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ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 2000 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)
(313)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 July 31, 2000 there were 17,874,374 outstanding shares of the registrant's
common stock, $1.00 par value each.
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ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
(In thousands)
June 30, 2000 and December 31, 1999
June 30
(Unaudited) Dec. 31
----------- -------
ASSETS
Current Assets
Cash and cash equivalents $ 4,439 $ 7,362
Accounts receivable 92,147 84,124
Inventories 18,357 19,448
Customer tooling in process 11,127 6,404
Prepaid expenses and other current assets 12,767 11,960
-------- --------
Total Current Assets 138,837 129,298
Property, Plant and Equipment
Cost 377,927 362,259
Less Accumulated Depreciation 189,627 179,346
-------- --------
Net Property, Plant and Equipment 188,300 182,913
Intangible Assets - net 43,908 46,847
Other Assets 2,121 2,398
-------- --------
$373,166 $361,456
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installment of long-term debt $ 5,079 $ 6,079
Notes payable 16,879 10,908
Accounts payable 58,691 62,654
Compensation and amounts withheld 11,661 12,614
Taxes, other than income taxes 3,289 3,797
Other current liabilities 11,554 10,261
-------- --------
Total Current Liabilities 107,153 106,313
Long-term debt, excluding current installment 102,898 98,955
Accrued Retirement Benefits and Other 16,124 16,098
Deferred Income Taxes 10,320 7,058
Minority Interest in Joint Venture 462 -
Shareholders' Equity 136,209 133,032
-------- --------
$373,166 $361,456
======== ========
See accompanying notes to condensed consolidated financial statements.
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ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Periods Ended June 30, 2000 and 1999
Three Months Six Months
2000 1999 2000 1999
-------- -------- -------- --------
Net sales $138,572 $139,399 $283,137 $272,501
Costs and expenses:
Cost of products sold 122,629 123,237 251,205 242,000
Administrative and selling 3,518 2,748 6,790 5,524
Amortization 487 504 1,053 1,025
-------- -------- -------- --------
126,634 126,489 259,048 248,549
-------- -------- -------- --------
Operating Earnings 11,938 12,910 24,089 23,952
Investment and other income, net 96 (13) (341) (109)
Interest expense (2,269) (2,184) (4,526) (4,316)
-------- -------- -------- --------
Earnings Before Income Taxes 9,765 10,713 19,222 19,527
Income taxes 3,418 3,750 6,728 6,835
-------- -------- -------- --------
Net Earnings $ 6,347 $ 6,963 $ 12,494 $ 12,692
======== ======== ======== ========
Comprehensive Income - net $ 3,856 $ 5,687 $ 9,224 $ 7,305
======== ======== ======== ========
Basic Earnings Per Share $0.36 $0.39 $0.70 $0.70
Diluted Earnings Per Share $0.36 $0.38 $0.70 $0.70
Cash dividends per share $0.10 $0.10 $0.20 $0.20
Average number of common equivalent shares:
Basic 17,874,374 18,065,871 17,890,228 18,105,252
Diluted 17,874,510 18,098,138 17,907,727 18,129,674
See accompanying notes to condensed consolidated financial statements.
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ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Six Months Ended June 30, 2000 and 1999
2000 1999
------- -------
OPERATING ACTIVITIES
Net earnings $12,494 $12,692
Depreciation and amortization 14,134 13,790
Provision for deferred income taxes 3,262 442
Amortization of restricted stock 237 284
(Loss) Gain on disposition of assets (20) 57
Changes in operating assets and liabilities (16,926) 488
-------- --------
Cash Provided By Operating Activities 13,181 27,753
INVESTING ACTIVITIES
Capital expenditures (17,965) (19,775)
Proceeds from disposal of property and equipment 25 112
-------- --------
Cash Used In Investing Activities (17,940) (19,663)
FINANCING ACTIVITIES
Cash dividends paid (3,576) (3,621)
Notes Payable, net 5,971 1,300
Proceeds (repayments) of long-term debt, net 2,711 (8,539)
Cash used in stock transactions, net (949) (1,389)
-------- --------
Cash Provided By (Used In) Financing Activities 4,157 (12,249)
Effect of foreign currency exchange rate changes (2,321) 1,738
-------- --------
Decrease In Cash and Cash Equivalents (2,923) (2,421)
Cash and cash equivalents at beginning of period 7,362 6,145
-------- --------
Cash and Cash Equivalents at End of Period $ 4,439 $ 3,724
======== ========
Supplemental Disclosures
Cash paid during the period for:
Interest $ 4,542 $ 3,459
Income Taxes 5,995 6,827
See accompanying notes to condensed consolidated financial statements.
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ITEM 1: 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 (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the period ended June 30, 2000 are
not necessarily indicative of the results to be expected for the year ending
December 31, 2000.
Note 2. Lines of Credit
The Company maintains credit lines that allow for borrowings of up to $25
million under a five-year agreement and up to $50 million under a 364-day
agreement. At June 30, 2000, there were no borrowings outstanding under the
364-day agreement, and $13.4 million outstanding under the five-year agreement.
