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 March 31, 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 April 30, 1998 there were 18,443,218 outstanding shares of the
registrant's common stock, $1.00 par value each.
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Consolidated Balance Sheets
(In thousands)
March 31, 1998 and December 31, 1997
March 31 Dec. 31
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 15,606 $ 8,235
Accounts receivable 80,300 66,055
Inventories 17,927 19,827
Customer tooling in process 4,441 7,888
Prepaid expenses and other current assets 11,037 12,689
Total Current Assets 129,311 114,694
Property, Plant and Equipment
Cost 316,523 313,499
Less Allowance 143,771 139,353
Total Property, Plant and Equipment 172,752 174,146
Intangible Assets - net 49,435 49,951
Other Assets 2,463 2,757
$353,961 $341,548
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 10,000 -
Current installment of long-term debt 3,579 $ 3,579
Accounts payable 50,886 45,803
Compensation and amounts withheld 9,507 11,350
Taxes, other than income taxes 3,505 3,072
Other current liabilities 8,966 14,524
Total Current Liabilities 86,443 78,328
Long-term debt, excluding current
installment 118,468 118,564
Accrued Retirement Benefits and Other 15,574 14,663
Deferred Income Taxes 12,396 12,121
Shareholders' Equity 121,080 117,872
$353,961 $341,548
See accompanying notes to consolidated financial statements.
Consolidated Statements of Operations (Unaudited)
Dollars in thousands, except per share amounts)
Three Months Ended March 31, 1998 and 1997
1998 1997
Net sales $125,556 $105,874
Costs and expenses:
Cost of products sold 111,933 95,058
Administrative and selling 3,045 3,032
Amortization of intangible assets 458 -
115,436 98,090
Operating Earnings 10,120 7,784
Investment and other income, net (73) 41
Interest expense (2,443) (1,293)
Earnings Before Income Taxes 7,604 6,910
Income taxes 2,699 2,523
Net Earnings 4,905 4,387
Comprehensive Income - net $ 4,509 $ 4,246
Basic Earnings Per Share $0.27 $0.24
Diluted Earnings Per Share $0.27 $0.24
Cash dividends per share $0.10 $0.10
Average number of common equivalent shares:
Basic 18,179,043 18,100,954
Diluted 18,287,889 18,162,908
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows (Unaudited)
In thousands)
Three Months Ended March 31, 1998 and 1997
1998 1997
OPERATING ACTIVITIES
Net earnings $ 4,905 $ 4,387
Depreciation and amortization 6,160 5,314
Provision for deferred income taxes 275 297
Other 116 (4)
Changes in operating assets and liabilities (7,926) (9,120)
Cash Provided By Operating Activities 3,530 874
INVESTING ACTIVITIES
Capital expenditures (4,275) (6,703)
Proceeds from disposal of property and equipment 6 109
Cash Used In Investing Activities (4,269) (6,594)
FINANCING ACTIVITIES
Cash dividends paid (1,824) (1,813)
Notes payable - net 10,000 -
Proceeds (repayments) of long-term debt, net (96) (145)
Cash provided by stock transactions 322 -
Cash Provided From (Used In) Financing Activities 8,402 (1,958)
Effect of foreign currency exchange rate changes (292) (104)
Increase (Decrease)In Cash and Cash Equivalents 7,371 (7,782)
Cash and cash equivalents at beginning of period 8,235 28,902
Cash and Cash Equivalents at End of Period $15,606 $21,120
Supplemental Disclosures
Cash paid during the year for:
Interest $ 3,257 $ 1,293
Income Taxes 2,085 375
See accompanying notes to consolidated financial statements.
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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 March 31, 1998 are not necessarily
indicative of the results to be expected for the year ending December
31, 1998.
Note 2. Lines of Credit
As discussed in Simpson's 1997 Annual Report on From 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 March 31, 1998 borrowings outstanding under these
agreements were $15 million and $10 million respectively.
The borrowings under the 364-day revolver are classified as short-term.
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.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net sales for the first quarter increased 18.6%, or $19.7 million, over
the first quarter of 1997. The inclusion of the acquisition of the
vibration attenuation business ("VA Business")of Holset Engineering,
Limited, effective June 27, 1997, from Cummins Engine Co., Inc.
contributed $15.9 million to the increase with the remainder coming from
strong sales to diesel engine customers.
Cost of products sold as a percent of sales for the first quarter of
1998 compared to the first quarter of 1997 decreased slightly to 89.1%
from 89.8%. This decrease is due to volume leveraging from the
increased sales.
Administrative and selling costs decreased to 2.4% from 2.9% of sales
for the first three months of 1998, compared to the same period of 1997.
