-----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, FcpHjFexgYwDYHY0Ce/HewakwfiOu7eH9R0FAy147x2Q0PvSdCzOiKRrKIpD7XrQ gkMHpY4GWckB/3ZQRIZm5A== 0000950135-00-002530.txt : 20000508 0000950135-00-002530.hdr.sgml : 20000508 ACCESSION NUMBER: 0000950135-00-002530 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000401 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMONDS INDUSTRIES INC CENTRAL INDEX KEY: 0001067919 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 050484518 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-62795 FILM NUMBER: 620086 BUSINESS ADDRESS: STREET 1: 135 INTERVALE RD CITY: FITCHBURG STATE: MA ZIP: 01420 BUSINESS PHONE: 9783433731 MAIL ADDRESS: STREET 1: 135 INTERVALE RD CITY: FITCHBURG STATE: MA ZIP: 01420 10-Q 1 SIMONDS INDUSTRIES 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended April 1, 2000. [ ] 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: N/A Simonds Industries Inc. (Exact name of registrant as specified in its charter) - -------------------------------------- -------------------------------------- Delaware 05-0484518 - -------------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer - -------------------------------------- -------------------------------------- Incorporation or organization) Identification No.) - -------------------------------------- -------------------------------------- 135 Intervale Road Fitchburg, MA 01420 (Address of principal executive offices) (978) 343-3731 (Registrant's telephone number, including area code) 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 Act of 1934 during the preceding 12 months (or for such shorter period 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 [ ] Number of shares outstanding of the registrant's voting and non-voting common stock, as of April 30, 2000: 66,298.39 and 7,897.45, respectively. 1 2 Simonds Industries Inc. Form 10-Q Index Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets - January 1, 2000 and April 1, 2000 3 Consolidated Statements of Operations - 4 three months ended April 3, 1999 and April 1, 2000 Consolidated Statements of Cash Flows - 5 three months ended April 3, 1999 and April 1, 2000 Consolidated Statements of Shareholders' 6 Equity (Deficit)- for the three months ended April 3, 1999 and April 1, 2000 Notes to Consolidated Financial Statements - 7 April 1, 2000 Item 2. Management's Discussion and Analysis of 13 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 Exhibit No. 27 - Financial Data Schedule 18 2 3 Part 1. Financial Information Item 1. Financial Statements (Unaudited) SIMONDS INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (In Thousands, except share amounts)
ASSETS January 1, April 1, ------ 2000 2000 ------------------ ------------------ (unaudited) CURRENT ASSETS: Cash $ 8,383 $ 3,942 Accounts receivable, net of reserves of $993 and $1,019 17,400 17,952 Inventories (Note 3) 26,650 27,071 Other current assets 3,162 3,295 Refundable income taxes 1,037 754 ------------------ ------------------ Total current assets 56,632 53,014 PROPERTY, PLANT AND EQUIPMENT: Land 2,300 2,288 Buildings and improvements 10,684 10,578 Machinery and equipment 32,126 32,221 Construction-in-progress 314 821 ------------------ ------------------ 45,424 45,908 Less- Accumulated depreciation 11,585 12,449 ------------------ ------------------ Net property, plant and equipment 33,839 33,459 OTHER ASSETS: Goodwill, net of accumulated amortization of $2,223 and $2,377 22,308 22,129 Deferred financing costs, net of accumulated amortization 3,900 3,770 of $764 and $891 Other, including buildings held for resale 1,608 1,539 ------------------ ------------------ Total other assets 27,816 27,438 ------------------ ------------------ Total assets $118,287 $113,911 ================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Overdraft facilities $ 190 $ 149 Revolving credit loans and notes payable 321 186 Current portion of long-term debt 14 9 Accounts payable 6,871 6,269 Accrued payroll and employee benefits 4,034 3,552 Accrued interest 5,153 2,509 Other accrued liabilities 2,739 2,582 Currently deferred income taxes 2,028 2,028 ------------------ ------------------ Total current liabilities 21,350 17,284 LONG-TERM DEBT, net of current portion (Note 4) 102,523 102,200 DEFERRED INCOME TAXES 4,808 4,823 OTHER NONCURRENT LIABILITIES 1,851 1,781 COMMITMENTS AND CONTINGENCIES - - SHAREHOLDERS' EQUITY: Common stock, $.01 par value- Authorized - 200,000 shares Issued and outstanding - 76,289 1 1 Capital in excess of par value (24,405) (24,387) Retained earnings 14,130 14,644 Additional minimum pension liability, net of $58 tax effect (135) (135) Cumulative translation adjustment (1,715) (2,179) Treasury stock, at cost (121) (121) ------------------ ------------------ Total shareholders' equity (deficit) (12,245) (12,177) ------------------ ------------------ Total liabilities and shareholders' equity $118,287 $113,911 ================== ==================
