-----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, WM8AIE//TKNJJTji/yezijiAO+rQdotIO4RXJIDq18Ei5VBKHW25vumk8k/YkPD1 yJ5QIRpfcStJ57ankurTDw== 0001047469-98-018375.txt : 19980507 0001047469-98-018375.hdr.sgml : 19980507 ACCESSION NUMBER: 0001047469-98-018375 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980329 FILED AS OF DATE: 19980506 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KAYNAR TECHNOLOGIES INC CENTRAL INDEX KEY: 0000917193 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT ENGINES & ENGINE PARTS [3724] IRS NUMBER: 330591091 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22519 FILM NUMBER: 98611345 BUSINESS ADDRESS: STREET 1: 500 N STATE COLLEGE BLVD STREET 2: STE 1000 CITY: ORANGE STATE: CA ZIP: 92868-1638 FORMER COMPANY: FORMER CONFORMED NAME: KAYNAR HOLDINGS INC DATE OF NAME CHANGE: 19970205 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 /x/ OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 29, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 / / OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission File No. 000-22519 KAYNAR TECHNOLOGIES INC. (Exact name of registrant as specified in its charter) Delaware 33-0591091 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 500 N. State College Blvd., Suite 1000, Orange, California 92868-1638 - ---------------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714)712-4900 ------------- 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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO The number of shares of common stock outstanding on April 24, 1998 was 3,704,000. KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES INDEX
Page ---- PART I - Financial Information ITEM 1. Financial Statements Condensed Consolidated Statements of Income for the three months ended March 29, 1998 (Unaudited) and March 30, 1997 (Unaudited) 3 Condensed Consolidated Balance Sheets at March 29, 1998 (Unaudited) and December 31, 1997 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 29, 1998 (Unaudited) and March 30, 1997 (Unaudited) 6 Notes to Consolidated Financial Statements 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II - Other Information ITEM 1. Legal Proceedings 12 ITEM 2. Changes in Securities and Use of Proceeds 12 ITEM 3. Defaults Upon Senior Securities 12 ITEM 4. Submission of Matters to a Vote of Security Holders 12 ITEM 5. Other Information 12 ITEM 6. Exhibits and Reports on Form 8-K 13
2 PART I ITEM 1. FINANCIAL STATEMENTS KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
Quarter Ended Quarter Ended March 29, 1998 March 30, 1997 -------------- -------------- (Unaudited) (Unaudited) Net sales, including $3,675 and $2,550 in 1998 and 1997, respectively, to a related party $45,355 $32,202 Cost of sales 31,474 22,969 ------- ------- Gross profit 13,881 9,233 Selling, general and administrative expenses 6,165 4,340 ------- ------- Operating income 7,716 4,893 Interest expense, net 591 1,265 ------- ------- Income before provision for income taxes 7,125 3,628 Provision for income taxes 2,850 1,459 ------- ------- Net income $ 4,275 $ 2,169 ------- ------- ------- ------- Earnings per share Basic $ 1.15 $ 1.35 Diluted $ 0.48 $ 0.32 ------- ------- ------- ------- Weighted average number of shares of common stock and common stock equivalents Basic 3,702 1,594 Diluted 8,908 6,800 ------- ------- ------- -------
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in thousands)
March 29, December 31, 1998 1997 ----------- ------------ (Unaudited) Current assets: Cash $ 1,220 $ 675 Marketable securities - 3,079 Accounts receivable, including $1,810 and $1,846 in 1998 and 1997, respectively, from a related party, net of allowance for doubtful accounts of $369 and $310 in 1998 and 1997, respectively 29,715 23,293 Inventories 35,529 34,231 Prepaid expenses and other current assets 931 647 Deferred tax asset 1,006 1,006 -------- -------- Total current assets 68,401 62,931 -------- -------- Property, plant and equipment, at cost 45,184 41,048 Less accumulated depreciation and amortization (9,873) (8,797) -------- -------- 35,311 32,251 -------- -------- Intangible assets, net of accumulated amortization of $584 and $480 at March 29, 1998 and December 31, 1997, respectively 6,778 6,409 Other assets 66 65 -------- -------- Total assets $110,556 $101,656 -------- -------- -------- --------
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars in thousands)
March 29, December 31, 1998 1997 ---------- ------------ (Unaudited) Current liabilities: Revolving line-of-credit, to a related party $ 6,497 $ - Current portion of long-term debt 986 1,021 Current portion of capital lease obligations 271 272 Accounts payable 9,321 9,969 Accrued payroll and related expenses 5,358 8,546 Other accrued expenses 6,236 4,423 -------- -------- Total current liabilities 28,669 24,231 -------- -------- Long-term liabilities: Long-term debt, primarily to a related party 26,067 26,372 Capital lease obligations 430 484 Deferred tax liability 1,136 1,136 -------- -------- Total long-term liabilities 27,633 27,992 -------- -------- Commitments and contingencies Stockholders' equity: Series C Convertible Preferred stock; $0.01 par value; Authorized--10,000,000; issued and outstanding-5,206,000 shares 52 52 Common stock; $0.01 par value; Authorized--20,000,000 shares; issued and outstanding--3,704,000 and 3,694,000 shares at March 29, 1998 and December 31, 1997, respectively 37 37 Additional paid-in capital 29,244 28,973 Retained earnings 25,669 21,394 Currency translation adjustment (748) (1,023) -------- -------- Total stockholders' equity 54,254 49,433 -------- -------- Total liabilities and stockholders' equity $110,556 $101,656 -------- -------- -------- --------
