... (25,250) (11,533)
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Net cash used for investing activities................................... (30,166) (16,158)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior debt......................................................... 22,000 5,882
Repurchase of common stock........................................................ (4,783) (2,363)
Retirement of warrants............................................................ (28) (3,253)
Exercise of warrants.............................................................. 0 210
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Net cash provided from financing activities.............................. 17,189 476
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................... (109) (4,463)
CASH AND CASH EQUIVALENTS, beginning of period......................................... 1,008 5,517
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CASH AND CASH EQUIVALENTS, end of period...............................................$ 899 $ 1,054
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</TABLE>
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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 June 30, 2000 and December 31, 1999 and its results of operations
and cash flows for the six months ended June 30, 2000 and June 30, 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 six-month period ended June 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
(2) Inventories
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Inventories consisted of:
June 30, December 31,
2000 1999
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Raw material and supplies $ 17,454 $ 15,214
Work-in-process and finished goods 39,031 29,501
Less progress payments (2,363) (2,288)
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Total inventories $ 54,122 $ 42,427
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(3) Interest and Income Tax Payments
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For the Six Months
Ended June 30,
2000 1999
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Interest $ 785 $ 337
Income taxes 259 356
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(4) Cash and Cash Equivalents
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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
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Revenue is recognized when products are shipped.
(6) Earnings Per Share
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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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MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND
CHANGES IN FINANCIAL POSITION
RESULTS OF OPERATIONS
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Second Quarter 2000 Compared to Second Quarter 1999
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Net sales for the three months ended June 30, 2000 were $57.41 million compared
to $44.77 for the same period in 1999. The 28% increase in sales for the second
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". Gross profit increased to 14.6% of sales in contrast to
11.2% of sales in the second quarter of 1999 as a result of improved absorption
of fixed costs by the increased level of sales. Energy cost increases in the
second quarter of 2000 had a negative impact on gross profits.
Selling, general and administrative expenses, as a percentage of sales, were
4.7% for the second quarter of 2000 compared to 4.3% for the same period in
1999. The increase in SG&A expenses for the period was largely attributable to
increased foreign sales and the PCT operations.
Interest expense for the period was $0.530 million in contrast to $0.181 million
in 1999. The increase in interest expense was due to higher loan balances of
senior debt resulting from the PCT purchase and stock buyback program. During
the second quarter of 2000, the Company's senior debt had an interest rate equal
to the LIBOR rate plus 0.80% per annum (reduced from commercial paper plus 1.0%
per annum as of June 30, 1999).
The $0.93 million provision for income taxes for 2000 and $0.445 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."
Net income for the second quarter of 2000 was $4.2 million, a 68% improvement
over the same period in 1999. The increase in profitability was due to
incremental sales growth partially offset by higher than anticipated energy
costs.
Six Months 2000 Compared to Six Months 1999
-------------------------------------------
During the first six months of 2000, the Company had net sales of $112.27
million. This represents a 28% increase in sales over the same period in 1999
due to an increase in the jet engine market and the PCT acquisition. Gross
profit at the Company improved to 15.1% of sales in 2000 in comparison to 9.7%
of sales during the first half of 1999.
In the first half of 2000, selling, general and administrative expenses
increased to 4.4% of sales in comparison to 4.1% of sales for the equivalent
period in 1999.
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Interest expense through the first half of 2000 was $0.974 million in contrast
to $0.342 million in 1999. This increase in interest expense was directly
attributable to an increase in borrowings to fund the PCT acquisition and the
stock buyback program along with higher interest rates during 2000.
As indicated above in the discussion of the second quarter, the $2.0 million tax
provision for the first six months of 2000, compared to $0.7 million for the
same period in 1999, represents the largely non-cash accounting charges
associated with the use of pre-restructuring NOLs.
The first half of 2000 yielded a net income of $9.1 million in contrast to $4.0
million in 1999. This 128% improvement is a reflection of an improved aerospace
market, a strategic acquisition and operating leverage, partially offset by
higher implied tax rates.
Liquidity and Capital Resources
-------------------------------
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 were initially 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.
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%. At June 30, 2000, approximately $45
million was available and undrawn under the New Facility. The balance of the
borrowings under the New Facility as of June 30, 2000 was $22.0 million.
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 504,266 shares, or share
equivalents, of its common stock during
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the second quarter of 2000. As of June 30, 2000, the Company has repurchased
2,181,628 shares, or share equivalents, of its common stock under the Program.
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
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On April 4, 2000, at the annual meeting of the stockholders of the Company, the
stockholders were asked to vote on the election of a new board of directors for
the next year or until their successors are elected. The result of said voting
is as follows:
Individual For Withheld
---------- ---------- --------
Lawrence W. Bianchi 11,782,283 431,871
Charles W. Finkl 11,782,616 431,538
Wayne E. Larsen 11,773,216 440,938
Robert W. Sullivan 11,781,533 432,621
Kerry L. Woody 11,772,716 441,438
In addition, the stockholders were asked to vote on allocating new shares of
common stock to the Company's 1996 Long-Term Incentive Plan. This proposal was
defeated by a vote of 7,311,842 to 4,548,071.
No other matters were submitted to a vote of the stockholders during the period
covered by this report.
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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 in a transaction valued at approximately $25 million. 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
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(a) Exhibit 27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the period covered by this report.
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.
LADISH CO., INC.
Date: July 25, 2000 By: /s/ WAYNE E. LARSEN
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Wayne E. Larsen
Vice President Law/Finance
& Secretary
