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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, 1999 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, 1999 there were 18,084,179 outstanding shares of the
registrant's common stock, $1.00 par value each.
<PAGE>
Consolidated Balance Sheets
(In thousands)
March 31, 1999 and December 31, 1998
March 31
(Unaudited) Dec. 31
----------- -------
ASSETS
Current Assets
Cash and cash equivalents $ 5,439 $ 6,145
Accounts receivable 84,025 72,785
Inventories 19,945 22,866
Customer tooling in process 3,150 1,749
Prepaid expenses and other current assets 12,424 10,994
Total Current Assets 124,983 114,539
Property, Plant and Equipment
Cost 332,601 328,609
Less Allowance 164,851 158,724
Total Property, Plant and Equipment 167,750 169,885
Intangible Assets - net 50,377 52,192
Other Assets 2,673 3,938
-------- --------
$345,783 $340,554
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installment of long-term debt $ 4,829 $ 4,829
Accounts payable 54,161 52,039
Compensation and amounts withheld 9,427 11,694
Taxes, other than income taxes 5,222 2,483
Other current liabilities 12,121 11,298
Total Current Liabilities 85,760 82,343
Long-term debt, excluding current installment 106,889 105,534
Accrued Retirement Benefits and Other 17,422 17,312
Deferred Income Taxes 10,898 10,797
Shareholders' Equity 124,814 124,568
-------- --------
$345,783 $340,554
======== ========
See accompanying notes to consolidated financial statements.
2
<PAGE>
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Periods Ended March 31, 1999 and 1998
Three Months
1999 1998
---- ----
Net sales $ 133,102 $ 125,556
Costs and expenses:
Cost of products sold 118,763 111,933
Administrative and selling 2,776 3,045
Amortization of intangible assets 521 458
------------ ------------
122,060 115,436
------------ ------------
Operating Earnings 11,042 10,120
Investment and other income, net (96) (73)
Interest expense (2,132) (2,443)
------------ ------------
Earnings Before Income Taxes 8,814 7,604
Income taxes 3,085 2,699
------------ ------------
Net Earnings 5,729 4,905
============ ============
Comprehensive Income - net $ 1,618 $ 4,509
============ ============
Basic Earnings Per Share $ 0.32 $ 0.27
Diluted Earnings Per Share $ 0.32 $ 0.27
Cash dividends per share $ 0.10 $ 0.10
Average number of common equivalent shares:
Basic 18,144,632 18,179,043
Diluted 18,161,211 18,287,889
See accompanying notes to consolidated financial statements.
3
<PAGE>
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Three Months Ended March 31, 1999 and 1998
1999 1998
---- ----
OPERATING ACTIVITIES
Net earnings $ 5,729 $ 4,905
Depreciation and amortization 6,879 6,160
Provision for deferred income taxes 101 275
Other 199 116
Changes in operating assets and liabilities (7,708) (7,926)
-------- --------
Cash Provided By Operating Activities 5,200 3,530
INVESTING ACTIVITIES
Capital expenditures (5,035) (4,275)
Proceeds from disposal of property and equipment 53 6
-------- --------
Cash Used In Investing Activities (4,982) (4,269)
FINANCING ACTIVITIES
Cash dividends paid (1,815) (1,824)
Notes payable - net -- 10,000
Proceeds (repayments) of long-term debt, net 1,355 (96)
Cash (Used in) provided by stock transactions (728) 322
-------- --------
Cash (Used In) provided from Financing Activities (1,188) 8,402
Effect of foreign currency exchange rate changes 264 (292)
-------- --------
Increase (Decrease)In Cash and Cash Equivalents (706) 7,371
Cash and cash equivalents at beginning of period 6,145 8,235
Cash and Cash Equivalents at End of Period $ 5,439 $ 15,606
======== ========
Supplemental Disclosures
Cash paid during the year for:
Interest $ 2,789 $ 3,257
Income Taxes 1,505 2,085
See accompanying notes to consolidated financial statements.
4
<PAGE>
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, 1999 are not necessarily indicative of the results to be
expected for the year ending December 31, 1999.
Note 2. Lines of Credit
As discussed in Simpson's 1998 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 March
31, 1999, there were no borrowings outstanding under the 364-day agreement,
and $9 million outstanding under the five-year agreement.
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.
5
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net sales for the first quarter of 1999 increased 6.0%, or $7.5 million, over
the first quarter of 1998. Weakness in the European market was offset by
strong North American sales growth, particularly within the medium- and
heavy-duty truck markets. Approximately $1.0 million of the sales growth was
due to the April 1, 1998, acquisition of Stahl International, Inc.
Cost of products sold as a percent of sales increased slightly, from 89.1% in
the first quarter of 1998 to 89.2% in the first quarter of 1999 reflecting a
slight increase in direct production costs. Administrative and selling costs
decreased from 2.4% of sales for the first quarter of 1998 to 2.1% of sales
for the first quarter of 1999. The decrease can be attributed to the effects
of recent cost cutting initiatives. Interest and other expense decreased from
2.0% of sales in the first quarter of 1998 to 1.6% of sales in the first
quarter of 1999, primarily due to lower debt levels. As a result, operating
earnings increased 9.1%, from $10.1 million as of March 31, 1998 to $11.0
million as of March 31, 1999 and net earnings rose 16.8%, from $4.9 million
to $5.7 million over the same period.
