-----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, S6h41HjLMPdFFYmp4nPmWDE86Tb6TR9eUPrBw/Dsg17BIHmTqFaUhIaHm5hnII2h QN1TNUitJVNhe+PwEQU7jg== 0000912057-00-024878.txt : 20000516 0000912057-00-024878.hdr.sgml : 20000516 ACCESSION NUMBER: 0000912057-00-024878 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAMES CORP CENTRAL INDEX KEY: 0000012180 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 360808480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01416 FILM NUMBER: 635929 BUSINESS ADDRESS: STREET 1: 9201 W BELMONT AVE CITY: FRANKLIN PARK STATE: IL ZIP: 60131 BUSINESS PHONE: 8477375970 MAIL ADDRESS: STREET 1: 9201 WEST BELMONT AVENUE CITY: FRANKLIN PARK STATE: IL ZIP: 60131 FORMER COMPANY: FORMER CONFORMED NAME: BINKS SAMES CORP DATE OF NAME CHANGE: 19970627 FORMER COMPANY: FORMER CONFORMED NAME: BINKS MANUFACTURING CO DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q 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 March 31, 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 001-01416 SAMES CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 36-0808480 - -------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 9201 WEST BELMONT AVENUE, FRANKLIN PARK, ILLINOIS 60131 ------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code 847-737-5970 Indicate by check mark whether the registrant (l) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 ----------- ----------- The number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report: Class Outstanding March 31, 2000 - ------------------------------ -------------------------- Capital Stock, par value $1.00 2,930,337 SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Form 10-Q Index Part I. Financial Information
PAGE ---- Item 1. Summarized Financial Statements Consolidated Balance Sheets March 31, 2000 (unaudited), December 31, 1999 (unaudited) and November 30, 1999 2 Consolidated Statements of Operations (unaudited) Three months ended March 31, 2000 and three months ended February 28, 1999 and one month ended December 31, 1999 3 Consolidated Statements of Cash Flows (unaudited) Three months ended March 31, 2000 and three months ended February 28, 1999 and one month ended December 31, 1999 4 Notes to Consolidated Financial Statements 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 Forward Looking Statements 13 Part II. Other Information Item 1. Legal Proceedings 14-15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16
-1- PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Company or group of companies for which report is filed: SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets March 31, 2000 (Unaudited), December 31, 1999 (Unaudited) and November 30, 1999 (in thousands, except per share amounts)
Mar 31, Dec 31, Nov 30, 2000 1999 1999 ---- ---- ---- ASSETS Current assets: Cash and cash equivalents $ 3,738 4,006 6,171 Receivables, net 37,933 41,455 43,171 Inventories 14,131 15,444 15,584 Other current assets 3,464 3,387 4,386 Net assets of discontinued operations 345 1,246 1,301 -------------- --------------- ------------- Total current assets 59,611 65,538 70,613 Other noncurrent assets 3,001 3,028 3,038 Property, plant and equipment, at cost 10,865 11,002 10,938 Less accumulated depreciation 6,162 6,234 6,172 -------------- --------------- ------------- Net property, plant and equipment 4,703 4,768 4,766 -------------- --------------- ------------- $ 67,315 73,334 78,417 ============== =============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable, bank overdrafts and current maturities of long-term debt $ 5,673 8,306 8,543 Accounts payable 25,278 26,911 27,881 Other current liabilities 7,903 8,346 10,980 -------------- --------------- ------------- Total current liabilities 38,854 43,563 47,404 Deferred compensation 6,311 6,394 6,426 Note payable, net of discount of $875, $942 and $964, respectively 2,863 3,182 3,500 Deferred income taxes 75 76 76 Long-term debt, less current maturities 2,652 2,762 2,767 -------------- --------------- ------------- Total liabilities 50,755 55,977 60,173 -------------- --------------- ------------- Stockholders' equity: Capital stock, $1.00 par value. Authorized 12,000,000 shares; issued and outstanding 2,966,837 shares at March 31, 2000, December 31, 1999 and 2,967 2,967 2,967 November 30, 1999, respectively Additional paid-in capital 19,677 19,677 19,677 Accumulated deficit (2,968) (2,727) (2,069) Accumulated other comprehensive loss: Foreign currency translation adjustments (2,535) (2,042) (2,035) -------------- --------------- ------------- 17,141 17,875 18,540 Treasury stock, at cost, 36,500, 32,500 and 18,200 shares at March 31, 2000, December 31, 1999 and November 30, 1999, respectively (581) (518) (296) -------------- --------------- ------------- Total stockholders' equity 16,560 17,357 18,244 -------------- --------------- ------------- $ 67,315 73,334 78,417 ============== =============== =============