The accompanying notes are an integral part of these consolidated financial statements. 3 4 SIMONDS INDUSTRIES INC. CONSOLIDATED STATEMENT OF OPERATIONS (In Thousands) (Unaudited)
--------------------------------------- Three Months Ended April 3, April 1, 1999 2000 ----------------- -------------------- Net sales $31,419 $32,792 Cost of goods sold 21,677 22,427 ----------------- -------------------- Gross profit 9,742 10,365 Selling, general and administrative expense 6,409 6,489 ----------------- -------------------- Operating income 3,333 3,876 Other expenses (income): Interest expense 2,770 2,736 Other, net (53) 191 ----------------- -------------------- Income before income taxes 616 949 Provision for income taxes 299 435 ----------------- -------------------- Net income $ 317 $ 514 ================= ====================
The accompanying notes are an integral part of these consolidated financial statements. 4 5 SIMONDS INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
----------------------------------- THREE MONTHS ENDED APRIL 3, APRIL 1, 1999 2000 ----------------------------------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 317 $ 514 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,207 1,306 Gain on asset sales (9) (2) (Benefit) Provision from deferred income taxes (8) 15 Changes in assets and liabilities, net of acquisitions: Accounts receivable (677) (552) Inventories (1,995) (421) Income tax refunds receivable - 283 Other current and noncurrent assets 289 (113) Accounts payable 1,225 (623) Accrued expenses (3,128) (3,283) Other non-current liabilities (99) (70) ----------------------------------- Net cash (used in) operating activities (2,878) (2,946) ----------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment 23 14 Purchases of equipment (1,035) (726) ----------------------------------- Net cash (used in) investing activities (1,012) (712) ----------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in overdrafts 14 (41) Net (uses) proceeds under revolving credit 110 (135) Proceeds from issuance of long- term debt-net of issuance costs 336 - Principal payments of long-term debt (6) (328) Issuance of common stock - 18 Other (1) - ----------------------------------- Net cash provided by (used in) financing activities 453 (486) ----------------------------------- EFFECT OF EXCHANGE RATE ON CASH (141) (297) ----------------------------------- NET (DECREASE) IN CASH (3,578) (4,441) CASH AT BEGINNING OF PERIOD 9,298 8,383 ----------------------------------- CASH AT END OF PERIOD $ 5,720 $ 3,942 ===================================
The accompanying notes are an integral part of these consolidated financial statements. 5 6 SIMONDS INDUSTRIES INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) For the three months ended April 3, 1999 and April 1, 2000 (In thousands, except share amounts) (Unaudited)
ACCUMULATED TOTAL CAPITAL OTHER SHAREHOLDERS' COMPREHENSIVE COMMON COMMON IN EXCESS RETAINED COMPREHENSIVE TREASURY EQUITY INCOME SHARES STOCK OF PAR EARNINGS LOSS STOCK (DEFICIT) (LOSS) ---------- ------- --------- -------- ------------- --------- ------------- ------------- Balance at January 2, 1999 76,333 $1 $(24,405) $12,696 $( 907) $( 65) $(12,680) - Net Income - - - 317 - - 317 $ 317 Foreign Currency Translation Adjustment - - - - (589) - (589) (589) ---------- ------- --------- -------- ------------- --------- ------------- ------------- Balance at April 3, 1999 76,333 $1 $(24,405) $13,013 $(1,496) $( 65) $(12,952) $(272) ========== ======= ========= ======== ============= ========= ============= ============= Balance at January 1, 2000 76,289 $1 $(24,405) $14,130 $(1,850) $(121) $(12,245) - Net Income - - - 514 - - 514 $514 Foreign Currency Translation Adjustment - - - - (464) - (464) (464) Amortization of Stock Option Compensation - - 18 - - - 18 - ---------- ------- --------- -------- ------------- --------- ------------- ------------- Balance at April 1, 2000 76,289 $1 $(24,387) $14,644 $(2,314) $(121) $(12,177) $ 50 ========== ======= ========= ======== ============= ========= ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 6 7 Notes to Consolidated