-----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, RgZYBIO2eUrCIQYcdnnGYrvYBlHNV7M58vv8wJ4lhHLqXdb+24YHoU+WO5B1ropk J/LrbvJUdKbi8odUaRSybw== /in/edgar/work/0001072613-00-000972/0001072613-00-000972.txt : 20001114 0001072613-00-000972.hdr.sgml : 20001114 ACCESSION NUMBER: 0001072613-00-000972 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 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: 758099 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 DATED 09/30/00 ================================================================================ 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 September 30, 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 October 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 September 30, 2000 3 Consolidated Statements of Operations - three and nine months ended October 2, 1999 and September 30, 2000 4 Consolidated Statements of Cash Flows - nine months ended October 2, 1999 and September 30, 2000 5 Consolidated Statements of Shareholders' Equity (Deficit)- for the nine months ended October 2, 1999 and September 30, 2000 6 Notes to Consolidated Financial Statements - September 30, 2000 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Part II. Other Information --------------------------- Item 6. Exhibits and Reports on Form 8-K 19 Signatures 20 Exhibit No. 27 - Financial Data Schedule 21 2 Part 1. Financial Information Item 1. Financial Statements (Unaudited)
SIMONDS INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (In Thousands, except share amounts) ASSETS ------ January 1, September 30, 2000 2000 --------- --------- (unaudited) CURRENT ASSETS: Cash $ 8,383 $ 5,980 Accounts receivable, net of reserves of $993 and $946 17,400 17,108 Inventories (Note 3) 26,650 24,436 Other current assets 3,162 2,917 Refundable income taxes 1,037 86 --------- --------- Total current assets 56,632 50,527 PROPERTY, PLANT AND EQUIPMENT: Land 2,300 2,265 Buildings and improvements 10,684 10,451 Machinery and equipment 32,126 32,535 Construction-in-progress 314 940 --------- --------- 45,424 46,191 Less- Accumulated depreciation 11,585 13,493 --------- --------- Net property, plant and equipment 33,839 32,698 OTHER ASSETS: Goodwill, net of accumulated amortization of $2,223 and $2,680 22,308 22,341 Deferred financing costs, net of accumulated amortization of $764 and $1,145 3,900 3,513 Other, including buildings held for resale 1,608 1,523 --------- --------- Total other assets 27,816 27,377 --------- --------- Total assets $ 118,287 $ 110,602 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Overdraft facilities $ 190 $ 242 Revolving credit loans and notes payable 321 279 Current portion of long-term debt 14 0 Accounts payable 6,871 6,030 Accrued payroll and employee benefits 4,034 4,026 Accrued interest 5,153 2,589 Other accrued liabilities 2,739 1,747 Currently deferred income taxes 2,028 2,025 --------- --------- Total current liabilities 21,350 16,938 LONG-TERM DEBT, net of current portion (Note 4) 102,523 102,412 DEFERRED INCOME TAXES 4,808 4,760 OTHER NONCURRENT LIABILITIES 1,851 1,656 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 13,673 Additional minimum pension liability, net of $58 tax effect (135) (135) Cumulative translation adjustment (1,715) (3,200) Treasury stock, at cost (121) (1,116) --------- --------- Total shareholders' equity (deficit) (12,245) (15,164) --------- --------- Total liabilities and shareholders' equity $ 118,287 $ 110,602 ========= ========= 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 Nine Months Ended October 2, September 30, October 2, September 30, 1999 2000 1999 2000 -------- -------- -------- -------- Net sales $ 32,072 $ 30,399 $ 95,076 $ 95,410 Cost of goods sold 22,071 22,403 65,403 66,969 -------- -------- -------- -------- Gross profit 10,001 7,996 29,673 28,441 Selling, general and administrative expense 6,156 6,343 18,790 19,140 -------- -------- -------- -------- Operating income 3,845 1,653 10,703 9,301 Other expenses (income): Interest expense 2,764 2,740 8,266 8,148 Other, net (280) 268 (381) 739 -------- -------- -------- -------- Income (loss) before income taxes 1,361 (1,355) 2,818 414 Provision for income taxes 581 86 1,311 871 -------- -------- -------- -------- Net income (loss) $ 780 ($ 1,441) $ 1,507 ($ 457) ======== ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
