-----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, DQDxZVqD3SxYfHhkOKNLewt8cTAmzL0XuUAZMOgSD5L6y1OiQXUVZG4DZL704gzk 3oxWCkGJb6nnAdRRNN0BiA== 0000950124-00-001308.txt : 20000320 0000950124-00-001308.hdr.sgml : 20000320 ACCESSION NUMBER: 0000950124-00-001308 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMPSON INDUSTRIES INC CENTRAL INDEX KEY: 0000090588 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 381225111 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-06611 FILM NUMBER: 572676 BUSINESS ADDRESS: STREET 1: 47603 HALYARD DR CITY: PLYMOUTH STATE: MI ZIP: 48170 BUSINESS PHONE: 3132076200 MAIL ADDRESS: STREET 1: 47603 HALYARD DR CITY: PLYMOUTH STATE: MI ZIP: 48170 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1999 Commission File Number 0-6611 SIMPSON INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Michigan 38-1225111 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 47603 Halyard Drive, Plymouth, Michigan 48170 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (734) 207-6200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g)of the Act: Common Stock, $ 1.00 par value (Title of Class) Common Stock Purchase Rights (Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant has been required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant as of March 15, 2000, computed by reference to the last sale price for such stock on that date as reported on the NASDAQ National Market System, was $165,155,657. At March 15, 2000, there were outstanding 17,883,194 shares of the registrant's common stock, $1.00 par value each. Portions of the Proxy Statement for the 2000 Annual Meeting of Shareholders have been incorporated by reference in this Annual Report on Form 10-K (Part III). 2 PART I ITEM 1. BUSINESS INTRODUCTION Simpson Industries, Inc. (the "Company") was organized under Michigan law in 1945. The Company's executive offices are located in Plymouth, Michigan, and the fourteen plant facilities at which its manufacturing operations are conducted are located in Michigan, Ohio, Indiana, North Carolina, Tennessee, Ontario (Canada), Iztapalapa, Mexico City, District of Mexico (Mexico), Halifax (England), Lyon (France), Barcelona (Spain) and Sao Paulo (Brazil). The Company also has interests in joint ventures in Pune (India) and Seoul (South Korea). Reference in this report to the Company includes Simpson Industries, Inc., and its predecessors, divisions and subsidiaries, unless otherwise indicated by the context. PRINCIPAL PRODUCTS AND MARKETS The Company develops and produces precision-engineered automotive components and modular systems for automotive, sport utility, light- and heavy-duty truck and diesel engines. The Company's major product lines include vibration control products, air conditioning compressor components, wheel-end and suspension components and assemblies, oil pumps, water pumps and other modular engine assemblies and transmission and driveline components that are machined from castings and forgings. These products are produced principally for original equipment manufacturers in North America and Europe. The Company manages its business under three similar product groups that are aggregated together as one segment in the global vehicular industry. These groups have similar long-term financial performance and economic characteristics. The products from all three groups utilize similar manufacturing processes. The production of the finished parts from the three focused groups uses similar machining equipment which may be interchanged from group to group. The Company distributes and sells final product to the same type of customers from all of its three product groups. The Company maintains product design and process development staffs, which work with customers' engineers, principally in the design, testing and development of new products, as well as in the on-going refinement of existing products. The Company also conducts its own research and development activities, which are separate from the product development activities conducted in cooperation with its customers. The Company expended $4,273,000 in 1999, $4,313,000 in 1998 and $3,668,000 in 1997 for its research and development. Competition in the sale of all of the Company's products is primarily based on engineering, product design, process capability, quality, cost, delivery and responsiveness. The Company believes that its performance record in these respects places it in a strong competitive position. The Company believes that, in the manufacture of its products, it competes with numerous supplier companies, some of which are larger and have greater financial resources than the Company. In addition, many of the Company's larger customers are capable of performing their own machining work. The Company's customers to whom sales exceeded 10% of total net sales include General Motors Corporation, Ford Motor Company and DaimlerChrysler Corporation. Substantially all of the Company's sales are based on competitive proposals on requests from customers. Sales of all products to General Motors Corporation, Ford Motor Company and DaimlerChrysler Corporation during the years ended December 31, 1999, 1998 and 1997 accounted for 55.3%, 54.3% and 60.1%, respectively, of the Company's total sales during those periods. In recent years, sales to other significant customers, in particular Consolidated Diesel Corporation, Caterpillar Incorporated, Cummins Engine Company Inc., Peugeot and Renault have grown in importance as the Company has broadened its customer base and more narrowly focused its product direction. However, the loss of all or a substantial portion of sales to major customers could have a detrimental effect on the Company's business. The Company believes that such a loss is unlikely because the Company's products, which generally have a life of five to ten years, require a substantial initial investment in engineering, equipment and tooling. Moreover, sales to automotive customers consist of a large number of different products as well as different types of the same products, which are sold to separate divisions and operating groups within each customer's organization. These customer-operating units generally act independently when making their purchasing decision. Because the Company principally ships to its customers' scheduled needs, information concerning its backlog is not meaningful to an understanding of its business. Purchase orders for machined products that do not necessarily 3 represent firm contracts are generally received from larger customers. Customers issue short-term releases against the purchase orders from time to time during the year and these releases are firm orders that typically remain open for acceptance by the Company for a period of 30 days or less. The basic raw materials for the Company's products include aluminum and ferrous castings, steel forgings, steel bar stock and rubber, all of which are available from a large number of sources. The Company has been purchasing such materials from several sources. The Company holds various patents and, from time to time, in the ordinary course of its business, files patent applications. However, the Company does not consider any individual patent or patent application to be material to the operation of its business. The Company's operations, in common with those of manufacturers generally, are subject to numerous federal, state and local laws and regulations pertaining to the discharge of materials into the environment or otherwise relating to the protection of the environment. Compliance with such laws and regulations has not had and is not anticipated to have a material effect on the capital expenditures, earnings or competitive position of the Company. At December 31, 1999, the Company employed 2,555 people on an active basis. Since most of the Company's machined products are for engines, transmissions and drive trains, they are generally not affected by style changes and their production and delivery continue at a relatively uniform rate. However, the Company's operations are affected by the cyclical nature of the United States and European automobile, sport utility and light- and heavy-duty vehicle markets. The Company's operations are conducted within one business segment and sales attributable to customers outside the United States from U.S. operations were $62,256,000 in 1999, $55,200,000 in 1998 and $63,400,000 in 1997. EXECUTIVE OFFICERS Set forth below is certain information concerning the current executive officers of the Company, which group includes the Company's principal officers.