Interest expense increased $1.2 million for the 1998 three-month period
ending March 31, 1998 over the same 1997 period. This increase was due
to the additional debt incurred to fund the VA Business acquisition.
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. Since December 31, 1997, $10 million has been borrowed under
the 364-day agreement. At March 31, 1998, borrowings outstanding were
$15 million and $10 million under the five-year agreement and the
364-day agreement, respectively.
Cash flow from operations was $2.8 million and $.9 million for the first
three months of 1998 and 1997, respectively. Net cash used in investing
activities was $4.3 million and $6.6 million for the three months ending
March 31, 1998 and 1997, respectively. These expenditures represent the
Company's investment in production capacity for new automotive, light
truck and diesel engine programs.
Net cash used in investing activities and dividends paid during the
three months ended March 31, 1998, exceeded cash flows from operations.
These items, combined with the net proceeds from borrowings, discussed
above, resulted in an increase of $7.4 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.
On April 1, 1998, the Company acquired 100% of the outstanding shares of
Stahl International, Inc., which has annual sales of approximately $4.1
million. The purchase price of approximately $3.7 million was financed
by issuing 206,893 shares of the Company's common stock and
approximately $1 million in cash. The acquisition will be accounted for
as a purchase. Accordingly, the purchase price will be allocated to the
underlying assets and liabilities at the date of the acquisition. The
estimated value of assets acquired and the liabilities assumed was
$2.3 million and $1.8 million, respectively.
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 has adopted Statement of Financial Accounting Standards
SFAS) No. 130 "Reporting Comprehensive Income" effective January 1,
1998, which establishes standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements and a total for comprehensive income in condensed
consolidated financial statements.
Effective January 1, 1998, the Company also adopted SFAS No. 131
"Disclosures about Segments of and Enterprise and Related Information,"
which requires reporting of certain information about operating segments
in complete sets of financial statements. Disclosures required by this
statement will be incorporated into the 1998 financial statements.
In February, 1998, the Financial Accounting Standards Board issued SFAS
No. 132 "Employers' Disclosure about Pensions and Other Postretirement
Benefits," which revises disclosure requirements for pension and other
postretirement benefit plans. This statement does not affect either the
measurement or the recognition of benefit costs. The Company has
adopted this statement for 1998, and necessary disclosures will be
incorporated into the 1998 financial statements.
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.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of Simpson Industries, Inc. was held on
April 21, 1998 in Plymouth, Michigan. The following persons were elected
to the Board of Directors until the 2001 annual meeting.
Votes In
Nominee Favor Withheld
Michael E. Batten 14,212,524 1,293,781
Robert W. Navarre 14,158,560 1,347,745
Frank K. Zinn 13,926,370 1,579,935
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report.
Exhibit No. Description
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 March 31,
1998.
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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
May 15, 1998 /s/Vinod M. Khilnani
Vinod M. Khilnani
Vice President and Chief Financial
Officer
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INDEX TO EXHIBITS
Exhibit No. Description
11 Computation of Earnings Per Share
27 Financial Data Schedule
Three Months Ended
March 31
1998 1997
Basic:
Average shares outstanding 18,179,043 18,100,954
Net earnings applicable to common
stock and common stock equivalents $ 4,905,000 $ 4,387,000
Basic earnings per share $.27 $.24
Diluted:
Average shares outstanding 18,179,043 18,100,954
Net effect of dilutive stock
options based on treasury stock
method using the average market
price 108,846 61,964
Average number of common shares
and common equivalent shares 18,287,889 18,162,908
Net earnings applicable to
common stock and common stock
equivalents $ 4,905,000 $ 4,387,000
Basic earnings per share $.27 $.24
<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 MARCH 31,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 3-MOS
<CASH> 15,606
<SECURITIES> 0
<RECEIVABLES> 80,300
<ALLOWANCES> 0
<INVENTORY> 17,927
<CURRENT-ASSETS> 129,311
<PP&E> 316,523
<DEPRECIATION> 143,771
<TOTAL-ASSETS> 353,961
<CURRENT-LIABILITIES> 86,443
<BONDS> 118,468
0
0
<COMMON> 18,236
<OTHER-SE> 102,844
<TOTAL-LIABILITY-AND-EQUITY> 353,961
<SALES> 125,556
<TOTAL-REVENUES> 125,556
<CGS> 111,933
<TOTAL-COSTS> 115,436
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,443
<INCOME-PRETAX> 7,604
<INCOME-TAX> 2,699
<INCOME-CONTINUING> 4,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,905
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
