-----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, D3f8g/F7d3XVkAI2AcTv4q5qsnngdMW8au0+wSLd016X9k9XwGrZxevYyteaVehl wXdg54Zc+i40m1JlUgNKZg== /in/edgar/work/20000811/0001072613-00-000800/0001072613-00-000800.txt : 20000921 0001072613-00-000800.hdr.sgml : 20000921 ACCESSION NUMBER: 0001072613-00-000800 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000701 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMONDS INDUSTRIES INC CENTRAL INDEX KEY: 0001067919 STANDARD INDUSTRIAL CLASSIFICATION: [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: 692443 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 0001.txt SIMONDS INDUSTRIES INC. FORM 10-Q ================================================================================ 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 July 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 July 20, 2000: 66,298.39 and 7,897.45, respectively. ================================================================================ 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 July 1, 2000 3 Consolidated Statements of Operations - three and six months 4 ended July 3, 1999 and July 1, 2000 Consolidated Statements of Cash Flows - six months ended 5 July 3, 1999 and July 1, 2000 Consolidated Statements of Shareholders' Equity (Deficit)- 6 for the six months ended July 3, 1999 and July 1, 2000 Notes to Consolidated Financial Statements - July 1, 2000 7 Item 2. Management's Discussion and Analysis of Financial 14 Condition and Results of Operations Part II. Other Information --------------------------- Item 6. Exhibits and Reports on Form 8-K 18 Signatures 19 Exhibit No. 27 - Financial Data Schedule 20 2 Part 1. Financial Information Item 1. Financial Statements (Unaudited) SIMONDS INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (In Thousands, except share amounts)
ASSETS January 1, July 1, 2000 2000 --------- --------- (unaudited) CURRENT ASSETS: Cash $ 8,383 $ 8,318 Accounts receivable, net of reserves of $993 and $958 17,400 18,183 Inventories (Note 3) 26,650 26,897 Other current assets 3,162 3,194 Refundable income taxes 1,037 86 --------- --------- Total current assets 56,632 56,678 PROPERTY, PLANT AND EQUIPMENT: Land 2,300 2,285 Buildings and improvements 10,684 10,602 Machinery and equipment 32,126 32,635 Construction-in-progress 314 1,236 --------- --------- 45,424 46,758 Less- Accumulated depreciation 11,585 13,309 --------- --------- Net property, plant and equipment 33,839 33,449 OTHER ASSETS: Goodwill, net of accumulated amortization of $2,223 and $2,523 22,308 22,039 Deferred financing costs, net of accumulated amortization of $764 and $1,019 3,900 3,643 Other, including buildings held for resale 1,608 1,585 --------- --------- Total other assets 27,816 27,267 --------- --------- Total assets $ 118,287 $ 117,394 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Overdraft facilities $ 190 $ 132 Revolving credit loans and notes payable 321 351 Current portion of long-term debt 14 3 Accounts payable 6,871 7,043 Accrued payroll and employee benefits 4,034 3,873 Accrued interest 5,153 5,152 Other accrued liabilities 2,739 2,499 Currently deferred income taxes 2,028 2,025 --------- --------- Total current liabilities 21,350 21,078 LONG-TERM DEBT, net of current portion (Note 4) 102,523 102,612 DEFERRED INCOME TAXES 4,808 4,818 OTHER NONCURRENT LIABILITIES 1,851 1,769 COMMITMENTS AND CONTINGENCIES -- -- SHAREHOLDERS' EQUITY: Common stock, $.01 par value- Authorized - 200,000 shares Issued and outstanding - 76,289 and 74,196 1 1 Capital in excess of par value (24,405) (24,387) Retained earnings 14,130 15,114 Additional minimum pension liability, net of $58 tax effect (135) (135) Cumulative translation adjustment (1,715) (2,360) Treasury stock, at cost (121) (1,116) --------- --------- Total shareholders' equity (deficit) (12,245) (12,883) --------- --------- Total liabilities and shareholders' equity $ 118,287 $ 117,394 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 3 SIMONDS INDUSTRIES INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands) (Unaudited)
------------------------------------------- Three Months Ended Six Months Ended July 3, July 1, July 3, July 1, 1999 2000 1999 2000 -------- -------- -------- -------- Net sales $ 31,585 $ 32,219 $ 63,004 $ 65,011 Cost of goods sold 21,655 22,139 43,332 44,566 -------- -------- -------- -------- Gross profit 9,930 10,080 19,672 20,445 Selling, general and administrative expense 6,405 6,308 12,814 12,797 -------- -------- -------- -------- Operating income 3,525 3,772 6,858 7,648 Other expenses (income): Interest expense 2,732 2,672 5,502 5,408 Other, net (48) 280 (101) 471 -------- -------- -------- -------- Income before income taxes 841 820 1,457 1,769 Provision for income taxes 431 350 730 785 -------- -------- -------- -------- Net income $ 410 $ 470 $ 727 $ 984 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 4 SIMONDS INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (Unaudited)
