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FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
------------------
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 0-14659
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SIMCLAR, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1709103
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2230 West 77th Street, Hialeah, Florida 33016
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(305) 556-9210
----------------------------------------------------
(Registrant's telephone number, including area code)
TECHDYNE, INC.
---------------------------------------------------------------
(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 (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| or No |_|
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes |_| No |X|
Common Stock Outstanding
Common Stock, $.01 par value - 6,435,345 shares as of September 30, 2003
SIMCLAR, INC. AND SUBSIDIARIES
-------------------------------
INDEX
PART I -- FINANCIAL INFORMATION
- ------ ---------------------
The Consolidated Statements of Operations (Unaudited) for the three and
nine months ended September 30, 2003 and September 30, 2002 include the accounts
of the Registrant and its subsidiaries.
Item 1. Financial Statements
1) Consolidated Balance Sheets as of September 30, 2003 (Unaudited)
and December 31, 2002.
2) Consolidated Statements of Operations for the three and nine
months ended September 30, 2003 and September 30, 2002
(Unaudited).
3) Consolidated Statements of Cash Flows for the nine months ended
September 30, 2003 and September 30, 2002 (Unaudited).
4) Notes to Consolidated Financial Statements as of September 30,
2003 (Unaudited).
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------- ----------------------------------------------------------
Item 4. Controls and Procedures
- ------- -----------------------
PART II -- OTHER INFORMATION
- ------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
Signatures
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EXHIBITS
- --------
2
PART I -- FINANCIAL INFORMATION
-------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
SIMCLAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2003 2002(A)
-----------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 939,250 $ 1,536,965
Accounts receivable, less allowances of $244,000 at September 30 and December 31 5,206,163 4,473,938
Amounts receivable from major stockholder, net 1,757,740 1,944,669
Inventories, less allowances for obsolescence of $1,383,000 at September 30
and $1,115,000 at December 31 9,551,715 7,431,382
Prepaid expenses and other current assets 970,971 802,037
----------------------------
Total current assets 18,425,839 16,188,991
----------------------------
Property and equipment (Note 6):
Land and improvements 174,120 174,120
Buildings and building improvements -- 672,359
Machinery, computer and office equipment 7,266,228 6,417,050
Tools and dies 282,928 259,453
Leasehold improvements 673,702 679,183
----------------------------
8,396,978 8,202,165
Less accumulated depreciation and amortization 5,502,041 5,186,660
----------------------------
2,894,937 3,015,505
----------------------------
Deferred expenses and other assets, net 8,336 8,692
Goodwill 4,307,200 2,954,995
Intangibles, net 10,000 --
----------------------------
4,325,536 2,963,687
----------------------------
$25,646,312 $22,168,183
============================
(A) Reference is made to the company's Annual Report on Form 10-K for the
year ended December 31, 2002 filed with the United States Securities and
Exchange Commission on March 31, 2003.
CONTINUED ON FOLLOWING PAGE
3
SIMCLAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
September 30, December 31,
2003 2002(A)
------------------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 1,750,000 $ 1,500,000
Accounts payable 3,230,293 2,188,700
Accrued expenses 983,454 889,356
Accrued income taxes 547,281 519,617
Current portion of long-term debt 1,004,500 1,073,429
------------------------------
Total current liabilities 7,515,528 6,171,102
Long-term debt 4,250,000 5,314,753
Deferred trade accounts payable 2,500,000 --
Deferred income taxes 334,777 310,800
------------------------------
Commitments and contingencies
Total liabilities 14,600,305 11,796,655
------------------------------
Stockholders' equity:
Common stock, $.01 par value, authorized 10,000,000 shares; issued and
outstanding 6,435,345 and 6,556,990 shares at September 30 and December 31;
respectively 64,354 65,570
Capital in excess of par value 11,386,386 11,592,995
Accumulated deficit (207,238) (854,863)
Accumulated other comprehensive loss (197,495) (224,349)
Notes receivable from options exercised -- (207,825)
------------------------------
Total stockholders' equity 11,046,007 10,371,528
------------------------------
$ 25,646,312 $ 22,168,183
==============================
(A) Reference is made to the company's Annual Report on Form 10-K for the
year ended December 31, 2002 filed with the United States Securities and
Exchange Commission on March 31, 2003.
See notes to consolidated financial statements.