4 SIMONDS INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (Unaudited) -------------------- NINE MONTHS ENDED OCTOBER 2, SEPTEMBER 30, 1999 2000 -------------------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income (loss) $ 1,507 ($ 457) Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,635 3,935 Gain (loss) on asset sales (11) 80 (Benefit) from deferred income taxes (38) (51) Changes in assets and liabilities, net of acquisitions: Accounts receivable (2,209) 417 Inventories (1,142) 2,225 Income tax refunds receivable -- 951 Other current and non-current assets (120) 13 Accounts payable (745) (939) Accrued expenses (2,265) (3,588) Other non-current liabilities (84) (195) ------- ------- Net cash (used in) provided by operating activities (1,472) 2,391 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment 34 930 Purchase of equipment (3,631) (2,828) Acquisition of assets of Bluebonnet Tool -- (483) Acquisition of Cirtec, Inc. -- (462) ------- ------- Net cash (used in) investing activities (3,597) (2,843) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in overdrafts 43 52 Net (uses) under revolving credit (1,205) (42) Proceeds from issuance of long- term debt-net of issuance costs 602 -- Principal payments of long-term debt (15) (125) Issuance of common stock -- 18 Purchase of treasury stock (56) (995) Other (38) -- ------- ------- Net cash (used in ) financing activities (669) (1,092) ------- ------- EFFECT OF EXCHANGE RATE ON CASH (207) (859) ------- ------- NET (DECREASE) IN CASH (5,945) (2,403) CASH AT BEGINNING OF PERIOD 9,298 8,383 ------- ------- CASH AT END OF PERIOD $ 3,353 $ 5,980 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 5
SIMONDS INDUSTRIES INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) For the nine months ended October 2, 1999 and September 30, 2000 (In thousands, except share amounts) (Unaudited) CAPITAL ACCUMULATED TOTAL IN OTHER SHAREHOLDERS' COMPREHENSIVE COMMON COMMON 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 -- -- -- 1,507 -- -- 1,507 $ 1,507 Foreign Currency Translation Adjustment -- -- -- -- (385) -- (385) (385) Acquisition of Treasury Stock (44) -- -- -- -- (56) (56) -------- -------- -------- -------- -------- -------- -------- -------- Balance at October 2, 1999 76,289 $ 1 $(24,405) $ 14,203 $ (1,292) $ (121) $(11,614) $ 1,122 ======== ======== ======== ======== ======== ======== ======== ======== Balance at January 1, 2000 76,289 $ 1 ($24,405) $ 14,130 ($ 1,850) ($ 121) ($12,245) -- Net Income -- -- -- (457) -- -- (457) $ (457) Foreign Currency Translation Adjustment -- -- -- -- (1,485) -- (1,485) (1,485) Amortization of Stock Option Compensation -- -- 18 -- -- -- 18 -- Acquisition of Treasury Stock (2,093) -- -- -- -- (995) (995) -------- -------- -------- -------- -------- -------- -------- -------- Balance at September 30, 2000 74,196 $ 1 $(24,387) $ 13,673 $ (3,335) $ (1,116) $(15,164) $ (1,942) ======== ======== ======== ======== ======== ======== ======== ======== Comprehensive income (loss) for the three month periods ended October 2, 1999 and September 30, 2000 was $915 and $(2,281). Net Translation Comprehensive Income (Loss) Adjustment Income(Loss) Period Ended October 2, 1999 $ 780 $ 135 $ 915 Period Ended September 30, 2000 $ (1,441) $ (840) $ (2,281) 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 nine months ended September 30, 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 and Divestitures 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. 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 September 12, 2000 the decision was made to close the Notting facility in the UK. Accordingly, the Company established a reserve for reorganization of $1,440. In accordance with EITF 94-3, the reserve is comprised of approximately $880 relating to the elimination of certain product lines, $220 to move equipment to other facilities and write off excess assets, $215 employee related costs, and $125 miscellaneous reorganization costs. These costs total $365 cash expenses and $1,075 of non-cash items. This reorganization cost was all recognized in the September quarter of 2000 and reflected in the accompanying financial statements. In conjunction with the reorganization of the Notting facility in the UK the Company has decided to curtail the W. Notting Limited Retirement Benefits Plan effective as of 7 September 30, 2000. Any gain or loss of the curtailment is pending an actuarial valuation. 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. On August 31, 2000 the Company purchased 100% of the outstanding stock of Cirtec Inc. ("Cirtec") for $462, which was paid in cash. 