-2- SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Operations (Unaudited, in thousands except per share amounts)
For the three One month months ended ended ------------------------------------- ---------------- Mar 31, Feb 28, Dec 31, 2000 1999 1999 ----------------- ----------------- ---------------- Net sales $ 22,614 17,776 5,023 Cost of goods sold 14,814 9,682 3,386 ----------------- ----------------- ---------------- Gross profit 7,800 8,094 1,637 Selling, general and administrative expenses 6,489 6,688 1,904 Research and development costs 642 994 299 ----------------- ----------------- ---------------- Operating income (loss) 669 412 (566) ----------------- ----------------- ---------------- Other expense (income): Interest expense 263 351 69 Other expense (income), net 49 (530) (34) ----------------- ----------------- ---------------- 312 (179) 35 ----------------- ----------------- ---------------- Income (loss) from continuing operations before income taxes 357 591 (601) Income tax expense (benefit) 114 (13) (81) ----------------- ----------------- ---------------- Income (loss) from continuing operations, net of tax 243 604 (520) Loss from discontinued operations, net of tax (484) (1,190) (138) ----------------- ----------------- ---------------- Net loss $ (241) (586) (658) ================= ================= ================ Income (loss) per share - basic Continuing operations $ .08 .20 (.17) Discontinued operations (.16) (.40) (.05) ----------------- ----------------- ---------------- Net loss $ (.08) (.20) (.22) ================= ================= ================ Income (loss) per share - diluted Continuing operations $ .08 .20 (.17) Discontinued operations (.16) (.40) (.05) ----------------- ----------------- ---------------- Net loss $ (.08) (.20) (.22) ================= ================= ================ Weighted average shares: Basic 2,932 2,964 2,942 Effect of stock options 5 8 4 ----------------- ----------------- ---------------- Diluted 2,937 2,972 2,946 ================= ================= ================
-3- SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited, in thousands of dollars)
For the three One month months ended ended -------------------------------- ---------------- Mar 31, Feb 28, Dec 31, 2000 1999 1999 -------------- -------------- ---------------- Cash flows from operating activities: Continuing operations: Income (loss) from continuing operations, net of tax $ 243 604 (520) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 228 254 77 Deferred compensation, net of payments (84) (503) (32) Other, net 8 188 227 Cash provided by (used in) changes in: Receivables 1,557 12,361 1,644 Inventories 978 (1,760) 111 Other current assets (149) (499) (52) Accounts payable (1,085) (3,310) (1,637) Accrued expenses (158) (2,318) (1,308) -------------- -------------- ---------------- Net cash provided (used) by operating activities 1,538 5,017 (1,490) -------------- -------------- ---------------- Cash flows from investing activities: Purchases of property, plant and equipment (305) (104) (85) Other investments and assets (3) (28) 9 -------------- -------------- ---------------- Net cash used in investing activities (308) (132) (76) -------------- -------------- ---------------- Cash flows from financing activities: Net increase (decrease) in short term borrowings (2,085) (3,436) 74 Repurchase of capital stock (63) -- (222) Principal payments on long-term debt 157 -- (300) -------------- -------------- ---------------- Net cash provided (used) by financing activities (1,991) (3,436) (448) -------------- -------------- ---------------- Net cash provided (used) by discontinued operations 501 (3,099) (154) Effect of exchange rate changes on cash (8) (173) 3 -------------- -------------- ---------------- Net decrease in cash and cash equivalents (268) (1,823) (2,165) Cash and cash equivalents at beginning of period 4,006 5,204 6,171 -------------- -------------- ---------------- Cash and cash equivalents at end of period $ 3,738 3,381 4,006 ============== ============== ================
-4- SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2000 (Unaudited), December 31, 1999 (Unaudited) and November 30, 1999 NOTE 1 The accompanying consolidated financial statements are unaudited, but in the opinion of management include all adjustments, consisting only of normal recurring adjustments except where indicated, necessary for a fair presentation of the results of operations and financial position for the periods presented. Results of operations for any interim period are not necessarily indicative of results for any other period or for the full year. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended November 30, 1999. On January 31, 2000, the Board of Directors determined to change the Company's fiscal year end from November 30 to December 31 to be effective for the year beginning January 1, 2000. Accordingly, the Company is including the unaudited financial information for the one month ended December 31, 1999 (the transition period) in this quarterly report on Form 10-Q for the quarterly period ended March 31, 2000. This new fiscal year will allow the Company to conform its quarterly reporting periods to those predominantly used in its industry. The Company has not presented financial statements for the three months ended March 31, 1999 but has instead presented financial statements for the three months ended February 28, 1999. Because the adoption of a new fiscal year resulted in only a one month change in annual and quarterly financial reporting periods, the Company believes that fiscal 2000 financial information is sufficiently comparable to the corresponding fiscal 1999 financial information, as originally reported, in terms of seasonal and other factors. Accordingly, the Company did not deem it practical nor could it justify the additional cost to prepare and present financial statements for the three months ended March 31, 1999. NOTE 2 On September 15, 1999 the Company announced a share repurchase program authorizing the Company to repurchase up to 150,000 shares of its outstanding Capital Stock. The shares will be repurchased from time to time in the open market as market conditions warrant. Under the terms of the repurchase program, the shares may be reissued to employees under the Company's stock option and employee stock purchase plans. Through March 31, 2000, the Company repurchased a total of 36,500 shares at a cost of $.6 million. NOTE 3 As part of the original sale agreement with Illinois Tool Works (ITW), dated August 31, 1998, the Company assigned and transferred to ITW all of the accounts receivable related to the "Binks Business". The agreement required the Company to repurchase such accounts receivable which were not collected within 180 days. On September 23, 1999, the Company agreed to repurchase certain receivables for approximately $1.0 million, which was paid to ITW on September 28, 1999. Through March 31, 2000, the Company had collected approximately $.7 million of the accounts receivable. It is anticipated that any future collections below or above the paid amount will be either charged or credited to loss from discontinued operations. The receivables repurchased from ITW and transferred back to the Company include a receivable from Haden Drysys International Limited ("Haden"), a United Kingdom corporation, in the amount of Pounds 434,885. On March 10, 2000, Haden filed an arbitration claim in the International Court of Arbitration of the International Chamber of Commerce in the United Kingdom against Binks Limited ("Binks UK"), a former subsidiary of the Company that was sold to ITW as part of the sale of the Binks Business, in the amount of Pounds 3,000,000. The claim alleges that Binks UK breached its agreements with Haden relating to automotive paint shop equipment for an automobile plant. Pursuant to the original sale agreement with ITW, the Company has agreed to indemnify ITW with respect to the claim and to assume the defense of the claim on behalf of ITW. On April 13, 2000, the Company filed an answer denying the claim and a counterclaim seeking to collect the receivable. -5- SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2000 (Unaudited), December 31, 1999 (Unaudited) and November 30, 1999 NOTE 4 The Company has certain contingent liabilities resulting from litigation and claims incident to the ordinary course of business. Management believes that the probable resolution of such contingencies will not materially affect the financial position or results of operations of the Company. For information relating to other legal matters involving the Company, reference is made to "Item 3 - Legal Proceedings" in the Company's Annual Report on Form 10-K for the year ended November 30, 1999 and to "Part II, Item 1 - Legal Proceedings" in this report. NOTE 5 Comprehensive loss for the three months ended March 31, 2000 and February 28, 1999 consisted of the following (in thousands):
Three months Three months One month ended March 31, ended February 28, ended December 31, 2000 1999 1999 ---- ---- ---- Net loss $ (241) (586) (658) Other comprehensive loss: Foreign currency translation adjustments (493) (569) (7) ------ ------ ---- Comprehensive loss $ (734) (1,155) (665) ====== ====== ====
-6- SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2000 (Unaudited), December 31, 1999 (Unaudited) and November 30, 1999 NOTE 6 The Company operates in one segment, the manufacture and distribution of electrostatic spray finishing and coating application equipment. The Company's products are sold to customers in North America, South America, Europe, Asia, Africa, and Australia. The table below presents the Company's consolidated continuing operations by country: United States; France; and Japan. Sales are presented by originating area. Interarea transfers comprise transactions among the Company and its subsidiaries in different geographic areas; these transfers are eliminated in consolidation.
