<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 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 (I.R.S. Employer
incorporation or organization) Identification No.)
47603 Halyard Drive, Plymouth, Michigan 48170
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (734) 207-6200
Securities registered pursuant to Section 12(b) of the Act: None
<TABLE>
<S> <C>
Securities registered pursuant to Section 12(g)of the Act: Common Stock, $ 1.00 par value
(Title of Class)
Common Stock Purchase Rights
(Title of Class)
</TABLE>
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 (or such shorter period that the registrant has been
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant as of March 15, 2000, computed by reference to
the last sale price for such stock on that date as reported on the NASDAQ
National Market System, was $165,155,657.
At March 15, 2000, there were outstanding 17,883,194 shares of the registrant's
common stock, $1.00 par value each.
Portions of the Proxy Statement for the 2000 Annual Meeting of Shareholders have
been incorporated by reference in this Annual Report on Form 10-K (Part III).
<PAGE> 2
PART I
ITEM 1. BUSINESS
INTRODUCTION
Simpson Industries, Inc. (the "Company") was organized under Michigan law in
1945. The Company's executive offices are located in Plymouth, Michigan, and the
fourteen plant facilities at which its manufacturing operations are conducted
are located in Michigan, Ohio, Indiana, North Carolina, Tennessee, Ontario
(Canada), Iztapalapa, Mexico City, District of Mexico (Mexico), Halifax
(England), Lyon (France), Barcelona (Spain) and Sao Paulo (Brazil). The Company
also has interests in joint ventures in Pune (India) and Seoul (South Korea).
Reference in this report to the Company includes Simpson Industries, Inc., and
its predecessors, divisions and subsidiaries, unless otherwise indicated by the
context.
PRINCIPAL PRODUCTS AND MARKETS
The Company develops and produces precision-engineered automotive components and
modular systems for automotive, sport utility, light- and heavy-duty truck and
diesel engines. The Company's major product lines include vibration control
products, air conditioning compressor components, wheel-end and suspension
components and assemblies, oil pumps, water pumps and other modular engine
assemblies and transmission and driveline components that are machined from
castings and forgings. These products are produced principally for original
equipment manufacturers in North America and Europe.
The Company manages its business under three similar product groups that are
aggregated together as one segment in the global vehicular industry. These
groups have similar long-term financial performance and economic
characteristics. The products from all three groups utilize similar
manufacturing processes. The production of the finished parts from the three
focused groups uses similar machining equipment which may be interchanged from
group to group. The Company distributes and sells final product to the same type
of customers from all of its three product groups. The Company maintains product
design and process development staffs, which work with customers' engineers,
principally in the design, testing and development of new products, as well as
in the on-going refinement of existing products. The Company also conducts its
own research and development activities, which are separate from the product
development activities conducted in cooperation with its customers. The Company
expended $4,273,000 in 1999, $4,313,000 in 1998 and $3,668,000 in 1997 for its
research and development.
Competition in the sale of all of the Company's products is primarily based on
engineering, product design, process capability, quality, cost, delivery and
responsiveness. The Company believes that its performance record in these
respects places it in a strong competitive position. The Company believes that,
in the manufacture of its products, it competes with numerous supplier
companies, some of which are larger and have greater financial resources than
the Company. In addition, many of the Company's larger customers are capable of
performing their own machining work.
The Company's customers to whom sales exceeded 10% of total net sales include
General Motors Corporation, Ford Motor Company and DaimlerChrysler Corporation.
Substantially all of the Company's sales are based on competitive proposals on
requests from customers. Sales of all products to General Motors Corporation,
Ford Motor Company and DaimlerChrysler Corporation during the years ended
December 31, 1999, 1998 and 1997 accounted for 55.3%, 54.3% and 60.1%,
respectively, of the Company's total sales during those periods. In recent
years, sales to other significant customers, in particular Consolidated Diesel
Corporation, Caterpillar Incorporated, Cummins Engine Company Inc., Peugeot and
Renault have grown in importance as the Company has broadened its customer base
and more narrowly focused its product direction. However, the loss of all or a
substantial portion of sales to major customers could have a detrimental effect
on the Company's business. The Company believes that such a loss is unlikely
because the Company's products, which generally have a life of five to ten
years, require a substantial initial investment in engineering, equipment and
tooling. Moreover, sales to automotive customers consist of a large number of
different products as well as different types of the same products, which are
sold to separate divisions and operating groups within each customer's
organization. These customer-operating units generally act independently when
making their purchasing decision.
Because the Company principally ships to its customers' scheduled needs,
information concerning its backlog is not meaningful to an understanding of its
business. Purchase orders for machined products that do not necessarily
<PAGE> 3
represent firm contracts are generally received from larger customers. Customers
issue short-term releases against the purchase orders from time to time during
the year and these releases are firm orders that typically remain open for
acceptance by the Company for a period of 30 days or less.
The basic raw materials for the Company's products include aluminum and ferrous
castings, steel forgings, steel bar stock and rubber, all of which are available
from a large number of sources. The Company has been purchasing such materials
from several sources.
The Company holds various patents and, from time to time, in the ordinary course
of its business, files patent applications. However, the Company does not
consider any individual patent or patent application to be material to the
operation of its business.
The Company's operations, in common with those of manufacturers generally, are
subject to numerous federal, state and local laws and regulations pertaining to
the discharge of materials into the environment or otherwise relating to the
protection of the environment. Compliance with such laws and regulations has not
had and is not anticipated to have a material effect on the capital
expenditures, earnings or competitive position of the Company.
At December 31, 1999, the Company employed 2,555 people on an active basis.
Since most of the Company's machined products are for engines, transmissions and
drive trains, they are generally not affected by style changes and their
production and delivery continue at a relatively uniform rate. However, the
Company's operations are affected by the cyclical nature of the United States
and European automobile, sport utility and light- and heavy-duty vehicle
markets.
The Company's operations are conducted within one business segment and sales
attributable to customers outside the United States from U.S. operations were
$62,256,000 in 1999, $55,200,000 in 1998 and $63,400,000 in 1997.
EXECUTIVE OFFICERS
Set forth below is certain information concerning the current executive officers
of the Company, which group includes the Company's principal officers.
<TABLE>
<CAPTION>
NAME AND AGE OFFICE(S) AND LENGTH OF SERVICE
------------ -------------------------------
<S> <C>
Roy E. Parrott, 59 ....................... Director since 1989; Chief Executive Officer since 1994;
Chairman since 1997; and President from 1989 to 1999
George A. Thomas, 50...................... President, Chief Operating Officer and Director since 1999
Vinod M. Khilnani, 47 .................... Vice President and Chief Financial Officer since 1997; and
Treasurer during 1997
George G. Gilbert, 51 .................... Vice President - Strategic Development & Emerging Markets
and Technology Services since 1998; Vice President -
Technology Service since 1995; Vice President -
Transmission & Chassis Group from 1993 to 1995; and
Vice President - Engine Products Group from 1990 to 1993
James A. Hug, 53 ........................ Vice President - Transmission & Chassis Products since
1997; Vice President - Automotive Group from 1995 to
1997; Vice President - Heavy Duty Products Group from
1992 to 1995; and Vice President - Heavy Duty Products
Group - South from 1990 to 1992
James B. Painter, 50...................... Vice President - NVH/Engine Products since 2000; Vice
President - Engine Products from 1998 to 1999; Vice
President - Heavy-Duty Group from 1995 to 1998; and Vice
President - Materials Management during 1995
</TABLE>
<PAGE> 4
Mr. Thomas was an executive with the automotive supply operations of TRW, Inc.
from 1990 until he joined the Company on March 1, 1999. Mr. Thomas held various
other positions with TRW since 1972.
Prior to joining the Company in July 1997, Mr. Khilnani served as Vice President
and Chief Financial Officer of Dayton Superior Corporation from December, 1996;
Executive Director - Treasury and Investment Evaluations for Cummins Engine
Company from 1995 to 1996; Vice President - Finance and MIS of Onan Corporation
and Power Generation Group of Cummins Engine from 1993 to 1995 and of Holset
Engineering Company (UK) from 1991 to 1993.
Prior to joining the Company in January 1996, Mr. Burris served as Purchasing
Manager of Brake Steering and Suspension at Ford Motor Company since 1994, and
was previously Supervisor of Purchasing Business Process Improvement and Systems
Development at Ford Motor Company since 1991.
Prior to joining the Company in March 1995, Mr. Painter served as General
Manager, Specialty Axle Group, Rockwell Process International Automotive
Operations from 1993 to 1995; President, Rockwell Clutch Company, Inc. from 1991
to 1993.
Executive officers of the Company are appointed annually by the Board of
Directors and serve at the pleasure of the Board.
ITEM 2. PROPERTIES
The Company's facilities are principally involved in the manufacture of the
Company's products and are owned by the Company and its subsidiaries free of
encumbrances, with the exception of the facilities located in Tennessee and
Brazil, which are leased by the Company. All of these properties as well as the
related machinery and equipment are considered to be well maintained, suitable
and adequate for their intended purpose. The following table sets forth the
location and approximate size of the Company's facilities.