At June 30, 2000, $10 million of the borrowings under the five-year agreement
are classified as long-term based on management's intent and ability to maintain
this level of borrowing for a period in excess of one year. In June of 2000, the
364-day agreement was renewed.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net sales for the second quarter of 2000 were $138.6 million, a small decrease
of $0.8 million, or 0.6%, compared to the record $139.4 million in the second
quarter of 1999. Year-to-date sales increased 3.9%, or $10.6 million from the
first half of 1999. Demand in North America from our automotive customers
continued to be strong. Sales to the "Big Three" (GM, Ford and DaimlerChrysler)
grew 5% this quarter versus the second quarter of 1999. Sales to our heavy-duty
and mid-range diesel customers decreased 17% following a general decline in
these markets. European sales were up 13% versus the second quarter of 1999,
despite a stronger U.S. dollar. Sales in local currencies are running 20% better
than 1999 levels.
Cost of products sold as a percent of sales increased slightly from 88.4% in the
second quarter of 1999 to 88.5% this quarter. Cost of products sold as a
percentage of sales for the first six months of 2000 compared to the first half
of 1999 decreased from 88.8% to 88.7%.
During the first six months of 2000, the Company added staff to support new
programs. As a result, administrative and selling expenses increased from $2.7
million, or 2.0% of sales, in the second quarter of 1999 to $3.5 million, or
2.5% of sales, in the second quarter of 2000; administrative and selling
expenses for the first six months of 2000 increased from $5.5 million, or 2.0%
of sales, in 1999 to $6.8 million, or 2.4% of sales.
Interest expense increased from $4.3 million, or 1.6% of sales, in the first six
months of 1999 to $4.5 million, or 1.6% of sales in the first six months of
2000. Second quarter interest expense increased from $2.2 million in 1999, or
1.6% of sales, to $2.3 million in 2000, or 1.6% of sales.
Operating earnings for the first six months remained almost constant with $24.1
million in 2000 compared to $24.0 million in 1999. Second quarter operating
earnings decreased 7.5%, from $12.9 million in 1999 to $11.9 million in 2000. As
a result, net earnings were down 8.8%, from $7.0 million in the second quarter
of 1999 to $6.3 million in the second quarter of 2000; net earnings decreased
1.6% for the first six months of 2000, from $12.7 million to $12.5 million.
Cash flow from operations was $13.2 million for the first six months of 2000, a
decrease of $14.6 million from the first six months of 1999. This is the result
of an increase in customer tooling to support new programs and higher receivable
balances due to increasing sales volumes. In addition, cash flow for the first
six months of 1999 was impacted favorably by a change in supplier payment terms.
Net cash used in investing activities totaled $17.9 million for the six months
ended June 30, 2000, down $1.8 million from the $19.7 million used in the first
half of 2000. These expenditures represent the Company's investment in
production capacity for new automotive, light truck and diesel engine programs.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cash flow from financing activities increased $16.4 million, from ($12.2)
million through June 1999 to $4.2 million through June 2000. To offset the cash
used in operations as explained earlier, the Company increased its total
borrowings with $8.7 million during the first six months of 2000 compared to a
reduction of $7.2 million in the first six months of 1999. 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 dividends, and working capital requirements.
The Company maintains credit lines that allow for borrowings of up to $25
million under a five-year agreement and up to $50 million under a 364-day
agreement. At June 30, 2000, there were no borrowings outstanding under the
364-day agreement, and $13.4 million outstanding under the five-year agreement.
At June 30, 2000, $10 million of the borrowings under the five-year agreement
are classified as long-term based on management's intent and ability to maintain
this level of borrowing for a period in excess of one year. In June of 2000, the
364-day agreement was renewed.
Derivative Instruments and Hedging Activities: SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", was issued in June 1998. It
establishes accounting and reporting standards for derivative instruments and
hedging activities. As issued SFAS No. 133 is effective for all fiscal quarters
of all fiscal years beginning after June 15, 1999. In 1999 the Financial
Accounting Standards Board deferred the effective date of SFAS No. 133 with FASB
Statement No. 137, Accounting for Derivative Instruments and Hedging Activities
- - Deferral of the Effective Date of FASB Statement No. 133. SFAS No. 137 is
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. Any future effects will be incorporated into the current year's financial
statements.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended June 30, 2000, the Company did not experience any material
change in market risk exposures affecting the quantitative and qualitative
disclosures as presented in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
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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
10.10 Amendment to Letter Agreement with Roy E. Parrot, dated June
23, 2000
10.25 Third Amendment to Credit Agreement (364 Day), dated June
14, 2000, among Simpson Industries, Inc., certain other
Borrowers, certain Commercial Lending Institutions, ABN AMRO
Bank N.V., and Comerica Bank
10.27 Amendment to Letter Agreement with Vinod M. Khilnani, dated
June 23, 2000
10.29 Amendment to Letter Agreement with George A. Thomas, dated
June 23, 2000
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 June 30, 2000.
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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
August 10, 2000 /s/Vinod M. Khilnani
Vinod M. Khilnani
Vice President and Chief Financial Officer
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Exhibit Index
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Exhibit No. Description
10.10 Amendment to Letter Agreement with Roy E. Parrot, dated June
23, 2000
10.25 Third Amendment to Credit Agreement (364 Day), dated June
14, 2000, among Simpson Industries, Inc., certain other
Borrowers, certain Commercial Lending Institutions, ABN AMRO
Bank N.V., and Comerica Bank
10.27 Amendment to Letter Agreement with Vinod M. Khilnani, dated
June 23, 2000
10.29 Amendment to Letter Agreement with George A. Thomas, dated
June 23, 2000
11 Computation of Earnings Per Share
27 Financial Data Schedule