-----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, P0M76vKMIlbtCmFuzJFMuLTaIgyxURkAW5ULz7KobzNW7hIU8SLzzdqP0Zkpfgdj zzbw+Cd0MtjJvY035ziFZA== /in/edgar/work/20000814/0000950144-00-010167/0000950144-00-010167.txt : 20000921 0000950144-00-010167.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950144-00-010167 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMCALA INC CENTRAL INDEX KEY: 0000941174 STANDARD INDUSTRIAL CLASSIFICATION: [3334 ] IRS NUMBER: 341780941 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-53791 FILM NUMBER: 696985 BUSINESS ADDRESS: STREET 1: OHIO FERRO ALLOYS ROAD STREET 2: P O BOX 68 CITY: MT MEIGS STATE: AL ZIP: 36057 BUSINESS PHONE: 3342157560 MAIL ADDRESS: STREET 1: OHIO FERRO ALLOYS ROAD STREET 2: P O BOX 68 CITY: MT MEIGS STATE: AL ZIP: 36057 10-Q 1 e10-q.txt SIMCALA, INC. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q ------------------- (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 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 NUMBER: 333-53791 SIMCALA, INC. (Exact Name of Registrant as Specified in Its Charter DELAWARE 34-1780941 (State of Incorporation) (I.R.S. Employer Identification No.) 1960 OHIO FERRO ROAD MT. MEIGS, ALABAMA 36057 (Address of principal executive offices) (334) 215-7560 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 the registrant's Common Stock outstanding as of August 4, 2000 was 10,889. ================================================================================ 1 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SIMCALA, INC. CONDENSED BALANCE SHEETS
JUNE 30, DECEMBER 31, ASSETS 2000 1999 - ----------------------------------------------------------------------------------------------------------------- (unaudited) Current Assets Cash and cash equivalents $ 6,285,678 $ 9,819,378 Restricted Cash 6,555,997 6,370,775 Accounts receivable 5,427,574 5,016,002 Inventories 4,104,010 2,561,105 Other current assets 413,697 284,172 - ----------------------------------------------------------------------------------------------------------------- Total current assets 22,786,956 24,051,432 Property, Plant and Equipment, net of accumulated depreciation of $9,443,256 and $7,259,635, at June 30, 2000 and December 31, 1999, respectively 50,258,835 50,480,712 Intangible Assets, net of accumulated amortization of $4,615,724 and $3,583,705, at June 30, 2000 and December 31, 1999, respectively 35,645,608 36,677,627 - ----------------------------------------------------------------------------------------------------------------- Total Assets $ 108,691,399 $ 111,209,771 ================================================================================================================= LIABILITIES AND SHAREHOLDER'S EQUITY - ----------------------------------------------------------------------------------------------------------------- Current Liabilities Accounts payable $ 4,193,890 $ 4,195,134 Accrued expenses 934,164 729,198 Accrued interest payable 1,546,166 1,566,331 Current maturities of long-term debt and capital leases 29,104 41,689 - ----------------------------------------------------------------------------------------------------------------- Total current liabilities 6,703,324 6,532,352 Long Term Debt and Capital Leases - Net of Current Portion 81,012,159 81,019,955 Deferred Income Taxes 10,364,444 10,925,499 - ----------------------------------------------------------------------------------------------------------------- Total Liabilities 98,079,927 98,477,806 - ----------------------------------------------------------------------------------------------------------------- Shareholder's Equity Preferred Stock (Series B preferred stock, 3,000 shares authorized, none issued and outstanding, $1.00 par value) -- -- Common stock, 20,000 shares authorized - 10,889 shares issued and outstanding, par value $.01 per share 109 109 Additional paid-in capital 18,806,891 18,806,891 Retained deficit (8,195,528) (6,075,035) - ----------------------------------------------------------------------------------------------------------------- Total shareholder's equity 10,611,472 12,731,965 - ----------------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholder's Equity $ 108,691,399 $ 111,209,771 =================================================================================================================
See Notes to Condensed Financial Statements. 2 3 SIMCALA, INC. CONDENSED STATEMENTS OF INCOME FOR THE THREE MONTH PERIOD ENDED JUNE 30 (UNAUDITED)
Company Company Three months ended Three months ended June 30, 2000 June 30, 1999 (unaudited) (unaudited) - -------------------------------------------------------------------------------------------------------------- Net Sales $ 12,338,151 $ 13,309,499 Cost of Goods Sold 11,549,536 13,175,781 - -------------------------------------------------------------------------------------------------------------- Gross Profit 788,615 133,718 Selling and Administrative Expenses 668,987 595,584 - -------------------------------------------------------------------------------------------------------------- Operating (Loss) Income 119,628 (461,866) Interest Expense 1,893,421 1,914,096 Other Income, Net (233,802) (241,401) - -------------------------------------------------------------------------------------------------------------- Loss before Income Taxes (1,539,991) (2,134,561) Income Tax Benefit (348,398) (593,077) - -------------------------------------------------------------------------------------------------------------- Net Loss $ (1,191,593) $ (1,541,484) ==============================================================================================================
