-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RkbcInM1ISQ++dc2Do2BLfx/lCH+/vdY7YI1111kXqmCHjDr1SUg17J/WxFWtOkK gRXmxS9+k9Hci42yVIm1Lw== 0000950124-98-000710.txt : 19980218 0000950124-98-000710.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950124-98-000710 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEENAH FOUNDRY CO CENTRAL INDEX KEY: 0001040599 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 390496210 STATE OF INCORPORATION: WI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-28751-03 FILM NUMBER: 98536017 BUSINESS ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 BUSINESS PHONE: 4147257000 MAIL ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEENAH TRANSPORT INC CENTRAL INDEX KEY: 0001040597 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 391378433 STATE OF INCORPORATION: WI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-28751-01 FILM NUMBER: 98536018 BUSINESS ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 BUSINESS PHONE: 4147257000 MAIL ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARTLEY CONTROLS CORP CENTRAL INDEX KEY: 0001040598 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 391378433 STATE OF INCORPORATION: WI FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-28751-02 FILM NUMBER: 98536019 BUSINESS ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 BUSINESS PHONE: 4147257000 MAIL ADDRESS: STREET 1: 2121 BROOKS AVE STREET 2: PO BOX 729 CITY: NEENAH STATE: WI ZIP: 54927 10-Q 1 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended December 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ______________ Commission File Number 333-28751 NEENAH FOUNDRY COMPANY NEENAH TRANSPORT, INC. HARTLEY CONTROLS CORPORATION (Exact name of each registrant as it appears in its charter) Wisconsin 39-1580331 Wisconsin 39-1378433 Wisconsin 39-0842568 (State or other jurisdiction of (IRS Employer ID Number) incorporation or organization) 2121 Brooks Avenue, P.O. Box 729, Neenah, Wisconsin 54957 2121 Brooks Avenue, P.O. Box 729, Neenah, Wisconsin 54957 2400 Holly Road, Neenah, Wisconsin 54956 (Address of principal executive offices) (Zip Code) (920) 725-7000 (920) 725-7000 (920) 734-2689 (Registrant's telephone number, including area code) None (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 (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Page 1 2 NEENAH FOUNDRY COMPANY Form 10-Q Index For the Quarter Ended December 31, 1997
Page Part 1. Financial Information Item 1. Financial Statements Condensed consolidated balance sheets -- December 31, 1997 and September 30, 1997 3 Condensed consolidated statements of income -- Three months ended December 31, 1997; and Three months ended December 31, 1996 4 Condensed consolidated statements of cash flows -- Three months ended December 31, 1997; and Three months ended December 31, 1996 5 Notes to condensed consolidated financial statements -- December 31, 1997 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7 Operations Part II. Other Information Item 1. Legal Proceedings 9 Item 2. Changes in Securities 9 Item 3. Defaults upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 9 Exhibit Index 10
Page 2 3 NEENAH FOUNDRY COMPANY PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
As of As of December 31 September 30 1997 1997(1) ----------- --------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents ........................ $ 21,994 $ 20,344 Accounts receivable, net ......................... 22,226 29,932 Inventories ...................................... 18,286 19,639 Other current assets ............................. 719 318 Deferred income taxes ............................ 1,628 1,695 -------- -------- Total current assets ....................... 64,853 71,928 Property, plant and equipment ...................... 104,841 103,710 Less accumulated depreciation ...................... 5,118 3,131 -------- -------- 99,723 100,579 Identifiable intangible assets, net ................ 34,415 35,277 Goodwill, net ...................................... 115,953 116,690 Other assets ....................................... 3,817 3,951 -------- -------- $ 318,761 $ 328,425 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ................................. $ 5,744 $ 10,333 Income taxes payable ............................. 3,730 4,384 Accrued liabilities .............................. 11,549 17,283 Current portion of long-term debt ................ 78 98 -------- -------- Total current liabilities .................. 21,101 32,098 Long-term debt ..................................... 197,457 197,522 Postretirement benefit obligations ................. 4,975 4,894 Deferred income taxes .............................. 44,452 44,519 Other liabilities .................................. 2,151 2,172 -------- -------- Total liabilities .......................... 270,136 281,205 Commitments and contingencies STOCKHOLDERS' EQUITY: Preferred stock, par value $100 per share -- authorized 3,000 shares, no shares issued or outstanding ................... -- -- Common stock, par value $100 per share -- authorized 11,000 shares, issued and outstanding 1,000 shares ............. 100 100 Additional paid in capital .................... 44,900 44,900 Retained earnings ............................. 3,625 2,220 -------- -------- Total stockholders' equity ................. 48,625 47,220 -------- -------- $ 318,761 $ 328,425 ======== ========
See notes to condensed consolidated financial statements. (1) The balance sheet as of September 30, 1997 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Page 3 4 NEENAH FOUNDRY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands)
