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 Quarter Ended September 30, 1998 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 IRS Employer Identification No.)
incorporation or organization)
47603 Halyard Drive, Plymouth, Michigan 48170-2429
(Address of principal executive offices) (Zip Code)
(734)207-6200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
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
At October 31, 1998 there were 18,235,450 outstanding shares of the
registrant's common stock, $1.00 par value each.
Consolidated Balance Sheets
(In thousands)
September 30, 1998 and December 31, 1997
Sept. 30 Dec. 31
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 4,843 $ 8,235
Accounts receivable 75,778 66,055
Inventories 20,536 19,827
Customer tooling in process 5,539 7,888
Prepaid expenses and other current assets 11,330 12,689
Total Current Assets 118,026 114,694
Property, Plant and Equipment
Cost 324,434 313,499
Less Allowance 153,662 139,353
Total Property, Plant and Equipment 170,772 174,146
Intangible Assets - net 53,610 49,951
Other Assets 3,780 2,757
$346,188 $341,548
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installment of long-term debt $ 2,829 $ 3,579
Notes payable 3,700 -
Accounts payable 47,376 45,803
Compensation and amounts withheld 11,460 11,350
Taxes, other than income taxes 2,549 3,072
Other current liabilities 6,491 14,524
Total Current Liabilities 74,405 78,328
Long-term debt, excluding current installment 117,925 118,564
Accrued Retirement Benefits and Other 16,241 14,663
Deferred Income Taxes 13,045 12,121
Shareholders' Equity 124,572 117,872
$346,188 $341,548
See accompanying notes to consolidated financial statements.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Periods Ended September 30, 1998 and 1997
Three Months Nine Months
1998 1997 1998 1997
Net sales $110,016 $112,327 $364,276 $328,475
Costs and expenses:
Cost of products sold 103,732 103,322 329,513 295,614
Administrative and selling 2,924 3,315 9,386 9,538
Amortization 524 - 1,464 -
Provision for plant closings - 8,769 - 8,769
107,180 115,406 340,363 313,921
Operating Earnings 2,836 (3,079) 23,913 14,554
Investment and other income, net 904 206 579 732
Interest expense (2,353) (2,377) (7,298) (5,094)
Earnings Before Income Taxes 1,387 (5,250) 17,194 10,192
Income taxes 458 (1,913) 5,674 3,724
Net Earnings $ 929 $(3,337) $11,520 $ 6,468
Comprehensive Income - net $ 1,368 $(2,525) $10,641 $ 6,802
Basic Earnings Per Share $0.05 $(0.18) $0.63 $0.36
Diluted Earnings Per Share $0.05 $(0.18) $0.63 $0.36
Cash dividends per share $0.10 $0.10 $0.30 $0.30
Average number of common
equivalent shares:
Basic 18,318,644 18,129,647 18,304,493 18,121,209
Diluted 18,395,029 18,219,271 18,410,846 18,188,713
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended September 30, 1998 and 1997
1998 1997
OPERATING ACTIVITIES
Net earnings $11,520 $ 6,468
Depreciation and amortization 19,237 17,032
Provision for deferred income taxes 924 2,185
Other 544 165
Changes in operating assets and
liabilities, net
of effects of acquisition of business (14,334) (10,585)
Cash Provided By Operating Activities 17,891 15,265
INVESTING ACTIVITIES
Acquisition of business, net of
cash acquired - (75,407)
Capital expenditures (14,894) (22,373)
Proceeds from disposal of property
and equipment 391 321
Cash Used In Investing Activities (14,503) (97,459)
FINANCING ACTIVITIES
Cash dividends paid (5,494) (5,439)
Notes Payable, net 2,488 -
Proceeds (repayments) of
long-term debt, net (1,389) 62,555
Cash used in stock transactions, net (1,724) -
Cash Provided From (Used In)
Financing Activities (6,119) 57,116
Effect of foreign currency exchange
rate changes (661) (1,037)
Decrease In Cash and Cash Equivalents (3,392) (26,115)
Cash and cash equivalents at
beginning of period 8,235 28,902
Cash and Cash Equivalents at End of Period $ 4,843 $ 2,787
Supplemental Disclosures
Cash paid during the year for:
Interest $ 7,628 $ 4,207
Income Taxes 7,440 4,662
See accompanying notes to consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Significant Accounting Principles
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting. In the opinion of management, all adjustments (consist-
ing of normal recurring accruals) considered necessary for a fair presenta-
tion have been included. The results of operations for the period ended
September 30, 1998 are not necessarily indicative of the results to be
expected for the year ending December 31, 1998.