------------------ SIX MONTHS ENDED JULY 3, JULY 1, 1999 2000 ------- ------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 727 $ 984 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,450 2,616 Gain (loss) on asset sales (11) 56 (Benefit) Provision from deferred income taxes (54) 7 Changes in assets and liabilities, net of acquisitions: Accounts receivable (1,211) (783) Inventories (2,109) (108) Income tax refunds receivable -- 951 Other current and non-current assets (98) (159) Accounts payable 1,022 172 Accrued expenses (5,006) (408) Other non-current liabilities (158) (82) ------- ------- Net cash (used in) provided by operating activities (4,448) 3,246 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment 34 40 Purchase of equipment (2,716) (1,615) Acquisition of assets of Bluebonnet Tool -- (483) ------- ------- Net cash (used in) investing activities (2,682) (2,058) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in overdrafts (9) (58) Net (uses) proceeds under revolving credit (1,324) 30 Proceeds from issuance of long- term debt-net of issuance costs 467 -- Principal payments of long-term debt (11) 78 Issuance of common stock -- 18 Purchase of treasury stock (35) (995) Other (35) -- ------- ------- Net cash (used in) financing activities (947) (927) ------- ------- EFFECT OF EXCHANGE RATE ON CASH 112 (326) ------- ------- NET (DECREASE) IN CASH (7,965) (65) CASH AT BEGINNING OF PERIOD 9,298 8,383 ------- ------- CASH AT END OF PERIOD $ 1,333 $ 8,318 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 5 SIMONDS INDUSTRIES INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) For the six months ended July 3, 1999 and July 1, 2000 (In thousands, except share amounts) (Unaudited)
ACCUMULATED CAPITAL IN OTHER TOTAL COMMON COMMON EXCESS RETAINED COMPREHENSIVE TREASURY SHAREHOLDERS' COMPREHENSIVE SHARES STOCK OF PAR EARNINGS LOSS STOCK EQUITY(DEFICIT) INCOME(LOSS) -------- -------- -------- -------- -------- -------- -------- -------- Balance at January 2, 1999 76,333 $ 1 $(24,405) $ 12,696 $ (907) $ (65) $(12,680) -- Net Income -- -- -- 727 -- -- 727 $ 727 Foreign Currency Translation Adjustment -- -- -- -- (520) -- (520) (520) Acquisition of Treasury Stock -- -- -- -- -- (35) (35) -- -------- -------- -------- -------- -------- -------- -------- -------- Balance at July 3, 1999 76,333 $ 1 $(24,405) $ 13,423 $ (1,427) $ (100) $(12,508) $ (207) ======== ======== ======== ======== ======== ======== ======== ======== Balance at January 1, 2000 76,289 $ 1 $(24,405) $ 14,130 $ (1,850) $ (121) $(12,245) -- Net Income -- -- -- 984 -- -- 984 $ 984 Foreign Currency Translation Adjustment -- -- -- -- (645) -- (645) (645) Amortization of Stock Option Compensation -- -- 18 -- -- -- 18 -- Acquisition of Treasury Stock (2,093) -- -- -- -- (995) (995) -- -------- -------- -------- -------- -------- -------- -------- -------- Balance at July 1, 2000 74,196 $ 1 $(24,387) $ 15,114 $ (2,495) $ (1,116) $(12,883) $ 339 ======== ======== ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 6 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 six months ended July 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. As of July 1, 2000, all 24 employees had been terminated. At July 1, 2000, all significant reorganization expenses had occurred. 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. On May 26, 2000 the Company purchased certain assets, mainly inventory and equipment, for $483 from Bluebonnet Tool Company, Inc. The Purchase price in excess of fair value of assets acquired of $193 is being amortized on a straight-line basis over 40 years. 7 3. Inventories at January 1, 2000 and July 1, 2000 were as follows (in thousands). January 1, July 1, 2000 2000 ------------------ ----------------- Raw Materials $4,967 $5,284 Work in progress 6,429 7,276 Finished goods 15,254 14,337 ------------------ ----------------- Total $26,650 $26,897 ================== ================= 4. Debt Debt consists of the following at January 1, 2000 and July 1, 2000 (in thousands):