Predecessor ------------ Three Months Three Months Ended Ended December 31, December 31, 1997 1996 ---------------- ------------ Net sales ................................................ $45,854 $37,815 Cost of sales ............................................ 32,771 26,990 ------- ------- Gross profit ............................................. 13,083 10,825 Selling, general and administrative expenses ............. 3,550 4,468 ------- ------- Operating income ......................................... 9,533 6,357 Net interest income (expense) ............................ (6,759) 347 ------- ------- Income before income taxes ............................... 2,774 6,704 Provision for income taxes ............................... 1,369 2,069 ------- ------- Net income ............................................... $ 1,405 $ 4,635 ======= =======
See notes to condensed consolidated financial statements. Page 4 5 NEENAH FOUNDRY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Predecessor ------------- Three Months Three Months Ended Ended December 31, December 31, 1997 1996 -------------- ------------- OPERATING ACTIVITIES Net income .............................................. $ 1,405 $ 4,635 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................ 3,518 1,759 Changes in operating assets and liabilities .......... (2,125) 2,459 ------- ------- Net cash provided by operating activities ..................................... 2,798 8,853 INVESTING ACTIVITIES Purchase of property, plant and equipment ............... (1,128) (911) Other ................................................... -- (18) ------- ------- Net cash used in investing activities ...................................... (1,128) (929) FINANCING ACTIVITIES Dividends paid .......................................... -- (2,220) Payments on long-term debt .............................. (20) (18) ------- ------- Net cash used in financing activities ...................................... (20) (2,238) ------- ------- Increase in cash and cash equivalents ................... 1,650 5,686 Cash and cash equivalents at beginning of period ........ 20,344 18,166 ------- ------- Cash and cash equivalents at end of period .............. $21,994 $23,852 ======= =======
See notes to condensed consolidated financial statements. Page 5 6 NEENAH FOUNDRY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) December 31, 1997 Note I -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended December 31, 1997 are not necessarily indicative of the results that may be expected for the period ending September 30, 1998. (The Company changed its fiscal year end to September 30 effective September 30, 1997). For further information, refer to the consolidated financial statements and footnotes thereto included in Neenah Foundry Company's Annual Report on Form 10-K for the period ended September 30, 1997. Note 2 -- Inventories The components of inventories are as follows:
December 31 September 30 1997 1997 --------------- ------------------ (000's omitted) Raw materials ................................. $ 1,927 $ 1,688 Work in process and finished goods............. 12,528 13,379 Supplies ...................................... 4,684 4,572 ------- ------- Inventories at FIFO cost ...................... 19,139 19,639 Excess of FIFO cost over LIFO cost ............ (853) -- ------- ------- $18,286 $19,639 ======= =======
At September 30, 1997, inventories at LIFO approximated FIFO cost. NOTE 3 -- GUARANTOR SUBSIDIARIES Neenah Transport, Inc. and Hartley Controls Corporation (the "Guarantor Subsidiaries") are wholly-owned subsidiaries of Neenah Foundry Company and have fully and unconditionally guaranteed the Senior Subordinated Notes (as defined below) on a joint and several basis. The Guarantor Subsidiaries comprise all of the Company's direct and indirect subsidiaries. The separate financial statements of the Guarantor Subsidiaries have not been included herein because management has concluded that such financial statements would not provide additional information that is material to investors. Page 6 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL On April 30, 1997, pursuant to an Agreement and Plan of Reorganization with NC Merger Company and NFC Castings, Inc., the stock of Neenah Corporation (the "Predecessor Company") was acquired by NFC Castings, Inc. (the "Merger"). On July 1, 1997, Neenah Foundry Company, which was the principal operating subsidiary of Neenah Corporation, merged with and into Neenah Corporation and the surviving company changed its name to Neenah Foundry Company (the "Company"). The following discussion and analysis of the Company's financial condition and results of operations addresses the periods both before and after the Merger. The Merger has had a significant impact on the Company's results of operations and financial condition. The Merger resulted in the recording of goodwill and identifiable intangible assets totaling approximately $148.8 million. These amounts are being amortized over their estimated useful lives, ranging from five months to 40 years. The Merger has also resulted in a significant increase in the Company's interest expense. The Merger has been accounted for as a business combination and has resulted in differences in the basis of certain assets and liabilities between the Predecessor Company and the Company. The Company changed its fiscal year end to September 30 from March 31 effective September 30, 1997. The following discussions compare the results of operations of the Company for the three months ended December 31, 1997, to the historical results of the Predecessor Company for the three months ended December 31, 1996. RESULTS OF OPERATIONS (dollars in thousands) Net sales. Net sales for the three months ended December 31, 1997 were $45,854 which are $8,039 or 21.3% higher than the quarter ended December 31, 1996. Net sales of municipal castings increased by $1,006 or 6.2% due primarily to market share gains in strategic focus areas of the Eastern and Southwestern United States as well as a continuation of the successful transition to a modernized product line. Net sales of industrial castings increased by $7,426 or 37.7% due to the overall strength of the