NAME AND AGE OFFICE(S) AND LENGTH OF SERVICE ------------ ------------------------------- Roy E. Parrott, 59 ....................... Director since 1989; Chief Executive Officer since 1994; Chairman since 1997; and President from 1989 to 1999 George A. Thomas, 50...................... President, Chief Operating Officer and Director since 1999 Vinod M. Khilnani, 47 .................... Vice President and Chief Financial Officer since 1997; and Treasurer during 1997 George G. Gilbert, 51 .................... Vice President - Strategic Development & Emerging Markets and Technology Services since 1998; Vice President - Technology Service since 1995; Vice President - Transmission & Chassis Group from 1993 to 1995; and Vice President - Engine Products Group from 1990 to 1993 James A. Hug, 53 ........................ Vice President - Transmission & Chassis Products since 1997; Vice President - Automotive Group from 1995 to 1997; Vice President - Heavy Duty Products Group from 1992 to 1995; and Vice President - Heavy Duty Products Group - South from 1990 to 1992 James B. Painter, 50...................... Vice President - NVH/Engine Products since 2000; Vice President - Engine Products from 1998 to 1999; Vice President - Heavy-Duty Group from 1995 to 1998; and Vice President - Materials Management during 1995
4 Mr. Thomas was an executive with the automotive supply operations of TRW, Inc. from 1990 until he joined the Company on March 1, 1999. Mr. Thomas held various other positions with TRW since 1972. Prior to joining the Company in July 1997, Mr. Khilnani served as Vice President and Chief Financial Officer of Dayton Superior Corporation from December, 1996; Executive Director - Treasury and Investment Evaluations for Cummins Engine Company from 1995 to 1996; Vice President - Finance and MIS of Onan Corporation and Power Generation Group of Cummins Engine from 1993 to 1995 and of Holset Engineering Company (UK) from 1991 to 1993. Prior to joining the Company in January 1996, Mr. Burris served as Purchasing Manager of Brake Steering and Suspension at Ford Motor Company since 1994, and was previously Supervisor of Purchasing Business Process Improvement and Systems Development at Ford Motor Company since 1991. Prior to joining the Company in March 1995, Mr. Painter served as General Manager, Specialty Axle Group, Rockwell Process International Automotive Operations from 1993 to 1995; President, Rockwell Clutch Company, Inc. from 1991 to 1993. Executive officers of the Company are appointed annually by the Board of Directors and serve at the pleasure of the Board. ITEM 2. PROPERTIES The Company's facilities are principally involved in the manufacture of the Company's products and are owned by the Company and its subsidiaries free of encumbrances, with the exception of the facilities located in Tennessee and Brazil, which are leased by the Company. All of these properties as well as the related machinery and equipment are considered to be well maintained, suitable and adequate for their intended purpose. The following table sets forth the location and approximate size of the Company's facilities. PROPERTIES IN ACTIVE USE
APPROXIMATE APPROXIMATE LOCATION LAND AREA FLOOR SPACE -------- --------- ----------- Litchfield, Michigan.......................... 22.8 Acres 230,000 Square Feet Plymouth, Michigan............................ 5.5 68,000 Middleville, Michigan......................... 3.5 107,000 Fremont, Indiana.............................. 13.7 105,000 Bluffton, Indiana............................. 12.5 176,000 Edon, Ohio.................................... 15.2 134,000 Troy, Ohio.................................... 12.2 100,000 Greenville, North Carolina.................... 12.6 113,000 Thamesville, Ontario.......................... 6.0 62,000 Lyon, France.................................. 3.8 83,000 Halifax, England.............................. 1.7 54,000 Barcelona, Spain.............................. 2.2 55,000 Iztapalapa, Mexico............................ 2.8 86,000 Memphis,Tennessee............................. n/a 28,000 Sao Paulo, Brazil............................. 3.6 45,000 TOTAL IN ACTIVE USE 118.1 1,446,000
5 ITEM 3. LEGAL PROCEEDINGS No material legal proceeding is pending to which the Company or any of its subsidiaries is a party, or of which any of their property is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted by the Company to a vote of security holders through the solicitation of proxies or otherwise, during the fourth quarter of 1999. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Stock Price and Dividend Information The Company's common stock is traded on the NASDAQ National Market Issue under the symbol SMPS. Stock prices are quoted in the automated quotation system operated by the National Association of Securities Dealers Automated Quotation System. The quarterly range of bid prices per share, as reported by NASDAQ, and the dividends paid thereon during the years ended December 31, 1999 and 1998 are shown in the accompanying table. Such prices may represent interdealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. At December 31, 1999 there were 3,713 individual shareholders of record of Simpson common stock. Other Simpson common shares outstanding were held in bank, money management, company and brokerage house "nominee" accounts for an estimated 4,200 additional shareholders as beneficial owners.
Bid Price per Share ------------------- Dividend Paid Quarter Ended High Low Per Share ---- --- --------- March 31, 1998 $14 $11 1/2 $ .10 June 30, 1998 15 3/8 11 7/8 .10 September 30, 1998 13 7/8 9 1/8 .10 December 31, 1998 12 1/8 8 3/4 .10 March 31, 1999 11 8 1/2 .10 June 30, 1999 10 3/4 9 .10 September 30, 1999 12 5/8 9 1/2 .10 December 31, 1999 12 1/8 9 1/2 .10
6 ITEM 6. SELECTED FINANCIAL DATA Five Year Summary (Dollar amounts in millions, except per share and per employee)
1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Operating Data Net sales $532.7 $496.4 $451.5 $408.0 $395.1 Cost of products sold 478.9 446.9 406.5 365.3 354.4 Gross profit 53.8 49.5 45.0 42.7 40.7 as a % of sales 10.1% 10.0% 10.0% 10.5% 10.3% Operating earnings before provisions for restructuring and plant closings $39.0 $34.1 $30.9 $29.6 $28.8 as a % of sales 7.3% 6.9% 6.8% 7.3% 7.3% Net earnings $20.8 $14.8(1) $10.1(2) $17.6(3) $15.3 as a % of sales 3.9% 3.0% 2.2% 4.3% 3.9% Net earnings per share (diluted) $1.15 $0.80 $0.55 $0.97 $0.85 Dividend per share 0.40 0.40 0.40 0.40 0.40 Weighted average shares (millions) 18.1 18.4 18.2 18.1 18.0 At Year End Working capital (4) $33.9 $32.2 $36.4 $45.0 $40.3 as a % of sales 6.4% 6.5% 8.1% 11.0% 10.2% Total assets 361.5 340.6 341.5 249.0 232.5 Long-term debt 99.0 105.5 118.6 58.6 62.3 Shareholders' equity 133.0 124.6 117.9 116.0 105.1 Book value per share 7.42 6.85 6.50 6.42 5.84 %Debt/equity 79% 89% 104% 54% 61% %Debt/total capital 44% 47% 51% 35% 38% Additional Statistics New program launches 9 15 13 6 10 EBITDA (5) 66.6 60.3 54.3(7) 50.1 47.7 Depreciation and amortization expense 27.6 26.1 23.4 20.5 18.9 Capital investment 41.8 19.6 29.0 26.3 31.5 % return on average equity 16.2% 12.2% 8.6% 15.9% 15.1% Sales per employee $210,461 $204,512 $197,687 $190,654 $186,706 Operating earnings per employee 15,404 14,067(6) 13,537(7) 13,832 13,594 Number of employees, year end 2,555 2,518 2,355 2,115 2,050 Stock Activity Price Range $8 1/2-12 5/8 $8 3/4-15 3/8 $9 1/8-12 3/4 $8 3/8-11 1/ $8-12 1/8 Price at year end 11 1/4 9 11/16 11 3/4 10 57/64 9
Notes: (1) 1998 includes $1.9 million for net restructuring provision. (2) 1997 includes $5.7 million for provision for net plant closing costs. (3) 1996 includes $1.1 million for federal tax credits. (4) Working capital excludes notes payable. (5) EBITDA includes operating income plus depreciation and amortization. (6) Before provision for restructuring of $2.5 million. (7) Before provision for plant closings of $8.8 million. 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table summarizes the Company's results of operations as a percentage of net sales for the years ending December 31, 1999, 1998, and 1997:
1999 1998 1997 ---- ---- ---- Net sales 100.0% 100.0% 100.0% Cost of products sold 89.9 90.0 90.0 Administrative and selling 2.4 2.7 2.9 Amortization of intangible assets 0.4 0.4 0.2 Provision for restructuring and plant closings --- 0.5 1.9 Operating Earnings 7.3 6.4 5.0 Investment and other income, net (0.3) --- (0.1) Interest expense 1.7 1.9 1.7 Earnings Before Income Taxes 5.9 4.5 3.4 Income taxes 2.0 1.5 1.2 Net Earnings 3.9% 3.0% 2.2%
1999 COMPARED TO 1998 1999 net sales reached a record $532,676,000, reflecting a 7.3% increase over 1998 net sales of $496,419,000. Record-setting North American light vehicle production levels, combined with continued growth in shipments to the medium- and heavy-duty truck markets, were the key factors contributing to the strong sales. Cost of products sold as a percent of sales decreased from 90.0% in 1998 to 89.9% in 1999. The decrease was primarily due to improved product mix and other manufacturing efficiencies. Administrative and selling expenses decreased from 2.7% of sales in 1998 to 2.4% of sales in 1999, reflecting a decreased administrative cost base resulting from last year's restructuring initiatives. In 1998, the Company initiated a worldwide workforce reduction program aimed at improving its long-term competitiveness and global cost structure. Amortization expense remained constant, at 0.4% of sales in 1998 and 1999. In 1998 the Company recorded a pre-tax charge of $2,500,000 associated with the above-referenced workforce reduction program. There were no such charges in 1999. Operating earnings increased from 6.4% of sales in 1998 to 7.3% of sales in 1999, reflecting both increased year-over-year sales volumes and decreased year-over-year fixed costs. Earnings increases occurred in all of our key businesses, but were especially strong within our European organization - despite significant start-up costs associated with a major new program launch. Net investment and other income increased $1,713,000 primarily due to interest earned on Federal tax refunds finalized during 1999 relating to credits for increasing research activities. Interest expense decreased slightly from $9,588,000 in 1998 to $9,279,000 in 1999, reflecting lower average debt levels. In 1999, the Company's effective tax rate was 34.3%, up slightly from 34.0% in 1998. 