PROPERTIES IN ACTIVE USE
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
LOCATION LAND AREA FLOOR SPACE
-------- --------- -----------
<S> <C> <C>
Litchfield, Michigan.......................... 22.8 Acres 230,000 Square Feet
Plymouth, Michigan............................ 5.5 68,000
Middleville, Michigan......................... 3.5 107,000
Fremont, Indiana.............................. 13.7 105,000
Bluffton, Indiana............................. 12.5 176,000
Edon, Ohio.................................... 15.2 134,000
Troy, Ohio.................................... 12.2 100,000
Greenville, North Carolina.................... 12.6 113,000
Thamesville, Ontario.......................... 6.0 62,000
Lyon, France.................................. 3.8 83,000
Halifax, England.............................. 1.7 54,000
Barcelona, Spain.............................. 2.2 55,000
Iztapalapa, Mexico............................ 2.8 86,000
Memphis,Tennessee............................. n/a 28,000
Sao Paulo, Brazil............................. 3.6 45,000
TOTAL IN ACTIVE USE 118.1 1,446,000
</TABLE>
<PAGE> 5
ITEM 3. LEGAL PROCEEDINGS
No material legal proceeding is pending to which the Company or any of its
subsidiaries is a party, or of which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by the Company to a vote of security holders through
the solicitation of proxies or otherwise, during the fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Stock Price and Dividend Information
The Company's common stock is traded on the NASDAQ National Market Issue under
the symbol SMPS.
Stock prices are quoted in the automated quotation system operated by the
National Association of Securities Dealers Automated Quotation System. The
quarterly range of bid prices per share, as reported by NASDAQ, and the
dividends paid thereon during the years ended December 31, 1999 and 1998 are
shown in the accompanying table. Such prices may represent interdealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
At December 31, 1999 there were 3,713 individual shareholders of record of
Simpson common stock. Other Simpson common shares outstanding were held in bank,
money management, company and brokerage house "nominee" accounts for an
estimated 4,200 additional shareholders as beneficial owners.
<TABLE>
<CAPTION>
Bid Price per Share
------------------- Dividend Paid
Quarter Ended High Low Per Share
---- --- ---------
<S> <C> <C> <C>
March 31, 1998 $14 $11 1/2 $ .10
June 30, 1998 15 3/8 11 7/8 .10
September 30, 1998 13 7/8 9 1/8 .10
December 31, 1998 12 1/8 8 3/4 .10
March 31, 1999 11 8 1/2 .10
June 30, 1999 10 3/4 9 .10
September 30, 1999 12 5/8 9 1/2 .10
December 31, 1999 12 1/8 9 1/2 .10
</TABLE>
<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA
Five Year Summary
(Dollar amounts in millions, except per share and per employee)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data
Net sales $532.7 $496.4 $451.5 $408.0 $395.1
Cost of products sold 478.9 446.9 406.5 365.3 354.4
Gross profit 53.8 49.5 45.0 42.7 40.7
as a % of sales 10.1% 10.0% 10.0% 10.5% 10.3%
Operating earnings before provisions for
restructuring and plant closings $39.0 $34.1 $30.9 $29.6 $28.8
as a % of sales 7.3% 6.9% 6.8% 7.3% 7.3%
Net earnings $20.8 $14.8(1) $10.1(2) $17.6(3) $15.3
as a % of sales 3.9% 3.0% 2.2% 4.3% 3.9%
Net earnings per
share (diluted) $1.15 $0.80 $0.55 $0.97 $0.85
Dividend per share 0.40 0.40 0.40 0.40 0.40
Weighted average shares
(millions) 18.1 18.4 18.2 18.1 18.0
At Year End
Working capital (4) $33.9 $32.2 $36.4 $45.0 $40.3
as a % of sales 6.4% 6.5% 8.1% 11.0% 10.2%
Total assets 361.5 340.6 341.5 249.0 232.5
Long-term debt 99.0 105.5 118.6 58.6 62.3
Shareholders' equity 133.0 124.6 117.9 116.0 105.1
Book value per share 7.42 6.85 6.50 6.42 5.84
%Debt/equity 79% 89% 104% 54% 61%
%Debt/total capital 44% 47% 51% 35% 38%
Additional Statistics
New program launches 9 15 13 6 10
EBITDA (5) 66.6 60.3 54.3(7) 50.1 47.7
Depreciation and
amortization expense 27.6 26.1 23.4 20.5 18.9
Capital investment 41.8 19.6 29.0 26.3 31.5
% return on
average equity 16.2% 12.2% 8.6% 15.9% 15.1%
Sales per employee $210,461 $204,512 $197,687 $190,654 $186,706
Operating earnings
per employee 15,404 14,067(6) 13,537(7) 13,832 13,594
Number of employees, year end 2,555 2,518 2,355 2,115 2,050
Stock Activity
Price Range $8 1/2-12 5/8 $8 3/4-15 3/8 $9 1/8-12 3/4 $8 3/8-11 1/ $8-12 1/8
Price at year end 11 1/4 9 11/16 11 3/4 10 57/64 9
</TABLE>
Notes:
(1) 1998 includes $1.9 million for net restructuring provision.
(2) 1997 includes $5.7 million for provision for net plant closing costs.
(3) 1996 includes $1.1 million for federal tax credits.
(4) Working capital excludes notes payable.
(5) EBITDA includes operating income plus depreciation and amortization.
(6) Before provision for restructuring of $2.5 million.
(7) Before provision for plant closings of $8.8 million.
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table summarizes the Company's results of operations as a
percentage of net sales for the years ending December 31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of products sold 89.9 90.0 90.0
Administrative and selling 2.4 2.7 2.9
Amortization of intangible assets 0.4 0.4 0.2
Provision for restructuring and plant closings --- 0.5 1.9
Operating Earnings 7.3 6.4 5.0
Investment and other income, net (0.3) --- (0.1)
Interest expense 1.7 1.9 1.7
Earnings Before Income Taxes 5.9 4.5 3.4
Income taxes 2.0 1.5 1.2
Net Earnings 3.9% 3.0% 2.2%
</TABLE>
1999 COMPARED TO 1998
1999 net sales reached a record $532,676,000, reflecting a 7.3% increase over
1998 net sales of $496,419,000. Record-setting North American light vehicle
production levels, combined with continued growth in shipments to the medium-
and heavy-duty truck markets, were the key factors contributing to the strong
sales.
Cost of products sold as a percent of sales decreased from 90.0% in 1998 to
89.9% in 1999. The decrease was primarily due to improved product mix and other
manufacturing efficiencies. Administrative and selling expenses decreased from
2.7% of sales in 1998 to 2.4% of sales in 1999, reflecting a decreased
administrative cost base resulting from last year's restructuring initiatives.
In 1998, the Company initiated a worldwide workforce reduction program aimed at
improving its long-term competitiveness and global cost structure.
Amortization expense remained constant, at 0.4% of sales in 1998 and 1999. In
1998 the Company recorded a pre-tax charge of $2,500,000 associated with the
above-referenced workforce reduction program. There were no such charges in
1999.
Operating earnings increased from 6.4% of sales in 1998 to 7.3% of sales in
1999, reflecting both increased year-over-year sales volumes and decreased
year-over-year fixed costs. Earnings increases occurred in all of our key
businesses, but were especially strong within our European organization -
despite significant start-up costs associated with a major new program launch.
Net investment and other income increased $1,713,000 primarily due to interest
earned on Federal tax refunds finalized during 1999 relating to credits for
increasing research activities. Interest expense decreased slightly from
$9,588,000 in 1998 to $9,279,000 in 1999, reflecting lower average debt levels.
In 1999, the Company's effective tax rate was 34.3%, up slightly from 34.0% in
1998.
1998 COMPARED TO 1997
Net sales in 1998 were $496,419,000, a 9.9% increase over the prior year's net
sales of $451,518,000. This increase was due to growth in the Class 8 truck
market, as well as the full year impact of revenues related to the June, 1997
acquisition of the Vibration Attenuation Business (VA Business).
Cost of products sold as a percent of sales was 90.0% in 1997 and 1998, despite
an increase in new program launches - from thirteen in 1997 to fifteen in 1998.
Administrative and selling expenses decreased from 2.9% of sales in 1997 to 2.7%
of sales in 1998 due to leverage from volume increases. Amortization increased
from 0.2% in 1997 to 0.4% in 1998, reflecting the mid-year 1997 acquisition of
the VA Business.
Plant closing and restructuring costs declined from 1.9% of sales in 1997 to
0.5% of sales in 1998. In 1997, the Company recorded a provision for plant
closing costs of $8,769,000 relating to the closure and consolidation of its
Jackson and Gladwin, Michigan plants with other North American operations. In
<PAGE> 8
1998, the Company announced a worldwide workforce reduction and recorded a
pre-tax charge of $2,500,000, primarily to cover the expenses of
severance-related payments. The action was initiated to improve the Company's
long-term competitiveness and global cost structure, while maintaining a strong
commitment to its new product development and customer support activities.
Operating earnings increased from 5.0% of sales in 1997 to 6.4% of sales in
1998. Excluding the Plant closing and restructuring charges, operating earnings
increased 10.4%, from $30,919,000 in 1997 to $34,146,000 in 1998.
