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 Quarter Ended June 30, 1998 Commission File Number 0-6611
SIMPSON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1225111
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
47603 Halyard Drive, Plymouth, Michigan 48170-2429
(Address of principal executive offices) (Zip Code)
(734)207-6200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
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
At July 31, 1998 there were 18,339,120 outstanding shares of the registrant's
common stock, $1.00 par value each.
<PAGE>
<PAGE>
Consolidated Balance Sheets
(In thousands)
June 30, 1998 and December 31, 1997
June 30 Dec. 31
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 3,553 $ 8,235
Accounts receivable 73,257 66,055
Inventories 20,894 19,827
Customer tooling in process 3,844 7,888
Prepaid expenses and other current assets 11,597 12,689
Total Current Assets 113,145 114,694
Property, Plant and Equipment
Cost 321,374 313,499
Less Allowance 149,258 139,353
Total Property, Plant and Equipment 172,116 174,146
Intangible Assets - net 52,864 49,951
Other Assets 3,325 2,757
$341,450 $341,548
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installment of long-term debt 2,829 $ 3,579
Accounts payable 46,745 45,803
Compensation and amounts withheld 10,995 11,350
Taxes, other than income taxes 2,305 3,072
Other current liabilities 5,902 14,524
Total Current Liabilities 68,776 78,328
Long-term debt, excluding current
installment 117,573 118,564
Accrued Retirement Benefits and Other 16,413 14,663
Deferred Income Taxes 12,686 12,121
Shareholders' Equity 126,002 117,872
$341,450 $341,548
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Periods Ended June 30, 1998 and 1997
<TABLE>
<S> <C> <C> <C> <C>
Six Months Three Months
1998 1997 1998 1997
Net sales $254,260 $216,148 $128,704 $110,274
Costs and expenses:
Cost of products sold 225,781 192,292 113,848 97,234
Administrative and selling 6,462 6,223 3,417 3,191
Amortization 940 - 482 -
233,183 198,515 117,747 100,425
Operating Earnings 21,077 17,633 10,957 9,849
Investment and other income, net (325) 526 (252) 107
Interest expense (4,945) (2,717) (2,502) (1,424)
Earnings Before Income Taxes 15,807 15,442 8,203 8,532
Income taxes 5,216 5,637 2,517 3,114
Net Earnings $10,591 $ 9,805 $ 5,686 $ 5,418
Comprehensive Income - net $ 9,273 $ 9,327 $ 4,764 $ 5,081
Basic Earnings Per Share $0.58 $0.54 $0.31 $0.30
Diluted Earnings Per Share $0.58 $0.54 $0.31 $0.30
Cash dividends per share $0.20 $0.20 $0.10 $0.10
Average number of common
equivalent shares:
Basic 18,297,418 18,116,990 18,415,792 18,133,025
Diluted 18,418,755 18,173,434 18,549,620 18,183,959
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Six Months Ended June 30, 1998 and 1997
1998 1997
OPERATING ACTIVITIES
Net earnings $10,591 $ 9,805
Depreciation 13,072 10,556
Provision for deferred income taxes 565 598
Amortization of restricted stock 250 163
(Gain) loss on disposition of assets 158 (85)
Changes in operating assets and
liabilities, net of effects of
acquisition of business (11,039) (11,370)
Cash Provided By Operating Activities 13,597 9,667
INVESTING ACTIVITIES
Acquisition of business, net of cash
acquired - (74,388)
Capital expenditures (9,291) (17,699)
Proceeds from disposal of property
and equipment 375 206
Cash Used In Investing Activities (8,916) (91,881)
FINANCING ACTIVITIES
Cash dividends paid (3,664) (3,626)
Notes Payable, net (1,212)
Proceeds (repayments) of
long-term debt, net (2,751) 58,211
Cash provided by stock
transactions, net (745) -
Cash Provided From (Used In)
Financing Activities (8,372) 54,585
Effect of foreign currency exchange
rate changes (991) (353)
Increase (Decrease)In Cash and
Cash Equivalents (4,682) (27,982)
Cash and cash equivalents at
beginning of period 8,235 28,902
Cash and Cash Equivalents at
End of Period $ 3,553 $ 920
Supplemental Disclosures
Cash paid during the year for:
Interest $ 4,803 $ 2,590
Income Taxes 5,992 4,207
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
ITEM 2: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Significant Accounting Principles
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for the period
ended June 30, 1998 are not necessarily indicative of the results to be
expected for the year ending December 31, 1998.