1998 COMPARED TO 1997 Net sales in 1998 were $496,419,000, a 9.9% increase over the prior year's net sales of $451,518,000. This increase was due to growth in the Class 8 truck market, as well as the full year impact of revenues related to the June, 1997 acquisition of the Vibration Attenuation Business (VA Business). Cost of products sold as a percent of sales was 90.0% in 1997 and 1998, despite an increase in new program launches - from thirteen in 1997 to fifteen in 1998. Administrative and selling expenses decreased from 2.9% of sales in 1997 to 2.7% of sales in 1998 due to leverage from volume increases. Amortization increased from 0.2% in 1997 to 0.4% in 1998, reflecting the mid-year 1997 acquisition of the VA Business. Plant closing and restructuring costs declined from 1.9% of sales in 1997 to 0.5% of sales in 1998. In 1997, the Company recorded a provision for plant closing costs of $8,769,000 relating to the closure and consolidation of its Jackson and Gladwin, Michigan plants with other North American operations. In 8 1998, the Company announced a worldwide workforce reduction and recorded a pre-tax charge of $2,500,000, primarily to cover the expenses of severance-related payments. The action was initiated to improve the Company's long-term competitiveness and global cost structure, while maintaining a strong commitment to its new product development and customer support activities. Operating earnings increased from 5.0% of sales in 1997 to 6.4% of sales in 1998. Excluding the Plant closing and restructuring charges, operating earnings increased 10.4%, from $30,919,000 in 1997 to $34,146,000 in 1998. Investment and other income decreased $228,000 in 1998 from $524,000 in 1997 to $296,000 in 1998, primarily due to lower average invested cash balances and lower interest rates. Interest expense increased $2,137,000, reflecting the full year impact of the debt incurred for the VA acquisition. 1998 income tax expense reflected an effective rate of 34.0%. The effective income tax rate in 1997 was 33.8%. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements relate primarily to capital expenditures, debt service and the cost of acquisitions. Historically, the Company's primary sources of financing have been cash from operations, borrowings under its revolving line of credit and the issuance of long-term debt and equity. Net cash generated from operations was $43,557,000 in 1999, a 6.5% increase versus the $40,901,000 generated in 1998 and a 44.6% increase versus the $30,115,000 generated in 1997. The cash flows were largely provided by net earnings and non-cash charges for depreciation. Working capital (excluding notes payable) was $33,893,000, $32,196,000 and $36,366,000 as of December 31, 1999, 1998 and 1997 respectively. During 1999 the Company invested $41,820,000 in capital equipment and plant expansions, compared to $19,571,000 in 1998 and $28,977,000 in 1997. Capital expenditures for 2000 are expected to exceed $45 million and will principally support investments in new and replacement business both domestically and internationally. The Company has paid uninterrupted cash dividends each year since becoming publicly-owned in 1972. Dividends paid in 1999 were $7,221,000 compared to $7,316,000 in 1998 and $7,252,000 in 1997. The dividend rate for all three years was $.40 per share. In June 1999, the Company amended it's revolving credit agreement which allows for borrowings of up to $50 million under a 364-day agreement. The Company also maintains a revolving credit agreement which allows for borrowings of up to $25 million under a five-year agreement. At December 31, 1999 there were $8.8 million of borrowings outstanding under the five-year agreement and there were no borrowings outstanding under the 364-day agreement. Borrowings under the credit agreements bear interest, at the election of the Company, at a floating rate of interest equal to (a) the higher of ABN AMRO's prime lending rate and the federal funds rate plus .5% or (b) the Eurodollar rate plus the applicable borrowing margin. At December 31, 1999, the outstanding borrowings under these agreements are at an interest rate of approximately 6.8% and there was $730,000 committed as letters of credit. At December 31, 1999, $5 million of the borrowings under the five-year agreement are classified as long-term based on management's intent and ability to maintain this level of borrowing for a period in excess of one year. The Company also maintains unsecured, short-term credit lines with banks under which it may borrow $32,300,000, of which $500,000 was committed as letters of credit. Short-term borrowings outstanding under the credit lines totaled $7,100,000 at December 31, 1999. The Company believes its liquidity, capital resources and cash flows from operations are sufficient to fund planned capital expenditures, working capital requirements and debt service in the absence of additional significant acquisitions. The Company intends to fund future acquisitions with cash, securities or a combination of cash and securities. To the extent the Company uses cash for all or part of any such acquisitions, it expects to raise such cash primarily from cash generated from operations, borrowings under the revolving credit agreements or, if feasible and attractive, issuance of long-term debt or additional common stock. 9 IMPACT OF INFLATION The Company does not expect that it will be significantly impacted by inflation in 2000. IMPACT OF FASB STATEMENTS Derivative Instruments and Hedging Activities: FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, was issued in June 1998. It establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. As issued SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. In 1999 the Board deferred the effective date of SFAS No. 133 with FASB Statement No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133. SFAS No. 137 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. This statement does not have a material effect on the consolidated financial statements. YEAR 2000 No Year 2000 compliance failures or service interruptions were experienced. All of our customers and suppliers reported having no Year 2000 problems. FORWARD-LOOKING STATEMENTS This Annual Report contains forward-looking statements within the meaning of the Securities Exchange Act of 1934. These statements, including those relating to future outlook and operating performance, capital expenditures and other statements regarding the belief or current expectations of the Company, involve risks and uncertainties. Accordingly, actual results may differ materially as a result of various factors including, but not limited to, general economic conditions in the markets in which the Company operates, fluctuation in demand for the Company's products, the activities of competitors, and various other factors outside the Company's control. The Company does not intend to update these forward-looking statements. 10 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Operations (In thousands, except per share amounts)
Year Ended December 31 ---------------------- 1999 1998 1997 ---- ---- ---- Net sales $532,676 $496,419 $451,518 Costs and expenses: Cost of products sold 478,903 446,914 406,513 Administrative and selling 12,746 13,397 13,152 Amortization of intangible assets 2,039 1,962 934 Provision for restructuring and plant closings -- 2,500 8,769 --------- --------- --------- 493,688 464,773 429,368 --------- --------- --------- Operating Earnings 38,988 31,646 22,150 Investment and other income, net 2,009 296 524 Interest expense (9,279) (9,588) (7,451) --------- --------- --------- Earnings Before Income Taxes 31,718 22,354 15,223 Income taxes 10,880 7,599 5,144 --------- --------- --------- Net Earnings $ 20,838 $ 14,755 $ 10,079 ========= ========= ========= Basic Earnings Per Share $ 1.15 $ .81 $ .56 ========= ========= ========= Diluted Earnings Per Share $ 1.15 $ .80 $ .55 ========= ========= =========
See accompanying notes to consolidated financial statements. 11 Consolidated Statements Of Cash Flows
(In thousands) Year Ended December 31 ---------------------- 1999 1998 1997 ---- ---- ---- OPERATING ACTIVITIES Net earnings $ 20,838 $ 14,755 $ 10,079 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation and amortization 27,594 26,115 23,427 Provision for restructuring and plant closings --- 2,500 6,424 Provision for deferred income taxes (1,390) (665) (828) Amortization of restricted stock 573 487 356 Loss on disposition of assets 57 223 249 Changes in operating assets and liabilities: Accounts receivable (11,242) (6,070) (12,118) Inventories 3,475 (2,404) (2,466) Other assets (8,128) 6,006 (6,381) Accounts payable and accrued expenses 11,780 (46) 11,373 --------- --------- --------- Cash Provided by Operating Activities 43,557 40,901 30,115 INVESTING ACTIVITIES Acquisition of business, net of cash acquired --- --- (75,293) Capital expenditures (41,820) (19,571) (28,977) Proceeds from disposal of property and equipment 812 450 2,105 --------- --------- --------- Cash Used in Investing Activities (41,008) (19,121) (102,165) FINANCING ACTIVITIES Cash dividends paid (7,221) (7,316) (7,252) Notes payable, net 10,908 (1,211) --- Principal repayments of long-term debt (15,329) (16,780) (55,079) Proceeds from long-term borrowings 10,000 5,000 115,000 Repurchase of common stock (3,075) (2,774) --- Exercise of stock options, net 440 327 --- --------- --------- --------- Cash (Used in) Provided by Financing Activities (4,277) (22,754) 52,669 Effect of foreign currency exchange rate changes 2,945 (1,116) (1,286) --------- --------- --------- Increase (Decrease) In Cash and Cash Equivalents 1,217 (2,090) (20,667) Cash and cash equivalents at beginning of year 6,145 8,235 28,902 --------- --------- --------- Cash and Cash Equivalents at End of Year $ 7,362 $ 6,145 $ 8,235 ========= ========= ========= SUPPLEMENTAL DISCLOSURES: Cash paid during the year for: Interest $ 6,936 $ 9,808 $ 5,625 Income Taxes 10,641 8,436 8,538
Non cash transactions: The Company issued shares of common stock and a note payable in connection with the acquisition of Stahl International in 1998. See accompanying notes to consolidated financial statements. 12