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Quarter Ended Quarter Ended March 29, 1998 March 30, 1997 -------------- -------------- (Unaudited) (Unaudited) Cash flows from operating activities: Net income $ 4,275 $ 2,169 Adjustments to reconcile net income to net cash used in operating activities- Depreciation and amortization 1,237 893 (Gain) loss on sale of property, plant and equipment (8) 62 Changes in operating assets and liabilities, net of acquisition- Increase in accounts receivable (3,140) (3,184) Increase in inventories (841) (860) (Increase) decrease in prepaid expenses and other current assets (267) 219 (Increase) decrease in other assets 6 (271) Increase (decrease) in accounts payable (1,972) 166 Increase (decrease) in accrued expenses (1,467) 458 ------- ------- Net cash used in operating activities (2,177) (348) ------- ------- Cash flows from investing activities: Purchases of property, plant and equipment (4,155) (3,058) Proceeds from sales of property, plant and equipment 87 - Net redemptions of marketable securities 3,079 - Acquisition of business assets (2,357) - Increase in intangible assets (133) (52) ------- ------- Net cash used in investing activities (3,479) (3,110) ------- ------- Cash flows from financing activities: Net (payments) borrowings on line-of-credit, from a related party 6,497 2,886 Borrowings on long-term debt, primarily from a related party - 500 Payments on long-term debt, primarily from a related party (276) (200) Net principal payments on capital lease obligations (76) (4) ------- ------- Net cash provided by financing activities 6,145 3,182 ------- ------- Effect of exchange rate changes on cash $ 56 $ (8) ------- ------- Net increase (decrease) in cash 545 (284) Cash, beginning of period 675 909 ------- ------- Cash, end of period $ 1,220 $ 625 ------- ------- ------- -------
6
Quarter Ended Quarter Ended March 29, 1998 March 30, 1997 -------------- -------------- (Unaudited) (Unaudited) Supplemental disclosures of cash flow information: Cash paid during the period for- Interest $ 469 $ 1,215 ------- ------- ------- ------- Income taxes $ 1,390 $ 574 ------- ------- ------- ------- Noncash financing activities: Capital lease obligations assumed for the purchase of equipment $ - $ 246 ------- ------- ------- ------- Borrowings on long-term debt for preferred stock dividends $ - $ 24 ------- ------- ------- ------- Common stock issued in connection with acquisition of business assets $ 271 $ - ------- ------- ------- -------
The accompanying notes are an integral part of these condensed consolidated financial statements. 7 KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 29, 1998 (Dollars in thousands) (1) BASIS OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements have been prepared on the same basis as the consolidated financial statements for the year ended December 31, 1997. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. The condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries after eliminating all significant intercompany transactions and reflect all normal recurring adjustments which are, in the opinion of management, necessary to present a fair statement of the financial position and results of operations for the interim periods reported. The results of operations for the three months ended March 29, 1998 are not necessarily indicative of the results to be expected for the full year. The Company's fiscal quarters are on a 13 week basis ending on the Sunday nearest to the calendar quarter end. The first fiscal quarters of 1998 and 1997 ended on March 29, 1998 and March 30, 1997, respectively. (2) INVENTORIES Inventories are stated at the lower of cost (FIFO) or market and include the cost of material, labor and factory overhead. Inventories consist of the following at March 29, 1998 and December 31, 1997:
March 29, December 31, 1998 1997 --------- ------------ Raw materials $ 3,524 $ 2,593 Work in progress 10,388 11,012 Components 5,724 5,325 Finished goods 9,651 9,550 Supplies and small tools 6,242 5,751 ------- ------- $35,529 $34,231 ------- ------- ------- -------
8 (3) EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." This statement provides for the presentation of (i) "basic" earnings per share, which is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding and (ii) "diluted" earnings per share, which is computed by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of other securities. The Company's other securities are (i) Series C Convertible Preferred stock and (ii) outstanding common stock options. The table below details the components of the basic and diluted earnings per share ("EPS") calculations:
Quarter Ended Quarter Ended March 29, 1998 March 30, 1997 --------------------- --------------------- Income Shares Income Shares ------ ------ ------ ------ (Amounts in thousands) Basic EPS Net income $4,275 3,702 $2,169 1,594 Less: dividends on previously issued preferred stock - - (34) - ------ ----- ------ ----- Income available to common stockholders 4,275 3,702 2,135 1,594 Effect of Dilutive Securities Series C Convertible Preferred stock - 5,206 34 5,206 Common stock options - - - - ------ ----- ------ ----- Diluted EPS $4,275 8,908 $2,169 6,800 ------ ----- ------ ----- ------ ----- ------ -----
(4) INCOME TAXES Income taxes are provided using the estimated effective tax rates for the years ended December 31, 1998 and December 31, 1997. (5) COMPREHENSIVE INCOME Effective January 1, 1998 the Company adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income" which establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is defined as the total of net income and all non-owner changes in equity. The following table details the components of comprehensive income for the three months ended March 29, 1998 and March 30, 1997:
Quarter Quarter Ended Ended March 29, March 30, 1998 1997 --------- --------- Net Income $ 4,275 $ 2,169 Foreign currency translation adjustment, net of tax 165 (125) ------- ------- Comprehensive Income $ 4,440 $ 2,044 ------- ------- ------- -------
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements "Management's Discussion and Analysis of Financial Condition and Result of Operations" includes forward-looking statements which are subject to certain risks and uncertainties. The Company's actual future results and trends may differ materially from those expressed or implied by such statements. Factors that might cause such a difference include, but are not limited to, the Company's dependence on conditions in the airline industry, commercial aircraft build rates (primarily Boeing and Airbus), the level of defense spending, competitive pricing pressures, cost of material and labor, and other risks described from time to time in the Company's registration statements and reports filed with the Securities and Exchange Commission. Summary The following table sets forth certain items from the Company's Condensed Consolidated Statements of Income for the periods indicated and presents the results of operations as a percentage of net sales:
Quarter Quarter Ended Ended March 29, March 30, 1998 1997 --------- -------- Net sales 100.0% 100.0% Cost of sales 69.4% 71.3% --------- -------- Gross profit 30.6% 28.7% Selling, general and administrative expenses 13.6% 13.5% --------- -------- Operating income 17.0% 15.2% Interest expense, net 1.3% 3.9% Provision for income taxes 6.3% 4.6% --------- -------- Net income 9.4% 6.7% --------- -------- --------- --------
Quarter Ended March 29, 1998 Compared to Quarter Ended March 30, 1997 NET SALES. Net sales increased 41.0% or $13.2 million, to $45.4 million in the first quarter of 1998 from $32.2 million in the first quarter of 1997. This growth was primarily the result of increased customer demand, which occurred as commercial aircraft build rates increased. In addition, net sales growth was enhanced by the expansion of existing product lines, the development of variations of existing products and the introduction of new products. 10 GROSS PROFIT. Gross profit increased 51.1% to $13.9 million or 30.6% of net sales in the first quarter of 1998 from $9.2 million or 28.7% of net sales in the first quarter of 1997. This improvement in gross profit margin was primarily due to the increase in sales volume (which resulted in a greater absorption of fixed costs) and improved productivity. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased 44.2% to $6.2 million in the first quarter of 1998 from $4.3 million in the first quarter of 1997, and were up 0.1% as a percentage of sales. The $1.9 million increase in these expenses was attributable primarily to additional employee costs needed to support the increased sales volume. INTEREST EXPENSE. Interest expense decreased 53.9% to $0.6 million in the first quarter of 1998 from $1.3 million in the first quarter of 1997, as a result of using proceeds received from the initial public offering in May 1997 to decrease outstanding debt by $24.0 million. NET INCOME. Net income for the first quarter of 1998 increased to $4.3 million or 48 cents per share compared to $2.2 million or 32 cents per share for the same period in 1997. BACKLOG. Backlog at March 29, 1998 increased 35.4% or $26.3 million, to $100.6 million from $74.3 million at March 30, 1997. Liquidity and Capital Resources The Company's liquidity requirements consist primarily of working capital needs, capital expenditures and scheduled payments of interest on its indebtedness to General Electric Capital Corporation. The Company's working capital requirements have increased as a result of higher accounts receivable and higher inventory levels needed to support its growth in net sales. The