Investment and other income decreased $228,000 in 1998 from $524,000 in 1997 to
$296,000 in 1998, primarily due to lower average invested cash balances and
lower interest rates. Interest expense increased $2,137,000, reflecting the full
year impact of the debt incurred for the VA acquisition. 1998 income tax expense
reflected an effective rate of 34.0%. The effective income tax rate in 1997 was
33.8%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements relate primarily to capital expenditures,
debt service and the cost of acquisitions. Historically, the Company's primary
sources of financing have been cash from operations, borrowings under its
revolving line of credit and the issuance of long-term debt and equity.
Net cash generated from operations was $43,557,000 in 1999, a 6.5% increase
versus the $40,901,000 generated in 1998 and a 44.6% increase versus the
$30,115,000 generated in 1997. The cash flows were largely provided by net
earnings and non-cash charges for depreciation. Working capital (excluding notes
payable) was $33,893,000, $32,196,000 and $36,366,000 as of December 31, 1999,
1998 and 1997 respectively.
During 1999 the Company invested $41,820,000 in capital equipment and plant
expansions, compared to $19,571,000 in 1998 and $28,977,000 in 1997. Capital
expenditures for 2000 are expected to exceed $45 million and will principally
support investments in new and replacement business both domestically and
internationally.
The Company has paid uninterrupted cash dividends each year since becoming
publicly-owned in 1972. Dividends paid in 1999 were $7,221,000 compared to
$7,316,000 in 1998 and $7,252,000 in 1997. The dividend rate for all three years
was $.40 per share.
In June 1999, the Company amended it's revolving credit agreement which allows
for borrowings of up to $50 million under a 364-day agreement. The Company also
maintains a revolving credit agreement which allows for borrowings of up to $25
million under a five-year agreement. At December 31, 1999 there were $8.8
million of borrowings outstanding under the five-year agreement and there were
no borrowings outstanding under the 364-day agreement. Borrowings under the
credit agreements bear interest, at the election of the Company, at a floating
rate of interest equal to (a) the higher of ABN AMRO's prime lending rate and
the federal funds rate plus .5% or (b) the Eurodollar rate plus the applicable
borrowing margin. At December 31, 1999, the outstanding borrowings under these
agreements are at an interest rate of approximately 6.8% and there was $730,000
committed as letters of credit. At December 31, 1999, $5 million of 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.
The Company also maintains unsecured, short-term credit lines with banks under
which it may borrow $32,300,000, of which $500,000 was committed as letters of
credit. Short-term borrowings outstanding under the credit lines totaled
$7,100,000 at December 31, 1999.
The Company believes its liquidity, capital resources and cash flows from
operations are sufficient to fund planned capital expenditures, working capital
requirements and debt service in the absence of additional significant
acquisitions.
The Company intends to fund future acquisitions with cash, securities or a
combination of cash and securities. To the extent the Company uses cash for all
or part of any such acquisitions, it expects to raise such cash primarily from
cash generated from operations, borrowings under the revolving credit agreements
or, if feasible and attractive, issuance of long-term debt or additional common
stock.
<PAGE> 9
IMPACT OF INFLATION
The Company does not expect that it will be significantly impacted by inflation
in 2000.
IMPACT OF FASB STATEMENTS
Derivative Instruments and Hedging Activities: FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, was issued in June
1998. It establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities.
As issued SFAS No. 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. In 1999 the Board deferred the effective date of
SFAS No. 133 with FASB Statement No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133. SFAS No. 137 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. This statement does not have a material effect on
the consolidated financial statements.
YEAR 2000
No Year 2000 compliance failures or service interruptions were experienced. All
of our customers and suppliers reported having no Year 2000 problems.
FORWARD-LOOKING STATEMENTS
This Annual 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, capital expenditures 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 the Company's control. The Company does not intend to update
these forward-looking statements.
<PAGE> 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $532,676 $496,419 $451,518
Costs and expenses:
Cost of products sold 478,903 446,914 406,513
Administrative and selling 12,746 13,397 13,152
Amortization of intangible assets 2,039 1,962 934
Provision for restructuring and plant closings -- 2,500 8,769
--------- --------- ---------
493,688 464,773 429,368
--------- --------- ---------
Operating Earnings 38,988 31,646 22,150
Investment and other income, net 2,009 296 524
Interest expense (9,279) (9,588) (7,451)
--------- --------- ---------
Earnings Before Income Taxes 31,718 22,354 15,223
Income taxes 10,880 7,599 5,144
--------- --------- ---------
Net Earnings $ 20,838 $ 14,755 $ 10,079
========= ========= =========
Basic Earnings Per Share $ 1.15 $ .81 $ .56
========= ========= =========
Diluted Earnings Per Share $ 1.15 $ .80 $ .55
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 11
Consolidated Statements Of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Year Ended December 31
----------------------
1999 1998 1997
---- ---- ----
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net earnings $ 20,838 $ 14,755 $ 10,079
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 27,594 26,115 23,427
Provision for restructuring and plant closings --- 2,500 6,424
Provision for deferred income taxes (1,390) (665) (828)
Amortization of restricted stock 573 487 356
Loss on disposition of assets 57 223 249
Changes in operating assets and liabilities:
Accounts receivable (11,242) (6,070) (12,118)
Inventories 3,475 (2,404) (2,466)
Other assets (8,128) 6,006 (6,381)
Accounts payable and accrued expenses 11,780 (46) 11,373
--------- --------- ---------
Cash Provided by Operating Activities 43,557 40,901 30,115
INVESTING ACTIVITIES
Acquisition of business, net of cash acquired --- --- (75,293)
Capital expenditures (41,820) (19,571) (28,977)
Proceeds from disposal of property and equipment 812 450 2,105
--------- --------- ---------
Cash Used in Investing Activities (41,008) (19,121) (102,165)
FINANCING ACTIVITIES
Cash dividends paid (7,221) (7,316) (7,252)
Notes payable, net 10,908 (1,211) ---
Principal repayments of long-term debt (15,329) (16,780) (55,079)
Proceeds from long-term borrowings 10,000 5,000 115,000
Repurchase of common stock (3,075) (2,774) ---
Exercise of stock options, net 440 327 ---
--------- --------- ---------
Cash (Used in) Provided by Financing Activities (4,277) (22,754) 52,669
Effect of foreign currency exchange rate changes 2,945 (1,116) (1,286)
--------- --------- ---------
Increase (Decrease) In Cash and Cash Equivalents 1,217 (2,090) (20,667)
Cash and cash equivalents at beginning of year 6,145 8,235 28,902
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 7,362 $ 6,145 $ 8,235
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest $ 6,936 $ 9,808 $ 5,625
Income Taxes 10,641 8,436 8,538
</TABLE>
Non cash transactions: The Company issued shares of common
stock and a note payable in connection with the acquisition of
Stahl International in 1998.
See accompanying notes to consolidated financial statements.