4
SIMCLAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------------------
2003 2002 2003 2002
--------------------------------------------------------------
Sales $ 9,600,665 $ 9,310,735 $24,696,571 $24,863,568
Cost of goods sold 8,477,537 7,982,369 21,384,316 21,511,095
--------------------------------------------------------------
Gross Margin 1,123,128 1,328,366 3,312,255 3,352,473
Selling, general and administrative expenses 804,923 725,305 2,175,771 2,170,028
--------------------------------------------------------------
Income from operations 318,205 603,061 1,136,484 1,182,445
--------------------------------------------------------------
Interest expense 53,759 71,084 170,949 214,179
Interest and other income 71,142 7,870 101,023 34,625
--------------------------------------------------------------
Income before income taxes 335,588 539,847 1,066,558 1,002,891
Income tax provision 124,881 -- 418,933 --
--------------------------------------------------------------
Net income $ 210,707 $ 539,847 $ 647,625 $ 1,002,891
==============================================================
Earnings per share:
Basic & deluted $ 0.03 $ 0.08 $ 0.10 $ 0.15
==============================================================
See notes to consolidated condensed financial statements
5
SIMCLAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
-----------------------------
2003 2002
-----------------------------
Operating activities:
Net income $ 647,625 $ 1,002,891
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 602,855 655,957
Amortization 63,269 63,872
Gain from insurance settlement on building destroyed by fire (55,621) --
Deferred expenses and other assets 1,099 2,801
Provision for inventory obsolescence 174,312 206,732
Changes relating to operating activities from:
Accounts receivable 95,098 (610,847)
Inventories 71,009 256,962
Prepaid expenses and other current assets (53,472) 51,424
Accounts payable 59,353 91,318
Accrued expenses (936) 79,163
Income taxes payable 48,454 --
-----------------------------
Net cash provided by operating activities 1,653,045 1,800,273
-----------------------------
Investing activities:
Acquisition on AG Technologies, Inc and subsidiary (1,949,247) --
Proceeds from insurance settlement on building destroyed by fire 535,022 --
Additions to property and equipment, net of minor disposals (157,861) (173,214)
-----------------------------
Net cash used in investing activities (1,571,861) (173,214)
-----------------------------
Financing activities:
Line of credit net borrowings 250,000 1,000,000
Payments on long-term bank borrowings (1,142,682) (794,785)
Receivable due from major shareholder, net borrowings (payments) 186,929 (1,769,605)
-----------------------------
Net cash used in financing activities (705,753) (1,564,390)
Effect of exchange rate fluctuations on cash 26,854 2,527
-----------------------------
(Decrease) increase in cash and cash equivalents (597,715) 65,196
Cash and cash equivalents at beginning of period 1,536,965 1,021,112
-----------------------------
Cash and cash equivalents at end of period $ 939,250 $ 1,086,308
=============================
Supplemental disclosure of cash flow information:
Interest paid in cash $ 183,599 $ 217,284
=============================
See notes to consolidated condensed financial statements
6
SIMCLAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Simclar,
Inc. ("Simclar") and its subsidiaries, including Simclar (Mexico), Inc.
("Simclar Mexico"), Techdyne (Europe) Limited ("Techdyne (Europe)"), and
Techdyne(Livingston) Limited, which is a subsidiary of Techdyne(Europe),
collectively referred to as the "company." On August 13, the company merged its
wholly owned subsidiary, Lytton Inc., into Simclar. All material intercompany
accounts and transactions have been eliminated in consolidation. The company is
a 72.4% owned subsidiary of Simclar Group Limited ("Simclar Group"), which
initially purchased the 71.3% interest of the company's former parent, Medicore,
Inc. ("Medicore") on June 27, 2001.
BUSINESS
The company operates in one business segment, the manufacture of
electronic and electro-mechanical products primarily manufactured to customer
specifications in the data processing, telecommunication, instrumentation and
food preparation equipment industries.
INVENTORIES
Inventories, which consist primarily of raw materials used in the
production of electronic components, are valued at the lower of cost (first-in,
first-out and/or weighted average cost method) or market value. The cost of
finished goods and work in process consists of direct materials, direct labor
and an appropriate portion of fixed and variable manufacturing overhead.
