SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2000
-----------------------
Commission File Number 0-23539
-----------------------
LADISH CO., INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 31-1145953
- ---------------------------------- --------------------------------------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5481 South Packard Avenue, Cudahy, Wisconsin 53110
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(414) 747-2611
- --------------------------------------------------------------------------------
(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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 30, 2000
- ----------------------------- ---------------------------------
Common Stock, $0.01 Par Value 12,888,368
Page 2 of 11
PART I - FINANCIAL INFORMATION
------------------------------
Page 3 of 11
LADISH CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
For the Three Months For the Six Months
Ended September 30, Ended September 30,
--------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net sales .........................................$ 58,399 $ 41,803 $ 170,665 $ 129,330
Cost of sales ......................................... 49,763 36,759 145,053 115,833
----------- ----------- ----------- -----------
Gross income on sales......................... 8,636 5,044 25,612 13,497
Selling, general and administrative expenses........... 3,538 1,869 8,482 5,448
----------- ----------- ------------ -----------
Income from operations........................ 5,098 3,175 17,130 8,049
Other income (expense):
Interest expense.................................. (512) (317) (1,486) (659)
Other, net........................................ 5 69 91 239
----------- ----------- ----------- -----------
Income before provision for income taxes...... 4,591 2,927 15,735 7,629
Provision for income taxes............................. 826 439 2,832 1,144
----------- ----------- ----------- -----------
Net income....................................$ 3,765 $ 2,488 $ 12,903 $ 6,485
=========== =========== =========== ===========
Basic earnings per share...............................$ 0.29 $ 0.18 $ 0.98 $ 0.47
Diluted earnings per share.............................$ 0.28 $ 0.17 $ 0.94 $ 0.44
Basic weighted average shares outstanding.............. 12,889,319 13,700,041 13,128,964 13,750,528
Diluted weighted average shares outstanding............ 13,647,165 14,271,807 13,778,539 14,626,639
Page 4 of 11
LADISH CO., INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share and Per Share Data)
September 30, December 31,
Assets 2000 1999
------ ------------ ------------
Current assets:
Cash and cash equivalents.........................................................$ 1,632 $ 1,008
Accounts receivable, less allowance of $340 and $300, respectively................ 37,968 25,222
Inventories....................................................................... 55,994 42,427
Prepaid expenses and other current assets......................................... 294 238
------------ ------------
Total current assets.......................................................... 95,888 68,895
------------ ------------
Property, plant and equipment:
Land and improvements............................................................. 5,800 3,855
Buildings and improvements........................................................ 17,207 15,912
Machinery and equipment........................................................... 129,721 120,526
Construction in progress.......................................................... 12,431 5,562
------------ ------------
165,159 145,855
Less - accumulated depreciation................................................... (73,181) (62,648)
------------ ------------
Net property, plant and equipment............................................. 91,978 83,207
Other assets ......................................................................... 16,405 7,481
------------ ------------
Total assets..................................................................$ 204,271 $ 159,583
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Senior debt.......................................................................$ 8,000 $ 0
Accounts payable.................................................................. 29,907 12,548
Accrued liabilities:
Pensions...................................................................... 441 504
Postretirement benefits....................................................... 5,551 5,551
Wages and salaries............................................................ 5,140 3,107
Taxes, other than income taxes................................................ 222 227
Interest...................................................................... 306 54
Profit sharing................................................................ 1,213 958
Paid progress billings........................................................ 4,869 5,556
Other......................................................................... 2,910 1,383
------------ ------------
Total current liabilities................................................ 58,559 29,888
Long term liabilities:
Senior debt, less current portion................................................. 12,000 0
Pensions ......................................................................... 9,203 14,692
Postretirement benefits........................................................... 39,107 40,929
Other noncurrent liabilities...................................................... 605 607
------------ ------------
Total liabilities........................................................ 119,474 86,116
------------ ------------
Stockholders' equity:
Common stock - authorized 100,000,000, issued and outstanding 14,319,906
and 14,318,406 shares of $.01 par value as of September 30, 2000 and
December 31, 1999, respectively 143 143