<PAGE> 12
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(In thousands, except share amounts) December 31
-----------
1999 1998
----- ----
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 7,362 $ 6,145
Accounts receivable 84,124 72,785
Inventories 19,448 22,866
Customer tooling in process 6,404 1,749
Prepaid expenses and other current assets 11,960 10,994
--------- ---------
Total Current Assets 129,298 114,539
Property, Plant and Equipment, at cost
Land 4,392 4,642
Buildings and improvements 54,622 59,165
Machinery and equipment 303,245 264,802
--------- ---------
362,259 328,609
Less accumulated depreciation 179,346 158,724
--------- ---------
Net Property, Plant and Equipment 182,913 169,885
Intangible Assets - net 46,847 52,192
Other Assets 2,398 3,938
--------- ---------
$ 361,456 $ 340,554
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installments of long-term debt $ 6,079 $ 4,829
Notes Payable 10,908 -
Accounts payable 62,654 52,039
Compensation and amounts withheld 12,614 11,694
Taxes, other than income taxes 3,797 2,483
Other current liabilities 10,261 11,298
--------- ---------
Total Current Liabilities 106,313 82,343
Long-Term Debt, excluding current installments 98,955 105,534
Accrued Retirement Benefits and Other 16,098 17,312
Deferred Income Taxes 7,058 10,797
Shareholders' Equity
Common stock, par value $1 per share:
Authorized - 55,000,000 shares
Outstanding - 17,929,553 shares
(1998 - 18,176,750 shares) 17,930 18,177
Additional paid-in capital 23,099 25,468
Retained earnings 103,157 89,540
Unamortized value of restricted stock (1,666) (2,220)
Accumulated other comprehensive income (9,488) (6,397)
--------- ---------
Total Shareholders' Equity 133,032 124,568
--------- ---------
$ 361,456 $ 340,554
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 13
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION> Unamortized
Additional Value Of
Common Paid-In Retained Restricted
Stock Capital Earnings Stock
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $18,080 $24,366 $79,274 $(2,028)
Net earnings for 1997 10,079
Other comprehensive income, net of tax
Foreign currency translation adjustment
Excess pension cost adjustment
Other comprehensive income
Comprehensive income
Cash dividends - $.40 per share (7,252)
Restricted stock awards, net 49 426 (475)
Amortization of restricted stock 356
-------------------------------------------------------------
Balance at December 31, 1997 18,129 24,792 82,101 (2,147)
Net earnings for 1998 14,755
Other comprehensive income, net of tax
Foreign currency translation adjustment
Excess pension cost adjustment
Other comprehensive income
Comprehensive income
Cash dividends - $.40 per share (7,316)
Issuance of shares for acquisitions 200 2,411
Exercise of stock options, net 46 281
Repurchase of common stock (239) (2,535)
Restricted stock awards, net 41 519 (560)
Amortization of restricted stock 487
-------------------------------------------------------------
Balance at December 31, 1998 18,177 25,468 89,540 (2,220)
Net earnings for 1999 20,838
Other comprehensive income, net of tax
Foreign currency translation adjustment
Excess pension cost adjustment
Other comprehensive income
Comprehensive income
Cash dividends - $.40 per share (7,221)
Exercise of stock options, net 56 384
Repurchase of common stock (306) (2,769)
Restricted stock awards, net 3 16 (19)
Amortization of restricted stock 573
-------------------------------------------------------------
Balance at December 31, 1999 $17,930 $23,099 $103,157 $(1,666)
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Comprehensive
Income Income Total
------- ------ -----
<S> <C> <C> <C>
Balance at January 1, 1997 $(3,700) $115,992
Net earnings for 1997 $10,079 10,079
Other comprehensive income, net of tax
Foreign currency translation adjustment (1,286) (1,286)
Excess pension cost adjustment (17) (17)
-------
Other comprehensive income (1,303) (1,303)
---------------------------------------------
Comprehensive income $8,776
======
Cash dividends - $.40 per share (7,252)
Restricted stock awards, net _
Amortization of restricted stock 356
---------------------------------------------
Balance at December 31, 1997 (5,003) 117,872
Net earnings for 1998 $14,755 14,775
Other comprehensive income, net of tax
Foreign currency translation adjustment (1,116) (1,116)
Excess pension cost adjustment (278) (278)
-------
Other comprehensive income (1,394) (1,394)
---------------------------------------------
Comprehensive income $13,361
=======
Cash dividends - $.40 per share (7,316)
Issuance of shares for acquisitions 2,611
Exercise of stock options, net 327
Repurchase of common stock (2,774)
Restricted stock awards, net -
Amortization of restricted stock 487
---------------------------------------------
Balance at December 31, 1998 (6,397) 124,568
Net earnings for 1999 $20,838 20,838
Other comprehensive income, net of tax
Foreign currency translation adjustment (3,394) (3,394)
Excess pension cost adjustment 303 303
-------
Other comprehensive income (3,091) (3,091)
---------------------------------------------
Comprehensive income $17,747
=======
Cash dividends - $.40 per share (7,221)
Exercise of stock options, net 440
Repurchase of common stock (3,075)
Restricted stock awards, net -
Amortization of restricted stock 573
---------------------------------------------
Balance at December 31, 1999 $(9,488) $133,032
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 14
Notes To Consolidated Financial Statements
Note A -- Significant Accounting Policies
Description of the Business: The Company is a supplier of precision-machined
powertrain and chassis products to the global automotive and heavy-duty diesel
engine markets, supplying in excess of 700 different components and assemblies
to original equipment manufacturers located principally in North America and
Europe.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and all subsidiaries after elimination of intercompany
accounts and transactions.
Foreign Currency Translation: Translation adjustments from foreign subsidiaries
are reflected in the consolidated financial statements as a separate component
of shareholders' equity. Foreign currency gains and losses resulting from
transactions are included in determining net earnings.
Cash Equivalents: Cash equivalents include all liquid investments purchased with
a maturity of three months or less.
Financial Instruments: Financial instruments consist primarily of cash and cash
equivalents, accounts receivable, accounts payable and long-term debt. At
December 31, 1999, the fair value of these financial instruments approximates
the carrying amount with the exception of long-term debt as discussed in Note F.
Inventories: Inventories are stated at the lower of cost or market. Costs are
determined by the last-in, first-out (LIFO) method for domestic inventories and
by the first-in, first-out (FIFO) method for foreign inventories.
Depreciation: Depreciation is computed using the straight-line method at annual
rates, which are sufficient to amortize the cost over the estimated useful
lives.
Amortization: Cost in excess of fair-market value of net assets acquired
(goodwill), arising from acquisitions (see Note B), is amortized on a
straight-line basis over 40 years. Specific intangibles including a supply, a
non-compete and various license agreements and various patents are amortized on
a straight-line basis over the estimated periods benefited with periods ranging
from 2.5 to 40 years. The carrying value of intangible assets is to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment would be
recognized when the expected undiscounted future operating cash flow derived
from such intangible assets is less than their carrying value. The Company
believes that no impairment exists at December 31, 1999.
Customer Tooling: Costs incurred for customer-owned tooling in excess of amounts
billed to date are recorded as customer tooling in process. Costs for
customer-owned tooling which will be recovered as parts are shipped are included
with other assets.
Income Taxes: Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. No deferred income taxes have been
provided for the income tax liability, which would be incurred on repatriation
of the permanently reinvested portion of unremitted earnings of the foreign
subsidiaries.
Net Earnings Per Share: Basic earnings per share are computed based upon the
weighted average shares of common stock outstanding during the year. Diluted
earnings per share are calculated to give effect to common stock equivalents
(stock options) outstanding during the year.
<PAGE> 15
Stock Based Compensation: The Company applies "Accounting for Stock-Based
Compensation," prescribed by SFAS No. 123, by making the required disclosures
only. This standard does not have an effect on the Company's financial position
or results of operations.
Use Of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make reasonable
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported net earnings for the period.
Ultimate resolution of uncertainties could cause actual results to differ from
these estimates.
Comprehensive Income: Comprehensive income consists of net income, net foreign
currency translation adjustments and excess pension costs and is presented in
the consolidated statements of shareholders' equity and comprehensive income.
Comprehensive income does not affect the Company's financial position or results
of operations.
Note B -- Business Acquisitions
On April 1, 1998, the Company purchased Stahl International, Inc. ("Stahl") for
200,074 shares of common stock and a $1 million note payable for a total of $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 and accordingly, the results of the
Stahl business' operations are included in the consolidated financial statements
since the date of acquisition. 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. Pro forma
unaudited financial data are not presented, as the effect is insignificant.
On June 27, 1997, the Company, through a wholly owned subsidiary, purchased the
Vibration Attenuation division of Holset Engineering Company Limited ("VA
Business") from Cummins Engine Company. The VA Business has operations in the
United Kingdom, France, Spain, Mexico, Korea, Brazil and the United States. The
VA Business manufactures rubber and viscous dampers and supplies three main
markets including heavy truck, light truck and automotive and industrial.
The acquisition was accounted for as a purchase transaction and accordingly, the
results of the VA Business' operations are included in the consolidated
financial statements since the date of acquisition. The final purchase cost of
$77.4 million has been allocated to assets acquired and liabilities assumed
based upon their estimated fair values at the acquisition date. The excess of
the purchase price over net assets acquired (goodwill) approximated $39.7
million and is being amortized over 40 years.
<PAGE> 16
The following pro forma unaudited financial data is presented to illustrate the
estimated effects of (i) the VA Business acquisition and (ii) the completion of
the new credit agreements as if the transactions had occurred as of January 1,
1997 (in thousands, except per share data).
<TABLE>
<CAPTION>
(Unaudited)
Twelve Months
Ended
Dec 31 1997
-------------
<S> <C>
Net sales $487,505
Net earnings 8,496
Net earnings per share:
Basic $ .47
Diluted $ .47
</TABLE>
The pro forma information above does not purport to be indicative of the results
that actually would have been achieved if the transactions had occurred at the
beginning of the period presented, and is not intended to be a projection of
future results or trends.
Note C -- Provision for Restructuring and Plant Closings
In the fourth quarter of 1998 in connection with management's continuing efforts
to reduce costs and improve efficiencies, the Company recorded a provision for
reduction of its worldwide salary workforce of approximately $2.5 million. The
reduction was for approximately 10% of its salaried workforce and resulted in
the elimination of 55 positions. The majority of these reductions were completed
by the second quarter of 1999. In the third quarter of 1997, the Company
recorded a provision for plant closings of approximately $8.8 million. The
principal actions in the plant closing plan involved the closure of two
manufacturing facilities.
The major components of the provisions are as follows:
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Severance and related costs --- $2,500 $4,965
Write-down of property, plant and equipment --- 2,191
Other --- --- 1,613
------------------------------------------
Total Provision $ --- $2,500 $8,769
===== ====== ======
</TABLE>
Note D -- Inventories
The components of inventories are summarized as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
---- -----
<S> <C> <C>
Finished and in-process products $ 8,023 $10,329
Raw materials 11,425 12,537
-------- -------
$ 19,448 $22,866
======== =======
</TABLE>
The LIFO inventories comprise approximately 72% and 75% of total inventories at
December 31, 1999 and 1998, respectively.
The replacement cost of inventories exceeded the balance sheet carrying amounts
by approximately $5,400,000 and $5,200,000 at December 31, 1999 and 1998,
respectively.