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. The purchase price in excess of fair value of net assets acquired of $342 is being amortized on a straight-line basis over 40 years. The results of operations of Cirtec subsequent to the date of acquisition are reflected in the accompanying financial statements. On August 31, 2000 the Company sold certain assets, mainly inventory and equipment, relating to its Rotary Rule business for $1,085 in cash to National Steel Rule Company ("Buyer"). The selling price in excess of book value of $785 was recorded as a gain. As part of the sale, the Company entered into an agreement not to compete with the Buyer in the Rotary Rule business. During the third quarter 2000 the Company sold and disposed of machinery with a book value of $605 in its Fitchburg facility. The excess of book value and removal costs over selling price of $648 was recorded as a loss. 3. Inventories at January 1, 2000 and September 30, 2000 were as follows (in thousands). January 1, September 30, 2000 2000 --------------- --------------- Raw Materials $4,967 $5,061 Work in progress 6,429 7,512 Finished goods 15,254 11,863 --------------- --------------- Total $26,650 $24,436 =============== =============== 8 4. Debt Debt consists of the following at January 1, 2000 and September 30, 2000 (in thousands): January 1, September 30, 2000 2000 -------- -------- Line of credit facility for German Subsidiary with $ 2,523 $ 2,412 First Union National Bank up to approximately $2,480, interest payable quarterly at EURIBOR (4.79% at September 30, 2000) plus 1.25% terminating on October 1, 2003, payable in Deutschmarks Line of credit facilities for Notting with Banco 135 60 Sabadell and Banco Popular of Spain, bearing interest at 7.00% and 6.75% and terminating on April 15, 2001 and May 17, 2001, respectively, payable in Spanish Pesetas Two term loans payable by Notting to National 200 219 Westminster Bank on October 31, 2000 and December 31, 2000 and bearing interest at 9.5% and 9.0%, respectively, 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% -------- -------- 102,858 102,691 Less-current maturities 335 279 -------- -------- $102,523 $102,412 ======== ======== 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 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 will adopt SFAS No. 133 for the next fiscal year, which begins on December 31, 2000. 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 9 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 to the fourth quarter of fiscal 2000 for registrants with fiscal years that begin between December 16, 1999 and March 15, 2000. The Company does not believe the adoption of SAB 101 will have a material impact on its consolidated financial statements. 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: 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 SEPTEMBER 30, 2000 -------------------------------------------------------------------- PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS CONSOLIDATED --------- --------- --------- --------- --------- ASSETS CURRENT ASSETS: Cash $ 4,873 $ 329 $ 778 -- $ 5,980 Accounts receivable 9,229 671 7,208 -- 17,108 Intercompany accounts receivable 3,231 1,943 2,102 (7,276) -- Inventories: Raw materials 3,359 49 1,653 -- 5,061 Work in progress 5,451 441 1,620 -- 7,512 Finished goods 4,547 645 6,956 (285) 11,863 Other current assets 2,667 37 299 -- 3,003 --------- --------- --------- --------- --------- Total current assets 33,357 4,115 20,616 (7,561) 50,527 --------- --------- --------- --------- --------- Net property, plant and equipment 24,171 2,926 5,601 -- 32,698 OTHER ASSETS: Investment in subsidiaries 41,167 5,031 -- (46,198) -- Intercompany loan receivable -- 24,683 -- (24,683) -- Other assets 19,349 3,643 4,385 -- 27,377 --------- --------- --------- --------- --------- Total assets $ 118,044 $ 40,398 $ 30,602 $ (78,442) $ 110,602 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES $ 14,081 $ 680 $ 9,452 $ (7,275) $ 16,938 LONG-TERM DEBT, net of current Portion 100,000 -- 2,412 -- 102,412 INTERDIVISION LONG-TERM DEBT 15,145 -- 9,538 (24,683) -- OTHER NONCURRENT LIABILITIES 3,982 638 1,796 -- 6,416 SHAREHOLDERS' EQUITY (DEFICIT) (15,164) 39,080 7,404 (46,484) (15,164) --------- --------- --------- --------- --------- Total liabilities and shareholders' equity $ 118,044 $ 40,398 $ 30,602 $ (78,442) $ 110,602 ========= ========= ========= ========= =========