See Notes to Condensed Financial Statements. 3 4 SIMCALA, INC. CONDENSED STATEMENTS OF INCOME FOR THE SIX MONTH PERIOD ENDED JUNE 30 (UNAUDITED)
Company Company Six months ended Six months ended June 30, 2000 June 30, 1999 (unaudited) (unaudited) - ------------------------------------------------------------------------------------------------------------- Net Sales $ 24,547,429 $ 28,220,630 Cost of Goods Sold 22,629,360 26,528,456 - ------------------------------------------------------------------------------------------------------------- Gross Profit 1,918,069 1,692,174 Selling and Administrative Expenses 1,286,733 1,283,300 - ------------------------------------------------------------------------------------------------------------- Operating Income 631,336 408,874 Interest Expense 3,801,651 3,851,935 Other Income, Net (488,767) (436,603) - ------------------------------------------------------------------------------------------------------------- Loss before Income Taxes (2,681,548) (3,006,458) Income Tax Benefit (561,055) (716,047) - ------------------------------------------------------------------------------------------------------------- Net Loss $ (2,120,493) $ (2,290,411) =============================================================================================================
See Notes to Condensed Financial Statements. 4 5 SIMCALA, INC. CONDENSED STATEMENTS OF CASH FLOW
Company Company Six Months Ended Six Months Ended June 30, 2000 June 30, 1999 Cash Flows from Operating Activities: (unaudited) (unaudited) - -------------------------------------------------------------------------------------------------------------------------------- Net loss $ (2,120,493) $ (2,290,411) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 3,215,640 3,149,152 Deferred income taxes (561,055) (716,047) Change in certain assets and liabilities: (Increase) decrease in accounts receivable (411,572) 112,910 (Increase) decrease in inventories (1,542,905) 1,841,653 Decrease (increase) in other assets (129,525) (193,345) Increase in accounts payable and accrued expenses 170,972 465,544 - -------------------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by operating activities (1,378,938) 2,369,456 - -------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities (1,961,744) (985,235) - Purchase of property, plant and equipment Cash Flows from Financing Activities - -------------------------------------------------------------------------------------------------------------------------------- Payments on non-interest-bearing debt (7,796) (15,274) Net borrowings of long-term debt -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net cash (used in) financing activities (7,796) (15,274) Change in Cash and Cash Equivalents and Restricted Cash (3,348,478) 1,368,947 Cash and Equivalents and Restricted Cash at Beginning of Period 16,190,153 14,652,789 - -------------------------------------------------------------------------------------------------------------------------------- Cash and Equivalents and Restricted Cash at End of Period $ 12,841,675 $ 16,021,736 ================================================================================================================================ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest $ 3,893,622 $ 3,883,133 ============= ============= Income taxes $ -- $ -- ============= =============
See Notes to Condensed Financial Statements. 5 6 SIMCALA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASICS OF PRESENTATION The accompanying condensed financial statements of SIMCALA, Inc. ("SIMCALA" or the "Company") have been prepared in accordance with the instructions for Form 10-Q and therefore, do not include all information on footnotes that generally accepted accounting principles require for complete financial statements. The unaudited condensed financial statements should be read in conjunction with the audited financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. In the opinion of management, the unaudited condensed financial statements contain all necessary adjustments (which include only normal, recurring adjustments) for a fair presentation of the interim period presented. Operating results for the six-months ended June 30, 2000, are not necessarily indicative of operating results for the year ended December 31, 2000. NOTE 2 - ORGANIZATION AND OPERATIONS On March 31, 1998, SIMCALA Holdings, Inc. ("Holdings"), through its wholly owned subsidiary, SAC Acquisition Corp. ("SAC") purchased all of the outstanding common stock of SIMCALA, Inc. (the "Acquisition"). On such date, SAC was