<PAGE> 17
Note E -- Intangible Assets
The components of intangible assets are summarized as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
---- ----
<S> <C> <C>
Goodwill $39,512 $43,072
Supply, non-compete, and license
agreements and various patents 12,153 12,276
------- -------
51,665 55,348
Less accumulated amortization 4,818 3,156
------- -------
Net Intangible Assets $46,847 $52,192
======= =======
</TABLE>
Note F -- Debt
Long-term debt at December 31 consisted of the following obligations:
(In thousands)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
8.8% Note payable due 1999 $ --- $ 750
8.82% Bank term note due 2003 1,784 2,363
9.98% Note payable due 2005 8,250 9,750
8.45% Bank term note due 2005 20,000 20,000
6.75% Bank term note due 2008 20,000 20,000
7.03% Series A notes due 2012 35,000 35,000
6.96% Series B notes due 2012 15,000 15,000
Revolving credit agreement 5,000 7,500
--------- --------
105,034 110,363
Less current installments 6,079 4,829
--------- --------
Long-term debt, excluding current installments $ 98,955 $105,534
========= ========
</TABLE>
As of December 31, 1999, the estimated fair value of long-term debt, discounted
at current interest rates, was $106,500,000.
In June 1999, the Company amended it's revolving credit agreement which allows
for borrowings of up to $50 million under a 364-day agreement. The Company also
maintains a revolving credit agreement which allows for borrowings of up to $25
million under a five year agreement. At December 31, 1999 there were $8.8
million of borrowings outstanding under the five-year agreement and there were
no borrowings outstanding under the 364-day agreement. Borrowings under the
credit agreements bear interest, at the election of the Company, at a floating
rate of interest equal to (a) the higher of ABN AMRO's prime lending rate and
the federal funds rate plus .5% or (b) the Eurodollar rate plus the applicable
borrowing margin. At December 31, 1999, the outstanding borrowings under these
agreements are at an interest rate of approximately 6.8% and there was $730,000
committed as letters of credit. At December 31, 1999, $5 million of 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.
Under the terms of its loan agreements, the Company is subject to restrictions
concerning additional borrowings and maintenance of minimum net worth. At
December 31, 1999, under the most restrictive covenant retained earnings of
approximately $18,430,000 were unrestricted. The Company was in compliance with
all such covenants at December 31, 1999.
The Company also has uncommitted short-term credit lines with banks under which
it may borrow up to $32,300,000, of which $500,000 was committed as letters of
credit at December 31, 1999. The contract amount of the letters of credit
approximate their fair value. The lines do not have termination dates, but are
reviewed periodically.
No compensating balances are required by any of the loan agreements.
<PAGE> 18
Principal maturities of long-term debt during the four years following 2000 are
as follows: 2001 - $8,079,000; 2002 - $9,442,000; 2003 - $8,912,000; and 2004 -
$8,864,000. In addition, $5,000,000 is outstanding under the five-year revolving
credit agreement which matures in 2002.
Note G -- Income Taxes
The components of earnings before income taxes were as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Domestic $ 25,187 $19,502 $ 9,963
Foreign 6,531 2,852 5,260
-------- ------- ---------
$ 31,718 $22,354 $ 15,223
======== ======= =========
</TABLE>
The provisions for income tax expense were as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 8,877 $ 5,799 $ 4,976
Foreign 2,751 1,953 691
State 642 512 305
------- --------- ---------
12,270 8,264 5,972
Deferred:
Federal (1,398) (599) (1,647)
Foreign 50 (70) 947
State (42) 4 (128)
-------- --------- ---------
(1,390) (665) (828)
-------- --------- ---------
$ 10,880 $ 7,599 $ 5,144
======== ========= =========
</TABLE>
A reconciliation of income tax expense to the amount computed by applying the
statutory federal income tax rate to earnings before income taxes follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income taxes at federal
statutory rate $ 11,101 $7,824 $5,235
State income tax, net of
federal benefit 390 338 116
Foreign operating loss 1,168 1,697 84
Federal tax credits (847) (950) (100)
Foreign Sales Corporation (96) (450) ---
Differences between domestic and
effective foreign tax rates (652) (812) (254)
Other, net (184) (48) 63
--------- ------ ------
$ 10,880 $7,599 $5,144
========= ====== ======
</TABLE>
<PAGE> 19
The tax effects of temporary differences that give rise to significant deferred
tax assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
(In thousands) Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Plant and equipment $ --- $ 16,361 $ --- $ 17,858
Accrued
retirement benefits 6,133 --- 6,557 ---
Other accrued expenses 4,276 --- 2,851 ---
Foreign net operating loss
carryforward 3,141 --- 1,782 ---
Federal tax credits 2,091 --- 2,144 ---
Other items 509 824 733 177
--------- --------- -------- -------
16,150 17,185 14,067 18,035
Valuation allowance (2,798) -- (2,407) --
--------- --------- -------- ---------
$ 13,352 $ 17,185 $ 11,660 $ 18,035
========= ========= ======== =========
</TABLE>
Based upon the level of historical taxable income and projections for future
taxable income over the periods which the deferred tax assets are deductible,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences, net of the existing valuation
allowances at December 31, 1999.
As of December 31, 1999, the Company has unrecognized foreign net operating loss
carryforwards of approximately $8,887,000 that begin expiring in 2003.
Deferred income tax assets of $3,225,000 and $4,422,000 are included in other
current assets at December 31, 1999, and 1998, respectively.
Note H - Pension and Other Postretirement Benefits
The Company has non-contributory and contributory defined benefit pension plans
covering substantially all employees, subject to eligibility requirements.
Benefits are based upon a percentage of compensation or monthly rates times
years of service. Plan assets are held by a trustee and invested in marketable
debt and equity securities and short-term investments. Benefits for certain
employees are provided through multi-employer defined benefit plans. The Company
also has an unfunded supplemental executive retirement plan for senior
management with benefits based on compensation and years of service.
Contributions to pension plans are sufficient to provide for both current
service costs and amortization of past service costs over a reasonable period.
In addition to the Company's defined benefit pension plans, the Company provides
medical benefits to certain retired employees, their covered dependents, and
beneficiaries. Generally, employees who have attained age 55 and who have
rendered 10 years of service are eligible for these benefits. Certain medical
plans are contributory and other medical plans are non-contributory. The
Company's retiree medical benefits are not funded.
During 1999 Simpson International (UK) Limited obtained final approval from
Inland Revenue for a defined benefit pension plan. Based on the 1997 sales
agreement, funds from the Cummins Engine Company plan for the UK employees were
transferred into the Simpson Industries plan after final approval. This plan is
reflected in the 1999 disclosure.
<PAGE> 20
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- --------------
(In thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 44,698 $38,471 $10,941 $10,577
Formation of new plan 9,214 --- --- ---
Service cost 3,520 2,508 628 595
Interest cost 3,662 2,849 748 777
Participant contribution 252 --- --- ---
Benefits paid (4,216) (1,858) (654) (716)
Actuarial (gains) and losses (6,977) 2,830 (673) (292)
Plan amendments 104 131 --- ---
Foreign exchange rate changes 172 (233) --- ---
-------- ------- ------- -------
Benefit obligation at end of year 50,429 44,698 10,990 10,941
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year 29,526 28,929
Formation of new plan 8,539 ---
Actual return on plan assets 4,767 885
Contributions by the employer 4,058 1,554
Participant contribution 252 ---
Benefits paid (4,076) (1,676)
Foreign exchange rate changes 134 (166)
-------- ------
Fair value of plan assets at end of year 43,200 29,526
Funded status (7,229) (15,172) (10,990) (10,941)
Unrecognized net (gain) loss 249 8,334 (608) 55
Unrecognized net asset (24) (181) --- ---
Unrecognized prior service cost 1,172 1,193 50 55
------- ------- -------- --------
Net amount recognized $(5,832) $(5,826) $(11,548) $(10,831)
======= ======= ======== ========
Amounts recognized in the statement of
financial position consist of:
Accrued benefit liability $(5,832) $(6,764) $(11,548) $(10,831)
Intangible asset --- 461 --- ---
Accumulated other comprehensive income --- 477 --- ---
------- ------- -------- --------
Net amount recognized $(5,832) $(5,826) $(11,548) $(10,831)
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- --------------
1999 1998 1997 1999 1998 1997
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF
DECEMBER 31
Discount rate 8% 7% 7.5% 8% 7% 7.5%
Expected return on plan assets 10% 10% 10%
Rate of compensation increase 4% 4% 4.5% 4% 4% 4.5%
</TABLE>
For measurement purposes in 1996, the medical cost trend was assumed to be 8.0%
and to decrease .5% per year to 5.0% in 2002 and remaining at that level
thereafter.
<PAGE> 21
<TABLE>
<CAPTION>
(In thousands) PENSION BENEFITS OTHER BENEFITS
---------------- --------------
COMPONENTS OF NET PERIODIC BENEFIT COST 1999 1998 1997 1999 1998 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 3,520 $ 2,508 $2,210 $ 628 $ 595 $ 598
Interest cost 3,662 2,849 2,613 748 777 759
Expected return on plan assets (3,691) (2,490) (2,174) --- --- ---
Net amortization and deferral 207 310 62 (5) 2 3
Multi-employer plans 24 72 510 --- --- ---
--------- ------- ------ ------- ------- ------
Net periodic benefit cost $ 3,722 $ 3,249 $3,221 $ 1,371 $ 1,374 $1,360
========= ======= ====== ======= ======= ======
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
(In thousands) Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost
components $426 $(187)
Effect on postretirement benefit obligation 2,120 (1,247)
</TABLE>
Certain employees participate in Company-sponsored 401(k) savings plans. Under
the plans, the Company contributes a defined amount to individual employee
accounts based on the respective employee's contribution. Contributions
approximated $1,700,000, $1,390,000 and $1,330,000 in 1999, 1998 and 1997
respectively.