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SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited) Three Months ended October 2, 1999 ------------------------------------------------------------------------ Parent Guarantors Non-Guarantors Eliminations Consolidated Net sales $ 21,092 $ 2,863 $ 10,854 ($ 2,737) $ 32,072 Cost of goods sold 14,686 1,779 8,401 (2,795) 22,071 -------- -------- -------- -------- -------- Gross profit 6,406 1,084 2,453 58 10,001 Selling, general and administrative expense 3,639 661 1,856 0 6,156 -------- -------- -------- -------- -------- Operating income 2,767 423 597 58 3,845 Other expenses (income): Interest expense 3,089 108 344 (753) 2,788 Interest income (20) (689) (68) 753 (24) Other, net 89 (348) (21) 0 (280) Equity in earnings of subsidiaries (1,071) (166) 0 1,237 0 -------- -------- -------- -------- -------- Income before income taxes 680 1,518 342 (1,179) 1,361 Provision (benefit) for income taxes (100) 505 176 0 581 -------- -------- -------- -------- -------- Net income $ 780 $ 1,013 $ 166 ($ 1,179) $ 780 ======== ======== ======== ======== ======== SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited) Three Months ended September 30, 2000 ------------------------------------------------------------------------ Parent Guarantors Non-Guarantors Eliminations Consolidated Net sales $ 21,216 $ 1,918 $ 10,826 ($ 3,561) $ 30,399 Cost of goods sold 14,636 1,318 10,010 (3,561) 22,403 -------- -------- -------- -------- -------- Gross profit 6,580 600 816 0 7,996 Selling, general and administrative expense 3,784 505 2,054 0 6,343 -------- -------- -------- -------- -------- Operating income (loss) 2,796 95 (1,238) 0 1,653 Other expenses (income): Interest expense 3,125 95 402 (831) 2,791 Interest income (47) (758) (77) 831 (51) Other, net 27 50 191 0 268 Equity in earnings of subsidiaries 1,175 1,597 0 (2,772) 0 -------- -------- -------- -------- -------- (Loss) before income taxes (1,484) (889) (1,754) 2,772 (1,355) Provision (benefit) for income taxes (43) 286 (157) 0 86 -------- -------- -------- -------- -------- Net (loss) ($ 1,441) ($ 1,175) ($ 1,597) $ 2,772 ($ 1,441) ======== ======== ======== ======== ========
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SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited) Nine Months ended October 2, 1999 ------------------------------------------------------------------------ Parent Guarantors Non-Guarantors Eliminations Consolidated Net sales $ 62,618 $ 8,060 $ 33,703 ($ 9,305) 95,076 Cost of goods sold 43,803 5,094 25,869 (9,363) 65,403 -------- -------- -------- -------- -------- Gross profit 18,815 2,996 7,834 58 29,673 Selling, general and administrative expense 11,040 1,991 5,939 0 18,970 -------- -------- -------- -------- -------- Operating income 7,775 975 1,895 58 10,703 Other expenses (income): Interest expense 9,213 328 998 (2,172) 8,367 Interest income (90) (1,984) (199) 2,172 (101) Other, net (296) (29) (56) 0 (381) Equity in earnings of subsidiaries (2,310) (623) 0 2,933 0 -------- -------- -------- -------- -------- Income before income taxes 1,258 3,283 1,152 (2,875) 2,818 Provision (benefit) for income taxes (249) 1,031 529 0 1,311 -------- -------- -------- -------- -------- Net income $ 1,507 $ 2,252 $ 623 ($ 2,875) $ 1,507 ======== ======== ======== ======== ======== SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENT OF OPERATIONS (In Thousands) (Unaudited) Nine Months ended September 30, 2000 ------------------------------------------------------------------------ Parent Guarantors Non-Guarantors Eliminations Consolidated Net sales $ 65,506 $ 7,093 $ 34,429 ($11,618) $ 95,410 Cost of goods sold 45,944 4,557 28,086 (11,618) 66,969 -------- -------- -------- -------- -------- Gross profit 19,562 2,536 6,343 0 28,441 Selling, general and administrative expense 11,432 1,796 5,912 0 19,140 -------- -------- -------- -------- -------- Operating income 8,130 740 431 0 9,301 Other expenses (income): Interest expense 9,339 299 1,146 (2,469) 8,315 Interest income (153) (2,254) (229) 2,469 (167) Other, net 292 265 182 0 739 Equity in earnings of subsidiaries (546) 931 0 (385) 0 -------- -------- -------- -------- -------- Income (loss) before income taxes (802) 1,499 (668) 385 414 Provision (benefit) for income taxes (345) 953 263 0 871 -------- -------- -------- -------- -------- Net income (loss) ($ 457) $ 546 ($ 931) $ 385 ($ 457) ======== ======== ======== ======== ========
13
SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENTS OF CASH FLOWS (IN THOUSANDS) (Unaudited) NINE MONTHS ENDED OCTOBER 2, 1999 --------------------------------------------------------------------------- PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED --------------------------------------------------------------------------- Net cash (used in)/provided by operating activities: ($4,829) $ 2,049 ($ 809) $ 2,117 ($1,472) Cash flows from investing activities: Proceeds from asset sales 12 -- 22 -- 34 Purchase of equipment (2,323) (774) (534) -- (3,631) Acquisitions -- -- -- -- -- ------- ------- ------- ------- ------- Net cash (used in) investing activities (2,311) (774) (512) -- (3,597) Cash flows from financing