merged into SIMCALA. Holdings and SAC conducted no significant business other than in connection with the Acquisition. The term "Predecessor" refers to the Company prior to the Acquisition. The Company is a producer of silicon metal for sale to the aluminum and silicones industries. The Company sells to customers in the metal industry who are located primarily throughout the United States. Credit is extended based on an evaluation of the customer's financial condition. During the six months ended June 30, 2000 and the six months ended June 30, 1999, three customers accounted for 53%, 26%, and 8% and 36%, 32%, and 10% of net sales, respectively. At June 30, 2000 and December 31, 1999, three customers accounted for 53%, 24%, and 7% and 43%, 27% and 5%, respectively, of outstanding receivables. The Company maintains credit insurance for all customer accounts receivable. The Acquisition of the Predecessor for approximately $65.3 million in cash, including $6.1 million in expenses directly related to the Acquisition and assumption of approximately $22 million in liabilities, has been accounted for as a purchase. The Acquisition was financed through the issuance of Senior Notes in the amount of $75 million and equity contributed of $22 million. The uses of cash associated with the Acquisition were as follows (in thousands of dollars): The Acquisition $ 65,291 Repayment of indebtedness 9,159 Transaction fees and expenses 6,051 General corporate purposes 16,499 -------- $ 97,000 ========
Accordingly, the purchase price has been allocated to the identifiable assets and liabilities based on fair values at the acquisition date. The excess of the purchase price over the fair value of the identifiable net assets in the amount of $34.5 million has been classified as goodwill. Additionally, the effect of the carryover basis of senior management of $3.2 million has been considered in the allocation of the purchase price. The carryover basis adjustment results from the application of Emerging Issues Task Force ("EITF") Consensus No. 88-16, Basis in 6 7 Leveraged Buyout Transactions, and is allocated to property, plant, and equipment and goodwill based upon the March 31, 1998 balances. The Acquisition was financed through the issuance of senior notes in the amount of $75,000,000 and equity contributed of $22,000,000. Senior Management had an 8% ownership interest in the Predecessor, and as a result of the Acquisition, has a 9% ownership interest in the Company. The sale of the Predecessor's stock of which 92% was not owned by Senior Management, constituted a change in control of the Predecessor. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For a summary of the Company's accounting policies, please refer to the Company's Form 10-K for the year ended December 31, 1999. NOTE 4 - INVENTORIES As of June 30, 2000 and December 31, 1999, inventories consisted of the following:
June 30, December 31, 2000 1999 (unaudited) ------------ ------------ Raw Materials $ 691,532 $ 1,143,075 Finished Goods 3,116,478 1,122,030 Supplies 296,000 296,000 ------------ ------------ $ 4,104,010 $ 2,561,105 ============ ============
7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL The following is a discussion of the Company's results of operations. The discussion is based upon the three-month and six-month periods ended June 30, 2000 in comparison to the three-month and six-month periods ended June 30, 1999. The table below sets forth certain statement of operations information as a percentage of net sales during six months ended June 30, 2000 and June 30, 1999 and the quarters ended June 30, 2000 and June 30, 1999:
Six months Six months Three months Three months ended ended ended ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ---------- ---------- ------------ ------------ Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 92.2 94.0 93.6 99.0 ----- ----- ----- ----- Gross profit 7.8 6.0 6.4 1.0 Selling and administrative expenses 5.2 4.6 5.4 4.5 ----- ----- ----- ----- Operating income (loss) 2.6 1.4 1.0 (3.5) Interest expense 15.5 13.7 15.3 14.4 Other income, net (2.0) (1.6) (1.9) (1.8) ----- ----- ----- ----- Loss before income taxes (10.9) (10.7) (12.4) (16.1) Income tax benefit (2.3) (2.5) (2.8) (4.5) ----- ----- ----- ----- Net loss (8.6)% (8.2)% (9.6)% (11.6)% ===== ===== ===== =====
8 9 THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999 NET SALES Net sales decreased by $0.9 million in the three months ended June 30, 2000, or 7.3%, to $12.4 million from $13.3 million for the comparable period in 1999. This decrease was due to a reduction in average selling prices for all aluminum grades of silicon metal partially offset by more tons sold. Production of silicon metal in the second quarter of 2000 was 9,185 metric tons, compared with 8,259 metric tons produced in the second quarter of 1999. GROSS PROFIT Gross profit increased by $0.7 million, or 575.9%, to $0.8 million in the three months ended June 30, 2000 as compared to $0.1 million in the comparable period in 1999. The gross profit margin increased to 6.4% in the three months ended June 30, 2000 from 1.0% in the comparable period