Inventories net of allowance for obsolescence are comprised of the following:
September 30, December 31,
2003 2002
-------------------------------
Finished goods $ 783,795 $ 703,754
Work in process 1,335,172 1,359,595
Raw materials and supplies 7,432,748 5,368,033
----------------------------
$9,551,715 $7,431,382
============================
LONG-LIVED ASSET IMPAIRMENT
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
long-lived assets to be held and used are reviewed for impairment whenever
events or circumstances indicate that the carrying amount may not be
recoverable. When required, impairment losses on assets to be held and used are
recognized based on the fair value of the asset. The fair value of these assets
is determined based upon estimates of future cash flows, market value of similar
assets, if available, or independent appraisals, if required. In analyzing the
fair value and recoverability using future cash flows, the company makes
projections based on a number of assumptions and estimates of growth rates,
future economic conditions, assignment of discount rates and estimates of
terminal values. An impairment loss is recognized if the carrying amount of the
long-lived
7
SIMCLAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
asset is not recoverable from its undiscounted cash flows. The measurement of
impairment loss is the difference between the carrying amount and fair value of
the asset. Long-lived assets to be disposed of and/or held for sale are reported
at the lower of carrying amount or fair value less cost to sell. We determine
the fair value of these assets in the same manner as described for assets held
and used. See Note 4.
REVENUE RECOGNITION
The company's sales are primarily derived from product manufacturing
including, but not limited to, finished molded and non-molded cables, wiring
harnesses, printed circuit board assemblies, electro-mechanical and electronic
assemblies. Revenue is recognized upon shipment of the product to the customer,
under contractual terms, which are generally FOB shipping point. Upon shipment,
title transfers and the customer assumes the risks and rewards of ownership of
the product. The selling price of the product is fixed and the ability to
collect for the sale to the customer is reasonably assured when the product is
shipped.
EARNINGS PER SHARE
Diluted earnings per share gives effect to potential common shares that
were dilutive and outstanding during the period, such as stock options and
warrants using the treasury stock method and average market price. No
potentially dilutive securities were included in the diluted earnings per share
computation for the three and nine months ended September 30, 2003 or for the
same period of the preceding year, as a result of exercise prices.
Following is a reconciliation of amounts used in the basic and diluted
computations:
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
-----------------------------------------------------------
Net income - numerator basic computation $ 210,707 $ 539,847 $ 647,625 $ 1,002,891
Weighted average shares - denominator basic computation 6,435,345 6,556,990 6,459,852 6,556,990
===========================================================
Earnings per share:
Basic $ 0.03 $ 0.08 $ 0.10 $ 0.15
===========================================================
Diluted $ 0.03 $ 0.08 $ 0.10 $ 0.15
===========================================================
COMPREHENSIVE INCOME
The company follows SFAS No. 130, "Reporting Comprehensive Income,"
which contains rules for the reporting of comprehensive income and its
components. Comprehensive income consists of net income and foreign currency
translation adjustments.
8
SIMCLAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
Below is a detail of comprehensive income for the three and nine months ended
September 30, 2003 and 2002:
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
----------------------------------------------------------------
Net Income $ 210,707 $ 539,847 $ 647,625 $1,002,891
Foreign currency translation 26,854 -- -- 2,527
----------------------------------------------------------------
Comprehensive Income $ 237,561 $ 539,847 $ 647,625 $1,005,418
================================================================
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2003, the company adopted the provisions of
Statement of Financial Accounting Standards No. 145, ("SFAS No. 145") which
updates and clarifies existing accounting pronouncements related to reporting
gains and losses from the extinguishment of debt and certain lease modifications
that have economic effects similar to sale-leaseback transactions. The adoption
of SFAS No. 145 did not have any material impact on the company's financial
position or results of operations.
Effective January 1, 2003, the company adopted the provisions of SFAS,
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3,
"Liability Recognition for Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under EITF Issue 94-3, a liability for an exit cost as defined in EITF
Issue 94-3 was recognized at the date of an entity's commitment to an exit plan.
The adoption of SFAS No. 146 did not have any material impact on the company's
financial position or results of operations.
Effective January 1, 2003, the company adopted the provisions of
Financial Accounting Standards Board, ("FASB") Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires that a
guarantor must recognize, at the inception of a guarantee, a liability for the
fair value of the obligation that it has undertaken in issuing a guarantee. FIN
No. 45 also addresses the disclosure requirements that a guarantor must include
in its financial statements for guarantees issued. The adoption of FIN No. 45
did not have any material impact on the company's financial position or results
of operations.