Note 2. Stahl International, Inc. Acquisition
On April 1, 1998, the Company purchased Stahl International, Inc. ("Stahl")
for $3.7 million. Stahl, located in Memphis, Tennessee, manufactures torsional
vibration dampers and flywheels for all types of diesel engines. The
acquisition was accounted for as a purchase transaction. The purchase cost of
$3.7 million has been allocated to assets and liabilities acquired based upon
their estimated fair values at the acquisition date. The excess of purchase
price over assets acquired (Goodwill) of $2.9 million is being amortized over
40 years.
Note 3. Lines of Credit
As discussed in Simpson's 1997 Annual Report on Form 10-K, the Company
maintains credit lines that allow for borrowings of up to $25 million under a
five-year agreement and up to $25 million under a 364-day agreement. At June
30, 1998 there were no borrowings outstanding under the 364-day agreement and
there was $15 million outstanding under the five-year agreement. In June of
1998 the 364-day line of credit was renewed. In addition, the restrictive
covenants for both the 364-day and the five-year agreements were renegotiated
during June 1998.
The borrowings under the five-year agreement are classified as long-term based
on management's intent and ability to maintain this level of borrowing for a
period in excess of one year.
<PAGE>
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net sales reached a record high in the second quarter of 1998, increasing
16.7% or $18,430,000 from the second quarter of 1997. Year-to-date sales
increased 17.6% or $38,112,000 from the first half of 1997. The increased
sales for both periods are primarily attributable to the inclusion of the VA
Business acquisition in the third quarter of 1997. In addition, the General
Motors strike reduced sales in both periods by approximately $3,500,000. The
strike effect was offset by increased sales to heavy-duty customers.
Cost of products sold as a percent of sales for the second quarter of 1998
compared to the second quarter of 1997 increased marginally to 88.5% from
88.2%. Cost of products sold as a percent of sales for the first six months
of 1998 compared to the first half of 1997 decreased marginally to 88.8% from
89.0%.
Administrative and selling costs remained at a relatively constant level for
the second quarter, decreasing slightly from 2.9% of sales in the 1997 second
quarter to 2.7% of sales in the 1998 second quarter. The decrease from 2.9%
for the six months ending June 30, 1997 to 2.5% for the six months ending June
30, 1998 is partially due to the timing of expenses and partially due to
increased efficiencies due to volume leveraging. Interest expense for the six-
and three-month periods ending June 30, 1998 increased over the same periods
in 1997 due to the additional debt used to fund the Holset VA acquisition
which occurred in June of 1997.
As discussed in Simpson's 1997 Annual Report on Form 10-K, the Company
maintains credit lines that allow for borrowings of up to $25 million under a
five-year agreement and up to $25 million under a 364-day agreement. At June
30, 1998 there were no borrowings outstanding under the 364-day agreement and
there was $15 million outstanding under the five-year agreement. In June of
1998 the 364-day line of credit was renewed. In addition, the restrictive
covenants for both the 364-day and the five-year agreements were renegotiated
during June 1998.
The borrowings under the five-year agreement are classified as long-term based
on management's intent and ability to maintain this level of borrowing for a
period in excess of one year.
Cash flow from operations was $13.6 million for the first half of 1998 up from
$9.7 million in 1997. Net cash used in investing activities was $8.9 million
and $91.9 million for the six months ending June 30, 1997 and 1996,
respectively. The primary reason for the decrease in investing activities was
the Holset VA acquisition that occurred during the second quarter of 1997.
The Company's investment in production capacity for new automotive, light
truck and diesel engine programs also decreased from $17.7 million in 1997 to
$9.3 million in 1998. The decrease was primarily due to the new program
launches occurring in 1997.