Financial Statements (In thousands except share and per share amounts) (Unaudited) 1. Basis of Presentation The unaudited interim consolidated financial statements presented herein have been prepared by Simonds Industries Inc. ("Simonds" or the "Company") and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of January 1, 2000 has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to those rules and regulations, but the Company believes that the disclosures are adequate to make the information presented not misleading. Operating results for the three months ended April 1, 2000 are not necessarily indicative of the results that may be expected for the year ending December 30, 2000. For further information, refer to the financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended January 1, 2000. 2. Acquisitions On May 8, 1998, the Company acquired 100% of the outstanding stock of W. Notting Limited ("Notting") for approximately $6,718, of which $5,471 was paid in cash with additional financing from the Company's revolving credit facility; the balance was in the form of a term Promissory Note to the sellers bearing interest at 8.5% and was repaid April 30, 1999. The acquisition was accounted for as a purchase and the purchase price has been allocated based on the fair market value of the underlying assets and liabilities. In accordance with EITF 95-3, the purchase price allocation reflects accruals of approximately $500 for lease contracts on facilities that are being closed; $300 for severance pay accruals for 24 employees to be terminated; and $300 for other reorganization expenses. At April 1, 2000, the remaining accruals were $7 for lease contracts on facilities and $100 for other reorganization expenses. As of April 1, 2000, all 24 employees had been terminated. Goodwill totaled $2,857 on this acquisition and is being amortized on a straight-line basis over 40 years. The consolidated financial statements include the results of operations of Notting subsequent to the date of acquisition. 7 8 3. Inventories at January 1, 2000 and April 1, 2000 were as follows (in thousands). January 1, April 1, 2000 2000 ------------------ ----------------- Raw Materials $ 4,967 $ 5,777 Work in progress 6,429 6,968 Finished goods 15,254 14,326 ------------------ ----------------- Total $ 26,650 $ 27,071 ================== ================= 4. Debt Debt consists of the following at January 1, 2000 and April 1, 2000 (in thousands):
January 1, April 1, 2000 2000 ---------------- ----------------- Line of credit facility for German Subsidiary with $ 2,523 $ 2,200 First Union National Bank up to approximately $2,689, interest payable quarterly at EURIBOR (3.68% at April 1, 2000) plus 1.25% terminating on October 1, 2003, payable in Deutschmarks. Line of credit facilities for Notting with Banco 135 59 Sabadell and Banco Popular of Spain, bearing interest at 6.25% and 6.50% and terminating on April 1, 2001 and May 17, 2000, respectively, payable in Spanish Pesetas. Two term loans payable by Notting to National 200 136 Westminster Bank on June 30, 2000 and September 30, 2000, bearing interest at 8.75% and 9.5%, payable in British Pounds. Senior Subordinated Notes issued July 8, 1998, and 100,000 100,000 maturing July 1, 2008, interest payable semi-annually at 10.25%. ---------------- ----------------- 102,858 102,395 Less-current maturities 335 195 ---------------- ----------------- $102,523 $102,200 ================ =================
5. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative 8 9 Instruments and Hedging Activities." This statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133, as amended by SFAS No. 137 "Accounting for Derivative Instruments and Hedging Activities Deferral of the Effective Date of FASB Statement No. 133" shall be effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company has not yet quantified the impact of adopting SFAS No. 133 on its consolidated financial statements and has not determined the timing nor method of its adoption of the statement. The Securities and Exchange Commission released Staff Accounting Bulletin (SAB) No. 101 Revenue Recognition in Financial Statements, on December 3, 1999. This SAB provides additional guidance on the accounting for revenue recognition, including both broad conceptual discussions as well as certain industry-specific guidance. The Company is in the process of accumulating the information necessary to quantify the potential impact, if any, of this new guidance. This SAB was amended by SAB 101A which defers the effective date of SAB 101 for registrants with fiscal years that begin between December 16, 1999 and March 15, 2000. The guidance is now effective for the second quarter of fiscal 2000 and would be adopted by recording the effect of any prior revenue transaction affected as a "cumulative effect of change in accounting principle" as of January 2, 2000. 