Consolidated Balance Sheets (In thousands, except share amounts) December 31 ----------- 1999 1998 ----- ---- ASSETS Current Assets Cash and cash equivalents $ 7,362 $ 6,145 Accounts receivable 84,124 72,785 Inventories 19,448 22,866 Customer tooling in process 6,404 1,749 Prepaid expenses and other current assets 11,960 10,994 --------- --------- Total Current Assets 129,298 114,539 Property, Plant and Equipment, at cost Land 4,392 4,642 Buildings and improvements 54,622 59,165 Machinery and equipment 303,245 264,802 --------- --------- 362,259 328,609 Less accumulated depreciation 179,346 158,724 --------- --------- Net Property, Plant and Equipment 182,913 169,885 Intangible Assets - net 46,847 52,192 Other Assets 2,398 3,938 --------- --------- $ 361,456 $ 340,554 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current installments of long-term debt $ 6,079 $ 4,829 Notes Payable 10,908 - Accounts payable 62,654 52,039 Compensation and amounts withheld 12,614 11,694 Taxes, other than income taxes 3,797 2,483 Other current liabilities 10,261 11,298 --------- --------- Total Current Liabilities 106,313 82,343 Long-Term Debt, excluding current installments 98,955 105,534 Accrued Retirement Benefits and Other 16,098 17,312 Deferred Income Taxes 7,058 10,797 Shareholders' Equity Common stock, par value $1 per share: Authorized - 55,000,000 shares Outstanding - 17,929,553 shares (1998 - 18,176,750 shares) 17,930 18,177 Additional paid-in capital 23,099 25,468 Retained earnings 103,157 89,540 Unamortized value of restricted stock (1,666) (2,220) Accumulated other comprehensive income (9,488) (6,397) --------- --------- Total Shareholders' Equity 133,032 124,568 --------- --------- $ 361,456 $ 340,554 ========= =========
See accompanying notes to consolidated financial statements. 13 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (In thousands)
Unamortized Additional Value Of Common Paid-In Retained Restricted Stock Capital Earnings Stock ----- ------- -------- ----- Balance at January 1, 1997 $18,080 $24,366 $79,274 $(2,028) Net earnings for 1997 10,079 Other comprehensive income, net of tax Foreign currency translation adjustment Excess pension cost adjustment Other comprehensive income Comprehensive income Cash dividends - $.40 per share (7,252) Restricted stock awards, net 49 426 (475) Amortization of restricted stock 356 ------------------------------------------------------------- Balance at December 31, 1997 18,129 24,792 82,101 (2,147) Net earnings for 1998 14,755 Other comprehensive income, net of tax Foreign currency translation adjustment Excess pension cost adjustment Other comprehensive income Comprehensive income Cash dividends - $.40 per share (7,316) Issuance of shares for acquisitions 200 2,411 Exercise of stock options, net 46 281 Repurchase of common stock (239) (2,535) Restricted stock awards, net 41 519 (560) Amortization of restricted stock 487 ------------------------------------------------------------- Balance at December 31, 1998 18,177 25,468 89,540 (2,220) Net earnings for 1999 20,838 Other comprehensive income, net of tax Foreign currency translation adjustment Excess pension cost adjustment Other comprehensive income Comprehensive income Cash dividends - $.40 per share (7,221) Exercise of stock options, net 56 384 Repurchase of common stock (306) (2,769) Restricted stock awards, net 3 16 (19) Amortization of restricted stock 573 ------------------------------------------------------------- Balance at December 31, 1999 $17,930 $23,099 $103,157 $(1,666)
Accumulated Other Comprehensive Comprehensive Income Income Total ------- ------ ----- Balance at January 1, 1997 $(3,700) $115,992 Net earnings for 1997 $10,079 10,079 Other comprehensive income, net of tax Foreign currency translation adjustment (1,286) (1,286) Excess pension cost adjustment (17) (17) ------- Other comprehensive income (1,303) (1,303) --------------------------------------------- Comprehensive income $8,776 ====== Cash dividends - $.40 per share (7,252) Restricted stock awards, net _ Amortization of restricted stock 356 --------------------------------------------- Balance at December 31, 1997 (5,003) 117,872 Net earnings for 1998 $14,755 14,775 Other comprehensive income, net of tax Foreign currency translation adjustment (1,116) (1,116) Excess pension cost adjustment (278) (278) ------- Other comprehensive income (1,394) (1,394) --------------------------------------------- Comprehensive income $13,361 ======= Cash dividends - $.40 per share (7,316) Issuance of shares for acquisitions 2,611 Exercise of stock options, net 327 Repurchase of common stock (2,774) Restricted stock awards, net - Amortization of restricted stock 487 --------------------------------------------- Balance at December 31, 1998 (6,397) 124,568 Net earnings for 1999 $20,838 20,838 Other comprehensive income, net of tax Foreign currency translation adjustment (3,394) (3,394) Excess pension cost adjustment 303 303 ------- Other comprehensive income (3,091) (3,091) --------------------------------------------- Comprehensive income $17,747 ======= Cash dividends - $.40 per share (7,221) Exercise of stock options, net 440 Repurchase of common stock (3,075) Restricted stock awards, net - Amortization of restricted stock 573 --------------------------------------------- Balance at December 31, 1999 $(9,488) $133,032
See accompanying notes to consolidated financial statements. 13 14 Notes To Consolidated Financial Statements Note A -- Significant Accounting Policies Description of the Business: The Company is a supplier of precision-machined powertrain and chassis products to the global automotive and heavy-duty diesel engine markets, supplying in excess of 700 different components and assemblies to original equipment manufacturers located principally in North America and Europe. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and all subsidiaries after elimination of intercompany accounts and transactions. Foreign Currency Translation: Translation adjustments from foreign subsidiaries are reflected in the consolidated financial statements as a separate component of shareholders' equity. Foreign currency gains and losses resulting from transactions are included in determining net earnings. Cash Equivalents: Cash equivalents include all liquid investments purchased with a maturity of three months or less. Financial Instruments: Financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. At December 31, 1999, the fair value of these financial instruments approximates the carrying amount with the exception of long-term debt as discussed in Note F. Inventories: Inventories are stated at the lower of cost or market. Costs are determined by the last-in, first-out (LIFO) method for domestic inventories and by the first-in, first-out (FIFO) method for foreign inventories. Depreciation: Depreciation is computed using the straight-line method at annual rates, which are sufficient to amortize the cost over the estimated useful lives. Amortization: Cost in excess of fair-market value of net assets acquired (goodwill), arising from acquisitions (see Note B), is amortized on a straight-line basis over 40 years. Specific intangibles including a supply, a non-compete and various license agreements and various patents are amortized on a straight-line basis over the estimated periods benefited with periods ranging from 2.5 to 40 years. The carrying value of intangible assets is to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment would be recognized when the expected undiscounted future operating cash flow derived from such intangible assets is less than their carrying value. The Company believes that no impairment exists at December 31, 1999. Customer Tooling: Costs incurred for customer-owned tooling in excess of amounts billed to date are recorded as customer tooling in process. Costs for customer-owned tooling which will be recovered as parts are shipped are included with other assets. Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. No deferred income taxes have been provided for the income tax liability, which would be incurred on repatriation of the permanently reinvested portion of unremitted earnings of the foreign subsidiaries. Net Earnings Per Share: Basic earnings per share are computed based upon the weighted average shares of common stock outstanding during the year. Diluted earnings per share are calculated to give effect to common stock equivalents (stock options) outstanding during the year. 15 Stock Based Compensation: The Company applies "Accounting for Stock-Based Compensation," prescribed by SFAS No. 123, by making the required disclosures only. This standard does not have an effect on the Company's financial position or results of operations. Use Of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make reasonable estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported net earnings for the period. Ultimate resolution of uncertainties could cause actual results to differ from these estimates. Comprehensive Income: Comprehensive income consists of net income, net foreign currency translation adjustments and excess pension costs and is presented in the consolidated statements of shareholders' equity and comprehensive income. Comprehensive income does not affect the Company's financial position or results of operations. Note B -- Business Acquisitions On April 1, 1998, the Company purchased Stahl International, Inc. ("Stahl") for 200,074 shares of common stock and a $1 million note payable for a total of $3.7 million. Stahl, located in Memphis, Tennessee, manufactures torsional vibration dampers and flywheels for all types of diesel engines. The acquisition was accounted for as a purchase transaction and accordingly, the results of the Stahl business' operations are included in the consolidated financial statements since the date of acquisition. The purchase cost of $3.7 million has been allocated to assets and liabilities acquired based upon their estimated fair values at the acquisition date. The excess of purchase price over assets acquired (goodwill) of $2.9 million is being amortized over 40 years. Pro forma unaudited financial data are not presented, as the effect is insignificant. On June 27, 1997, the Company, through a wholly owned subsidiary, purchased the Vibration Attenuation division of Holset Engineering Company Limited ("VA Business") from Cummins Engine Company. The VA Business has operations in the United Kingdom, France, Spain, Mexico, Korea, Brazil and the United States. The VA Business manufactures rubber and viscous dampers and supplies three main markets including heavy truck, light truck and automotive and industrial. The acquisition was accounted for as a purchase transaction and accordingly, the results of the VA Business' operations are included in the consolidated financial statements since the date of acquisition. The final purchase cost of $77.4 million has been allocated to assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The excess of the purchase price over net assets acquired (goodwill) approximated $39.7 million and is being amortized over 40 years. 16 The following pro forma unaudited financial data is presented to illustrate the estimated effects of (i) the VA Business acquisition and (ii) the completion of the new credit agreements as if the transactions had occurred as of January 1, 1997 (in thousands, except per share data).