Net cash used in investing activities and dividends paid during the six months
ended June 30, 1998, exceeded cash flows from operations and net proceeds from
borrowings, discussed above, resulting in a reduction of $4.7 million in cash
and cash equivalents. The Company believes that cash flows from operations
and available credit facilities will be sufficient to meet its debt service
requirements, projected capital expenditures and working capital requirements.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 133 "Accounting for Derivative Instruments and Hedging
Activities which becomes effective for fiscal quarters of fiscal years
beginning after June 15, 1999. The Company expects to adopt this Standard
during 1999, but does not believe that it will have a material impact upon
future financial statements.
Certain statements in this report may be "forward-looking statements" under
the Securities Exchange Act of 1934. Statements regarding future operating
performance, new programs expected to be launched and other future prospects
and developments are based on current expectations and involve certain risks
and uncertainties that could cause the actual results and developments to
differ materially from the forward-looking statements. Potential risks and
uncertainties include such factors as demand for the Company's products,
pricing and other actions taken by competitors, and general economic
conditions affecting the markets served by the Company.
The Company will be required to modify or replace substantially all of the
computer systems that it uses to prepare for the year 2000. The Company has
completed an assessment of the costs of making its computer systems Year 2000
compliant and has determined that such costs will not be material. The
Company expects to complete the required changes by January 1, 1999.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report.
Exhibit No. Description
10.24 Amendment to Credit Agreement, dated June 16, 1998,
among Simpson Industries Inc. and certain other
Borrowers, certain Commercial Lending Institutions,
ABN AMRO Bank N.V. and Comerica Bank
10.25 Amendment to Credit Agreement, dated June 16, 1998,
among Simpson Industries Inc. and certain other
Borrowers, certain Commercial Lending Institutions,
ABN AMRO Bank N.V. and Comerica Bank
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1998.
<PAGE>
<PAGE>
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.
SIMPSON INDUSTRIES, INC.
Registrant
August 10, 1998 By: /S/VINOD M. KHILNANI
Vinod M. Khilnani
Vice President and
Chief Financial Officer
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
10.24 Amendment to Credit Agreement, dated June 16, 1998,
among Simpson Industries Inc. and certain other
Borrowers, certain Commercial Lending Institutions,
ABN AMRO Bank N.V. and Comerica Bank
10.25 Amendment to Credit Agreement, dated June 16, 1998,
among Simpson Industries Inc. and certain other
Borrowers, certain Commercial Lending Institutions,
ABN AMRO Bank N.V. and Comerica Bank
11 Computation of Earnings Per Share
27 Financial Data Schedule
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (Five Year), dated as of June
16, 1998 (this "Amendment"), amends the Credit Agreement (Five Year), dated as
of June 17, 1997 (the "Credit Agreement"), among SIMPSON INDUSTRIES, INC., a
Michigan corporation ("Simpson"), certain subsidiaries of Simpson (together
with Simpson, the "Borrowers"), the various financial institutions parties
thereto (collectively, the "Lenders") and ABN AMRO BANK N.V, as agent (the
"Agent") for the Lenders. Terms defined in the Credit Agreement are, unless
otherwise defined herein or the context otherwise requires, used herein as
defined therein.
WHEREAS, the parties hereto have entered into the Credit Agreement,
which provides for the Lenders to extend certain credit facilities to the
Borrowers from time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1. AMENDMENTS. Effective as of June 16, 1998, the Credit
Agreement and the Swing Note shall be amended in accordance with Sections 1.1
through 1.9 below.
SECTION 1.1. Agreement is hereby amended to state in its entirety as
follows:
"SECTION 2.7. Swing Line Commitment. From time to time on any
Business Day occurring prior to the Commitment Termination Date, the
Swing Lender agrees to make loans to Simpson (each such loan, a "Swing
Loan") in an aggregate principal amount when added to the "Swing Loans"
under the Companion Agreement not to exceed $15,000,000. All Swing
Loans shall be in Dollars. On the terms and subject to the conditions
hereof, Simpson may from time to time borrow, prepay and reborrow Swing
Loans."