6. Selected consolidating financial statements of parent, guarantors, and non-guarantors The Company's wholly owned domestic subsidiaries fully and unconditionally guarantee, on a senior subordinated basis, the 10.25% Senior Subordinated Notes, jointly and severally. The guarantor subsidiary data below includes financial statements of Armstrong Manufacturing Company. The non-guarantor subsidiaries data below includes combining financial statements of Wespa, Simonds UK, UK Holding Co., and Simonds Canada. Separate financial statements of the guarantor subsidiary have not been presented because management believes that such financial statements are not material to investors. In addition, the Senior Credit Facility is guaranteed on a full and unconditional basis by the guarantor subsidiary. The following data summarizes the consolidating results of the Company on the equity method of accounting for the following periods presented: 9 10 SIMONDS INDUSTRIES INC. CONSOLIDATING BALANCE SHEET (In Thousands)
AS OF JANUARY 1, 2000 -------------------------------------------------------------------------- PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS CONSOLIDATED ---------- ------------ --------------- -------------- ------------- ASSETS CURRENT ASSETS: Cash $ 7,159 $ 340 $ 884 - $ 8,383 Accounts receivable 8,245 1,228 7,927 - 17,400 Intercompany accounts receivable 1,563 1,271 1,215 (4,049) - Inventories: Raw materials 2,999 183 1,785 - 4,967 Work in progress 5,300 259 870 - 6,429 Finished goods 5,926 629 8,984 (285) 15,254 Other current assets 3,524 79 596 - 4,199 ---------- ------------ --------------- -------------- ------------- Total current assets 34,716 3,989 22,261 (4,334) 56,632 ---------- ------------ --------------- -------------- ------------- Net property, plant and equipment 24,515 3,035 6,289 - 33,839 OTHER ASSETS: Investment in subsidiaries 43,638 5,939 - (49,577) - Intercompany loan receivable - 25,420 - (25,420) - Other assets 19,288 3,843 4,685 - 27,816 ---------- ------------ --------------- -------------- ------------- Total assets $122,157 $42,226 $33,235 $(79,331) $118,287 ========== ============ =============== ============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES $ 15,275 $ 1,075 $ 8,922 $ (3,922) $ 21,350 LONG-TERM DEBT, net of current portion 100,000 - 2,523 - 102,523 INTERDIVISION LONG-TERM DEBT 15,145 - 10,275 (25,420) - OTHER NONCURRENT LIABILITIES 3,982 638 2,039 - 6,659 SHAREHOLDERS' EQUITY (DEFICIT) (12,245) 40,513 9,476 (49,989) (12,245) ---------- ------------ --------------- -------------- ------------- Total liabilities and shareholders' equity $122,157 $42,226 $33,235 $(79,331) $118,287 ========== ============ =============== ============== =============
SIMONDS INDUSTRIES INC. CONSOLIDATING BALANCE SHEET (In Thousands) (Unaudited)
AS OF APRIL 1, 2000 -------------------------------------------------------------------------- PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS CONSOLIDATED ---------- ------------ --------------- -------------- ------------- ASSETS CURRENT ASSETS: Cash $ 3,287 $ 209 $ 446 - $ 3,942 Accounts receivable 8,139 1,327 8,486 - 17,952 Intercompany accounts receivable 3,365 1,446 1,390 (6,201) - Inventories: Raw materials 3,157 42 2,578 - 5,777 Work in progress 5,370 470 1,128 - 6,968 Finished goods 5,740 598 8,273 (285) 14,326 Other current assets 3,431 63 555 - 4,049 ---------- ------------ --------------- -------------- ------------- Total current assets 32,489 4,155 22,856 (6,486) 53,014 ---------- ------------ --------------- -------------- ------------- Net property, plant and equipment 24,408 2,998 6,053 - 33,459 OTHER ASSETS: Investment in subsidiaries 43,736 5,541 - (49,277) - Intercompany loan receivable - 25,546 - (25,546) - Other assets 19,050 3,776 4,612 - 27,438 ---------- ------------ --------------- -------------- ------------- Total assets $119,683 $42,016 $33,521 $(81,309) $113,911 ========== ============ =============== ============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES $ 12,733 $ 1,147 $ 9,607 $ (6,203) $ 17,284 LONG-TERM DEBT, net of current portion 100,000 - 2,200 - 102,200 INTERDIVISION LONG-TERM DEBT 15,145 - 10,401 (25,546) - OTHER NONCURRENT LIABILITIES 3,982 638 1,984 - 6,604 SHAREHOLDERS' EQUITY (DEFICIT) (12,177) 40,231 9,329 (49,560) (12,177) ---------- ------------ --------------- -------------- ------------- Total liabilities and shareholders' equity $119,683 $42,016 $33,521 $(81,309) $113,911 ========== ============ =============== ============== =============