Note I -- Long-Term Incentive Plans
The Company has long-term incentive plans under which employees or directors may
be granted stock options or other long-term incentives. The 1984 Plan, which
allowed for options to be granted for up to 1,687,500 common shares, was
terminated in 1993. Options and restricted shares previously granted under the
1984 Plan remain outstanding for up to 10 years. Stock appreciation rights which
provide that optionees may receive cash in lieu of shares, were also granted in
conjunction with stock option grants.
In 1993, the Company adopted the 1993 Executive Long-Term Incentive Plan for
employees. The 1993 Plan permits the grant of stock options, restricted stock,
stock appreciation rights, performance shares and performance units. The
authorized share pool for making grants under the 1993 Plan is 1,350,000 common
shares. Also in 1993, the Company adopted the 1993 Non-Employee Director Stock
Option Plan. Under this plan, nonqualified stock options may be granted to
non-employee directors for up to 150,000 common shares.
Options granted have varying exercise dates within five years after grant date
and generally expire after ten years. At December 31, 1999 there were 1,233,700
shares of common stock reserved for issuance under the plans of which 494,880
are available for future grants.
The Company applies APB Opinion No. 25 in accounting for its stock compensation
plans. Accordingly, no compensation cost has been recognized for the stock
options granted in 1999, 1998 or 1997. Had compensation cost for these options
been determined on the basis of fair value pursuant to SFAS No. 123, the
Company's pro forma net income and earnings per share would have been as
indicated below:
<PAGE> 22
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
(In thousands, except per share amounts)
Net earnings As reported $20,838 $14,755 $10,079
Pro forma $20,592 $14,536 $ 9,874
Basic earnings
per share As reported $ 1.15 $ .81 $ 56
Pro forma $ 1.14 $ .80 $ .54
Diluted earnings
per share As reported $ 1.15 $ .80 $ .55
Pro forma $ 1.14 $ .79 $ .54
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black Scholes option-pricing model with the following weighted average
assumptions used for grants in 1999, 1998 and 1997, respectively: dividend yield
of 3.8% for all years; expected volatility of 37%, 35% and 37%; risk-free
interest rates of 5.3%, 5.8% and 6.5%; and an expected life of 6.4, 7.1 and 7.0
years.
Incentive plan activity is summarized as follows:
<TABLE>
<CAPTION>
Stock Option Plans
-------------------------------------------------------------------------------------
Weighted
Option Average Restricted
Shares Exercise Price Shares
-----------------------------------------------------
<S> <C> <C> <C>
1998:
Outstanding
January 1, 1998 531,390 $9.50 230,338
Granted/awarded 106,080 12.75 66,840
Exercised (50,400) 4.68 ---
Restrictions lapsed --- --- (46,227)
Canceled/forfeited --- --- (26,500)
Outstanding 587,070 10.50 224,451
Exercisable 333,778 --- ---
Weighted-average
fair value of options
granted during the year $ 12.75
1999:
Granted/awarded 188,780 $9.52 11,000
Exercised (92,198) 8.68 ---
Restrictions lapsed --- --- (54,095)
Canceled/forfeited (43,030) 11.09 (8,508)
Outstanding 640,622 10.43 172,848
Exercisable 299,798 --- ---
Weighted-average
fair value of options
granted during the year $ 9.52
</TABLE>
<PAGE> 23
Note J -- Shareholder Rights Plan
In 1997, the Company adopted a Shareholder Rights Plan designed to discourage
partial or two-tier tender offers, which could result in unequal treatment of
shareholders. Under the Plan, the right to purchase one share of common stock
was distributed for each outstanding share of the Company's common stock. The
Plan provides that the Rights become exercisable if a person or group acquires,
in a transaction not approved by the Board of Directors, 20% or more of the
Company's common stock or commences a tender or exchange offer which would
result in a person or group acquiring 20% or more of the Company's common stock.
In addition, the Plan permits the Board of Directors to declare a person or
group owning 10% or more of the Company's common stock an "Adverse Person,"
under certain circumstances, which also causes the Rights to become exercisable.
When exercisable, each Right entitles shareholders to purchase one share of the
Company's common stock at a specified exercise price. The Company will be
entitled to redeem the Rights at $.005 per Right until a person or group has
been declared an "Adverse Person" or the close of business on the tenth business
day after a public announcement that a 20% position has been acquired. If a 20%
position is acquired, a person or group is declared an "Adverse Person," the
Company is acquired or certain other events occur after the Rights become
exercisable, each Right will entitle its holder to purchase, for the exercise
price, a number of the Company's or acquiring company's common shares having a
market value of twice the exercise price. Rights were issued in 1997 to
shareholders and will be attached to each share issued thereafter until the
Rights become exercisable, expire or are redeemed. Rights expire May 9, 2007,
unless extended by the Board of Directors.
Note K -- Earnings Per Share
<TABLE>
<CAPTION>
(In thousands, except per
share amounts) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net earnings applicable to
common stock and common
stock equivalents $20,838 $14,755 $ 10,079
Basic Earnings per Share
Weighted average shares
outstanding 18,057 18,285 18,123
Earnings Per Share $ 1.15 $ .81 $ .56
======= ======= ========
Diluted Earnings per Share
Weighted average shares
outstanding 18,057 18,285 18,123
Net effect of dilutive
stock options 43 89 79
------- ------- --------
18,100 18,374 18,202
Earnings Per Share $ 1.15 $ .80 $ .55
======= ======= ========
</TABLE>
Options to purchase 131,634, 64,560, and 43,020 shares of common stock were
outstanding during 1999 through 1997 respectively, at prices ranging from $10.94
to $14.67. These shares were not included in the computation of diluted EPS
because the options' exercise price was greater than the average market price of
the common shares.
<PAGE> 24
Note L - Comprehensive Income
The accumulated balances for each classification of comprehensive income are as
follows:
<TABLE>
<CAPTION>
Accumulated
Foreign Minimum Other
Currency Pension Comprehensive
(In thousands) Items Liability Income
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1997 $ (3,692) $ (8) $ (3,700)
Net of tax amount (1,286) (17) (1,303)
--------------------------------------------
Balance at December 31, 1997 (4,978) (25) (5,003)
Net of tax amount (1,116) (278) (1,394)
--------------------------------------------
Balance at December 31, 1998 (6,094) (303) (6,397)
Net of tax amount (3,394) 303 (3,091)
--------------------------------------------
Balance at December 31, 1999 $ (9,488) $ - $ (9,488)
</TABLE>
Note M -- Segment Information
REPORTING SEGMENT
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," during 1998. SFAS No. 131 established standards for
reporting information about operating segments in annual financial statements
and related disclosures about products and geographic areas.
The Company manages its business under three similar product groups that are
aggregated together as one segment in the global vehicular industry. These
groups have similar long-term financial performance and economic
characteristics. The products from all three groups utilize similar
manufacturing processes. The production of the finished parts from the three
focused groups uses similar machining equipment which may be interchanged from
group to group. The Company distributes and sells final product to the same type
of customers from all its three product groups.
GEOGRAPHIC SEGMENTS
The Company's geographic data for the years ended December 31, 1999, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales
North America $466,651 $ 431,657 $ 421,117
Europe 66,025 64,762 30,401
---------- --------- ----------
Total $532,676 $ 496,419 $ 451,518
Operating earnings
North America $ 34,970 $ 31,342 $ 29,474
Europe 4,018 2,804 1,445
Restructuring/plant closings - (2,500) (8,769)
---------- --------- ----------
$ 38,988 $31,646 $ 22,150
Identifiable assets
North America $275,901 $256,284
Europe 85,555 84,270
---------- ---------
Total $ 361,456 $ 340,554
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
Net sales to major customers were:
(In thousands) 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
General Motors Corporation $ 77,100 $98,700 $107,500
Delphi Automotive 54,800 25,000 19,000
Ford Motor Company 81,300 85,100 88,500
DaimlerChrysler Corporation 70,400 61,000 56,500
Consolidated Diesel Company
and its parent companies,
Cummins Engine Company
Inc. and Case Corporation 52,300 52,400 47,000
Caterpillar Inc. 49,600 41,800 36,100
</TABLE>
In 1999, Delphi Automotive was spun-off from General Motors Corporation and
became its own entity. Prior year amounts have been restated to reflect this
change. Aggregate receivables for these customers at December 31, 1999 and 1998
approximate the same percent of total receivables as aggregate sales to these
customers bear to total sales.
Note N -- Commitments and Contingencies
The Company has been identified as a potentially responsible party under federal
environmental regulations to share in the cost of cleanups at two waste disposal
sites along with many other companies. While management believes the Company's
responsibility in these matters is minimal, it has established reserves which it
believes are adequate to cover potential liabilities.
<PAGE> 26
Independent Auditors' Report
The Board of Directors and Shareholders
Simpson Industries, Inc.