SECTION 1.2. Liens. Section 8.2.2 of the Credit Agreement is hereby
amended to state in its entirety as follows:
"SECTION 8.2.2. Liens. Simpson will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any asset, whether now owned or hereafter acquired, except:
(a) Liens existing on the date of this Agreement and identified
on Item 8.2.6(a)(iii) ("Ongoing Indebtedness") of the Disclosure
Schedule, securing Indebtedness outstanding on the date of this
Agreement described in said Item;
(b) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(c) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(d) Liens incurred in the ordinary course of business other than
in connection with borrowed money;
(e) judgment Liens in existence less than 15 days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible)
by insurance maintained with responsible insurance companies;
(f) Liens in connection with Capitalized Lease Liabilities in
amounts permitted hereunder;
(g) Liens on newly acquired assets of, and stock of, special
purpose entities; and
(h) Liens on assets securing Indebtedness incurred in connection
with the securitization of receivables in an amount when added to
Indebtedness secured by other Liens (other than Liens permitted under
Sections 8.2.2(b) and (c)) permitted under this Section 8.2.2 and
Indebtedness of Subsidiaries of Simpson shall not exceed 10% of the sum
of the total Indebtedness of Simpson and its Subsidiaries and the Net
Worth of Simpson and its Subsidiaries."
SECTION 1.3. Investments. Section 8.2.5 of the Credit Agreement is
hereby deleted and intentionally left blank.
SECTION 1.4. Indebtedness. Section 8.2.6 of the Credit Agreement is
hereby amended to state in its entirety as follows:
"Section 8.2.6. Indebtedness. () The Borrowers will not, and
will not permit any of their Subsidiaries to, create, incur, assume or
suffer to exist or otherwise become or be liable in respect of any
Indebtedness at any time outstanding in excess of 3.5 times EBITDA (as
of the most recent Fiscal Quarter end.)
(a) Simpson shall not permit any Indebtedness of any of its
Subsidiaries to exist except:
(i) Indebtedness to Simpson or another Subsidiary; and
(ii) Indebtedness in an amount which, when added to the
amount of Indebtedness of Simpson subject to Liens (other than
Liens described in Sections 8.2.2(b) and (c)), shall not exceed
10% of the sum of the total Indebtedness of Simpson and its
Subsidiaries and the Net Worth of Simpson and its Subsidiaries."
SECTION 1.5. Subordinated Debt. Section 8.2.7 of the Credit Agreement
is hereby amended to state in its entirety as follows:
"SECTION 8.2.7. Subordinated Debt. The Borrower will not incur,
or permit to exist, any Subordinated Debt with respect to which
principal payments are required to be made prior to the Stated Maturity
Date and will not make any prepayments on any Subordinated Debt."
SECTION 1.6. Capital Expenditures. Section 8.2.8 of the Credit
Agreement is hereby deleted and intentionally left blank.
SECTION 1.7. Sale/Leaseback. Section 8.2.10 of the Credit Agreement is
hereby amended to state in its entirety as follows:
"SECTION 8.2.10. Sale/Leaseback. The Borrowers will not, and
will not permit any of their Subsidiaries to, sell or otherwise transfer
any assets with the intent to lease such assets as lessee other than the
transfer of Simpson's corporate headquarters and technical center at
47603 Halyard Drive, Plymouth, Michigan 48170."
SECTION 1.8. Asset Dispositions. Section 8.2.12 of the Credit Agreement
is hereby amended to state in its entirety as follows:
"SECTION 8.2.12 Asset Dispositions, etc. The Borrowers will not,
and will not permit any of their Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or other
rights with respect to, all or any substantial part of their assets
(including accounts receivable and capital stock of Subsidiaries) to any
Person, unless
(a) such sale, transfer, lease, contribution or conveyance is in
the ordinary course of its business; or
(b) the net book value of such assets, together with the net
book value of all other assets sold, transferred, leased,
contributed or conveyed otherwise than in the ordinary course of
business by the Borrowers or any of their Subsidiaries pursuant to
this clause in any Fiscal Year, does not exceed 10% of the
consolidated total assets of Simpson and its Subsidiaries in
addition to any transfer in connection with a sale and leaseback
permitted pursuant to Section 8.2.10."