THREE MONTHS ENDED ONE MONTH ENDED MARCH 31, FEBRUARY 28, DECEMBER, 31 2000 1999 1999 ------------ ------------- ---------------- Sales to unaffiliated customers (includes exports): United States $ 6,043 5,390 1,666 France 14,939 10,798 3,060 Japan 1,632 1,589 297 Interarea transfers from: France 2,899 3,841 818 Eliminations (2,899) (3,841) (818) ------------ ------------- ---------------- Total $ 22,614 17,777 5,023 ============ ============= ================ Operating income (loss): United States $ (92) (244) (88) France 763 722 (401) Japan (2) (66) (77) ------------ ------------- ---------------- Total $ 669 412 (566) ============ ============= ================ Identifiable assets of continuing operations: United States $ 21,608 21,941 22,833 France 40,276 38,216 44,134 Japan 5,086 5,139 5,121 ------------ ------------- ---------------- Total $ 66,970 65,296 72,088 ============ ============= ================
- 7 - SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIGNIFICANT DEVELOPMENTS On February 28, 2000 the Company announced the formation of a strategic alliance with JBI, L.P., based in Osseo, WI, a leading manufacturer of paint spray booths. JBI will manufacture the Sames' line of powder booths, including ProTouch and SoftTouch powder booths and will also support the growth of Sames' distributor network in North America. This strategy is exemplified by the distributor agreement signed on February 17, 2000 with Dove Equipment Co., Inc. based in Peoria, IL. Dove is an existing distributor for JBI and a leading industrial distributor in North America for liquid electrostatic and powder systems. Dove will represent the full Sames general industry product line in Illinois, Wisconsin, Iowa and Mexico. JBI will also provide the turnkey installation of the new Sames Customer Demonstration Facility in Livonia, MI. The new facility will allow current and prospective customers to evaluate the performance capabilities of Sames liquid electrostatic and powder coating equipment and systems. On September 15, 1999 the Company announced a share repurchase program authorizing the Company to repurchase up to 150,000 shares of its outstanding Capital Stock. The shares will be repurchased from time to time in the open market as market conditions warrant. Under the terms of the repurchase program, the shares may be reissued to employees under the Company's stock option and employee stock purchase plans. Through March 31, 2000, the Company repurchased a total of 36,500 shares at a cost of $.6 million. On April 25, 2000, the Sames stockholders approved the adoption of the Sames Employee Stock Purchase Plan, effective January 1, 2000, pursuant to which employees of the Company have the opportunity to acquire shares of the capital stock of the Company at a 15% discount. The purpose of the Plan is to advance the interests of the Company and its stockholders by providing employees of the Company and certain designated subsidiaries with an opportunity to acquire an ownership interest in the Company. With respect to employees who reside in the United States, the Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. On January 31, 2000, the Board of Directors determined to change the Company's fiscal year end from November 30 to December 31 to be effective for the year beginning January 1, 2000. Accordingly, the Company is including the unaudited financial information for the one month ended December 31, 1999 (the transition period) in this quarterly report on Form 10-Q for the quarterly period ended March 31, 2000. This new fiscal year will allow the Company to conform its quarterly reporting periods to those predominantly used in its industry. The Company has not presented financial statements for the three months ended March 31, 1999 but has instead presented financial statements for the three months ended February 28, 1999. Because the adoption of a new fiscal year resulted in only a one month change in annual and quarterly financial reporting periods, the Company believes that fiscal 2000 financial information is sufficiently comparable to the corresponding fiscal 1999 financial information, as originally reported, in terms of seasonal and other factors. Accordingly, the Company did not deem it practical nor could it justify the additional cost to prepare and present financial statements for the three months ended March 31, 1999. On April 25, 2000, the Company elected Arnold H. Dratt, its President and CEO, to the position of Chairman of the Board of Directors. Mr. Dratt succeeded Dr. Wayne Edwards, who will remain a director. Philippe Vuillerme, the managing director of the Company's largest subsidiary, Sames S.A., was promoted to Chief Operating Officer. Mr. Vuillerme is also a director of the Company. As part of the original sale agreement with Illinois Tool Works (ITW), dated August 31, 1998, the Company assigned and transferred to ITW all of the accounts receivable related to the "Binks Business". The agreement required the Company to repurchase such accounts receivable which were not collected within 180 days. On September 23, 1999 the Company agreed to repurchase certain receivables for approximately $1.0 million, which was paid to ITW on September 28, 1999. Through March 31, 2000, the Company had collected approximately $.7 million of the accounts receivable. It is anticipated that any future collections below or above the paid amount will be either charged or credited to loss from discontinued operations. - 8 - SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) SIGNIFICANT DEVELOPMENTS (CONTINUED) The Board of Directors approved a change in the Company's listing stock symbol from BIN to SGT, effective May 22, 2000. As shorthand for "Sames Global Technology", the symbol was chosen to underline the core strengths of Sames in high technology electrostatic finishing on a global basis. RESULTS OF OPERATIONS NET SALES Net sales for the three months ended March 31, 2000 ("First Quarter 2000") were $22.6 million compared to $17.8 million for the three months ended February 28, 1999 ("First Quarter 1999"), an increase of $4.8 million, or 27%. Sames, S.A. experienced the majority of the sales increase or $4.1 million. The significant backlog at Sames S.A. in the previous year end in large automotive installations gave rise to significant improvement in First Quarter 2000 sales over the prior year. In fiscal 1999, the sales mix of Sames S.A. was more heavily weighted toward lower volume, higher margin standard equipment and spare part sales. GROSS PROFIT Gross profit of $7.8 million for the First Quarter 2000 decreased $.3 million, or 3.6% from the comparable 1999 period. Gross profit was 34.5% of net sales for First Quarter 2000 compared to 45.5% for the First Quarter 1999. The decrease in the First Quarter 2000 was primarily due to the reduction in volume of higher margin standard and spare part sales from the First Quarter 1999. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative ("SG&A") expense was $6.5 million for the First Quarter 2000 compared to $6.7 million for the First Quarter 1999. SG&A expense as a percentage of net sales was 28.7% for the First Quarter 2000 and 37.6 % for the comparable First Quarter 1999. These decreases are the result of management's cost control programs and emphasis on profitability. RESEARCH AND DEVELOPMENT Research and development ("R&D") expense was $.7 million for the First Quarter 2000 compared with $1.0 million for the First Quarter 1999. The Company is continually engaged in experimental work on various paint and powder coating systems. The Company believes that a strong commitment to research and development is necessary to drive long-term growth. - 9 - SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) INTEREST EXPENSE Interest expense was $.3 million for the First Quarter 2000 compared with $.4 million for the First Quarter 1999. Interest expense decreased in the three months ended March 31, 2000 primarily due to decreased borrowing levels achieved from improved operational cashflows by Sames, S.A. and Sames North America. OTHER EXPENSE (INCOME) - NET Other expense was approximately $.1 million for the First Quarter 2000 compared with other income of $.5 million in the First Quarter 1999. The majority of the variance in other income between the periods was attributable to foreign currency transaction gains, principally by Sames North America, that arose due to the weakening French Franc in the First Quarter 1999. INCOME TAXES The Company recorded an income tax expense of $.1 million in the First Quarter 2000 versus an insignificant provision for the First Quarter 1999. The consolidated relationship of income tax expense and pretax income or loss was a function of the Company's geographical mix of pretax profitability, and, generally, the utilization of available domestic net operating loss carryforwards. LOSS FROM DISCONTINUED OPERATIONS - NET OF TAX Loss from discontinued operations, net of tax, decreased from $1.2 million ($.40 loss per diluted share) in the First Quarter 1999 to $.5 million ($.16 loss per diluted share) in the First Quarter 2000 principally due to the loss from the sale of the Canadian operation in the First Quarter 1999. NET INCOME (LOSS) As a result of all of the factors above, the Company recorded a net loss of $.2 million ($.08 loss per diluted share) and $.6 million ($.20 loss per diluted share) in the First Quarter 2000 and in the First Quarter 1999, respectively. - 10 - SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES Cash flows from operations are the primary source of the Company's liquidity. Short-term funds are also provided for current operations through lines of credit and overdraft facilities. At March 31, 2000, the Company had aggregate credit facilities of approximately $17.8 million, borrowings under these facilities of $7.6 million, and amounts available under these facilities of $10.2 million. In the three months ended March 31, 2000, the Company generated cash flow of $1.5 million from operating activities primarily due to a significant reduction in accounts receivable and inventory and offset by a decrease of accounts payable from the period ended December 31, 1999. The Company increased capital spending levels to $.3 million in the First Quarter 2000. During First Quarter 2000 the Company paid down short-term borrowing levels by approximately $2.1 million. Overall, cash and cash equivalents decreased in First Quarter 2000 by $.3 million. Based upon the current level of operations, the Company believes that its cash flow from operations together with the available borrowing capacity under it credit agreements will be adequate to meet its presently anticipated requirements for working capital and accrued liabilities, capital expenditures, interest payments, and scheduled principal payments. There can be no assurance, however, that the Company's business will continue to generate cash flow at or above current levels. QUARTERLY FLUCTUATIONS