Cash flow from operations increased $1.7 million, from $3.5 million for the
first three months of 1998 to $5.2 million for the first three months of
1999. Net cash used in investing activities totaled $5.0 million as of March
31, 1999, up $0.7 million from the $4.3 million used as of March 31, 1998.
These expenditures represent the Company's investment in production capacity
for new automotive, light truck and diesel engine programs.
Cash Flow Before Financing Activities increased $0.9 million, from ($0.7)
million as of March 31, 1998 to $0.2 million as of March 31, 1999. 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 dividends, and working capital
requirements.
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, 1998, up to $10 million has been borrowed under
the five-year agreement. At March 31, 1999, $9 million in borrowings were
outstanding under the five-year agreement.
This report contains forward-looking statements within the meaning of the
Securities Exchange Act of 1934. These statements, including those relating
to future outlook and operating performance, Year 2000 compliance and other
statements regarding the belief or current expectations of the company,
involve risks and uncertainties. Accordingly, actual results may differ
materially as a result of various factors including, but not limited to,
general economic conditions in the markets in which the company operates,
fluctuation in demand for the company's products, the activities of
competitors, and various other factors outside of the company's control. The
company does not intend to update these forward-looking statements.
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 133 "Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments and
hedging activities. Any future effects will be incorporated into the current
year's financial statements.
Many computer systems and software products refer to years in terms of their
final two digits only. Such programs may interpret the year 2000
6
<PAGE>
to mean the year 1900 instead. If not corrected, these programs could cause
date-related transaction failures. Although we currently believe that our
systems are Year 2000 compliant in all material respects, our current systems
may contain undetected errors or defects with Year 2000 date functions that
may result in material costs.
In 1997, we developed a compliance assurance process to address the problem.
A project team, headed by the Vice President - Information Technology, has
performed a detailed assessment of all internal computer systems, and
computing-related equipment in all facilities. Our primary vendors, material
suppliers, service suppliers and banks have been asked to verify their Year
2000 readiness. We plan to conduct audits at key supplier locations by June
30, 1999. Our computer operations provider and disaster recovery site have
advised us they will be compliant by the same date.
Our central computing hardware and operating software have been updated and
are now compliant. While many of our machine tools use programmable logic
controllers, they operate independently and are not connected to a computer
network. These controllers will be tested by July 31, 1999.
Contingency plans will be completed by May 1999. Several automated and manual
approaches are being considered to offset anticipated problems in the supply
chain.
7
<PAGE>
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 20, 1999 in Bluffton, IN. The following
matters were submitted to a vote of security holders.
1. The following persons were elected to the Board of Directors
until the 2000 annual meeting:
Votes In
Nominee Favor Withheld
------- -------- --------
George R. Kempton 15,013,351 637,911
Ronald L. Roudebush 15,039,164 612,098
George A. Thomas 15,023,852 627,410
F. Lee Weaver 15,035,833 615,429
2. Proposal to eliminate classification of Board of Directors and
provide for the annual election of all Directors:
Votes In Favor 12,247,182
Votes Against 385,582
Votes Withheld/Abstentions 984,519
Non-Votes 2,033,979
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, 1999.
8
<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
May 11, 1999 /s/Vinod M. Khilnani
-----------------------
Vinod M. Khilnani
Vice President and
Chief Financial Officer
9
Exhibit (11) - Computation of Earnings Per Share
Three Months Ended
March 31
1999 1998
---- ----
Basic:
Average shares outstanding 18,144,632 18,179,043
========== ==========
Net earnings applicable to common stock and
common stock equivalents $5,729,000 $4,905,000
========== ==========
Basic earnings per share $.32 $.27
==== ====
Diluted:
Average shares outstanding 18,144,632 18,179,043
Net effect of dilutive stock options based on
treasury stock method using the average
market price 16,579 108,846
---------- ----------
Average number of common shares and common
equivalent shares 18,161,211 18,287,889
========== ==========
Net earnings applicable to common stock and
common stock equivalents $5,729,000 $4,905,000
========== ==========
Basic earnings per share $.32 $.27
==== ====
<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,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 3-MOS
<CASH> 5,439
<SECURITIES> 0
<RECEIVABLES> 84,025
<ALLOWANCES> 0
<INVENTORY> 19,945
<CURRENT-ASSETS> 124,983
<PP&E> 332,601
<DEPRECIATION> 164,851
<TOTAL-ASSETS> 345,783
<CURRENT-LIABILITIES> 85,760
<BONDS> 106,889
<COMMON> 18,105
0
0
<OTHER-SE> 106,709
<TOTAL-LIABILITY-AND-EQUITY> 345,783
<SALES> 133,102
<TOTAL-REVENUES> 133,102
<CGS> 118,763
<TOTAL-COSTS> 122,060
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,132
<INCOME-PRETAX> 8,814
<INCOME-TAX> 3,085
<INCOME-CONTINUING> 5,729
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,729
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