SECTION 1.9. Swing Note. The Swing Note is hereby amended to delete
the numbers "$10,000,000" and "Ten Million Dollars" wherever they appear and
substitute therefor the numbers "$15,000,00" and "Fifteen Million Dollars",
respectively.
SECTION 2. CONDITIONS PRECEDENT. This Amendment shall become effective
when each of the conditions precedent set forth in this Section 2 shall have
been satisfied, and notice thereof shall have been given by the Agent to
Simpson and the Lenders.
SECTION 2.1. Receipt of Documents. The Agent shall have received all
of the following documents duly executed, dated the date hereof or such other
date as shall be acceptable to the Agent, and in form and substance
satisfactory to the Agent:
(a) Amendment. This Amendment, duly executed by Simpson, the
Agent and the Required Lenders.
(b) Secretary's Certificate. A certificate of the secretary or
an assistant secretary of Simpson, as to (i) resolutions of the Board of
Directors of Simpson then in full force and effect authorizing the
execution, delivery and performance of this Amendment and each other
document described herein, and (ii) the incumbency and signatures of
those officers of Simpson authorized to act with respect to this
Amendment and each other document described herein.
SECTION 2.2. Compliance with Warranties, No Default, etc. Both before
and after giving effect to the effectiveness of this Amendment, the following
statements by Simpson shall be true and correct (and Simpson, by its execution
of this Amendment, hereby represents and warrants to the Agent and each Lender
that such statements are true and correct as at such times):
(a) the representations and warranties set forth in Article VII
of the Credit Agreement shall be true and correct with the same effect
as if then made (unless stated to relate solely to an earlier date, in
which case such representations and warranties shall be true and correct
as of such earlier date); and
(b) no Default shall have then occurred and be continuing.
SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the Lenders and
the Agent to enter into this Amendment, Simpson hereby represents and warrants
to the Agent and each Lender as follows:
SECTION 3.1. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by Simpson of this Amendment are within Simpson's
corporate powers, have been duly authorized by all necessary corporate action,
and do not
(a) contravene Simpson's Organic Documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting Simpson; or
(c) result in, or require the creation or imposition of, any
Lien on any of Simpson's properties.
SECTION 3.2. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due
execution, delivery or performance by Simpson of this Amendment.
SECTION 3.3. Validity, etc. This Amendment constitutes the legal,
valid and binding obligation of Simpson enforceable in accordance with its
terms.
SECTION 4. MISCELLANEOUS.
SECTION 4.1. Continuing Effectiveness, etc. This Amendment shall be
deemed to be an amendment to the Credit Agreement, and the Credit Agreement,
as amended hereby, shall remain in full force and effect and is hereby
ratified, approved and confirmed in each and every respect. After the
effectiveness of this Amendment in accordance with its terms, all references
to the Credit Agreement in the Loan Documents or in any other document,
instrument, agreement or writing shall be deemed to refer to the Credit
Agreement as amended hereby.
SECTION 4.2. Payment of Costs and Expenses. Simpson agrees to pay on
demand all expenses of the Agent (including the fees and out-of-pocket
expenses of counsel to the Agent) in connection with the negotiation,
preparation, execution and delivery of this Amendment.
SECTION 4.3. Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such provision
and such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 4.4. Headings. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or any provisions hereof.
SECTION 4.5. Execution in Counterparts. This Amendment may be executed
by the parties hereto in several counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but one and the
same agreement.
SECTION 4.6. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS.
SECTION 4.7. Successors and Assigns. This Amendment shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
SIMPSON INDUSTRIES, INC.