(Unaudited) Twelve Months Ended Dec 31 1997 ------------- Net sales $487,505 Net earnings 8,496 Net earnings per share: Basic $ .47 Diluted $ .47
The pro forma information above does not purport to be indicative of the results that actually would have been achieved if the transactions had occurred at the beginning of the period presented, and is not intended to be a projection of future results or trends. Note C -- Provision for Restructuring and Plant Closings In the fourth quarter of 1998 in connection with management's continuing efforts to reduce costs and improve efficiencies, the Company recorded a provision for reduction of its worldwide salary workforce of approximately $2.5 million. The reduction was for approximately 10% of its salaried workforce and resulted in the elimination of 55 positions. The majority of these reductions were completed by the second quarter of 1999. In the third quarter of 1997, the Company recorded a provision for plant closings of approximately $8.8 million. The principal actions in the plant closing plan involved the closure of two manufacturing facilities. The major components of the provisions are as follows: (In thousands)
1999 1998 1997 ---- ---- ---- Severance and related costs --- $2,500 $4,965 Write-down of property, plant and equipment --- 2,191 Other --- --- 1,613 ------------------------------------------ Total Provision $ --- $2,500 $8,769 ===== ====== ======
Note D -- Inventories The components of inventories are summarized as follows:
(In thousands) 1999 1998 ---- ----- Finished and in-process products $ 8,023 $10,329 Raw materials 11,425 12,537 -------- ------- $ 19,448 $22,866 ======== =======
The LIFO inventories comprise approximately 72% and 75% of total inventories at December 31, 1999 and 1998, respectively. The replacement cost of inventories exceeded the balance sheet carrying amounts by approximately $5,400,000 and $5,200,000 at December 31, 1999 and 1998, respectively. 17 Note E -- Intangible Assets The components of intangible assets are summarized as follows:
(In thousands) 1999 1998 ---- ---- Goodwill $39,512 $43,072 Supply, non-compete, and license agreements and various patents 12,153 12,276 ------- ------- 51,665 55,348 Less accumulated amortization 4,818 3,156 ------- ------- Net Intangible Assets $46,847 $52,192 ======= =======
Note F -- Debt Long-term debt at December 31 consisted of the following obligations: (In thousands)
1999 1998 ---- ---- 8.8% Note payable due 1999 $ --- $ 750 8.82% Bank term note due 2003 1,784 2,363 9.98% Note payable due 2005 8,250 9,750 8.45% Bank term note due 2005 20,000 20,000 6.75% Bank term note due 2008 20,000 20,000 7.03% Series A notes due 2012 35,000 35,000 6.96% Series B notes due 2012 15,000 15,000 Revolving credit agreement 5,000 7,500 --------- -------- 105,034 110,363 Less current installments 6,079 4,829 --------- -------- Long-term debt, excluding current installments $ 98,955 $105,534 ========= ========
As of December 31, 1999, the estimated fair value of long-term debt, discounted at current interest rates, was $106,500,000. In June 1999, the Company amended it's revolving credit agreement which allows for borrowings of up to $50 million under a 364-day agreement. The Company also maintains a revolving credit agreement which allows for borrowings of up to $25 million under a five year agreement. At December 31, 1999 there were $8.8 million of borrowings outstanding under the five-year agreement and there were no borrowings outstanding under the 364-day agreement. Borrowings under the credit agreements bear interest, at the election of the Company, at a floating rate of interest equal to (a) the higher of ABN AMRO's prime lending rate and the federal funds rate plus .5% or (b) the Eurodollar rate plus the applicable borrowing margin. At December 31, 1999, the outstanding borrowings under these agreements are at an interest rate of approximately 6.8% and there was $730,000 committed as letters of credit. At December 31, 1999, $5 million of the borrowings under the five-year agreement are classified as long-term based on management's intent and ability to maintain this level of borrowing for a period in excess of one year. Under the terms of its loan agreements, the Company is subject to restrictions concerning additional borrowings and maintenance of minimum net worth. At December 31, 1999, under the most restrictive covenant retained earnings of approximately $18,430,000 were unrestricted. The Company was in compliance with all such covenants at December 31, 1999. The Company also has uncommitted short-term credit lines with banks under which it may borrow up to $32,300,000, of which $500,000 was committed as letters of credit at December 31, 1999. The contract amount of the letters of credit approximate their fair value. The lines do not have termination dates, but are reviewed periodically. No compensating balances are required by any of the loan agreements. 18 Principal maturities of long-term debt during the four years following 2000 are as follows: 2001 - $8,079,000; 2002 - $9,442,000; 2003 - $8,912,000; and 2004 - $8,864,000. In addition, $5,000,000 is outstanding under the five-year revolving credit agreement which matures in 2002. Note G -- Income Taxes The components of earnings before income taxes were as follows:
(In thousands) 1999 1998 1997 ---- ---- ---- Domestic $ 25,187 $19,502 $ 9,963 Foreign 6,531 2,852 5,260 -------- ------- --------- $ 31,718 $22,354 $ 15,223 ======== ======= =========
The provisions for income tax expense were as follows:
(In thousands) 1999 1998 1997 ---- ---- ---- Current: Federal $ 8,877 $ 5,799 $ 4,976 Foreign 2,751 1,953 691 State 642 512 305 ------- --------- --------- 12,270 8,264 5,972 Deferred: Federal (1,398) (599) (1,647) Foreign 50 (70) 947 State (42) 4 (128) -------- --------- --------- (1,390) (665) (828) -------- --------- --------- $ 10,880 $ 7,599 $ 5,144 ======== ========= =========
A reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to earnings before income taxes follows:
(In thousands) 1999 1998 1997 ---- ---- ---- Income taxes at federal statutory rate $ 11,101 $7,824 $5,235 State income tax, net of federal benefit 390 338 116 Foreign operating loss 1,168 1,697 84 Federal tax credits (847) (950) (100) Foreign Sales Corporation (96) (450) --- Differences between domestic and effective foreign tax rates (652) (812) (254) Other, net (184) (48) 63 --------- ------ ------ $ 10,880 $7,599 $5,144 ========= ====== ======
19 The tax effects of temporary differences that give rise to significant deferred tax assets and liabilities at December 31 are as follows:
1999 1998 -------------------------- -------------------------- Deferred Deferred Deferred Deferred Tax Tax Tax Tax (In thousands) Assets Liabilities Assets Liabilities ------ ----------- ------ ----------- Plant and equipment $ --- $ 16,361 $ --- $ 17,858 Accrued retirement benefits 6,133 --- 6,557 --- Other accrued expenses 4,276 --- 2,851 --- Foreign net operating loss carryforward 3,141 --- 1,782 --- Federal tax credits 2,091 --- 2,144 --- Other items 509 824 733 177 --------- --------- -------- ------- 16,150 17,185 14,067 18,035 Valuation allowance (2,798) -- (2,407) -- --------- --------- -------- --------- $ 13,352 $ 17,185 $ 11,660 $ 18,035 ========= ========= ======== =========
Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 1999. As of December 31, 1999, the Company has unrecognized foreign net operating loss carryforwards of approximately $8,887,000 that begin expiring in 2003. Deferred income tax assets of $3,225,000 and $4,422,000 are included in other current assets at December 31, 1999, and 1998, respectively. Note H - Pension and Other Postretirement Benefits The Company has non-contributory and contributory defined benefit pension plans covering substantially all employees, subject to eligibility requirements. Benefits are based upon a percentage of compensation or monthly rates times years of service. Plan assets are held by a trustee and invested in marketable debt and equity securities and short-term investments. Benefits for certain employees are provided through multi-employer defined benefit plans. The Company also has an unfunded supplemental executive retirement plan for senior management with benefits based on compensation and years of service. Contributions to pension plans are sufficient to provide for both current service costs and amortization of past service costs over a reasonable period. In addition to the Company's defined benefit pension plans, the Company provides medical benefits to certain retired employees, their covered dependents, and beneficiaries. Generally, employees who have attained age 55 and who have rendered 10 years of service are eligible for these benefits. Certain medical plans are contributory and other medical plans are non-contributory. The Company's retiree medical benefits are not funded. During 1999 Simpson International (UK) Limited obtained final approval from Inland Revenue for a defined benefit pension plan. Based on the 1997 sales agreement, funds from the Cummins Engine Company plan for the UK employees were transferred into the Simpson Industries plan after final approval. This plan is reflected in the 1999 disclosure. 20
PENSION BENEFITS OTHER BENEFITS ---------------- -------------- (In thousands) 1999 1998 1999 1998 ---- ---- ---- ---- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 44,698 $38,471 $10,941 $10,577 Formation of new plan 9,214 --- --- --- Service cost 3,520 2,508 628 595 Interest cost 3,662 2,849 748 777 Participant contribution 252 --- --- --- Benefits paid (4,216) (1,858) (654) (716) Actuarial (gains) and losses (6,977) 2,830 (673) (292) Plan amendments 104 131 --- --- Foreign exchange rate changes 172 (233) --- --- -------- ------- ------- ------- Benefit obligation at end of year 50,429 44,698 10,990 10,941 CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 29,526 28,929 Formation of new plan 8,539 --- Actual return on plan assets 4,767 885 Contributions by the employer 4,058 1,554 Participant contribution 252 --- Benefits paid (4,076) (1,676) Foreign exchange rate changes 134 (166) -------- ------ Fair value of plan assets at end of year 43,200 29,526 Funded status (7,229) (15,172) (10,990) (10,941) Unrecognized net (gain) loss 249 8,334 (608) 55 Unrecognized net asset (24) (181) --- --- Unrecognized prior service cost 1,172 1,193 50 55 ------- ------- -------- -------- Net amount recognized $(5,832) $(5,826) $(11,548) $(10,831) ======= ======= ======== ======== Amounts recognized in the statement of financial position consist of: Accrued benefit liability $(5,832) $(6,764) $(11,548) $(10,831) Intangible asset --- 461 --- --- Accumulated other comprehensive income --- 477 --- --- ------- ------- -------- -------- Net amount recognized $(5,832) $(5,826) $(11,548) $(10,831) ======= ======= ======== ========