10 11 SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited)
Three Months ended April 3, 1999 ------------------------------------------------------------------- Parent Guarantors Non-Guarantors Eliminations Consolidated Net sales $20,370 $2,413 $12,035 $(3,399) $31,419 Cost of goods sold 14,299 1,541 9,236 (3,399) 21,677 ---------- ----------- --------------- ------------ ------------- Gross profit 6,071 872 2,799 0 9,742 Selling, general and administrative expense 3,735 669 2,005 0 6,409 ---------- ----------- --------------- ------------ ------------- Operating income 2,336 203 794 0 3,333 Other expenses (income): Interest expense 3,066 110 330 (697) 2,809 Interest income (35) (636) (65) 697 (39) Other, net (49) 12 (16) 0 (53) Equity in earnings of subsidiaries (738) (309) 0 1,047 0 ---------- ----------- --------------- ------------ ------------- Income before income taxes 92 1,026 545 (1,047) 616 Provision (benefit) for income taxes (225) 288 236 0 299 ---------- ----------- --------------- ------------ ------------- Net income $ 317 $ 738 $ 309 $(1,047) $ 317 ========== =========== =============== ============ =============
SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited)
Three Months ended April 1, 2000 ------------------------------------------------------------------- Parent Guarantors Non-Guarantors Eliminations Consolidated Net sales $22,013 $2,800 $12,293 $(4,314) $32,792 Cost of goods sold 15,671 1,736 9,334 (4,314) 22,427 ---------- ----------- --------------- ------------ ------------- Gross profit 6,342 1,064 2,959 0 10,365 Selling, general and administrative expense 3,875 677 1,937 0 6,489 ---------- ----------- --------------- ------------ ------------- Operating income 2,467 387 1,022 0 3,876 Other expenses (income): Interest expense 3,095 101 369 (798) 2,767 Interest income (27) (729) (73) 798 (31) Other, net 87 136 (32) 0 191 Equity in earnings of subsidiaries (984) (446) 0 1,430 0 ---------- ----------- --------------- ------------ ------------- Income before income taxes 296 1,325 758 (1,430) 949 Provision (benefit) for income taxes (218) 341 312 0 435 ---------- ----------- --------------- ------------ ------------- Net income $ 514 $ 984 $ 446 $(1,430) $ 514 ========== =========== =============== ============ =============
11 12 SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
THREE MONTHS ENDED APRIL 3, 1999 -------------------------------------------------------------------- PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED -------------------------------------------------------------------- Net cash (used in)/provided by operating activities: $(3,405) $490 $(743) $780 $(2,878) Cash flows from investing activities: Proceeds from asset sales 8 - 15 - 23 Purchase of equipment (311) (614) (110) - (1,035) Acquisitions - - - - - ----------- ---------- --------------- ----------- ------------- Net cash (used in) investing activities (303) (614) (95) (1,012) Cash flows from financing activities: Change in overdraft - - 14 - 14 Net proceeds from revolving credit facility - - 110 - 110 Proceeds from issuance of long-term debt- net of issuance cost - - 336 - 336 Principal payments of long-term debt - - (6) - (6) Intercompany loans - (751) 591 160 - Issuance of common stock - 750 - (750) - Other (1) - - (1) ----------- ---------- --------------- ----------- ------------- Net cash provided by financing activities (1) (1) 1,045 (590) 453 Effect of Foreign Exchange - - 49 (190) (141) ----------- ---------- --------------- ----------- ------------- Increase (decrease) in cash (3,709) (125) 256 (3,578) Cash at beginning of the period 8,602 209 487 - 9,298 ----------- ---------- --------------- ----------- ------------- Cash at end of the period $ 4,893 $ 84 $ 743 - $ 5,720 =========== ========== =============== =========== =============
SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