Note 2. Lines of Credit
As discussed in Simpson's 1997 Annual Report on Form 10-K, the Company
maintains credit lines that allow for borrowings of up to $25 million
under a five-year agreement and up to $25 million under a 364-day agreement.
At September 30, 1998 there were no borrowings outstanding under the 364-day
agreement and there was $17.5 million outstanding under the five-year
agreement.
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.
ITEM 2: Managements' Discussion and Analysis
of Financial Condition and Results of Operations
Net sales in the third quarter totaled $110,016,000 a 2.1% ($2,311,000)
decrease from the third quarter of 1997. Year-to-date sales increased to
$364,276,000, a 10.9% increase over 1997 year-to-date sales. Both periods
were impacted by the General Motors strike, which reduced 1998 third quarter
and year-to-date sales by approximately $7,500,000 and $11,000,000,
respectively. The impact of the strike was somewhat offsetby increased
sales to the heavy-duty market. In addition, September 30, 1998
year-to-date sales benefited from the inclusion of the June, 1997 VA
Business acquisition.
The cost of products sold increased from 92.0% of sales in the third quarter
of 1997 to 94.3% of sales in the third quarter of 1998. Year-to-date cost of
products sold increased from 90.0% to 90.5% for the nine months ending
September 1997 and September 1998, respectively. In general, the increase
can be attributed to the level of fixed costs associated with the lost sales
to General Motors.
Third quarter administrative and selling costs decreased from 3.0% of sales in
1997 to 2.7% of sales in 1998. Year-to-date, administrative and selling costs
decreased from 2.9% of sales in 1997 to 2.6% of sales in 1998. This decrease
is partially due to the timing of expenses and partially due to increased
efficiencies from volume leveraging.
Third quarter interest expense remained relatively constant versus the prior
year. Interest expense for the nine month period ending September 30, 1998
increased over the same period in 1997 due to costs of the additional debt
used to fund the June 1997 acquisition of the VA Business division.
As discussed in Simpson's 1997 Annual Report on Form 10-K, the Company
maintains credit lines that allow for borrowings of up to $25 million under
a five-year agreement and up to $25 million under a 364-day agreement. At
September 30, 1998 there were no borrowings outstanding under the 364-day
agreement and there was $17.5 million outstanding under the five-year
agreement.
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.
Cash flow from operations totaled $17,891,000 for the nine month period ending
September 30, 1998, a $2,626,000 increase versus the same period in 1997.
Year-to-date net cash used in investing activities decreased to $14,503,000
in 1998, from $97,459,000 in the prior year. 1997 year-to-date cash flows
reflect the VA Business acquisition that occurred during the second quarter
of 1997. The Company's investment in production capacity for new automotive,
light truck and diesel engine programs also decreased from $22,373,000 in
1997 to $14,894,000 in 1998. The decrease was primarily due to a lower
than average number of new program launches in 1998.
Net cash used in investing activities and dividends paid during the nine
months ended September 30, 1998, exceeded cash flows from operations and
net proceeds from borrowings, discussed above, resulting in a reduction of
$3,400,000 in cash and cash equivalents. The Company believes that cash
flows from operations and available credit facilities will be sufficient to
meet its debt service requirements, projected capital expenditures and
working capital requirements.
Certain statements in this report may be "forward-looking statements" under
the Securities Exchange Act of 1934. Statements regarding future operating
performance, new programs expected to be launched and other future prospects
and developments are based on current expectations and involve certain risks
and uncertainties that could cause the actual results and developments to
differ materially from the forward-looking statements. Potential risks and
uncertainties include such factors as demand for the Company's products,
pricing and other actions taken by competitors, and general economic
conditions affecting the markets served by the Company.
The Company will be required to modify or replace substantially all of the
computer systems that it uses to prepare for the year 2000. The Company has
completed an assessment of the costs of making its computer systems Year 2000
compliant and has determined that such costs will not be material. The
Company expects to complete the required changes by January 31, 1999.
Part II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report.
Exhibit No. Description
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 1998.
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.
SIMPSON INDUSTRIES, INC.
Registrant
November 12, 1998 /S/VINOD M. KHILNANI
Vinod M. Khilnani
Vice President and
Chief Financial Officer
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
11 Computation of Earnings Per Share
27 Financial Data Schedule