January 1, July 1, 2000 2000 ----------------- ----------------- Line of credit facility for German Subsidiary with First Union $2,523 $2,612 National Bank up to approximately $2,685, interest payable quarterly at EURIBOR (4.42% at July 1, 2000) plus 1.25% terminating on October 1, 2003, payable in Deutschmarks. Line of credit facilities for Notting with Banco Sabadell and 135 127 Banco Popular of Spain, bearing interest at 6.25% and 6.50% and terminating on April 15, 2001 and May 17, 2001, respectively, payable in Spanish Pesetas. Two term loans payable by Notting to National Westminster Bank on 200 227 September 30, 2000, bearing interest at 9.0% and 9.5%, payable in British Pounds. Senior Subordinated Notes issued July 8, 1998, and maturing July 100,000 100,000 1, 2008, interest payable semi-annually at 10.25%. ----------------- ----------------- 102,858 102,966 Less-current maturities 335 354 ================= ================= $102,523 $102,612 ================= =================
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 Instruments and Hedging Activities." This statement establishes accounting and reporting 8 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 101B 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 fourth 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
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 JULY 1, 2000 ------------------------------------------------------------------------------------- PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS CONSOLIDATED -------------- -------------- -------------- -------------- -------------- ASSETS CURRENT ASSETS: Cash $ 7,538 $ 90 $ 690 -- $ 8,318 Accounts receivable 8,856 942 8,385 -- 18,183 Intercompany accounts receivable 2,934 1,768 1,514 (6,216) -- Inventories: Raw materials 3,357 45 1,882 -- 5,284 Work in progress 5,368 477 1,431 -- 7,276 Finished goods 5,254 645 8,723 (285) 14,337 Other current assets 2,756 54 470 -- 3,280 -------------- -------------- -------------- -------------- -------------- Total current assets 36,063 4,021 23,095 (6,501) 56,678 -------------- -------------- -------------- -------------- -------------- Net property, plant and equipment 24,525 2,993 5,931 -- 33,449 OTHER ASSETS: Investment in subsidiaries 43,758 5,031 -- (48,789) -- Intercompany loan receivable 25,146 -- (25,146) -- Other assets 19,018 3,710 4,539 -- 27,267 -------------- -------------- -------------- -------------- -------------- Total assets $ 123,364 $ 40,901 $ 33,565 $ (80,436) $ 117,394 ============== ============== ============== ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES $ 17,120 $ 877 $ 9,307 $ (6,226) $ 21,078 LONG-TERM DEBT, net of current Portion 100,000 -- 2,612 -- 102,612 INTERDIVISION LONG-TERM DEBT 15,145 -- 10,001 (25,146) -- OTHER NONCURRENT LIABILITIES 3,982 638 1,967 -- 6,587 SHAREHOLDERS' EQUITY (DEFICIT) (12,883) 39,386 9,678 (49,064) (12,883) -------------- -------------- -------------- -------------- -------------- Total liabilities and shareholders' equity $ 123,364 $ 40,901 $ 33,565 $ (80,436) $ 117,394 ============== ============== ============== ============== ==============
10
SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited) Three Months ended July 3, 1999 -------------------------------------------------------------------------------------- Parent Guarantors Non-Guarantors Eliminations Consolidated -------------- -------------- -------------- -------------- -------------- Net sales $ 21,156 $ 2,784 $ 10,814 $ (3,169) $ 31,585 Cost of goods sold 14,818 1,774 8,232 (3,169) 21,655 -------------- -------------- -------------- -------------- -------------- Gross profit 6,338 1,010 2,582 0 9,930 Selling, general and administrative expense 3,666 661 2,078 0 6,405 -------------- -------------- -------------- -------------- -------------- Operating income 2,672 349 504 0 3,525 Other expenses (income): Interest expense 3,058 110 324 (722) 2,770 Interest income (35) (659) (66) 722 (38) Other, net (336) 307 (19) 0 (48) Equity in earnings of subsidiaries (501) (148) 0 649 0 -------------- -------------- -------------- -------------- -------------- Income before income taxes 486 739 265 (649) 841 Provision for income taxes 76 238 117 0 431 -------------- -------------- -------------- -------------- -------------- Net income $ 410 $ 501 $ 148 $ (649) $ 410 ============== ============== ============== ============== ============== SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited) Three Months ended July 1, 2000 -------------------------------------------------------------------------------------- Parent Guarantors