Additional paid-in capital........................................................ 83,596 80,293
(Accumulated deficit) retained earnings........................................... 11,144 (1,759)
Treasury stock, 1,431,538 shares and 770,672 shares of common stock
at cost as of September 30, 2000 and December 31, 1999, respectively............ (10,086) (5,210)
------------ ------------
Total stockholders' equity............................................... 84,797 73,467
------------ ------------
Total liabilities and stockholders' equity...............................$ 204,271 $ 159,583
============ ============
Page 5 of 11
LADISH CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For the Nine Months
Ended September 30,
-------------------------------
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................$ 12,903 $ 6,485
Adjustments to reconcile net income to net cash
provided from (used for) operating activities:
Depreciation.................................................................. 10,554 8,915
Amortization.................................................................. 618 395
Reduction in valuation allowance.............................................. 2,635 990
Non-cash compensation expense................................................. 810 0
Other......................................................................... 12 (3)
Change in assets and liabilities:
Accounts receivable........................................................... (9,153) 6,754
Inventories................................................................... (8,362) (3,292)
Other assets................................................................. (272) (447)
Accounts payable and accrued liabilities...................................... 17,533 (5,449)
Other liabilities............................................................. (7,313) (3,162)
------------ ------------
Net cash provided from operating activities.............................. 19,965 11,186
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment........................................ (9,127) (5,878)
Proceeds from sale of property, plant and equipment............................... 54 13
Acquisition of business........................................................... (25,250) (11,533)
IPO funds from escrow............................................................. - 3,650
------------ ------------
Net cash used for investing activities................................... (34,323) (13,748)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior debt......................................................... 20,000 3,500
Repurchase of common stock........................................................ (5,002) (2,565)
Retirement of warrants............................................................ (28) (3,253)
Exercise of warrants.............................................................. 0 210
Issuance of common stock.......................................................... 12 12
------------ ------------
Net cash provided from financing activities.............................. 14,982 (2,096)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................... 624 (4,658)
CASH AND CASH EQUIVALENTS, beginning of period......................................... 1,008 5,517
------------ ------------
CASH AND CASH EQUIVALENTS, end of period...............................................$ 1,632 $ 859
============ ============
Page 6 of 11
LADISH CO., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(1) Basis of Presentation
---------------------
In the opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments necessary to present fairly its
financial position at September 30, 2000 and December 31, 1999 and its results
of operations and cash flows for the nine months ended September 30, 2000 and
September 30, 1999. All adjustments are of a normal recurring nature.
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with Article 10 of Regulation S-X and therefore do not
include all information and footnotes necessary for a fair presentation of the
financial position, results of operations and cash flow in conformity with
generally accepted accounting principles. In conjunction with its Form 10-K, the
Company filed audited consolidated financial statements which included all
information and footnotes necessary for a fair presentation of its financial
position at December 31, 1999 and 1998, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the years ended December
31, 1999, 1998 and 1997.
The results of operations for the nine-month period ended September 30, 2000 are
not necessarily indicative of the results to be expected for the full year.
(2) Inventories
-----------
Inventories consisted of:
September 30, December 31,
2000 1999
------------- ------------
Raw material and supplies $ 17,947 $ 15,214
Work-in-process and finished goods 41,021 29,501
Less progress payments (2,974) (2,288)
---------- ---------
Total inventories $ 55,994 $ 42,427
========== =========
(3) Interest and Income Tax Payments
--------------------------------
For the Nine Months
Ended September 30,
---------------------------
2000 1999
-------- -------
Interest $1,232 $ 641
Income taxes 433 373
Page 7 of 11
(4) Cash and Cash Equivalents
-------------------------
Cash in excess of daily requirements is invested in marketable securities
consisting of Commercial Paper and Repurchase Agreements which mature in three
months or less. Such investments are deemed to be cash equivalents for purposes
of the statement of cash flows.
(5) Revenue Recognition
-------------------
Revenue is recognized when products are shipped.
(6) Earnings Per Share
------------------
The incremental difference between basic weighted average shares outstanding and
diluted weighted average shares outstanding is due to the dilutive impact of
outstanding options and warrants.