Company's working capital was $39.7 million as of March 29, 1998, compared to $29.8 million as of March 30, 1997. For the first quarter of 1998, net cash used in operating activities was $ 2.1 million, as compared to $0.3 million for the first quarter of 1997. The primary sources of cash from operations during the first quarter of 1998 included net income of $4.3 million and non-cash charges for depreciation and amortization of $1.2 million, offset by increases in accounts receivable and inventories of $3.1 million and $0.8 million, respectively, and decreases in accounts payable and accrued expenses of $2.0 million and $1.5 million, respectively. The primary sources of cash from operations during the first quarter of 1997 included net income of $2.2 million, non-cash charges for depreciation and amortization of $0.9 million, an increase in accounts payable of $0.2 million and an increase in accrued expenses of $0.5 million, offset by increases in accounts receivable and inventories of $3.2 million and $0.9 million, respectively. The Company's net cash used in investing activities in the first quarter of 1998 was $3.5 million, consisting primarily of $4.2 million in capital expenditures and $2.4 million related to the acquisition of selected operating assets of Aerospace Precision Systems, Inc., offset by $3.1 million in net redemptions of marketable securities, as compared to net cash used in investing activities in the first quarter of 1997 of $3.1 million, which consisted primarily of $3.1 million in capital expenditures. The Company's net cash provided by financing activities in the first quarter of 1998 was $6.1 million, consisting of net borrowings of $6.1 million on debt, as compared to net borrowings on debt of $3.2 million in the first quarter of 1997. The Company believes that internally generated cash flow and amounts that may be available under the Company's revolving line-of-credit will provide adequate funds to meet its working 11 capital needs, planned capital expenditures and debt service obligations. However, the Company's ability to fund its operations, make planned capital expenditures and make scheduled payments on, and refinance, its indebtedness depends on its future operating performance and cash flow. Future operating performance and cash flow are, in turn, subject to prevailing economic conditions and to financial, business and other factors affecting the Company, some of which are beyond the Company's control. During the first quarters of 1998 and 1997, inflation has not had a significant impact on the Company's operations. Other Developments During the past several years, the Company's growth in net sales has occurred primarily as a result of increased customer demand due to the increases in commercial aircraft build rates. Boeing, a significant customer of the Company, has announced that it has been experiencing significant production difficulties affecting build rates. There can be no assurance that such difficulties will not affect Boeing's demand for the Company's products or that commercial aircraft build rates will continue to increase. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable PART II ITEM 1. LEGAL PROCEEDINGS During the ordinary course of business, the Company, from time to time, is threatened with, or becomes a party to, legal actions and other proceedings. Management is of the opinion that the outcome of currently known legal actions and proceedings to which it is a party will not, singly or in the aggregate, have a material adverse effect on the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS In connection with the acquisition of selected operating assets and assumption of certain liabilities of Aerospace Precision Systems, Inc. ("APSI") on January 23, 1998, the Company issued 10,000 shares of common stock to the Burns Heirs' Trust, the owner of APSI, pursuant to Regulation D under the Securities Exchange Act of 1933, as amended. These shares were valued based upon the average closing price of the Company's publicly traded common stock, as quoted on the NASDAQ National Market System for the 20 preceding trading days. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the first quarter of 1998. ITEM 5. OTHER INFORMATION None 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Number Description ------ ------------------------- 27.1 Financial Data Schedule (b) Reports on Form 8-K No reports on form 8-K were filed during the quarter covered by this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in the City of Orange, State of California on this 5th day of May, 1998. KAYNAR TECHNOLOGIES INC. /s/ David A. Werner ------------------------------------ By: David A. Werner Executive Vice President /s/ Robert M. Nelson ------------------------------------- Robert M. Nelson Controller (Chief Accounting Officer) 13 EX-27.1 2 EXHIBIT 27.1 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-29-1998 1,220 0 30,084 369 35,529 68,401 45,184 9,873 110,556 28,669 0 0 52 37 54,165 110,556 45,355 45,355 31,474 31,474 6,165 0 591 7,125 2,850 4,275 0 0 0 4,275 1.15 0.48
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