heavy duty truck market coupled with very high demand in the agricultural and HVAC lines of business. Net sales for Hartley Controls Corporation for the three months ended December 31, 1997, declined by $393 which is mostly attributable to a reduction in foundry expansion and lower capital spending at the major foundry customers that Hartley Controls Corporation services. Gross profit. Gross profit for the three months ended December 31, 1997 was $13,083, an increase of $2,258, or 20.9%, as compared to the quarter ended December 31, 1996. The margin improvement was due to the combined effect of spreading manufacturing overhead over a greater volume, improved efficiency in plant operations and, to a lesser extent, improved pricing of industrial castings. Page 7 8 Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended December 31, 1997 were $3,550, a decrease of $918, or 20.5%, as compared to the $4,468 for the quarter ended December 31, 1996. As a percentage of net sales, selling, general and administrative expenses decreased from 11.8% for the quarter ended December 31, 1996 to 7.7% for the three months ended December 31, 1997. The decrease in selling, general and administrative expenses was mainly due to the reduction in compensation for senior executives who did not remain with the Company after the Merger, which was offset by amortization of goodwill and identifiable intangible assets resulting from the Merger. Operating income. Operating income was $9,533 for the three months ended December 31, 1997, an increase of $3,176, or 50.0%, from the quarter ended December 31, 1996. As a percentage of net sales, operating income increased from 16.8% for the quarter ended December 31, 1996 to 20.8% for the three months ended December 31, 1997. The improvement in operating income was achieved for the reasons discussed above. LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands) In connection with the Merger, the Company issued $150.0 million principal amount of 11-1/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes") and entered into a credit agreement providing for term loans of $45.0 million and a revolving credit facility of up to $50.0 million, as amended (the "Senior Bank Facility"). On July 1, 1997, the Company issued an additional $45.0 million principal amount of Senior Subordinated Notes and used the proceeds of $47.6 million to pay the term loans, the accrued interest thereon and related fees and expenses. The Company's liquidity needs will arise primarily from debt service on the above indebtedness, working capital needs and funding of capital expenditures. Borrowings under the revolving credit facility bear interest at variable interest rates. The Senior Bank Facility imposes restrictions on the Company's ability to make capital expenditures and both the Senior Bank Facility and the indentures governing the Senior Subordinated Notes limit the Company's ability to incur additional indebtedness. The covenants contained in the Senior Bank Facility also, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur guarantee obligations, prepay the Senior Subordinated Notes or amend the indentures, pay dividends, create liens on assets, enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, change the business conducted by the Company, make capital expenditures or engage in certain transactions with affiliates, and otherwise restrict corporate activities. For the three months ended December 31, 1997 and December 31, 1996, capital expenditures were $1,128 and $911, respectively. The $217 increase in capital expenditures was primarily the result of planned enhancements to certain equipment in the manufacturing area. The Company's principal source of cash to fund its liquidity needs will be net cash from operating activities and borrowings under its revolving credit facility. Net cash from operating activities for the three months ended December 31, 1997 was $2,798, a decrease of $6,055 from $8,853 for the three months ended December 31, 1996. The decrease in net cash from operating activities was primarily a result of a decrease in net income and interest payments made in October 1997 on the Company's outstanding indebtedness. The Company believes that cash generated from operations and existing revolving lines of credit under the Senior Bank Facility will be sufficient to meet its normal operating requirements, including interest payments on the Company's outstanding indebtedness. Page 8 9 NEENAH FOUNDRY COMPANY PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None. Item 2. CHANGES IN SECURITIES None. Item 3. DEFAULTS UPON SENIOR SECURITIES None. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. Item 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended December 31, 1997. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NEENAH FOUNDRY COMPANY DATE: February 13, 1998 /s/ Gary LaChey ------------------------------------------------ Gary LaChey Vice President-Finance, Secretary & Treasurer (Principal Financial Officer) NEENAH TRANSPORT, INC. DATE: February 13, 1998 /s/ Gary LaChey ------------------------------------------------ Gary LaChey Vice President-Finance, Secretary & Treasurer (Principal Financial Officer) HARTLEY CONTROLS CORPORATION DATE: February 13, 1998 /s/ Gary LaChey ------------------------------------------------ Gary LaChey Vice President-Finance, Secretary & Treasurer (Principal Financial Officer) Page 9 10 EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule EX-27 2 EXHIBIT 27
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF NEENAH FOUNDRY COMPANY AS OF AND FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001040599 NEENAH FOUNDRY COMPANY 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 21,994 0 22,636 410 18,286 64,853 104,841 5,118 318,761 21,101 197,457 0 0 100 48,525 318,761 45,854 45,854 32,771 32,771 0 0 (6,759) 2,774 1,369 1,405 0 0 0 1,405 0 0
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