By______________________________
Title:__________________________
ABN AMRO BANK N.V., Chicago Branch,
individually and as Agent
By______________________________
Title:__________________________
By______________________________
Title:__________________________
COMERICA BANK,
individually and as Documentation Agent
By______________________________
Title:__________________________
HARRIS TRUST AND SAVINGS BANK
By______________________________
Title:__________________________
THE BANK OF NEW YORK
By______________________________
Title:__________________________
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (364 Day), dated as of June 16,
1998 (this "Amendment"), amends the Credit Agreement (364 Day), dated as of
June 17, 1997 (the "Credit Agreement"), among SIMPSON INDUSTRIES, INC., a
Michigan corporation ("Simpson"), certain subsidiaries of Simpson (together
with Simpson, the "Borrowers"), the various financial institutions parties
thereto (collectively, the "Lenders") and ABN AMRO BANK N.V, as agent (the
"Agent") for the Lenders. Terms defined in the Credit Agreement are, unless
otherwise defined herein or the context otherwise requires, used herein as
defined therein.
WHEREAS, the parties hereto have entered into the Credit Agreement,
which provides for the Lenders to extend certain credit facilities to the
Borrowers from time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1. AMENDMENTS. Effective as of June 16, 1998, the Credit
Agreement and the Swing Note shall be amended in accordance with Sections 1.1
through 1.10 below.
SECTION a. Stated Maturity Date. The definition of "Stated Maturity
Date" in Section 1.1 of the Credit Agreement is hereby amended by the deletion
of the date "June 16, 1998" and the substitution therefor of the date "June
15, 1999."
SECTION b. Swing Line. Section 2.7 of the Credit Agreement is hereby
amended to state in its entirety as follows:
"SECTION 2.7. Swing Line Commitment. From time to time on
any Business Day occurring prior to the Commitment Termination
Date, the Swing Lender agrees to make loans to Simpson (each such
loan, a "Swing Loan") in an aggregate principal amount when added
to the "Swing Loans" under the Companion Agreement not to exceed
$15,000,000. All Swing Loans shall be in Dollars. On the terms
and subject to the conditions hereof, Simpson may from time to
time borrow, prepay and reborrow Swing Loans."
SECTION c. Liens. Section 8.2.2 of the Credit Agreement is hereby
amended to state in its entirety as follows:
"SECTION 8.2.2. Liens. Simpson will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer
to exist any Lien upon any asset, whether now owned or hereafter
acquired, except:
i. Liens existing on the date of this Agreement and
identified on Item 8.2.6(a)(iii) ("Ongoing Indebtedness") of the
Disclosure Schedule, securing Indebtedness outstanding on the date
of this Agreement described in said Item;
ii. Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
iii. Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of
business for sums not overdue or being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its
books;
iv. Liens incurred in the ordinary course of business
other than in connection with borrowed money;
v. judgment Liens in existence less than 15 days after
the entry thereof or with respect to which execution has been
stayed or the payment of which is covered in full (subject to a
customary deductible) by insurance maintained with responsible
insurance companies;
vi. Liens in connection with Capitalized Lease Liabilities
in amounts permitted hereunder;
vii. Liens on newly acquired assets of, and stock of,
special purpose entities; and
viii. Liens on assets securing Indebtedness incurred in
connection with the securitization of receivables in an amount
when added to Indebtedness secured by other Liens (other than
Liens permitted under Sections 8.2.2(b) and (c)) permitted under
this Section 8.2.2 and Indebtedness of Subsidiaries of Simpson
shall not exceed 10% of the sum of the total Indebtedness of
Simpson and its Subsidiaries and the Net Worth of Simpson and its
Subsidiaries."
SECTION d. Investments. Section 8.2.5 of the Credit Agreement is
hereby deleted and intentionally left blank.
SECTION e. Indebtedness. Section 8.2.6 of the Credit Agreement is
hereby amended to state in its entirety as follows:
"Section 8.2.6. Indebtedness.
i. The Borrowers will not, and will not permit any of
their Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness at
any time outstanding in excess of 3.5 times EBITDA (as of the most
recent Fiscal Quarter end.)
ii. Simpson shall not permit any Indebtedness of any of
its Subsidiaries to exist except:
1) Indebtedness to Simpson or another Subsidiary; and
2) Indebtedness in an amount which, when added to the
amount of Indebtedness of Simpson subject to Liens
(other than Liens described in Sections 8.2.2(b) and
(c)), shall not exceed 10% of the sum of the total
Indebtedness of Simpson and its Subsidiaries and the
Net Worth of Simpson and its Subsidiaries."