Non-Guarantors Eliminations Consolidated -------------- -------------- -------------- -------------- -------------- Net sales $ 22,277 $ 2,375 $ 11,310 $ (3,743) $ 32,219 Cost of goods sold 15,637 1,503 8,742 (3,743) 22,139 -------------- -------------- -------------- -------------- -------------- Gross profit 6,640 872 2,568 0 10,080 Selling, general and administrative expense 3,773 614 1,921 0 6,308 -------------- -------------- -------------- -------------- -------------- Operating income 2,867 258 647 0 3,772 Other expenses (income): Interest expense 3,119 103 375 (840) 2,757 Interest income (79) (767) (79) 840 (85) Other, net 178 79 23 0 280 Equity in earnings of subsidiaries (737) (220) 0 957 0 -------------- -------------- -------------- -------------- -------------- Income before income taxes 386 1,063 328 (639) 820 Provision (benefit) for income taxes (84) 326 108 0 350 -------------- -------------- -------------- -------------- -------------- Net income $ 470 $ 737 $ 220 $ (957) $ 470 ============== ============== ============== ============== ==============
11
SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited) Six Months ended July 3, 1999 -------------------------------------------------------------------------------------- Parent Guarantors Non-Guarantors Eliminations Consolidated -------------- -------------- -------------- -------------- -------------- Net sales $ 41,526 $ 5,197 $ 22,849 $ (6,568) $ 63,004 Cost of goods sold 29,117 3,315 17,468 (6,568) 43,332 -------------- -------------- -------------- -------------- -------------- Gross profit 12,409 1,882 5,381 0 19,672 Selling, general and administrative expense 7,401 1,330 4,083 0 12,814 -------------- -------------- -------------- -------------- -------------- Operating income 5,008 552 1,298 0 6,858 Other expenses (income): Interest expense 6,124 220 654 (1,419) 5,579 Interest income (70) (1,295) (131) 1,419 (77) Other, net (385) 319 (35) 0 (101) Equity in earnings of subsidiaries (1,239) (457) 0 1,696 0 -------------- -------------- -------------- -------------- -------------- Income before income taxes 578 1,765 810 (1,696) 1,457 Provision (benefit) for income taxes (149) 526 353 0 730 -------------- -------------- -------------- -------------- -------------- Net income $ 727 $ 1,239 $ 457 $ (1,696) $ 727 ============== ============== ============== ============== ============== SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited) Six Months ended July 1, 2000 -------------------------------------------------------------------------------------- Parent Guarantors Non-Guarantors Eliminations Consolidated -------------- -------------- -------------- -------------- -------------- Net sales $ 44,290 $ 5,175 $ 23,603 $ (8,057) $ 65,011 Cost of goods sold 31,308 3,239 18,076 (8,057) 44,566 -------------- -------------- -------------- -------------- -------------- Gross profit 12,982 1,936 5,527 0 20,445 Selling, general and administrative expense 7,648 1,291 3,858 0 12,797 -------------- -------------- -------------- -------------- -------------- Operating income 5,334 645 1,669 0 7,648 Other expenses (income): Interest expense 6,214 204 744 (1,638) 5,524 Interest income (106) (1,496) (152) 1,638 (116) Other, net 265 215 (9) 0 471 Equity in earnings of subsidiaries (1,721) (666) 0 2,387 0 -------------- -------------- -------------- -------------- -------------- Income before income taxes 682 2,388 1,086 (2,387) 1,769 Provision (benefit) for income taxes (302) 667 420 0 785 -------------- -------------- -------------- -------------- -------------- Net income $ 984 $ 1,721 $ 666 $ (2,387) $ 984 ============== ============== ============== ============== ==============
12
SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENTS OF CASH FLOWS (IN THOUSANDS) (Unaudited) SIX MONTHS ENDED JULY 3, 1999 -------------------------------------------------------------------------------------- PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED -------------- -------------- -------------- -------------- -------------- Net cash (used in)/provided by operating activities: $ (6,439) $ 574 $ (698) $ 2,115 $ (4,448) Cash flows from investing activities: Proceeds from asset sales 12 -- 22 -- 34 Purchase of equipment (1,631) (755) (330) -- (2,716) Acquisitions -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- Net cash (used in) investing activities (1,619) (755) (308) -- (2,682) Cash flows from financing activities: Change in overdraft -- -- (9) -- (9) Net repayment of revolving credit facility -- -- (1,324) -- (1,324) Proceeds from issuance of long-term debt- net of issuance cost -- -- 467 -- 467 Principal payments of long-term debt -- -- (11) -- (11) Intercompany loans -- (1,834) 1,836 (2) -- Issuance of common stock -- 2,072 1 (2,073) -- Purchase of treasury stock (35) -- -- -- (35) Dividends (paid) received 182 (182) -- -- -- Other (35) -- -- -- (35) -------------- -------------- -------------- -------------- -------------- Net cash (used in)/provided by financing activities 112 56 960 (2,075) 947 Effect of Foreign Exchange -- -- 152 (40) 112 -------------- -------------- -------------- -------------- -------------- Increase (decrease) in cash (7,946) (125) 106 (7,965) Cash at beginning of the period 8,602 209 487 -- 9,298 -------------- -------------- -------------- -------------- -------------- Cash at end of the period $ 656 $ 84 $ 593 -- $ 1,333 ============== ============== ============== ============== ============== SIMONDS INDUSTRIES INC CONSOLIDATING STATEMENTS OF CASH FLOWS (IN THOUSANDS) (Unaudited) SIX MONTHS ENDED JULY 1, 2000 -------------------------------------------------------------------------------------- PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED -------------- -------------- -------------- -------------- -------------- Net cash provided by operating activities: $ 2,031 $ 847 $ 384 $ (16) $ 3,246 Cash flows from investing activities: Proceeds from asset sales 8 -- 32 -- 40 Purchase of equipment (1,300) (97) (218) -- (1,615) Acquisitions (483) -- -- -- (483) -------------- -------------- -------------- -------------- -------------- Net cash (used in) investing activities (1,775) (97) (186) -- (2,058) Cash flows from financing activities: Change in overdraft -- -- (58) -- (58) Net proceeds from revolving credit facility -- -- 30 -- 30 Proceeds from issuance of long-term debt- net of issuance cost -- -- -- -- -- Principal payments of long-term debt -- -- 78 -- 78 Intercompany loans -- 274 (273) (1) -- Issuance of common stock 18 144 (1) (143) 18 Dividends (paid) received 1,100 (1,100) -- -- -- Purchase of treasury stock (995) -- -- -- (995) Other -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- Net cash (used in)/provided by financing activities 123 (682) (224) (144) (927) Effect of Foreign Exchange -- (318) (168) 160 (326) -------------- -------------- -------------- -------------- -------------- Increase (decrease) in cash 379 (250) (194) -- (65) Cash at beginning of the period 7,159 340 884 -- 8,383 -------------- -------------- -------------- -------------- -------------- Cash at end of the period $ 7,538 $ 90 $ 690 -- $ 8,318 ============== ============== ============== ============== ==============
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 Second Quarter 2000 and Second Quarter 1999 Net Sales: Net Sales for the second quarter of 2000 were $32.2 million or 2.0% higher than second quarter 1999 net sales of $31.6 million. The higher 2000 quarterly results were realized primarily through higher sales of metal products during the period. Sales from our European operations were better than last year in their own currencies and in U.S. dollars, but were impacted unfavorably by the comparably strong U.S. dollar. Sales would have been higher in 2000 by $440 and $200 in our German and UK operations, respectively, if exchange rates were unchanged from last year's second quarter. Gross Profit Margin: Gross Profit was $10,080 for the second quarter of 2000, an increase of $150 from $9,930 for the corresponding period in 1999. Gross Profit as a percentage of net sales was 31.3 % and 31.4% for the three months ended July 1, 2000 and July 3, 1999, respectively. The slight change in gross profit margin is due primarily to the change in product mix between quarters. Selling, General and Administrative Expenses: Selling, general and administrative expenses as a percent of net sales were 19.6% or $6,308 and 20.3% or $6,405 for the second quarter of 2000 and 1999, respectively. Expenses were below last year's level primarily due to lower Selling and Administrative expenses. This in combination with higher sales in the second quarter of 2000 resulted in a 0.7% improvement as a percent of sales. Operating Income: As a result of the foregoing, operating income increased $247 to $3,772 in the second quarter of 2000 when compared to the comparable period in 1999. Other, Net: Other, Net was $280 in the second quarter of 2000 and $(48) in the comparable quarter of 1999. This swing from quarter to quarter is primarily comprised of unfavorable realized