Page 8 of 11
Management's Discussion
and Analysis of Results of Operations and
Changes in Financial Position
RESULTS OF OPERATIONS
- ---------------------
Third Quarter 2000 Compared to Third Quarter 1999
- -------------------------------------------------
Net sales for the three months ended September 30, 2000 were $58.4 million
compared to $41.8 for the same period in 1999. The 40% increase in sales for the
third quarter of 2000 was primarily attributed to an improvement in the jet
engine market and the Company's acquisition of Pacific Cast Technologies, Inc.
("PCT"). See "Other Information". Gross profit increased to 14.8% of sales in
contrast to 12.1% of sales in the third quarter of 1999 as a result of improved
absorption of fixed costs by the increased level of sales. Energy cost increases
in the third quarter of 2000 had a negative impact on gross profits.
Selling, general and administrative expenses, as a percentage of sales, were
6.1% for the third quarter of 2000 compared to 4.5% for the same period in 1999.
The increase in SG&A expenses for the period was partially attributable to
increased foreign sales and the PCT operations. However, the most significant
impact on SG&A was the Company's recognition of approximately $0.8 million in
non-cash expenses due to the effective date of FIN 44 on stock option programs.
Under the provisions of this interpretation, repriced options are accounted for
under variable accounting, which records compensation expense or benefit for
increases or decreases in the market value of the Company's common stock until
the options are exercised, forfeited or expire.
Interest expense for the period was $0.512 million in contrast to $0.317 million
in 1999. The increase in interest expense was due to higher loan balances of
senior debt resulting from the PCT purchase and stock buyback program. During
the third quarter of 2000, the Company's senior debt had an interest rate equal
to the LIBOR rate plus 0.80% per annum (reduced from commercial paper plus 1.0%
per annum as of September 30, 1999).
The $0.83 million provision for income taxes for 2000 and $0.44 million for 1999
represent largely non-cash accounting charges. The reversal of valuation
allowances relating to pre-restructuring NOLs requires the Company to record a
tax provision and to reflect the offset as an addition to paid-in capital,
rather than as an offset to the provision for income taxes. The overall
effective rate differs substantially from the statutory tax rate due to the
reversal of valuation allowances relating to post-restructuring versus
pre-restructuring deferred tax assets. The Company intends to continue to use
its NOLs in the future to reduce actual payment of federal income taxes. The
future use of the NOLs is subject to certain statutory restrictions. See
"Liquidity and Capital Resources."
Net income for the third quarter of 2000 after increased energy costs and
non-cash compensation expense was $3.8 million, a 51% improvement over the same
period in 1999. The increase in profitability was due to incremental sales
growth partially offset by the aforementioned energy costs and non-cash
compensation expense.
Nine Months 2000 Compared to Nine Months 1999
- ---------------------------------------------
During the first nine months of 2000, the Company had net sales of $170.67
million. This represents a 32% increase in sales over the same period in 1999
due to an increase in the jet engine market and the PCT acquisition. Gross
profit at the Company improved to 15% of sales in 2000 in comparison to 10.4% of
sales during the first three quarters of 1999.
Page 9 of 11
Through September 30, 2000, selling, general and administrative expenses
increased to 5.0% of sales in comparison to 4.2% of sales for the equivalent
period in 1999. As indicated above, the increase in SG&A was largely attributed
to the impact of FIN 44 and the recognition of additional expense.
Interest expense through the first three quarters of 2000 was $1.49 million in
contrast to $0.66 million in 1999. This increase in interest expense was
directly attributable to an increase in borrowings to fund the PCT acquisition
and the stock buyback program along with higher interest rates during 2000.
As indicated above in the discussion of the third quarter, the $2.8 million tax
provision for the first nine months of 2000, compared to $1.1 million for the
same period in 1999, represents the largely non-cash accounting charges
associated with the use of pre-restructuring NOLs.
The first three quarters of 2000 yielded a net income of $12.9 million in
contrast to $6.5 million in 1999. This 99% improvement is a reflection of an
improved aerospace market, a strategic acquisition and operating leverage,
partially offset by higher implied tax rates and increases to SG&A for non-cash
compensation expense.