THREE MONTHS ENDED APRIL 1, 2000 -------------------------------------------------------------------- PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED -------------------------------------------------------------------- Net cash provided by operating activities: $(3,721) $449 $458 $(132) $(2,946) Cash flows from investing activities: Proceeds from asset sales 7 - 7 - 14 Purchase of equipment (598) (32) (96) - (726) Acquisitions - - - - - ----------- ---------- --------------- ----------- ------------- Net cash (used in) investing activities (591) (32) (89) 0 (712) Cash flows from financing activities: Change in overdraft - - (41) - (41) Net (uses) from revolving credit facility - - (135) - (135) Proceeds from issuance of long-term debt- net of issuance cost - - - - - Principal payments of long-term debt - - (328) - (328) Intercompany loans - (126) 127 (1) - Issuance of common stock 18 - (1) 1 18 Dividends (paid) received 422 (422) - - - Other - - - - - ----------- ---------- --------------- ----------- ------------- Net cash (used in)/provided by financing activities 440 (548) (378) 0 (486) Effect of Foreign Exchange - - (429) 132 (297) ----------- ---------- --------------- ----------- ------------- (Decrease) in cash (3,872) (131) (438) - (4,441) Cash at beginning of the period 7,159 340 884 - 8,383 ----------- ---------- --------------- ----------- ------------- Cash at end of the period $ 3,287 $209 $446 - $ 3,942 =========== ========== =============== =========== =============
12 13 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS) The following discussion of the Company's financial condition and results of operations should be read in conjunction with the Company's consolidated financial statements and notes thereto. Results of Operations Comparison of First Quarter 2000 and First Quarter 1999 Net Sales: Net Sales for the first quarter of 2000 were $32.8 million or 4.4% higher than first quarter 1999 net sales of $31.4 million. The higher 2000 quarterly results were realized primarily in our North American operations. Sales from our European operations were better than last year in their own currencies, but were impacted unfavorably by the comparably strong U.S. dollar. Sales would have been higher in 2000 by $472 and $28 in our German and UK operations, respectively, if exchange rates were unchanged from last year's first quarter. Gross Profit Margin: Gross Profit was $10,365 for the first quarter of 2000, an increase of $623 from $9,742 for the corresponding period in 1999. Gross Profit as a percentage of net sales was 31.6% and 31.0% for the three months ended April 1, 2000 and April 3, 1999, respectively. Favorable product mix helped contribute to a 0.5% improvement in gross profit. Strong demand for machinery and equipment in the first quarter of 2000 is the primary component of the favorable product mix. Selling, General and Administrative Expenses: Selling, general and administrative expenses as a percent of net sales were 19.8% or $6,489 and 20.4% or $6,409 for the first quarter of 2000 and 1999, respectively. Expenses were over last year's level primarily due to higher accrual levels pertaining to performance based compensation plans, as a result of the above plan performance year-to-date. Operating Income: As a result of the foregoing, operating income increased $543 in the first quarter of 2000 when compared to the comparable period in 1999. Interest Expense: Interest expense was lower by $34 in the first quarter of 2000 compared to the corresponding period in 1999. This is primarily due to lower debt outstanding in the Company's European operations. The vast majority of the Company's interest expense is for $100,000 of Senior Subordinated Notes at 10 1/4% per annum. Income Taxes: The provision for income taxes before extraordinary items was approximately $435 or a 45.8% effective tax rate for the first quarter of 2000, as compared to approximately $299 or a 48.5% effective tax rate for the first quarter of 13 14 1999. The effective tax rates differ primarily as a result of goodwill amortization and certain expenses that are not deductible for tax purposes. Net Income: As a result of the foregoing, net income increased $197 in the first quarter of 2000 when compared to the comparable period of 1999. Liquidity and Capital Resources Simonds principal capital requirements are to fund working capital needs, meet required debt payments, and to complete planned maintenance and manufacturing improvements. The Company's Senior Credit Facility provides a $30,000 line of credit to meet acquisition and expansion needs as well as seasonal working capital and general corporate requirements. This credit line was undrawn as of April 1, 2000. Borrowings under the Senior Credit Facility bear interest at a fluctuating rate based on, at the Company's option, either the lender's alternate base rate, as defined, or LIBOR plus the applicable margin. A