activities: Change in overdraft -- -- 43 -- 43 Net repayment of revolving credit facility -- -- (1,205) -- (1,205) Proceeds from issuance of long-term debt- -- -- 602 -- 602 net of issuance cost Principal payments of long-term debt -- -- (15) -- (15) Intercompany loans -- (2,097) 2,088 9 -- Issuance of common stock -- 2,085 1 (2,086) -- Purchase of treasury stock (56) -- -- -- (56) Dividends (paid) received 1,201 (1,201) -- -- -- Other (38) -- -- -- (38) ------- ------- ------- ------- ------- Net cash (used in)/provided by financing activities 1,107 (1,213) 1,514 (2,077) (669) Effect of Foreign Exchange -- -- (167) (40) (207) ------- ------- ------- ------- ------- Increase (decrease) in cash (6,033) 62 26 -- (5,945) Cash at beginning of the period 8,602 209 487 -- 9,298 ------- ------- ------- ------- ------- Cash at end of the period $ 2,569 $ 271 $ 513 -- $ 3,353 ======= ======= ======= ======= ======= SIMONDS INDUSTRIES INC. CONSOLIDATING STATEMENTS OF CASH FLOWS (IN THOUSANDS) (Unaudited) NINE MONTHS ENDED SEPTEMBER 30, 2000 --------------------------------------------------------------------------- PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED --------------------------------------------------------------------------- Net cash (used in)/provided by operating activities: ($ 535) $ 1,353 $ 1,593 ($ 20) $ 2,391 Cash flows from investing activities: Proceeds from asset sales 895 -- 35 -- 930 Purchase of equipment (2,400) (99) (329) -- (2,828) Acquisitions (945) -- -- -- (945) ------- ------- ------- ------- ------- Net cash (used in) investing activities (2,450) (99) (294) -- (2,843) Cash flows from financing activities: Change in overdraft -- -- 52 -- 52 Net repayments of revolving credit facility -- -- (42) -- (42) Proceeds from issuance of long-term debt- net of issuance cost -- -- -- -- -- Principal payments of long-term debt -- -- (125) -- (125) Intercompany loans -- 737 (736) (1) -- Issuance of common stock 18 144 (2) (142) 18 Dividends (paid) received 1,646 (1,646) -- -- -- Purchase of treasury stock (995) -- -- -- (995) Other -- -- -- -- -- ------- ------- ------- ------- ------- Net cash (used in)/provided by financing activities 669 (765) (853) (143) (1,092) Effect of Foreign Exchange 30 (500) (552) 163 (859) ------- ------- ------- ------- ------- (Decrease) in cash (2,286) (11) (106) -- (2,403) Cash at beginning of the period 7,159 340 884 -- 8,383 ------- ------- ------- ------- ------- Cash at end of the period $ 4,873 $ 329 $ 778 -- $ 5,980 ======= ======= ======= ======= =======
14 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 Third Quarter 2000 and Third Quarter 1999 Net Sales: Net Sales for the third quarter of 2000 were $30.4 million or 5.2% lower than third quarter 1999 net sales of $32.1 million. The lower 2000 quarterly results were the result of a depressed wood market for both machinery and consumable products during the period. Sales from our German operations were significantly better than last year in their own currency, but were impacted unfavorably by the comparably strong U.S. dollar. The strong U.S dollar also affected UK operations unfavorably. Sales would have been higher in 2000 by $536 and $334 in our German and UK operations, respectively, if exchange rates were unchanged from last year's third quarter. Gross Profit Margin: Gross Profit was $7,996 for the third quarter of 2000, a decrease of $2,005 from $10,001 for the corresponding period in 1999. Gross Profit as a percentage of net sales was 26.3% and 31.2% for the three months ended September 30, 2000 and October 2, 1999, respectively. Gross Profits for the third quarter of 2000 reflect $988 reorganization charge to operations due to the shutdown of our Notting UK plant. Excluding this charge our gross profits would have been $8,894 or 29.6% of sales for the quarter. Selling, General and Administrative Expenses: Selling, general and administrative expenses as a percent of net sales were 20.9% or $6,343 and 19.2% or $6,156 for the second quarter of 2000 and 1999, respectively. The September 2000 quarter includes $302 as part of the Notting UK reorganization reserves. Excluding this charge, selling, general and administrative expenses would have been $6,041 or 19.9% of sales for the quarter. Operating Income: As a result of the foregoing, operating income decreased $2,192 to $1,653 in the third quarter of 2000 when compared to the comparable period in 1999. Other, Net: Other, Net was $268 in the third quarter of 2000 and $(280) in the comparable quarter of 1999. This swing from quarter to quarter is primarily comprised of unfavorable realized foreign exchange losses, the gain on certain assets relating to the sale of our rotary rule business, losses on disposal of U.S. fixed assets, and loss on disposal of fixed assets in the restructure of Notting UK in our 2000 third quarter, and realized exchange gains in the third quarter of 1999. 