We have audited the accompanying consolidated balance sheets of Simpson
Industries, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Simpson Industries,
Inc. and subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
KPMG LLP
Detroit, Michigan
January 26, 2000
<PAGE> 27
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
-------------
Mar.31 Jun.30 Sep.30 Dec.31
------ ------ ------ ------
<S> <C> <C> <C> <C>
1999
Net sales $133,102 $139,399 $124,220 $135,955
Gross profit 14,339 16,162 9,838 13,434
Net earnings 5,729 6,963 2,850 5,296
Net earnings per share
Basic .32 .39 .16 .29
Diluted .32 .38 .16 .29
1998
Net sales $ 125,556 $128,704 $110,016 $132,143
Gross profit 13,623 14,856 6,284 14,742
Net earnings 4,905 5,686 929 3,235
Net earnings per share
Basic .27 .31 .05 .18
Diluted .27 .31 .05 .18
</TABLE>
Net earnings for the quarter ended December 31, 1998 were decreased by $1,900
($.10 per share for both basic and diluted) for the provision for restructuring.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, we are exposed to market risk associated with
fluctuations in foreign exchange rates and interest rates. We conservatively
manage these risks through the use of derivative financial instruments in
accordance with management's guidelines.
We enter into all hedging transactions for periods consistent with the
underlying exposures. We do not enter into derivative instruments for trading
purposes. We have entered into foreign currency forward contracts to protect
ourselves from adverse currency rate fluctuations on foreign currency
commitments. These commitments are generally for terms of less than one year.
Foreign Exchange
The foreign currency contracts are executed with banks that we believe are
creditworthy and are denominated in currencies of major industrialized
countries. The gains and losses relating to the foreign currency forwards are
recognized in the current period. We believe that any gain or loss incurred on
foreign currency forward contracts is offset by the direct effects of currency
movements on the underlying transactions. We have performed a quantitative
analysis of our overall currency rate exposure at December 31, 1999. Based on
this analysis, a 10% change in currency rates would not have a material effect
on our earnings.
Interest Rates
We generally manage risk associated with interest rate movements through the use
of or combination of variable and fixed rate debt. Our exposure as a result of
variable interest rates relates primarily to outstanding floating rate debt
instruments that are indexed to U.S. short-term money market rates. We have
performed a quantitative analysis of our overall interest rate exposure at
December 31, 1999. Based on this analysis, a 10% change in the average cost of
our variable rate debt would not have a material effect on our earnings.
<PAGE> 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
NONE
PART III
The information called for by the items within this part is included in the
Company's Proxy Statement for the 2000 Annual Meeting of Shareholder's, and is
incorporated herein by reference, as follows:
<TABLE>
<CAPTION>
PAGES IN 2000
PROXY STATEMENT
---------------
<S> <C>
Item 10. Directors......................................... 1-4
Item 11. Executive Compensation............................ 6-11
Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................... 11-12
Item 13. Certain Relationships and Related Transactions.... N/A
</TABLE>
<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The Consolidated Financial Statements of the Company and its
subsidiaries, included in Item 8 herein by reference:
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Shareholders' Equity and
Comprehensive Income - years ended December 31, 1999, 1998 and
1997 Consolidated Statements of Operations - years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows - years ended December 31,
1999, 1998 and 1997 Notes to Consolidated Financial Statements -
December 31, 1999
(2) All financial statement schedules for which provision is made in
the applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions.
(3) EXHIBITS. The following exhibits designated with a "+" symbol
represents the Company's management contracts or compensatory
plans or arrangements for executive officers:
3.1 Restated Articles of Incorporation, as amended (previously filed
as Exhibit 3.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 and incorporated
herein by reference)
3.2 Bylaws, as amended (previously filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q/A for the quarter ended
September 30, 1999 and incorporated herein by reference)
4.2 Rights Agreement, dated as of February 28, 1997, between Simpson
Industries, Inc. and Harris Trust and Savings Bank, as Rights
Agent (previously filed as Exhibit 4.2 to the Company's Current
Report on Form 8-K, dated April 22, 1997 and incorporated herein
by reference)
10.3 Note Agreement with Aetna Life Insurance Company, dated June 12,
1986 (previously filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K, dated June 12, 1986 and incorporated herein
by reference)
Amendment to Note Agreement with Aetna Life Insurance Company,
dated November 17, 1994 (previously filed as Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated herein by reference)
Amendment No. 2 to Note Agreement with Aetna Life Insurance
Company, dated as of June 17, 1997 (previously filed as Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by
reference)
10.4 + 1984 Stock Option Plan, as amended (previously filed as Exhibit
10.4 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988 and incorporated herein by
reference)
10.8 + Supplemental Executive Retirement Plan (previously filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988, and incorporated herein by
reference)
<PAGE> 30
10.10 + Letter Agreement, dated September 12, 1989, with Roy E. Parrott
(previously filed as Exhibit 10.10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1989 and
incorporated herein by reference)
+ Amendment to Letter Agreement with Roy E. Parrott, dated March
15, 1994 (previously filed as Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994, and incorporated herein by reference)
10.11 Note Agreement with Massachusetts Mutual Life Insurance Company,
dated August 15, 1991 (previously filed as Exhibit 10.11 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991 and incorporated herein by reference)
Amendment No. 1 to Note Agreement with Massachusetts Mutual Life
Insurance Company, dated as of June 17, 1997 (previously filed
as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 and incorporated herein by
reference)
10.13 + Simpson Industries, Inc. 1993 Executive long-term Incentive Plan
(previously filed as Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated herein by reference)
10.14 + Simpson Industries, Inc. 1993 Non-Employee Director Stock Option
Plan (previously filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated herein by reference)
10.15 Term Loan Agreement with Comerica Bank, dated as of December 17,
1993 (previously filed as Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993
and incorporated herein by reference)
Amendment to Term Loan Agreement with Comerica Bank, dated as of
November 1, 1994 (previously filed as Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated herein by reference)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated
as of June 17, 1997 (previously filed as Exhibit 10.15 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 and incorporated herein by reference)
10.18 + Letter Agreement, dated December 16,1994, with George G. Gilbert
(previously filed as Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
and incorporated herein by reference)
10.19 + Letter Agreement, dated December 16, 1994, with James A. Hug
(previously filed as Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
and incorporated herein by reference)
10.20 Term Note Agreement with Comerica Bank, dated as of January 25,
1995 (previously filed as Exhibit 10.20 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
and incorporated herein by reference)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated
as of June 17, 1997 (previously filed as Exhibit 10.20 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 and incorporated herein by reference)
<PAGE> 31
10.21 Term Note Agreement with Comerica Bank, dated as of February 7,
1995 (previously filed as Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
and incorporated herein by reference)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated
as of June 17, 1997 (previously filed as Exhibit 10.21 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 and incorporated herein by reference)
10.23 + Letter Agreement, dated March 1, 1996, with James B. Painter
(previously filed as Exhibit 10.23 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996,
and incorporated herein by reference)
10.24 Credit Agreement, dated June 17, 1997, among Simpson Industries
and certain other Borrowers, certain Commercial Lending
Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously
filed as Exhibit 10.24 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and incorporated herein
by reference)
Amendment to Credit Agreement, dated August 22, 1997 among
Simpson Industries, Inc. and certain other Borrowers, certain
Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica
Bank (previously filed as Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the year December 31,1997, and
incorporated herein by reference)
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 (previously filed as Exhibit 10.24 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30,1998, and incorporated herein by reference)
10.25 Credit Agreement, dated June 17, 1997, among Simpson Industries
and certain other Borrowers, certain Commercial Lending
Institutions, ABN AMRO Bank N.V. and Comerica Bank(previously
filed as Exhibit 10.25 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and incorporated herein
by reference)
Amendment to Credit Agreement, dated August 22, 1997 among
Simpson Industries, Inc. and certain other Borrowers, certain
Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica
Bank (previously filed as Exhibit 10.25 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, and
incorporated herein by reference)
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 (previously filed as Exhibit 10.25 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, and incorporated herein by reference)
Amendment to Credit Agreement, dated June 15, 1999, among
Simpson Industries, Inc. and certain other Borrowers, certain
Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica
Bank (previously filed as Exhibit 10.25 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999, and incorporated herein by reference)
10.26 Note Agreement, dated August 1, 1997 with Northwestern Mutual
Life Insurance Company, Chubb Life Insurance Company of America,
Chubb Colonial Life Insurance Company, Allstate Life Insurance
Company and United of Omaha Life Insurance Company (previously
filed as Exhibit 10.26 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997 and incorporated
herein by reference)
<PAGE> 32
10.27+ Letter Agreement, dated September 1, 1997, with Vinod M.
Khilnani (previously filed as Exhibit 10.27 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1997, and incorporated herein by reference)
10.28+ * Letter Agreement dated February 5, 1999, with George A. Thomas
10.29+ * Letter agreement dated March 1, 1999 with George A. Thomas
21 * Subsidiaries of registrant
23 * Consent of independent public accountants
27.1 * Financial Data Schedule
*Filed with this report
(b) No reports on Form 8-K were filed during the last quarter of the
Company's fiscal year ended December 31, 1999
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 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.
By: /s/ Roy E. Parrott
------------------
Roy E. Parrott,
Chairman and Chief Executive Officer
Date: March 17, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 17, 2000.
