<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended September 30, 2000 Commission File Number 0-6611
SIMPSON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1225111
(State or other jurisdiction of IRS Employer Identification No.)
incorporation or organization)
47603 Halyard Drive, Plymouth, Michigan 48170-2429
(Address of principal executive offices) (Zip Code)
(734)207-6200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
At October 31, 2000 there were 17,866,753 outstanding shares of the registrant's
common stock, $1.00 par value each.
<PAGE> 2
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
(In thousands)
September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
Sep.30
(Unaudited) Dec. 31
----------- -------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 7,672 $ 7,362
Accounts receivable 82,472 84,124
Inventories 19,157 19,448
Customer tooling in process 4,343 6,404
Prepaid expenses and other current assets 11,291 11,960
-------- -------
Total Current Assets 124,935 129,298
Property, Plant and Equipment
Cost 383,740 362,259
Less Accumulated Depreciation 194,424 179,346
-------- --------
Net Property, Plant and Equipment 189,316 182,913
Intangible Assets - net 41,838 46,847
Other Assets 2,117 2,398
-------- --------
$358,206 $361,456
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installment of long-term debt $ 8,079 $ 6,079
Notes payable 13,797 10,908
Accounts payable 55,852 62,654
Compensation and amounts withheld 11,930 12,614
Taxes, other than income taxes 2,503 3,797
Other current liabilities 8,160 10,261
-------- --------
Total Current Liabilities 100,321 106,313
Long-term debt, excluding current installment 97,254 98,955
Accrued Retirement Benefits and Other 15,974 16,098
Deferred Income Taxes 11,094 7,058
Minority Interest in Joint Venture 462 -
Shareholders' Equity 133,101 133,032
-------- --------
$358,206 $361,456
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 3
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Periods Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Three Months Nine Months
2000 1999 2000 1999
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $ 116,468 $ 124,220 $ 399,605 $ 396,721
Costs and expenses:
Cost of products sold 108,903 114,382 360,108 356,382
Administrative and selling 3,543 3,201 10,333 8,725
Amortization 485 508 1,538 1,533
--------- --------- --------- ---------
112,931 118,091 371,979 366,640
--------- --------- --------- ---------
Operating Earnings 3,537 6,129 27,626 30,081
Investment and other income
(loss), net (276) 177 (617) 68
Interest expense (2,434) (2,178) (6,960) (6,494)
--------- --------- --------- ---------
Earnings Before Income Taxes 827 4,128 20,049 23,655
Income taxes (363) 1,278 6,365 8,113
--------- --------- --------- ---------
Net Earnings $ 1,190 $ 2,850 $ 13,684 $ 15,542
========= ========= ========= =========
Comprehensive Income (Loss) - net $ (3,175) $ 3,836 $ 8,721 $ 11,141
========= ========= ========= =========
Basic Earnings Per Share $ 0.07 $ 0.16 $ 0.77 $ 0.86
Diluted Earnings Per Share $ 0.07 $ 0.16 $ 0.76 $ 0.86
Cash dividends per share $ 0.10 $ 0.10 $ 0.30 $ 0.30
Average number of common equivalent shares:
Basic 17,874,139 18,033,679 17,884,865 18,081,394
Diluted 17,874,424 18,098,532 17,896,626 18,119,294
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 13,684 $ 15,542
Depreciation and amortization 21,587 20,800
Provision for deferred income taxes 4,036 753
Other 302 540
Changes in operating assets and liabilities (6,687) (13,876)
-------- --------
Cash Provided By Operating Activities 32,922 23,759
INVESTING ACTIVITIES
Capital expenditures (28,466) (29,604)
Proceeds from disposal of property and equipment 35 789
-------- --------
Cash Used In Investing Activities (28,431) (28,815)
FINANCING ACTIVITIES
Cash dividends paid (5,364) (5,425)
Notes payable, net 2,889 10,400
Proceeds (repayments) of long-term debt, net 67 (184)
Cash used in stock transactions, net (949) (1,485)
-------- --------
Cash (Used In) Provided By Financing Activities (3,357) 3,306
Effect of foreign currency exchange rate changes (824) 1,322
-------- --------
Increase (Decrease) In Cash and Cash Equivalents 310 (428)
Cash and cash equivalents at beginning of period 7,362 6,145
-------- --------
Cash and Cash Equivalents at End of Period $ 7,672 $ 5,717
======== ========
Supplemental Disclosures
Cash paid during the period for:
Interest $ 7,643 $ 6,208
Income Taxes 8,162 7,744
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
ITEM 1: NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Significant Accounting Principles
The accompanying unaudited consolidated financial statements of Simpson
Industries Inc. (Company) have been prepared in accordance with generally
accepted accounting principles for interim financial reporting. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The results of
operations for the period ended September 30, 2000 are not necessarily
indicative of the results to be expected for the year ending December 31, 2000.
Note 2. Lines of Credit
The Company maintains credit lines that allow for borrowings of up to $25
million under a five-year agreement and up to $50 million under a 364-day
agreement. At September 30, 2000, there were no borrowings outstanding under the
364-day agreement, and $21.6 million outstanding under the five-year agreement.