SECTION f. Subordinated Debt. Section 8.2.7 of the Credit Agreement is
hereby amended to state in its entirety as follows:
"SECTION 8.2.7. Subordinated Debt. The Borrower will not
incur, or permit to exist, any Subordinated Debt with respect to
which principal payments are required to be made prior to the
Stated Maturity Date and will not make any prepayments on any
Subordinated Debt."
SECTION g. Capital Expenditures. Section 8.2.8 of the Credit Agreement
is hereby deleted and intentionally left blank.
SECTION h. Sale/Leaseback. Section 8.2.10 of the Credit Agreement is
hereby amended to state in its entirety as follows:
"SECTION 8.2.10. Sale/Leaseback. The Borrowers will not,
and will not permit any of their Subsidiaries to, sell or
otherwise transfer any assets with the intent to lease such assets
as lessee other than the transfer of Simpson's corporate
headquarters and technical center at 47603 Halyard Drive,
Plymouth, Michigan 48170."
SECTION i. Asset Dispositions. Section 8.2.12 of the Credit Agreement
is hereby amended to state in its entirety as follows:
"SECTION 8.2.12 Asset Dispositions, etc. The Borrowers
will not, and will not permit any of their Subsidiaries to, sell,
transfer, lease, contribute or otherwise convey, or grant options,
warrants or other rights with respect to, all or any substantial
part of their assets (including accounts receivable and capital
stock of Subsidiaries) to any Person, unless
i. such sale, transfer, lease, contribution or conveyance
is in the ordinary course of its business; or
ii. the net book value of such assets, together with the
net book value of all other assets sold, transferred,
leased, contributed or conveyed otherwise than in the
ordinary course of business by the Borrowers or any of their
Subsidiaries pursuant to this clause in any Fiscal Year,
does not exceed 10% of the consolidated total assets of
Simpson and its Subsidiaries in addition to any transfer in
connection with a sale and leaseback permitted pursuant to
Section 8.2.10."
SECTION j. Swing Note. The Swing Note is hereby amended to delete the
numbers "$10,000,000" and "Ten Million Dollars" wherever they appear the
substitute therefor the numbers "$15,000,00" and "Fifteen Million Dollars",
respectively.
SECTION 2. CONDITIONS PRECEDENT. This Amendment shall become effective
when each of the conditions precedent set forth in this Section 2 shall have
been satisfied, and notice thereof shall have been given by the Agent to
Simpson and the Lenders.
SECTION a. Receipt of Documents. The Agent shall have received all
of the following documents duly executed, dated the date hereof or such other
date as shall be acceptable to the Agent, and in form and substance
satisfactory to the Agent:
i. Amendment. This Amendment, duly executed by Simpson,
the Agent and the Required Lenders.
ii. Secretary's Certificate. A certificate of the
secretary or an assistant secretary of Simpson, as to (i)
resolutions of the Board of Directors of Simpson then in full
force and effect authorizing the execution, delivery and
performance of this Amendment and each other document described
herein, and (ii) the incumbency and signatures of those officers
of Simpson authorized to act with respect to this Amendment and
each other document described herein.
SECTION b. Compliance with Warranties, No Default, etc. Both before
and after giving effect to the effectiveness of this Amendment, the following
statements by Simpson shall be true and correct (and Simpson, by its execution
of this Amendment, hereby represents and warrants to the Agent and each Lender
that such statements are true and correct as at such times):
i. the representations and warranties set forth in
Article VII of the Credit Agreement shall be true and correct with
the same effect as if then made (unless stated to relate solely to
an earlier date, in which case such representations and warranties
shall be true and correct as of such earlier date); and
ii. no Default shall have then occurred and be continuing.
SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the Lenders and
the Agent to enter into this Amendment, Simpson hereby represents and warrants
to the Agent and each Lender as follows:
SECTION a. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by Simpson of this Amendment are
within Simpson's corporate powers, have been duly authorized by all
necessary corporate action, and do not
i. contravene Simpson's Organic Documents;
ii. contravene any contractual restriction, law or
governmental regulation or court decree or order binding on
or affecting Simpson; or
iii. result in, or require the creation or imposition of,
any Lien on any of Simpson's properties.
SECTION b. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due
execution, delivery or performance by Simpson of this Amendment.
SECTION c. Validity, etc. This Amendment constitutes the legal,
valid and binding obligation of Simpson enforceable in accordance with its
terms.
SECTION 4. MISCELLANEOUS.
SECTION a. Continuing Effectiveness, etc. This Amendment shall be
deemed to be an amendment to the Credit Agreement, and the Credit Agreement,
as amended hereby, shall remain in full force and effect and is hereby
ratified, approved and confirmed in each and every respect. After the
effectiveness of this Amendment in accordance with its terms, all references
to the Credit Agreement in the Loan Documents or in any other document,
instrument, agreement or writing shall be deemed to refer to the Credit
Agreement as amended hereby.
SECTION b. Payment of Costs and Expenses. Simpson agrees to pay on
demand all expenses of the Agent (including the fees and out-of-pocket
expenses of counsel to the Agent) in connection with the negotiation,
preparation, execution and delivery of this Amendment.
SECTION c. Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such provision
and such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION d. Headings. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or any provisions hereof.
SECTION e. Execution in Counterparts. This Amendment may be executed
by the parties hereto in several counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but one and the
same agreement.
SECTION f. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS.
SECTION g. Successors and Assigns. This Amendment shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
SIMPSON INDUSTRIES, INC.
By______________________________
Title:__________________________
ABN AMRO BANK N.V., Chicago Branch,
individually and as Agent
By______________________________
Title:__________________________
By______________________________
Title:__________________________
COMERICA BANK,
individually and as Documentation Agent
By______________________________
Title:__________________________
HARRIS TRUST AND SAVINGS BANK
By______________________________
Title:__________________________
THE BANK OF NEW YORK
By______________________________
Title:__________________________
<TABLE>
<S> <C> <C> <C> <C>
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
Basic:
Average shares
outstanding 18,297,418 18,116,990 18,415,792 18,133,025
Net earnings applicable
to common stock and
common stock
equivalents $10,591,000 $9,805,000 $5,686,000 $5,418,000
Basic earnings per share $0.58 $0.54 $0.31 $0.30
Diluted:
Average shares
outstanding 18,297,418 18,116,990 18,415,792 18,133,025
Net effect of dilutive
stock options based on
treasury stock method
using the average
market price to
common stock and
common stock
equivalents 121,337 56,444 133,828 50,934
Average number of common
shares and common
equivalent shares 18,418,755 18,173,434 18,549,620 18,183,959
Net earnings applicable
to common stock and
common stock
equivalents $10,591,000 $9,805,000 $5,686,000 $5,418,000
Diluted earnings
per share $0.58 $0.54 $0.31 $0.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD ENDING JUNE 30,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<CASH> 3,553
<SECURITIES> 0
<RECEIVABLES> 73,257
<ALLOWANCES> 0
<INVENTORY> 20,894
<CURRENT-ASSETS> 113,145
<PP&E> 321,374
<DEPRECIATION> 149,258
<TOTAL-ASSETS> 341,450
<CURRENT-LIABILITIES> 68,776
<BONDS> 0
0
0
<COMMON> 18,356
<OTHER-SE> 107,646
<TOTAL-LIABILITY-AND-EQUITY> 341,450
<SALES> 254,260
<TOTAL-REVENUES> 253,935
<CGS> 225,781
<TOTAL-COSTS> 7,402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,945
<INCOME-PRETAX> 15,807
<INCOME-TAX> 5,216
<INCOME-CONTINUING> 10,591
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,591
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