Signature Title
--------- -----
/s/ Roy E. Parrott Chairman and Chief Executive Officer
------------------
Roy E. Parrott (principal executive officer)
/s/ George A. Thomas President and Chief Operating Officer
--------------------
George A. Thomas and Director
(principal operating officer)
/s/ Vinod M. Khilnani Vice President, Chief Financial Officer
---------------------
Vinod M. Khilnani (principal financial officer)
(principal accounting officer)
/s/ Michael E. Batten Director
---------------------
Michael E. Batten
/s/ Susan F. Haka Director
-----------------
Susan F. Haka
/s/ George R. Kempton Director
---------------------
George R. Kempton
/s/ Walter J. Kirchberger Director
-------------------------
Walter J. Kirchberger
/s/ Robert W. Navarre Director
---------------------
Robert W. Navarre
/s/ Ronald L. Roudebush Director
-----------------------
Ronald L. Roudebush
/s/ F. Lee Weaver Director
-----------------
F. Lee Weaver
/s/ Frank K. Zinn Director and Secretary
-----------------
Frank K. Zinn
<PAGE> 34
INDEX TO EXHIBITS
3.1 Restated Articles of Incorporation, as amended (previously filed
as Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31,1997 and incorporated herein
by reference)
3.2 Bylaws, as amended (previously filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q/A for the quarter ended
September 30, 1999 and incorporated herein by reference)
4.2 Rights Agreement, dated as of February 28, 1997, between Simpson
Industries, Inc. and Harris Trust and Savings Bank, as Rights
Agent (previously filed as Exhibit 4.2 to the Company's Current
Report on Form 8-K, dated April 22, 1997 and incorporated herein
by reference)
10.3 Note Agreement with Aetna Life Insurance Company, dated June 12,
1986 (previously filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K, dated June 12, 1986 and incorporated herein
by reference)
Amendment to Note Agreement with Aetna Life Insurance Company,
dated November 17, 1994 (previously filed as Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated herein by reference)
Amendment No. 2 to Note Agreement with Aetna Life Insurance
Company, dated as of June 17, 1997 (previously filed as Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by
reference)
10.4 + 1984 Stock Option Plan, as amended (previously filed as
Exhibit 10.4 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988 and incorporated herein by
reference)
10.8 + Supplemental Executive Retirement Plan (previously filed as
Exhibit 10.8 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988, and incorporated herein by
reference)
10.10 + Letter Agreement, dated September 12, 1989, with Roy E. Parrott
(previously filed as Exhibit 10.10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1989 and
incorporated herein by reference)
+ Amendment to Letter Agreement with Roy E. Parrott, dated March
15, 1994 (previously filed as Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994, and incorporated herein by reference)
10.11 Note Agreement with Massachusetts Mutual Life Insurance Company,
dated August 15, 1991 (previously filed as Exhibit 10.11 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991 and incorporated herein by reference)
Amendment No. 1 to Note Agreement with Massachusetts Mutual Life
Insurance Company, dated as of June 17, 1997 (previously filed
as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 and incorporated herein by
reference)
<PAGE> 35
10.13 + Simpson Industries, Inc. 1993 Executive long-term Incentive Plan
(previousTly filed as Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated herein by reference)
10.14 + Simpson Industries, Inc. 1993 Non-Employee Director Stock Option
Plan (previously filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated herein by reference)
10.15 Term Loan Agreement with Comerica Bank, dated as of December 17,
1993 (previously filed as Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993
and incorporated herein by reference)
Amendment to Term Loan Agreement with Comerica Bank, dated as of
November 1, 1994 (previously filed as Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated herein by reference)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated
as of June 17, 1997 (previously filed as Exhibit 10.15 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 and incorporated herein by reference)
10.18 + Letter Agreement, dated December 16, 1994, with George G.
Gilbert (previously filed as Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994, and incorporated herein by reference)
10.19 + Letter Agreement, dated December 16, 1994, with James A. Hug
(previously filed as Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
and incorporated herein by reference)
10.20 Term Note Agreement with Comerica Bank, dated as of January 25,
1995 (previously filed as Exhibit 10.20 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
and incorporated herein by reference)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated
as of June 17, 1997 (previously filed as Exhibit 10.20 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 and incorporated herein by reference)
10.21 Term Note Agreement with Comerica Bank, dated as of February 7,
1995 (previously filed as Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994,
and incorporated herein by reference)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated
as of June 17, 1997 (previously filed as Exhibit 10.21 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 and incorporated herein by reference)
10.23 + Letter Agreement, dated March 1, 1996, with James B. Painter
(previously filed as Exhibit 10.23 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996,
and incorporated herein by reference)
10.24 Credit Agreement, dated June 17, 1997, among Simpson Industries
and certain other Borrowers, certain Commercial Lending
Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously
filed as Exhibit 10.24 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and incorporated herein
by reference)
<PAGE> 36
Amendment to Credit Agreement, dated August 22, 1997 among
Simpson Industries, Inc. and certain other Borrowers, certain
Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica
Bank (previously filed as Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the year December 31,1997, and
incorporated herein by reference)
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 (previously filed as Exhibit 10.24 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30,1998, and incorporated herein by reference)
10.25 Credit Agreement, dated June 17, 1997, among Simpson Industries
and certain other Borrowers, certain Commercial Lending
Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously
filed as Exhibit 10.25 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and incorporated herein
by reference)
Amendment to Credit Agreement, dated August 22, 1997 among
Simpson Industries, Inc. and certain other Borrowers, certain
Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica
Bank (previously filed as Exhibit 10.25 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, and
incorporated herein by reference)
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 (previously filed as Exhibit 10.25 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, and incorporated herein by reference)
Amendment to Credit Agreement, dated June 15, 1999, among
Simpson Industries, Inc. and certain other Borrowers, certain
Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica
Bank (previously filed as Exhibit 10.25 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999, and incorporated herein by reference)
10.26 Note Agreement, dated August 1, 1997 with Northwestern Mutual
Life Insurance Company, Chubb Life Insurance Company of America,
Chubb Colonial Life Insurance Company, Allstate Life Insurance
Company and United of Omaha Life Insurance Company (previously
filed as Exhibit 10.26 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997 and incorporated
herein by reference)
10.27 + Letter Agreement, dated September 1, 1997, with Vinod M.
Khilnani (previously filed as Exhibit 10.27 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1997, and incorporated herein by reference)
10.28 + Letter Agreement dated February 5, 1999, with George A. Thomas
10.29 + Letter agreement dated March 1, 1999 with George A. Thomas
21 * Subsidiaries of registrant
23 * Consent of independent public accountants
27.1 * Financial Data Schedule
*Filed with this report
"+" symbol represents the Company's management contracts or compensatory
plans or arrangements for executive officers.
<PAGE> 1
EXHIBIT 21
Subsidiaries of Registrant
<TABLE>
<CAPTION>
State or
Jurisdiction of Percent
Name of Subsidiary Incorporation Owned
- ------------------ ------------- -----
<S> <C> <C>
Simpson International France SAS Lyon, France 100%
</TABLE>
<PAGE> 1
[KPMG LETTERHEAD]
Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Simpson Industries, Inc.:
We consent to incorporation by reference in the registration statement
(No. 33-39679) on Form S-8 pertaining to the Simpson Industries, Inc. Savings
Plan, to incorporation by reference in the registration statement
(No. 33-39678) on Form S-8 pertaining to the Simpson Industries, Inc. - Fremont
Operation Savings Plan, to incorporation by reference in the registration
statement (No. 2-95425) on Form S-8 pertaining to the Simpson Industries, Inc.
1984 Stock Option Plan, to incorporation by reference in the registration
statement (No. 33-62806) on Form S-8 pertaining to the 1993 Executive Long-Term
Incentive Plan, to incorporation by reference in the registration statement
(No. 33-62802) on Form S-8 pertaining to the 1993 Non-Employee Director Stock
Option Plan, and to incorporation by reference in the registration statement
(333-52843) on Form S-3 pertaining to the offering of shares in connection with
the acquisition of Stahl International, Inc. of our report dated January 26,
2000, relating to the consolidated balance sheets of Simpson Industries, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, shareholders' equity and comprehensive income, and
cash flows for each of the years in the three-year period ended December 31,
1999, which report appears in the December 31, 1999 Annual Report on Form 10-K
of Simpson Industries, Inc.
/s/KPMG LLP
Detroit, Michigan
March 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDING DECEMBER
31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,362
<SECURITIES> 0
<RECEIVABLES> 84,124
<ALLOWANCES> 0
<INVENTORY> 19,448
<CURRENT-ASSETS> 129,298
<PP&E> 362,259
<DEPRECIATION> 179,346
<TOTAL-ASSETS> 361,456
<CURRENT-LIABILITIES> 106,313
<BONDS> 0
0
0
<COMMON> 17,930
<OTHER-SE> 115,102
<TOTAL-LIABILITY-AND-EQUITY> 361,456
<SALES> 532,676
<TOTAL-REVENUES> 534,685
<CGS> 478,903
<TOTAL-COSTS> 493,688
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,279
<INCOME-PRETAX> 31,718
<INCOME-TAX> 10,880
<INCOME-CONTINUING> 20,838
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,838
<EPS-BASIC> 1.15
<EPS-DILUTED> 1.15
</TABLE>