PENSION BENEFITS OTHER BENEFITS ---------------- -------------- 1999 1998 1997 1999 1998 1997 ------------------------------------------------------- WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31 Discount rate 8% 7% 7.5% 8% 7% 7.5% Expected return on plan assets 10% 10% 10% Rate of compensation increase 4% 4% 4.5% 4% 4% 4.5%
For measurement purposes in 1996, the medical cost trend was assumed to be 8.0% and to decrease .5% per year to 5.0% in 2002 and remaining at that level thereafter. 21
(In thousands) PENSION BENEFITS OTHER BENEFITS ---------------- -------------- COMPONENTS OF NET PERIODIC BENEFIT COST 1999 1998 1997 1999 1998 1997 ------------------------------------------------------------- Service cost $ 3,520 $ 2,508 $2,210 $ 628 $ 595 $ 598 Interest cost 3,662 2,849 2,613 748 777 759 Expected return on plan assets (3,691) (2,490) (2,174) --- --- --- Net amortization and deferral 207 310 62 (5) 2 3 Multi-employer plans 24 72 510 --- --- --- --------- ------- ------ ------- ------- ------ Net periodic benefit cost $ 3,722 $ 3,249 $3,221 $ 1,371 $ 1,374 $1,360 ========= ======= ====== ======= ======= ======
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
1-Percentage- 1-Percentage- (In thousands) Point Increase Point Decrease -------------- -------------- Effect on total of service and interest cost components $426 $(187) Effect on postretirement benefit obligation 2,120 (1,247)
Certain employees participate in Company-sponsored 401(k) savings plans. Under the plans, the Company contributes a defined amount to individual employee accounts based on the respective employee's contribution. Contributions approximated $1,700,000, $1,390,000 and $1,330,000 in 1999, 1998 and 1997 respectively. Note I -- Long-Term Incentive Plans The Company has long-term incentive plans under which employees or directors may be granted stock options or other long-term incentives. The 1984 Plan, which allowed for options to be granted for up to 1,687,500 common shares, was terminated in 1993. Options and restricted shares previously granted under the 1984 Plan remain outstanding for up to 10 years. Stock appreciation rights which provide that optionees may receive cash in lieu of shares, were also granted in conjunction with stock option grants. In 1993, the Company adopted the 1993 Executive Long-Term Incentive Plan for employees. The 1993 Plan permits the grant of stock options, restricted stock, stock appreciation rights, performance shares and performance units. The authorized share pool for making grants under the 1993 Plan is 1,350,000 common shares. Also in 1993, the Company adopted the 1993 Non-Employee Director Stock Option Plan. Under this plan, nonqualified stock options may be granted to non-employee directors for up to 150,000 common shares. Options granted have varying exercise dates within five years after grant date and generally expire after ten years. At December 31, 1999 there were 1,233,700 shares of common stock reserved for issuance under the plans of which 494,880 are available for future grants. The Company applies APB Opinion No. 25 in accounting for its stock compensation plans. Accordingly, no compensation cost has been recognized for the stock options granted in 1999, 1998 or 1997. Had compensation cost for these options been determined on the basis of fair value pursuant to SFAS No. 123, the Company's pro forma net income and earnings per share would have been as indicated below: 22
1999 1998 1997 ---- ---- ---- (In thousands, except per share amounts) Net earnings As reported $20,838 $14,755 $10,079 Pro forma $20,592 $14,536 $ 9,874 Basic earnings per share As reported $ 1.15 $ .81 $ 56 Pro forma $ 1.14 $ .80 $ .54 Diluted earnings per share As reported $ 1.15 $ .80 $ .55 Pro forma $ 1.14 $ .79 $ .54
The fair value of each option grant is estimated on the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions used for grants in 1999, 1998 and 1997, respectively: dividend yield of 3.8% for all years; expected volatility of 37%, 35% and 37%; risk-free interest rates of 5.3%, 5.8% and 6.5%; and an expected life of 6.4, 7.1 and 7.0 years. Incentive plan activity is summarized as follows:
Stock Option Plans ------------------------------------------------------------------------------------- Weighted Option Average Restricted Shares Exercise Price Shares ----------------------------------------------------- 1998: Outstanding January 1, 1998 531,390 $9.50 230,338 Granted/awarded 106,080 12.75 66,840 Exercised (50,400) 4.68 --- Restrictions lapsed --- --- (46,227) Canceled/forfeited --- --- (26,500) Outstanding 587,070 10.50 224,451 Exercisable 333,778 --- --- Weighted-average fair value of options granted during the year $ 12.75 1999: Granted/awarded 188,780 $9.52 11,000 Exercised (92,198) 8.68 --- Restrictions lapsed --- --- (54,095) Canceled/forfeited (43,030) 11.09 (8,508) Outstanding 640,622 10.43 172,848 Exercisable 299,798 --- --- Weighted-average fair value of options granted during the year $ 9.52
23 Note J -- Shareholder Rights Plan In 1997, the Company adopted a Shareholder Rights Plan designed to discourage partial or two-tier tender offers, which could result in unequal treatment of shareholders. Under the Plan, the right to purchase one share of common stock was distributed for each outstanding share of the Company's common stock. The Plan provides that the Rights become exercisable if a person or group acquires, in a transaction not approved by the Board of Directors, 20% or more of the Company's common stock or commences a tender or exchange offer which would result in a person or group acquiring 20% or more of the Company's common stock. In addition, the Plan permits the Board of Directors to declare a person or group owning 10% or more of the Company's common stock an "Adverse Person," under certain circumstances, which also causes the Rights to become exercisable. When exercisable, each Right entitles shareholders to purchase one share of the Company's common stock at a specified exercise price. The Company will be entitled to redeem the Rights at $.005 per Right until a person or group has been declared an "Adverse Person" or the close of business on the tenth business day after a public announcement that a 20% position has been acquired. If a 20% position is acquired, a person or group is declared an "Adverse Person," the Company is acquired or certain other events occur after the Rights become exercisable, each Right will entitle its holder to purchase, for the exercise price, a number of the Company's or acquiring company's common shares having a market value of twice the exercise price. Rights were issued in 1997 to shareholders and will be attached to each share issued thereafter until the Rights become exercisable, expire or are redeemed. Rights expire May 9, 2007, unless extended by the Board of Directors. Note K -- Earnings Per Share
(In thousands, except per share amounts) 1999 1998 1997 ---- ---- ---- Net earnings applicable to common stock and common stock equivalents $20,838 $14,755 $ 10,079 Basic Earnings per Share Weighted average shares outstanding 18,057 18,285 18,123 Earnings Per Share $ 1.15 $ .81 $ .56 ======= ======= ======== Diluted Earnings per Share Weighted average shares outstanding 18,057 18,285 18,123 Net effect of dilutive stock options 43 89 79 ------- ------- -------- 18,100 18,374 18,202 Earnings Per Share $ 1.15 $ .80 $ .55 ======= ======= ========
Options to purchase 131,634, 64,560, and 43,020 shares of common stock were outstanding during 1999 through 1997 respectively, at prices ranging from $10.94 to $14.67. These shares were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. 24 Note L - Comprehensive Income The accumulated balances for each classification of comprehensive income are as follows:
Accumulated Foreign Minimum Other Currency Pension Comprehensive (In thousands) Items Liability Income - ------------------------------------------------------------------------------------------- Balance at January 1, 1997 $ (3,692) $ (8) $ (3,700) Net of tax amount (1,286) (17) (1,303) -------------------------------------------- Balance at December 31, 1997 (4,978) (25) (5,003) Net of tax amount (1,116) (278) (1,394) -------------------------------------------- Balance at December 31, 1998 (6,094) (303) (6,397) Net of tax amount (3,394) 303 (3,091) -------------------------------------------- Balance at December 31, 1999 $ (9,488) $ - $ (9,488)
Note M -- Segment Information REPORTING SEGMENT The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," during 1998. SFAS No. 131 established standards for reporting information about operating segments in annual financial statements and related disclosures about products and geographic areas. The Company manages its business under three similar product groups that are aggregated together as one segment in the global vehicular industry. These groups have similar long-term financial performance and economic characteristics. The products from all three groups utilize similar manufacturing processes. The production of the finished parts from the three focused groups uses similar machining equipment which may be interchanged from group to group. The Company distributes and sells final product to the same type of customers from all its three product groups. GEOGRAPHIC SEGMENTS The Company's geographic data for the years ended December 31, 1999, 1998 and 1997 are as follows:
(In thousands) 1999 1998 1997 ---- ---- ---- Net sales North America $466,651 $ 431,657 $ 421,117 Europe 66,025 64,762 30,401 ---------- --------- ---------- Total $532,676 $ 496,419 $ 451,518 Operating earnings North America $ 34,970 $ 31,342 $ 29,474 Europe 4,018 2,804 1,445 Restructuring/plant closings - (2,500) (8,769) ---------- --------- ---------- $ 38,988 $31,646 $ 22,150 Identifiable assets North America $275,901 $256,284 Europe 85,555 84,270 ---------- --------- Total $ 361,456 $ 340,554
25
Net sales to major customers were: (In thousands) 1999 1998 1997 ---- ---- ---- General Motors Corporation $ 77,100 $98,700 $107,500 Delphi Automotive 54,800 25,000 19,000 Ford Motor Company 81,300 85,100 88,500 DaimlerChrysler Corporation 70,400 61,000 56,500 Consolidated Diesel Company and its parent companies, Cummins Engine Company Inc. and Case Corporation 52,300 52,400 47,000 Caterpillar Inc. 49,600 41,800 36,100
In 1999, Delphi Automotive was spun-off from General Motors Corporation and became its own entity. Prior year amounts have been restated to reflect this change. Aggregate receivables for these customers at December 31, 1999 and 1998 approximate the same percent of total receivables as aggregate sales to these customers bear to total sales. Note N -- Commitments and Contingencies The Company has been identified as a potentially responsible party under federal environmental regulations to share in the cost of cleanups at two waste disposal sites along with many other companies. While management believes the Company's responsibility in these matters is minimal, it has established reserves which it believes are adequate to cover potential liabilities. 26 Independent Auditors' Report The Board of Directors and Shareholders Simpson Industries, Inc. We have audited the accompanying consolidated balance sheets of Simpson Industries, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, shareholders' equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Simpson Industries, Inc. and subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999 in conformity with generally accepted accounting principles. KPMG LLP Detroit, Michigan January 26, 2000 27 SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (In thousands, except per share amounts)
Quarter Ended ------------- Mar.31 Jun.30 Sep.30 Dec.31 ------ ------ ------ ------ 1999 Net sales $133,102 $139,399 $124,220 $135,955 Gross profit 14,339 16,162 9,838 13,434 Net earnings 5,729 6,963 2,850 5,296 Net earnings per share Basic .32 .39 .16 .29 Diluted .32 .38 .16 .29 1998 Net sales $ 125,556 $128,704 $110,016 $132,143 Gross profit 13,623 14,856 6,284 14,742 Net earnings 4,905 5,686 929 3,235 Net earnings per share Basic .27 .31 .05 .18 Diluted .27 .31 .05 .18
Net earnings for the quarter ended December 31, 1998 were decreased by $1,900 ($.10 per share for both basic and diluted) for the provision for restructuring. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, we are exposed to market risk associated with fluctuations in foreign exchange rates and interest rates. We conservatively manage these risks through the use of derivative financial instruments in accordance with management's guidelines. We enter into all hedging transactions for periods consistent with the underlying exposures. We do not enter into derivative instruments for trading purposes. We have entered into foreign currency forward contracts to protect ourselves from adverse currency rate fluctuations on foreign currency commitments. These commitments are generally for terms of less than one year. Foreign Exchange The foreign currency contracts are executed with banks that we believe are creditworthy and are denominated in currencies of major industrialized countries. The gains and losses relating to the foreign currency forwards are recognized in the current period. We believe that any gain or loss incurred on foreign currency forward contracts is offset by the direct effects of currency movements on the underlying transactions. We have performed a quantitative analysis of our overall currency rate exposure at December 31, 1999. Based on this analysis, a 10% change in currency rates would not have a material effect on our earnings. Interest Rates We generally manage risk associated with interest rate movements through the use of or combination of variable and fixed rate debt. Our exposure as a result of variable interest rates relates primarily to outstanding floating rate debt instruments that are indexed to U.S. short-term money market rates. We have performed a quantitative analysis of our overall interest rate exposure at December 31, 1999. Based on this analysis, a 10% change in the average cost of our variable rate debt would not have a material effect on our earnings. 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE NONE PART III The information called for by the items within this part is included in the Company's Proxy Statement for the 2000 Annual Meeting of Shareholder's, and is incorporated herein by reference, as follows:
PAGES IN 2000 PROXY STATEMENT --------------- Item 10. Directors......................................... 1-4 Item 11. Executive Compensation............................ 6-11 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................... 11-12 Item 13. Certain Relationships and Related Transactions.... N/A
29 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The Consolidated Financial Statements of the Company and its subsidiaries, included in Item 8 herein by reference: Consolidated Balance Sheets - December 31, 1999 and 1998 Consolidated Statements of Shareholders' Equity and Comprehensive Income - years ended December 31, 1999, 1998 and 1997 Consolidated Statements of Operations - years ended December 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows - years ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements - December 31, 1999 (2) All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions. (3) EXHIBITS. The following exhibits designated with a "+" symbol represents the Company's management contracts or compensatory plans or arrangements for executive officers: 3.1 Restated Articles of Incorporation, as amended (previously filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference) 3.2 Bylaws, as amended (previously filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q/A for the quarter ended September 30, 1999 and incorporated herein by reference) 4.2 Rights Agreement, dated as of February 28, 1997, between Simpson Industries, Inc. and Harris Trust and Savings Bank, as Rights Agent (previously filed as Exhibit 4.2 to the Company's Current Report on Form 8-K, dated April 22, 1997 and incorporated herein by reference) 10.3 Note Agreement with Aetna Life Insurance Company, dated June 12, 1986 (previously filed as Exhibit 10.3 to the Company's Current Report on Form 8-K, dated June 12, 1986 and incorporated herein by reference) Amendment to Note Agreement with Aetna Life Insurance Company, dated November 17, 1994 (previously filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Note Agreement with Aetna Life Insurance Company, dated as of June 17, 1997 (previously filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.4 + 1984 Stock Option Plan, as amended (previously filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference) 10.8 + Supplemental Executive Retirement Plan (previously filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference) 30 10.10 + Letter Agreement, dated September 12, 1989, with Roy E. Parrott (previously filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) + Amendment to Letter Agreement with Roy E. Parrott, dated March 15, 1994 (previously filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.11 Note Agreement with Massachusetts Mutual Life Insurance Company, dated August 15, 1991 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 and incorporated herein by reference) Amendment No. 1 to Note Agreement with Massachusetts Mutual Life Insurance Company, dated as of June 17, 1997 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.13 + Simpson Industries, Inc. 1993 Executive long-term Incentive Plan (previously filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.14 + Simpson Industries, Inc. 1993 Non-Employee Director Stock Option Plan (previously filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.15 Term Loan Agreement with Comerica Bank, dated as of December 17, 1993 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference) Amendment to Term Loan Agreement with Comerica Bank, dated as of November 1, 1994 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.18 + Letter Agreement, dated December 16,1994, with George G. Gilbert (previously filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.19 + Letter Agreement, dated December 16, 1994, with James A. Hug (previously filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.20 Term Note Agreement with Comerica Bank, dated as of January 25, 1995 (previously filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 31 10.21 Term Note Agreement with Comerica Bank, dated as of February 7, 1995 (previously filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.23 + Letter Agreement, dated March 1, 1996, with James B. Painter (previously filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference) 10.24 Credit Agreement, dated June 17, 1997, among Simpson Industries and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) Amendment to Credit Agreement, dated August 22, 1997 among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year December 31,1997, and incorporated herein by reference) Amendment to Credit Agreement, dated June 16, 1998, among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,1998, and incorporated herein by reference) 10.25 Credit Agreement, dated June 17, 1997, among Simpson Industries and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank(previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) Amendment