In December 2002, the FASB issued SFAS, No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS
Statement No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the prior disclosure guidance and requires prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The provisions of SFAS No. 148 are generally
9
SIMCLAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
effective for fiscal years ending after December 15, 2002. At this time, the
company does not plan to adopt the accounting provisions of SFAS No. 123 and
will continue to account for stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities" (an interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements"), which becomes effective for the company in
October 2003. FIN No. 46 provides consolidation guidance for certain variable
interest entities ("VIE") in which equity investors of the VIE do not have the
characteristics of a controlling interest or do not have sufficient equity at
risk for the VIE to finance its activities independently. FIN No. 46 requires
each enterprise involved with a special purpose entity to determine whether it
provides financial support to the special purpose entity through a variable
interest. Variable interests may arise from financial instruments, service
contracts, minority ownership interests or other arrangements. If an entity
holds a majority of the variable interests, or a significant variable interest
that is considerably more than any other party's variable interest, that entity
would be the primary beneficiary and would be required to include the assets,
liabilities and results of operations of the special purpose entity in its
consolidated financial statements. The company does not expect the adoption of
FIN 46 to have a material impact on its financial position or results of
operations.
NOTE 2-INTERIM ADJUSTMENTS
The financial summaries for the three and nine months ended September
30, 2003 and 2002, respectively, are unaudited and include, in the opinion of
management of the company, all adjustments consisting of normal recurring
accruals necessary to present fairly the earnings for such periods. Operating
results for the three and nine months ended September 30, 2003 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 2003.
While the company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these Consolidated
Financial Statements be read in conjunction with the financial statements and
notes included in the company's latest Annual Report on Form 10-K for the year
ended December 31, 2002.
NOTE 3-AMOUNTS RECEIVABLE FROM MAJOR STOCKHOLDER
On September 3, 2002, the company received a demand note from Simclar
Group in the amount of $1,500,000 in exchange for cash. The note bears interest
at LIBOR plus 2%. The balance of the demand note and other net intercompany
items due from Simclar Group was $1,757,740 and $1,944,669 at September 30, 2003
and December 31, 2002, respectively.
10
SIMCLAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 4-NOTES RECEIVABLE FROM OPTIONS EXERCISED
On February 27, 1995 the company granted non-qualified stock options, to
directors of Simclar and its former subsidiary for 142,500 shares exercisable at
$1.75 per share for five years. In April 1995, the company granted a
non-qualified stock option for 10,000 shares, which vested immediately, to its
general counsel at the same price and terms as the directors' options. On
February 25, 2000, 145,000 of these options were exercised. The company received
cash payment of the par value and the balance in three-year promissory notes
totaling $207,825, which is presented in the stockholders' equity section of the
balance sheet, with interest at 6.19%. The notes, which were due in February
2003, were not repaid and, as a result, the notes as well as the related balance
sheet entries for common stock and capital in excess of par value were written
off in the first quarter of 2003. The common shares issued upon the exercise of
these options have been cancelled.
NOTE 5-INCOME TAXES
The company files separate federal and state income tax returns from
Simclar Group with its income tax liability reflected on a separate return
basis.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
The company had $125,000 and $410,000 domestic income tax expense for
the three and nine months ended September 30, 2003 respectively and no domestic
income tax expense for the three and nine months ended September 30, 2002 due to
the reversal of a tax allowance reserve established in 2001 on its available tax
loss carryforwards.
Income tax payments amounted to $35,800 and $449,000 for the three and
nine months ended September 30, 2003, respectively and $0 for the same period of
the preceding year.
NOTE 6-CESSATION OF SCOTLAND MANUFACTURING OPERATIONS
As a result of continuing operating losses, in 2001 the company decided
to discontinue the manufacturing operations of its European subsidiary, Techdyne
(Europe).
With the cessation of the sales and manufacturing activities, the
company made the land, building and equipment available for sale during the
third quarter of 2001. On February 28, 2002, the company agreed to transfer to
Simclar Group at net book value the operating assets of Techdyne (Europe) except
for the land and building. Included in property and equipment at September 30,
2003, is the Scottish land, which was sold on October 17, 2003 for
(pound)120,000 ($174,120) before selling expenses.