in 1999. These increases were principally due to lower product costs resulting from improved production processes and increased volume. These cost improvements were partially offset by decreased selling prices for all aluminum grades of silicon metal. Average selling price per metric ton decreased to $1,439 in the three months ended June 30, 2000 from $1,478 in the comparable period in 1999. This was due to the excess supply conditions in the secondary aluminum market which have existed for most of 2000. Average production cost per metric ton decreased to $1,185 in the three months ended June 30, 2000 from $1,310 in the comparable period in 1999. This decrease resulted primarily from increased production volumes which allowed for greater absorption of fixed costs. The higher production volumes resulted from improved furnace performance in the quarter ended June 30, 2000. SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses increased $0.1 million, or 12.3%, to $0.7 million in the three months ended June 30, 2000 as compared to $0.6 million in the comparable period in 1999. The increase was primarily due higher medical insurance costs. OPERATING INCOME Income from operations increased $0.6 million to $0.1 million in the three months ended June 30, 2000 from a loss of $0.5 million in the comparable period of 1999. At the same time, the operating margin increased to 1.0% from (3.5)% for the comparable period in the prior year. The increase was primarily due to a slight reduction of selling prices for all grades of silicon metal which was offset by increased production volume and the resulting lower production cost per metric ton. INTEREST EXPENSE Interest expense decreased $0.021 million, or 1.1%, to $1.893 million in the three months ended June 30, 2000 from $1.914 million in the comparable period in 1999. The change in interest expense is insignificant. OTHER INCOME - NET Other income - net decreased $0.008 million, or 3.1%, to $0.233 million in the three months ended June 30, 2000 from $0.241 million in the comparable period in 1999. The change in other income is insignificant. INCOME TAXES The income tax benefit recorded decreased $0.3 million, or 41.3%, to $0.3 million in three months ended June 30, 2000 when compared to the comparable period in 1999. The decrease resulted from the factors above, which created a smaller pre-tax loss. 9 10 NET LOSS As a result of the above factors, the net loss for the three months ended June 30, 2000 was $1.2 million compared to a net loss of $1.5 million for the comparable period in 1999. SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999 NET SALES Net sales decreased by $3.7 million, or 13.0%, to $24.5 million in the six months ended June 30, 2000, from $28.2 million in the comparable period in 1999. This decrease was due principally to a reduction in average selling prices for all aluminum grades of silicon metal offset partially by higher sales volumes. Production of silicon metal in the six months ended June 30, 2000 was 19,199 metric tons, compared with 17,427 metric tons produced in the comparable period in 1999. GROSS PROFIT Gross profit increased by $0.2 million, or 13.4%, to $1.9 million in six months ended June 30, 2000 as compared to $1.7 million in the comparable period in 1999. The gross profit margin increased to 7.8% in the six months ended June 30, 2000 from 6.0% in the same period in 1999. These increases were due to lower production cost and offset partially by decreased selling prices for all aluminum grades of silicon metal. Average selling price per metric ton decreased to $1,419 in the six months ended June 30, 2000 from $1,484 in the comparable period in 1999. This was due to the excess supply conditions in the secondary aluminum market which existed for most of 2000. Average production cost per metric ton decreased to $1,144 in the six months ended June 30, 2000 from $1,237 in the comparable period in 1999. This decrease resulted primarily from increased production volumes which allowed for greater absorption of fixed costs. The higher production volumes resulted from improved furnace performance. SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative expenses were materially unchanged in the six months ended June 30, 2000 as compared to the comparable period in 1999. 10 11 OPERATING INCOME Income from operations increased $0.2 million, or 54.4%, to $0.6 million in the six months ended June 30, 2000 from $0.4 million in the comparable period in 1999. At the same time, the operating margin increased to 2.6% from 1.4% for the comparable period in the prior year. These increases were primarily due to increased production volume and the resulting lower production cost per metric ton which was offset partially by a slight reduction of selling prices for all grades of silicon metal. . INTEREST EXPENSE Interest expense decreased $0.050 million, or 1.3%, to $3.802 million in the six months ended June 30, 2000 from $3.852 million in the comparable period in 1999. OTHER INCOME - NET Other income - net increased $0.052 million, or 11.9%, to $0.489 million in the six months ended June 30, 2000 from $0.4 million