commitment fee calculated based upon the unused portion of the revolving credit facility is payable quarterly in arrears. The Company believes that future cash flows from operations, together with the borrowings available under the Senior Credit Facility will provide the Company with sufficient liquidity and financial resources to finance its growth and satisfy its working capital requirements for the foreseeable future. The Company may not be able to generate sufficient cash flows from operations to pay the entire principal amount of the Notes when due in 2008. In such event, the Company would be required to refinance the Notes. However, there can be no assurance that the Company will be able to obtain financing on acceptable terms. Net Cash Flow: During the first quarters of 1999 and 2000 net cash used in operating activities was $2,878 and $2,946, respectively. The most significant component of cash used in operating activities is interest expense. In both years the first quarter payment of interest on the Senior Subordinated Notes, which is payable on January 1 and July 1, had a significant impact on cash flow. Seasonality Historically, the Company's business has not been subject to seasonality in any material respect. The Company's third quarter, which includes July through September, is typically lower due to customers' and plant vacation shutdowns. Inflation Certain of the Company's expenses, such as wages and benefits, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures. Although the Company to date has been able to offset inflationary cost increases through operating 14 15 efficiencies, there can be no assurance that the Company will be able to offset any future inflationary cost increases through similar efficiencies. Year 2000 The Company developed plans to address the possible exposure related to the impact of the Year 2000 problem ("Y2K") on its computer systems and key service providers. The Company aggressively monitored the transition of its computer systems into 2000 and is pleased with the results. Minor exceptions were noted and corrected quickly. Management will continue to monitor computer systems throughout 2000 as a normal course of business, paying particular attention to the remaining critical Y2K dates. Forward Looking Statements Statements contained in this Form 10-Q that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words "believes," "expects," "anticipates" and similar expressions are used to identify forward looking statements. The Company cautions that a number of important factors could cause actual results for fiscal 2000 and beyond to differ materially from those expressed in any forward looking statements made by or on behalf of the Company. All of these forward looking statements are based on estimates and assumptions made by management of the Company, which although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not be placed on such estimates and statements. No assurance can be given that any of such estimates or statements will be realized and it is likely that actual results will differ materially from those contemplated by such forward looking statements. Factors that may cause such differences include: (1) increased competition; (2) increased costs; (3) loss or disruption of supply sources of specialty steels; (4) loss or retirement of key members of management; (5) increases in the Company's cost of borrowings or unavailability of additional debt or equity capital on terms considered reasonable by management; (6) adverse state, federal or foreign legislation or regulation or adverse determinations by regulators; and (7) changes in general economic conditions in the markets in which the Company may compete and fluctuations in demand in the metal processing and primary wood industries. Many of such factors are beyond the control of the Company and its management. 15 16 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K EXHIBITS Exhibit No. 27 - Financial Data Schedule REPORTS ON FORM 8-K No reports on Form 8-K were filed during the quarter ended April 1, 2000. 16 17 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. SIMONDS INDUSTRIES INC. By: /s/ Henry J. Botticello --------------------------------- Henry J. Botticello CFO May 5, 2000 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS DEC-30-2000 JAN-02-2000 APR-01-2000 1 3,942 0 17,952 1,019 27,071 53,014 45,908 12,449 113,911 17,284 102,200 0 0 1 (12,178) 113,911 32,792 32,792 22,427 22,427 6,680 0 2,736 949 435 514 0 0 0 514 0 0
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