15 Interest Expense: Interest expense was higher by $24 in the third quarter of 2000 compared to the corresponding period in 1999. The vast majority of the Company's interest expense is for $100,000 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 $86 compared to approximately $581 or a 42.7% effective tax rate for the third quarter of 1999. The primary reason for the tax provision in the third quarter of 2000 is that no tax benefits have been recognized on $1,440 of certain foreign losses in 2000. Net Income: As a result of the foregoing, net income decreased $2,221 in the third quarter of 2000 when compared to the comparable period of 1999. Comparison of Nine Months Ended September 30, 2000 and October 2, 1999 Net Sales: Net Sales for the nine months ended September 30, 2000 were $95.4 million or 0.4% higher than nine months ended October 2, 1999 net sales of $95.1 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 $1,448 and $603 in our German and UK operations, respectively, if exchange rates were unchanged from last year's. Gross Profit Margin: Gross Profit was $28,441 for the first nine months of 2000, a decrease of $1,232 from $29,673 for the corresponding period in 1999. Gross Profit as a percentage of net sales was 29.8 % and 31.2% for the nine months ended September 30, 2000 and October 2, 1999, respectively. As mentioned above, gross profits for the third quarter of 2000 reflect $988 reorganization charge to operations due to the shutdown of our Notting UK plant. Excluding the reorganization charge, gross profits were 30.8% of sales for the period in 2000. Selling, General and Administrative Expenses: Selling, general and administrative expenses as a percent of net sales were 20.1% or $19,140 and 20.0% or $18,970 for the nine months of 2000 and 1999, respectively. Excluding reorganization charges of $302 year-to-date 2000 would have been 19.7% or 18,838. Operating Income: As a result of the foregoing, operating income decreased $1,402 to $9,301 in the first nine months of 2000 when compared to the comparable period in 1999. Interest Expense: Interest expense was lower by $118 in the first nine 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. 16 Other, net: The primary reasons for other expense of $739 in the nine months of 2000 and other (income) of $(381) in the comparable nine months of 1999 was primarily comprised of realized foreign exchange losses in 2000 and gains in 1999 as well as losses on disposal of fixed assets pertaining to U.S Domestic operations in the third quarter of 2000, and loss on disposal of fixed assets in the restructure of Notting UK. Income Taxes: The provision for income taxes was approximately $871 or a 210.4% effective tax rate for the first nine months of 2000, as compared to approximately $1,311 or a 46.5% effective tax rate for the first nine months of 1999. The primary reason for this increase is that since their realization is uncertain, tax benefits have not been recognized on $1,440 of certain foreign losses in 2000. Net Income: As a result of the foregoing, net income decreased $1,964 in the first nine 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 September 30, 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 $2,391 for the nine month period ended September 30, 2000 compared to a use of cash of $1,472 for the comparable period a year ago. The primary reasons for the large swing between periods are an aggregate increase in accounts receivable and inventory in 1999 of $3,351 versus an aggregate decrease of $2,642. This favorable difference was offset somewhat by lower net income in 2000 when compared to 1999 of $1,964. However, $1,440 of the difference in net income is the result of the Notting reorganization charges to operations in the September 2000 quarter, of which, $1,075 represents non-cash items. 17 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 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. 18 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 September 30, 2000. 19 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 November 10, 2000 20 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 9-MOS DEC-30-2000 JAN-02-2000 SEP-30-2000 5,980 0 17,108 946 24,436 50,527 46,191 13,493 110,602 16,938 102,412 0 0 1 (15,165) 110,602 95,410 95,410 66,969 66,969 19,140 0 8,315 414 871 (457) 0 0 0 (457) 0 0
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