On April 2, 2003 the Techdyne (Europe) building located in Livingston,
Scotland was destroyed by a fire started by vandalism. The claims with the
insurance companies were settled during the third quarter in the amount of
(pound)364,900 ($588,185) less demolition expenses. The company realized a net
gain on this disposition of (pound)34,500 ($55,621).
11
SIMCLAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
NOTE 7--ACQUISITION OF AG TECHNOLOGIES, INC.
On July 15, 2003, the company acquired for cash, all of the outstanding
stock of AG Technologies, Inc., a privately owned company based in Schaumburg,
Illinois. The company name was changed to Simclar (Mexico), Inc ("Simclar
Mexico") on August 29, 2003. Additional consideration of up to $1,300,000 is
payable based on Simclar Mexico's net sales in each of the three years ending
July 14, 2004, 2005 and 2006. Simclar Mexico is an international value added
provider of comprehensive electronic manufacturing services to OEMs serving the
automotive, industrial controls, medical and power equipment industries. Simclar
Mexico's Mexican facility will enable the company to be competitive in the
higher volume arena for assembly in North America. Simclar Mexico additionally
brings with it an impressive list of customers in a broad range of industries
and extensive manufacturing and design relationships in Asia.
The acquisition was accounted for by the purchase method of accounting
under SFAS No. 141, "Business Combinations." The purchase price for the
acquisition, including loan repayment and net of cash received, totaled
$1,949,247 and was allocated to assets acquired and liabilities assumed based on
estimated fair values at the date of acquisition. The company recorded
$1,352,205 of goodwill and $10,000 of intangibles based on the opening balance
sheet. Additional consideration payable based on Simclar Mexico's sales in the
next three years could increase the amount of this goodwill to $2,652,205.
The preliminary purchase allocation is as follows:
Current Assets $3,308,439
Equipment 867,322
Goodwill 1,352,205
Intangibles 10,000
Other assets 743
----------
Total Assets acquired $5,538,709
----------
Current liabilities $1,556,485
Long-term debt 9,000
Long-term liabilities 2,023,977
----------
Total liabilities $3,589,462
----------
Net assets acquired $1,949,247
----------
Results of operations have been included in the company's consolidated
financial statements prospectively from the date of acquisition. The following
table summarizes selected Unaudited pro forma financial information for the
three-month and nine-month periods ended September 30,2003 and 2002,
respectively, as if Simclar Mexico had been acquired at the beginning of 2003
and 2002. The audited pro forma financial information includes adjustments for
income taxes, prepaid expenses, accrued expenses, depreciation and amortization.
12
SIMCLAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
The pro forma financial information does not necessarily reflect the
results that would have occurred if the acquisition had been in effect for the
periods presented. In addition, they are not intended to be a projection of
future results and do not reflect any synergies that might be achieved from
combining the operations.
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
-----------------------------------------------------------
Net sales $ 2,415,870 $ 3,218,180 $ 7,392,999 $ 7,788,663
Net Income(loss) 176,269 230,364 100,003 (77,319)
===========================================================
Earnings per share:
Basic $ 0.03 $ 0.04 $ 0.02 $ (0.01)
===========================================================
Diluted $ 0.03 $ 0.04 $ 0.02 $ (0.01)
===========================================================
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
FORWARD-LOOKING INFORMATION
This report includes certain forward-looking statements with respect to
the company and its business that involve risks and uncertainties. These
statements are influenced by the company's financial position, business
strategy, budgets, projected costs and the plans and objectives of management
for future operations. They use words such as anticipate, believe, plan,
estimate, expect, intend, project and other similar expressions. Although we
believe our expectations reflected in these forward-looking statements are based
on reasonable assumptions, we cannot assure the reader that our expectations
will prove correct. Actual results and developments may differ materially from
those conveyed in the forward-looking statements. For these statements, the
company claims the protections for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Important factors such as changes in general economic, business and
market conditions, as well as changes in such conditions that may affect
industries or the markets in which the company operates, including, in
particular, the continuation of the worldwide recession in the
telecommunications and electronics sectors, could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
made in this Form 10-Q. Further, information on other factors that could affect
the financial results of Simclar is included in the company's other filings with
the Securities and Exchange Commission (the "Commission"). These documents are
available free of charge at the Commission's website at http://www.sec.gov
and/or from Simclar. The forward-looking statements speak only as of the date on
which they are made, and the company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this report.