The Company has experienced significant quarterly fluctuations in operating results and anticipates that those fluctuations will continue. The fluctuations have been caused by periodic changes in the components of the Company's sales mix. In particular, the Company's sales of large automotive installations can fluctuate substantially and they generally result in relatively lower gross profit margins. Sales of standard products and spare parts typically generate relatively higher gross profit margins. The Company therefore believes that quarter-to-quarter comparisons of its results are not necessarily meaningful and should not be relied upon as indications of future performance. CONVERSION TO THE EURO On January 1, 1999, eleven European Union member states adopted the euro as their common national currency. From that date until January 1, 2002, either the euro or a participating country's present currency will be accepted as legal tender. Beginning on January 1, 2002, euro-denominated bills and coins will be issued, and by July 1, 2002, only euro currency will be used. The Company will is evaluating the strategic, financial, legal, and systems issues related to the various phases of transition to the Euro currency. While the Company does not believe the ultimate costs of conversion will be material to its results of operations, cash flow, or financial position, efforts will be made to address customer and business needs on a timely basis and anticipate and prevent any complications. -11- SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK A substantial portion of the Company's non-U.S. transactions is denominated in French francs. Although Sames, S.A. is not typically subject to significant foreign exchange transaction gains or losses, its financial statements are translated into U.S. dollars as part of the Company's consolidated financial reporting. Fluctuations in the French franc/U.S. dollar exchange rate therefore will affect the Company's consolidated balance sheets and statements of operations. At March 31, 2000, the French franc had depreciated by approximately 4.5% compared to December 31, 1999. However, the average French franc/U.S. dollar exchange rate decreased approximately 17% in the three months ended March 31, 2000 compared to the First Quarter 1999 period. The Company also has operations in Japan and Sweden, where transactions are denominated in Japanese yen and Swedish krona. In the three months ended March 31, 2000, the net change in the cumulative foreign currency translation adjustment account, which is a component of stockholders' equity, was an unrealized loss of $.5 million. An unrealized foreign currency translation loss of $.6 million was recorded in the three months ended February 28, 1999. Foreign currency exchange transactions have not typically resulted in significant periodic gains or losses, although Sames North America recorded a gain of approximately $.1 million during the three months ended March 31, 2000. The gain was recorded due to the combination of a significant intercompany payable to Sames, S.A., denominated in French francs, and the depreciation of the French franc relative to the U.S. dollar during the period. The Company generally does not use derivative financial instruments to manage currency exchange risks and no such instruments were outstanding at March 31, 2000. - 12 - SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES FORWARD-LOOKING STATEMENTS Statements regarding the Company's future plans and expectations, operating performance, product development and distribution and strategic alternatives and alliances, and effects of the euro conversion constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, and are subject to the safe harbor created thereby. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations reflected in such forward-looking statements will prove to be correct. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Important factors that could cause actual results to differ materially from the Company's expectations include, without limitation, adverse changes in the economy or overall market generally, increased competition relating to the Company's products and services both within the United States and globally, lower than expected sales of the Company's products and services, the Company's inability to successfully implement manufacturing assembly and cost-reduction programs, adverse results of the testing of the Company's products and validation programs or the failure of such products or programs to gain wide market acceptance, the inability of the Company to enter into or secure new or anticipated strategic alliances, continuing losses resulting from discontinued operations relating to the resolution and conclusion of the matters relating to the sale of the Binks business, fluctuation in the sales revenues caused in part by currency fluctuations and translations, uncertainty relating to economic and political conditions in the countries and international markets in which the Company operates and competes, and changes in accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. -13- SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings As of September 23, 1999, the Company reached agreement with ITW to resolve its outstanding dispute relating to the purchase price adjustment associated with the sale to ITW, effective September 30, 1998 of certain assets, operations and subsidiaries that included specific standard or non-electrostatic