foreign exchange losses and losses on disposal of fixed assets in the second quarter of 2000 and realized exchange gains in the second quarter of 1999. Interest Expense: Interest expense was lower by $60 in the second quarter of 2000 compared to the corresponding period in 1999. This is primarily due to a significant increase in interest income generated during the second quarter from overnight investing of available cash. The vast majority of the Company's interest expense is for $100,000 14 of Senior Subordinated Notes at 10 1/4% per annum, which does not change from one quarter to the next. Income Taxes: The provision for income taxes was approximately $350 or a 42.7% effective tax rate for the second quarter of 2000, as compared to approximately $431 or a 51.2% effective tax rate for the second quarter of 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 $60 in the second quarter of 2000 when compared to the comparable period of 1999. Comparison of Six Months Ended July 1, 2000 and July 3, 1999 Net Sales: Net Sales for the six months ended July 1, 2000 were $65.0 million or 3.2% higher than six months ended July 3, 1999 net sales of $63.0 million. The higher 2000 year-to-date 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 $912 and $269 in our German and UK operations, respectively, if exchange rates were unchanged from last year's. Gross Profit Margin: Gross Profit was $20,445 for the first six months of 2000, an increase of $773 from $19,672 for the corresponding period in 1999. Gross Profit as a percentage of net sales was 31.4 % and 31.2% for the six months ended July 1, 2000 and July 3, 1999, respectively. Selling, General and Administrative Expenses: Selling, general and administrative expenses as a percent of net sales were 19.7% or $12,797 and 20.3% or $12,814 for the six months of 2000 and 1999, respectively. With expenses remaining constant and the higher sales in the six months of 2000, this resulted in a 0.6% improvement as a percent of sales. Operating Income: As a result of the foregoing, operating income increased $790 to $7,648 in the first six months of 2000 when compared to the comparable period in 1999. Interest Expense: Interest expense was lower by $94 in the first six months of 2000 compared to the corresponding period in 1999. This is primarily due to lower debt outstanding in the Company's European operations and higher interest income. The vast majority of the Company's interest expense is for $100,000 of Senior Subordinated Notes at 10 1/4% per annum which is the same in both periods. Other, net: The primary reason for other expense of $471 in the six months of 2000 and other (income) of $(101) in the comparable six months of 1999 was primarily comprised of realized foreign exchange losses in 2000 and gains in 1999. 15 Income Taxes: The provision for income taxes was approximately $785 or a 44.4% effective tax rate for the first six months of 2000, as compared to approximately $730 or a 50.1% effective tax rate for the first six months of 1999. Net Income: As a result of the foregoing, net income increased $257 in the first six months 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 July 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: Operations generated $3,246 for the six month period ended July 1, 2000 compared to a use of cash of $4,448 for the comparable period year ago. The primary reason for the large swing between periods is the payment of semi-annual interest on the Company's Senior Subordinated Notes which occurred twice during the 1999 period, but only once in the 2000 period. Additionally, the combined spending on inventory build and purchases of equipment was $3,102 higher in the first six months of 1999 than the comparable period in 2000. 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. 16 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 efficiencies, there can be no assurance that the Company will be able to offset any future inflationary cost increases through similar efficiencies. 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. 17 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 July 1, 2000. 18 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 August 11, 2000 19 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 U.S.DOLLARS 6-MOS DEC-30-2000 JAN-02-2000 JUL-01-2000 1 8,318 0 18,183 958 26,897 56,678 46,758 13,309 117,394 21,078 102,612 0 0 1 (12,884) 117,394 65,011 65,011 44,566 44,566 12,797 0 5,524 1,769 785 984 0 0 0 984 0 0
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