in the comparable period in 1999. The increase in other income was primarily due to higher interest rates and the resulting increase in interest income on cash balances in the current year. INCOME TAXES The income tax benefit recorded decreased $0.1 million, or 21.6%, to $0.6 million in six months ended June 30, 2000 from $0.7 million in the comparable period in 1999. The decrease resulted from factors above, which created a smaller pre-tax loss. NET LOSS As a result of the above factors, the net loss for the six months ended June 30, 2000 was $2.1 million compared to a net loss of $2.3 million for the comparable period in 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are cash flow from operations, borrowings under its secured credit facility and a portion of the net proceeds from the offering of its 9 5/8% Senior Notes due 2006 (the "Notes"). The Company's principal uses of liquidity are to fund operations, meet debt service requirements and finance the Company's planned capital expenditures, including the possible construction of a fourth smelting furnace, engineering work for which has already begun. The Company's cash flows from its operations are influenced by selling prices of its products and raw materials costs, and are subject to moderate fluctuation due to market supply factors driven by imports. The Company's silicon metal business experiences price fluctuations principally due to the competitive nature of one of its markets, the secondary aluminum market. Historically, the Company's microsilica business has been affected by the developing nature of the markets for this product. The Company's cash flows from its operations are also influenced by the cost of labor. The Company is in the process of renegotiating its labor agreement with the United Steelworkers of America (the "USWA"), which represents approximately 120 of the Company's employees. The USWA leadership called for a strike commencing at 12:00 p.m. on August 8, 2000. Cash flows going forward, as well as revenues, may be affected by the Company's ability to negotiate successfully with its unionized employees or obtain alternate sources of labor. Cash and cash equivalents were $6.3 million and $9.8 million at June 30, 2000 and December 31, 1999, respectively, and restricted cash was $6.6 million and $6.4 million as of June 30, 2000 and December 31, 1999, respectively. The decrease in total cash and equivalents resulted primarily from an increase in accounts receivable 11 12 and inventories in the six months ended June 30, 2000. The increase in restricted cash in the first six months of 2000 resulted principally from interest earned on that cash. Depreciation and amortization for the second quarter of 2000 was unchanged from the same period in 1999. In the first six months of 2000 and 1999, net cash provided by (used in) operating activities was $(1.4 million) and $2.4 million, respectively. The decrease in the first six months of 2000 resulted primarily from an increase in accounts receivable and inventories in 2000. In the first six months of 2000 and 1999, net cash used in investing activities was $2.0 million and $1.0 million, respectively. The changes primarily reflect different levels of capital spending during the corresponding periods of each year. In the first six months of 2000 and 1999, net cash used in financing activities was insignificant. In connection with the Acquisition, the Company replaced its existing credit facility with a new credit facility (the "Credit Facility") providing availability for revolving borrowings and letters of credit in an aggregate principal amount of up to $15.0 million (of which $6.1 million is reserved for support of a letter of credit issued in connection with the industrial revenue bond financing of the Company). As of June 30, 2000 and December 31, 1999, no borrowings were outstanding under the Credit Facility. Ongoing interest payments on the Notes represent significant liquidity requirements for the Company. With respect to the $75.0 million borrowed under the Notes, the Company will be required to make semiannual interest payments of approximately $3.6 million over the life of the Notes. With respect to ongoing capital spending, the Company expects to spend approximately $2.5 million to $3.0 million annually to maintain properly its furnaces and other production facilities. In addition, the Company is considering the addition of a fourth smelting furnace using proceeds of the Notes, together with internally generated or borrowed cash. The Company estimates that construction of the furnace, if undertaken, will cost approximately $25.0 million. The agreement governing the Credit Facility (the "Credit Agreement") imposes restrictions on the Company's ability to make capital expenditures, and both the Credit Agreement and the indenture governing the Notes (the "Indenture") limit the Company's ability to incur additional indebtedness. Such restrictions, together with the highly leveraged nature of the Company, could limit the Company's ability to respond to market conditions, to meet its capital spending program, to provide for unanticipated capital