to Credit Agreement, dated August 22, 1997 among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and incorporated herein by reference) Amendment to Credit Agreement, dated June 16, 1998, among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference) Amendment to Credit Agreement, dated June 15, 1999, among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference) 10.26 Note Agreement, dated August 1, 1997 with Northwestern Mutual Life Insurance Company, Chubb Life Insurance Company of America, Chubb Colonial Life Insurance Company, Allstate Life Insurance Company and United of Omaha Life Insurance Company (previously filed as Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 and incorporated herein by reference) 32 10.27+ Letter Agreement, dated September 1, 1997, with Vinod M. Khilnani (previously filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, and incorporated herein by reference) 10.28+ * Letter Agreement dated February 5, 1999, with George A. Thomas 10.29+ * Letter agreement dated March 1, 1999 with George A. Thomas 21 * Subsidiaries of registrant 23 * Consent of independent public accountants 27.1 * Financial Data Schedule *Filed with this report (b) No reports on Form 8-K were filed during the last quarter of the Company's fiscal year ended December 31, 1999 33 SIGNATURES Pursuant to the requirements of Section 13 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. SIMPSON INDUSTRIES, INC. By: /s/ Roy E. Parrott ------------------ Roy E. Parrott, Chairman and Chief Executive Officer Date: March 17, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 17, 2000. Signature Title --------- ----- /s/ Roy E. Parrott Chairman and Chief Executive Officer ------------------ Roy E. Parrott (principal executive officer) /s/ George A. Thomas President and Chief Operating Officer -------------------- George A. Thomas and Director (principal operating officer) /s/ Vinod M. Khilnani Vice President, Chief Financial Officer --------------------- Vinod M. Khilnani (principal financial officer) (principal accounting officer) /s/ Michael E. Batten Director --------------------- Michael E. Batten /s/ Susan F. Haka Director ----------------- Susan F. Haka /s/ George R. Kempton Director --------------------- George R. Kempton /s/ Walter J. Kirchberger Director ------------------------- Walter J. Kirchberger /s/ Robert W. Navarre Director --------------------- Robert W. Navarre /s/ Ronald L. Roudebush Director ----------------------- Ronald L. Roudebush /s/ F. Lee Weaver Director ----------------- F. Lee Weaver /s/ Frank K. Zinn Director and Secretary ----------------- Frank K. Zinn 34 INDEX TO EXHIBITS 3.1 Restated Articles of Incorporation, as amended (previously filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,1997 and incorporated herein by reference) 3.2 Bylaws, as amended (previously filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q/A for the quarter ended September 30, 1999 and incorporated herein by reference) 4.2 Rights Agreement, dated as of February 28, 1997, between Simpson Industries, Inc. and Harris Trust and Savings Bank, as Rights Agent (previously filed as Exhibit 4.2 to the Company's Current Report on Form 8-K, dated April 22, 1997 and incorporated herein by reference) 10.3 Note Agreement with Aetna Life Insurance Company, dated June 12, 1986 (previously filed as Exhibit 10.3 to the Company's Current Report on Form 8-K, dated June 12, 1986 and incorporated herein by reference) Amendment to Note Agreement with Aetna Life Insurance Company, dated November 17, 1994 (previously filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Note Agreement with Aetna Life Insurance Company, dated as of June 17, 1997 (previously filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.4 + 1984 Stock Option Plan, as amended (previously filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference) 10.8 + Supplemental Executive Retirement Plan (previously filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference) 10.10 + Letter Agreement, dated September 12, 1989, with Roy E. Parrott (previously filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) + Amendment to Letter Agreement with Roy E. Parrott, dated March 15, 1994 (previously filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.11 Note Agreement with Massachusetts Mutual Life Insurance Company, dated August 15, 1991 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 and incorporated herein by reference) Amendment No. 1 to Note Agreement with Massachusetts Mutual Life Insurance Company, dated as of June 17, 1997 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 35 10.13 + Simpson Industries, Inc. 1993 Executive long-term Incentive Plan (previousTly filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.14 + Simpson Industries, Inc. 1993 Non-Employee Director Stock Option Plan (previously filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.15 Term Loan Agreement with Comerica Bank, dated as of December 17, 1993 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference) Amendment to Term Loan Agreement with Comerica Bank, dated as of November 1, 1994 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.18 + Letter Agreement, dated December 16, 1994, with George G. Gilbert (previously filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.19 + Letter Agreement, dated December 16, 1994, with James A. Hug (previously filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.20 Term Note Agreement with Comerica Bank, dated as of January 25, 1995 (previously filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.21 Term Note Agreement with Comerica Bank, dated as of February 7, 1995 (previously filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as of June 17, 1997 (previously filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 10.23 + Letter Agreement, dated March 1, 1996, with James B. Painter (previously filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and incorporated herein by reference) 10.24 Credit Agreement, dated June 17, 1997, among Simpson Industries and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) 36 Amendment to Credit Agreement, dated August 22, 1997 among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year December 31,1997, and incorporated herein by reference) Amendment to Credit Agreement, dated June 16, 1998, among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,1998, and incorporated herein by reference) 10.25 Credit Agreement, dated June 17, 1997, among Simpson Industries and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference) Amendment to Credit Agreement, dated August 22, 1997 among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and incorporated herein by reference) Amendment to Credit Agreement, dated June 16, 1998, among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, and incorporated herein by reference) Amendment to Credit Agreement, dated June 15, 1999, among Simpson Industries, Inc. and certain other Borrowers, certain Commercial Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference) 10.26 Note Agreement, dated August 1, 1997 with Northwestern Mutual Life Insurance Company, Chubb Life Insurance Company of America, Chubb Colonial Life Insurance Company, Allstate Life Insurance Company and United of Omaha Life Insurance Company (previously filed as Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 and incorporated herein by reference) 10.27 + Letter Agreement, dated September 1, 1997, with Vinod M. Khilnani (previously filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, and incorporated herein by reference) 10.28 + Letter Agreement dated February 5, 1999, with George A. Thomas 10.29 + Letter agreement dated March 1, 1999 with George A. Thomas 21 * Subsidiaries of registrant 23 * Consent of independent public accountants 27.1 * Financial Data Schedule *Filed with this report "+" symbol represents the Company's management contracts or compensatory plans or arrangements for executive officers. EX-21 2 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21 Subsidiaries of Registrant
State or Jurisdiction of Percent Name of Subsidiary Incorporation Owned - ------------------ ------------- ----- Simpson International France SAS Lyon, France 100%
EX-23 3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTS 1 [KPMG LETTERHEAD] Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors and Shareholders Simpson Industries, Inc.: We consent to incorporation by reference in the registration statement (No. 33-39679) on Form S-8 pertaining to the Simpson Industries, Inc. Savings Plan, to incorporation by reference in the registration statement (No. 33-39678) on Form S-8 pertaining to the Simpson Industries, Inc. - Fremont Operation Savings Plan, to incorporation by reference in the registration statement (No. 2-95425) on Form S-8 pertaining to the Simpson Industries, Inc. 1984 Stock Option Plan, to incorporation by reference in the registration statement (No. 33-62806) on Form S-8 pertaining to the 1993 Executive Long-Term Incentive Plan, to incorporation by reference in the registration statement (No. 33-62802) on Form S-8 pertaining to the 1993 Non-Employee Director Stock Option Plan, and to incorporation by reference in the registration statement (333-52843) on Form S-3 pertaining to the offering of shares in connection with the acquisition of Stahl International, Inc. of our report dated January 26, 2000, relating to the consolidated balance sheets of Simpson Industries, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 1999, which report appears in the December 31, 1999 Annual Report on Form 10-K of Simpson Industries, Inc. /s/KPMG LLP Detroit, Michigan March 17, 2000 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDING DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 7,362 0 84,124 0 19,448 129,298 362,259 179,346 361,456 106,313 0 0 0 17,930 115,102 361,456 532,676 534,685 478,903 493,688 0 0 9,279 31,718 10,880 20,838 0 0 0 20,838 1.15 1.15
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