At September 30, 2000, $10 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.
Note 3. Proposed Merger of Company
The Company has entered into a definitive agreement to merge with an affiliate
of Heartland Industrial Partners, LP. Under the terms of the agreement, each
shareholder of the Company is expected to receive $13.00 in cash per share at
the closing. The value of the transaction, including the assumption of debt, is
estimated to be approximately $350 million.
<PAGE> 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net sales for the third quarter of 2000 were $116.5 million, a decrease of $7.8
million, or 6.2%, compared to $124.2 million in the third quarter of 1999.
Year-to-date sales increased 0.7%, or $2.9 million from the first nine months of
1999. Demand in North America from our automotive customers continued to be
strong. Sales to the "Big Three" (GM, Ford and DaimlerChrysler) grew 6% this
quarter versus the third quarter of 1999. Sales to our heavy-duty and mid-range
diesel customers decreased 28% following a general decline in these markets.
European sales were up 3% versus the third quarter of 1999, despite a stronger
U.S. dollar.
Cost of products sold as a percent of sales increased slightly from 92.1% in the
third quarter of 1999 to 93.5% this quarter. Cost of products sold as a
percentage of sales for the first nine months of 2000 compared to the first nine
months of 1999 increased from 89.8% to 90.1%.
During the first nine months of 2000, the Company added staff to support new
program development and launch costs. As a result, administrative and selling
expenses increased from $3.2 million, or 2.6% of sales, in the third quarter of
1999 to $3.5 million, or 3.0% of sales, in the third quarter of 2000;
administrative and selling expenses for the first nine months of 2000 increased
from $8.7 million, or 2.2% of sales, in 1999 to $10.3 million, or 2.6% of sales.
Third quarter interest expense increased from $2.2 million in 1999, or 1.8% of
sales, to $2.4 million in 2000, or 2.1% of sales. Interest expense increased
from $6.5 million, or 1.6% of sales, in the first nine months of 1999 to $7.0
million, or 1.7% of sales in the first nine months of 2000. Higher interest
rates and increased outstanding debt were factors in the increase for both the
third quarter and year-to-date interest expense.
Operating earnings for the first nine months decreased to $27.6 million in 2000
compared to $30.1 million in 1999. Third quarter operating earnings decreased
42.3%, from $6.1 million in 1999 to $3.5 million in 2000, due to lower sales and
increased startup costs for new programs. As a result, net earnings were down
58.2%, from $2.9 million in the third quarter of 1999 to $1.2 million in the
third quarter of 2000; net earnings decreased 12.0% for the first nine months of
2000, from $15.5 million to $13.7 million.
Cash flow from operations was $32.9 million for the first nine months of 2000,
an increase of $9.2 million from the first nine months of 1999. Net cash used in
investing activities totaled $28.4 million for the nine months ended September
30, 2000, down $0.4 million from the $28.8 million used in the first nine months
of 1999. These expenditures represent the Company's investment in production
capacity for new automotive, light truck and diesel engine programs.
Cash flow from financing activities decreased $6.7 million, from $3.3 million
through September 1999 to ($3.4) million through September 2000. The Company
believes that cash flows from operations and available credit facilities will be
sufficient to meet its debt service requirements, projected capital expenditures
and dividends, and working capital requirements.
<PAGE> 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company maintains credit lines that allow for borrowings of up to $25
million under a five-year agreement and up to $50 million under a 364-day
agreement. At September 30, 2000, there were no borrowings outstanding under the
364-day agreement, and $21.6 million outstanding under the five-year agreement.
At September 30, 2000, $10 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 has entered into a definitive agreement to merge with an affiliate
of Heartland Industrial Partners, LP. Under the terms of the agreement, each
shareholder of the Company is expected to receive $13.00 in cash per share at
the closing. The value of the transaction, including the assumption of debt, is
estimated to be approximately $350 million.
Derivative Instruments and Hedging Activities: SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", was issued in June 1998. It
establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No. 133, as amended by FASB Statement No. 137 and SFAS
No. 138 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000. Any future effects will be incorporated into the current year's
financial statements. The Company is in the process of completing its review to
determine the impact on its financial statements.
This report contains forward-looking statements within the meaning of the
Securities Exchange Act of 1934. These statements, including those relating to
future outlook and operating performance, new programs expected to be launched,
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, fluctuations
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> 8
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended September 30, 2000, the Company did not experience any
material change in market risk exposures affecting the quantitative and
qualitative disclosures as presented in the Company's Annual Report on Form 10-K
for the year ended December 31, 1999.
<PAGE> 9
Part II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are part of this report.
Exhibit No. Description
2 Agreement and Plan of Merger dated
September 29, 2000 among Simpson
Industries, Inc., Simmer Acquisition
Company LLC and Simmer Acquisition
Corporation (previously filed as Exhibit
99.1 to the Company's Current Report on
Form 8-K, dated October 12, 2000 and
incorporated herein by reference).
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 2000.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIMPSON INDUSTRIES, INC.
Registrant
November 07, 2000 /s/Vinod M. Khilnani
Vinod M. Khilnani
Vice President and Chief Financial Officer
<PAGE> 11
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