Liquidity and Capital Resources
- -------------------------------
As of July 1, 1999, the Company entered into a new credit facility (the
"Facility") with a syndicate of lenders. The Facility provides for borrowings of
up to $100 million subject to certain limitations. Borrowings under the Facility
are unsecured and were initially structured as revolving loans with the option
of conversion into term loans. Borrowings under the Facility bear interest at a
rate of LIBOR plus 0.75% per annum. Proceeds from the Facility were used to
terminate the prior credit agreement on July 1, 1999.
On April 14, 2000 the Company and substantially the same group of lenders
entered into an amended and restated credit facility (the "New Facility"). The
New Facility is comprised of a $24 million term facility with a three-year
maturity and a $76 million revolving loan facility. The term facility bears
interest at a rate of LIBOR plus 1.25% and the revolving loan facility bears
interest at a rate of LIBOR plus 0.80%. At September 30, 2000, approximately $50
million was available and undrawn under the New Facility. The balance of the
borrowings under the New Facility as of September 30, 2000 was $20.0 million.
The Company has net operating loss ("NOL") carryforwards, which were generated
prior to a financial restructuring that was completed on April 30, 1993, as well
as NOL carryforwards that were generated in subsequent years. The total
remaining NOL carryforwards were approximately $50 million as of December 31,
1999. The NOL carryforwards expire gradually beginning in the year 2007 through
2010.
The Company's IPO created an ownership change as defined by the Internal Revenue
Service, ("IRS"). This ownership change generated an IRS imposed limitation on
the utilization of NOL carryforwards on future tax returns. The annual use of
the NOL carryforwards is limited to the lesser of the Company's taxable income
or the amount of the IRS imposed limitation. Approximately $12 million of the
NOL carryforwards is available for use annually. Approximately $2 million of the
$12 million annual limitation relates to a previous restriction on NOL
carryforwards generated prior to the financial restructuring.
Based on the limitations described above and certain other factors, a valuation
allowance has been recorded against the entire amount of the net deferred tax
assets. Any tax benefit that is realized in subsequent years from the reduction
of the valuation allowance established at or prior to the financial
restructuring will be recorded as an addition to paid-in capital. Any tax
benefit that is realized in
Page 10 of 11
subsequent years from the utilization of deferred tax assets created after April
30, 1993, will be recorded as a reduction of future income tax provisions.
Under the common stock repurchase program (the "Program") authorized by the
Company's Board of Directors, the Company repurchased 35,000 shares, or share
equivalents, of its common stock during the third quarter of 2000. As of
September 30, 2000, the Company has repurchased 2,216,628 shares, or share
equivalents, of its common stock under the Program.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
The Company believes that its exposure to market risk related to changes in
foreign currency exchange rates and trade accounts receivable is immaterial.
-------------------------
Any statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Legislation Reform Act of 1995, and involve risks and uncertainties. These
forward-looking statements include expectations, beliefs, plans, objectives,
future financial performance, estimates, projections, goals and forecasts.
Potential factors which could cause the Company's actual results of operations
to differ materially from those in the forward-looking statements include market
conditions and demand for the Company's products; competition; technologies; raw
material prices; interest rates and capital costs; taxes; unstable governments
and business conditions in emerging economies; and legal, regulatory and
environmental issues. Any forward-looking statement speaks only as of the date
on which such statement is made. The Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which such statement is made.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted to a vote of the stockholders during the period
covered by this report.
Item 5. Other Information
- --------------------------
On January 14, 2000, the Company acquired substantially all of the assets and a
portion of the liabilities of the business formerly known as Wyman-Gordon
Titanium Castings, LLC in a transaction valued at approximately $25 million. The
business, which will operate independently as a wholly-owned subsidiary of the
Company, is located in Albany, Oregon and has been renamed PCT. The principal
focus of PCT's business is in the investment casting of titanium for jet engine
and aerospace applications.
Item 6. Reports on Form 8-K
- -----------------------------
(a) Exhibit 27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the period covered by this report.
Page 11 of 11
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.
LADISH CO., INC.
Date: October 23, 2000 By: /s/ WAYNE E. LARSEN
-------------------------------------
Wayne E. Larsen
Vice President Law/Finance
& Secretary