products comprising the Binks Business. Under the terms of the settlement, the Company agreed to pay ITW approximately $6.1 million in sixteen quarterly installments, without interest, of $385,458 each, which commenced on September 30, 1999 and end June 30, 2003. As part of the original sale agreement to ITW, the Company assigned and transferred to ITW all of the accounts receivable related to the Binks Business. The sale agreement also provided for indemnification of ITW with respect to such accounts receivable not collected within 180 days of the date of the agreement. The Company and ITW have resolved disputes which arose regarding these receivables. As a result, the Company paid approximately $1.0 million to ITW on September 28, 1999 and ITW transferred back to the Company accounts receivable in the aggregate amount of approximately $3.7 million. As of March 31, 2000, the Company had collected $.7 million of the accounts receivable. It is anticipated that any future collections below or above the paid amount will be either charged to or credited to loss from discontinued operations. The receivables repurchased from ITW and transferred back to the Company include a receivable from Haden Drysys International Limited ("Haden"), a United Kingdom corporation, in the amount of Pounds 434,885. On March 10, 2000, Haden filed an arbitration claim in the International Court of Arbitration of the International Chamber of Commerce in the United Kingdom against Binks Limited ("Binks UK"), a former subsidiary of the Company that was sold to ITW as part of the sale of the Binks Business, in the amount of Pounds 3,000,000. The claim alleges that Binks UK breached its agreements with Haden relating to automotive paint shop equipment for an automobile plant. Pursuant to the original sale agreement with ITW, the Company has agreed to indemnify ITW with respect to the claim and to assume the defense of the claim on behalf of ITW. On April 13, 2000, the Company filed an answer denying the claim and a counterclaim seeking to collect the receivable. In October 1997, Robert Hashima, the former branch manager of Binks Japan Limited, filed a lawsuit against the Company, claiming that he is entitled to receive 145 million yen (approximately US$1.2 million) plus interest under his retirement policy. The Company is responding vigorously to Mr. Hashima's claim and in June 1998, the Company filed a counterclaim for damages in the amount of 172 million yen (approximately US$1.4 million) for various wrongdoings on the part of Mr. Hashima. The case is pending in Tokyo, Japan. On February 24, 1997, Chester Baranowski, the former President of Binks Canada, brought suit against the Company seeking US $4.55 million claiming wrongful dismissal, breach of contract and non-payment of certain salary and employee benefits. The Company has denied all substantive allegations and filed a counterclaim on November 28, 1997 against Baranowski for breach of fiduciary duty and conspiracy with Burke B. Roche to injure the Company. The case went to trial in the Superior Court of Justice at Toronto, Canada and reasons for judgement was issued January 12, 2000. Both parties have filed notices of appeal. On May 28, 1999, Burke B. Roche, former Chairman and CEO of the Company, brought suit against the Company seeking a judgment in the amount of all payments alleged to be due him under a retirement contract, presently approximately $277,500, and that the court direct the Company to make remaining installment payments allegedly due. Mr. Roche claims that payments of approximately $18,500 per month are due for at least 76 more months or until June, 2006, and payments in this amount are due for an additional 60 months thereafter, so long as Mr. Roche is living when each such monthly payment is due. The Company is vigorously defending these claims and has filed a counterclaim seeking damages in an amount to be determined alleging various breaches of fiduciary duty by Mr. Roche. On May 2, 2000, the Company amended its counterclaim to exclude alleged breach of contract by Mr. Roche. For all legal matters discussed above, after consulting with counsel, the Company has determined that it is not possible at this time to estimate the amount of damages, if any, that may ultimately be incurred. -14- SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES PART II - OTHER INFORMATION (CONTINUED) Item 1. Legal Proceedings (continued) See Note 4 to Consolidated Financial Statements for the period ended March 31, 2000 (Unaudited) contained herein. Items 2. 3. 4. and 5. Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K (1) Form 8-K dated January 31, 2000, filed with the SEC on February 10, 2000. Item 8. Change in fiscal year. - On January 31, 2000 the Company determined to change its fiscal year-end from November 30 to December 31. -15- 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. SAMES CORPORATION /s/ Arnold H. Dratt - ------------------- Arnold H. Dratt - Chairman, President and Chief Executive Officer Principal Executive Officer /s/ Ronald A. Koltz - ------------------- Vice President - Controller Corporate Accounting Principal Accounting and Financial Officer Date May 15, 2000 -16- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 DEC-01-1999 MAR-31-2000 3,738 0 37,933 0 14,131 59,611 10,865 6,162 67,315 38,854 2,652 0 0 0 16,560 67,315 22,614 22,614 14,814 14,814 0 0 263 357 114 243 (484) 0 0 (241) (0.08) (0.08)
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