investments or to take advantage of business opportunities. The covenants contained in the Credit Agreement also, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur guarantee obligations, repay the Notes, pay dividends, create liens on assets, enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions, engage in acquisitions or consolidations, make capital expenditures or engage in certain transactions with affiliates, and otherwise restrict corporate activities. At June 30, 2000, the Company was in compliance with all loan covenants, as amended. The covenants contained in the Indenture governing the Notes also impose restrictions on the operation of the Company's business. FORWARD-LOOKING STATEMENTS Certain of the matters discussed in this document, particularly regarding anticipating future financial performance, business prospects, growth and operating strategies, the effects of the Acquisition on the Company and similar matters, and those preceded by, followed by or that otherwise include the words "may," "would," "could," "will," "believes," "expects," "anticipates," "plans," "intends," "estimates," or similar expressions or variations thereof may constitute "forward-looking statements" for purposes of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Those forward-looking statements involve a number of risks and uncertainties. A variety of factors, including without limitation changes in the prevailing prices for the Company's products; the Company's continued ability to achieve operating efficiencies and the ability of the Company to negotiate successfully with its unionized employees or obtain alternate sources of labor, those factors discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" herein and in Item 7 12 13 of the Company's Annual Report on Form 10-K, and in other filings by the Company with the Securities and Exchange Commission, may affect the future results of the Company and could cause those results to differ materially from those expressed in the forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The fair value of the Company's long-term debt and capital leases is affected by changes in interest rates. Based upon current market conditions, the fair value and hypothetical increase in fair value of long-term debt and capital leases, including current portion, is not expected to be materially different from that as of December 31, 1999. 13 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not applicable ITEM 2. CHANGES IN SECURITIES. Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. In May of 1999, the sole stockholder of the Company executed a written consent in lieu of an annual meeting, naming Edward A. Wahlen, Jr., William A. Davies, James A. O'Donnell, and C. Edward Boardwine as Directors of the Company. ITEM 5. OTHER INFORMATION. On August 7, 2000, the 1995-2000 Basic Labor Agreement and Seniority Rules and Regulations dated August 8, 1995, between the United Steelworkers of America (AFL-CIO) (the "USWA") and Simcala, Inc. ("Simcala" or the "Company") expired after more than three months of negotiations over a new labor agreement. The USWA leadership called for a strike commencing at 12:00 p.m. on August 8, 2000. The USWA represents approximately 120 Simcala employees. Substantially all of the employees represented by the USWA have decided to strike, and Simcala is unable to predict the strike's duration. The Company is mitigating the effects of the strike by using managers and supervisors to replace temporarily the striking employees. In addition, the Company is encouraging the USWA employees to continue to work despite the absence of a new labor agreement, under the same general conditions as to wages and benefits only. The Company also may hire replacement workers if the strike continues for an extended time. Despite these efforts, the strike may adversely impact the Company's ability to maintain its current level of production. Management does not expect that revenues and earnings will be adversely affected by the strike or that the Company may lose customers because of the strike. Management cannot, however, predict the exact financial impact of the strike, which will depend in part upon its duration. Additionally, if Simcala and the USWA reach a new labor agreement, management anticipates that employee expense will increase. Management believes its current financial resources are adequate to support the Company's operations during the strike. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K 14 15 SIGNATURE 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. SIMCALA, Inc. Date: August 11, 2000 /s/ R. Myles Cowan -------------------------------------------- R. Myles Cowan Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) 15 EX-27 2 ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF SIMCALA, INC. FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 12,841 0 5,428 0 4,104 22,787 59,702 9,443 108,691 6,703 81,000 0 0 18,807 (8,195) 108,691 24,547 24,547 22,629 22,629 489 0 3,801 (2,682) (561) (2,120) 0 0 0 (2,120) 0 0 Of this amount, 6,556 was Restricted Cash
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