The company's operations have continued to depend upon a relatively
small number of customers for a significant percentage of its net revenue.
Significant reductions in sales to any of the company's large customers would
have a material adverse effect on our results of operations. The level and
timing of orders placed by a customer vary due to the customer's attempts to
balance its inventory, design modifications, changes in a customer's
manufacturing strategy, acquisitions of or consolidations among customers, and
variation in demand for a customer's products due to, among other things,
product life cycles, competitive conditions and general economic conditions.
Termination of manufacturing relationships or changes, reductions or delays in
orders could have an adverse effect on the company's results of operations and
financial condition, as has occurred in the past. The company's results also
depend to a substantial extent on the success of our original equipment
manufacturer ("OEM") customers in marketing their products. The company
continues to seek to diversify its customer base to reduce its reliance on the
company's few major customers.
The industry segments the company serves, and the electronics industry
as a whole, are subject to rapid technological change and product obsolescence.
Discontinuance or modification of products containing components manufactured by
the company could adversely affect the results of operations. The electronics
industry is also subject to economic cycles and has in the past experienced, and
is likely in the future to experience, recessionary periods. A prolonged
worldwide recession in the electronics industry, as has been experienced since
the third quarter of 2000, has had a material adverse effect on business and
financial condition and has required us to realign the company's organization
and operations beginning the second half of 2001 and continuing through the
third quarter of 2003. The company typically does not obtain long-term volume
purchase contracts from customers, but rather we work with our customers to
anticipate future volumes of orders. Based upon these anticipated future orders
and considering the level of production schedules and facilities utilization,
the company will make commitments regarding the acceptable level of new
business. Occasionally, the company purchases raw materials without a customer
order or commitment. Customers may cancel, delay or reduce orders, usually
without penalty, for a variety of reasons, whether relating to the customer or
the industry in general. Any significant cancellations, reductions or order
delays could adversely affect results of operations.
14
The company uses "Electronic Data Interchange" ("EDI") with customers
and suppliers in an effort to continuously develop accurate forecasts of
customer volume requirements, as well as sharing future requirements with
suppliers. The company depends on the timely availability of many components.
Component shortages could result in manufacturing and shipping delays or
increased component prices, which could have a material adverse effect on
results of operations. In anticipation of future sales, it is important for the
company to efficiently manage inventory by assuring proper timing of
expenditures and allocations of physical and personnel resources used in
manufacturing.
The company must continuously develop improved manufacturing procedures
to accommodate customers' needs for increasingly complex products. To continue
to grow and be a successful competitor, the company must be able to maintain and
enhance its technological capabilities, develop and market manufacturing
services which meet changing customer needs and successfully anticipate or
respond to technological changes in manufacturing processes on a cost-effective
and timely basis. Although the company believes that its operations utilize the
assembly and testing technologies and equipment currently required by customers,
there can be no assurance that process development efforts will be successful or
that the emergence of new technologies, industry standards or customer
requirements will not render the company's technology, equipment or processes
obsolete or noncompetitive. In addition, to the extent that the company
determines that new assembly and testing technologies and equipment are required
to remain competitive, the acquisition and implementation of such technologies
and equipment are likely to require significant capital investment.
Results of operations are also affected by other factors, including
price competition, the level and timing of customer orders, fluctuations in
material costs (due to availability), the overhead efficiencies achieved by
management in managing the costs of operations, experience in manufacturing a
particular product, the timing of expenditures in anticipation of increased
orders, selling, and general and administrative expenses. Accordingly, gross
margins and operating income margins have generally improved during periods of
high volume and high capacity utilization. The company generally has idle
capacity and reduced operating margins during periods of lower-volume
production.
The company competes with much larger electronic manufacturing entities
for expansion opportunities. Any acquisitions may result in potentially dilutive
issuance of equity securities, the incidence of debt and amortization expenses
related to intangible assets, and other costs and expenses, all of which could
materially affect financial results adversely. Acquisition transactions also
involve numerous business risks, including difficulties in successfully
integrating the acquired operations, technologies and products or formalizing
anticipated synergies, and the diversion of management's attention from other
business concerns.
CRITICAL ACCOUNTING ESTIMATES
In preparing its financial statements and accounting for the underlying
transactions and balances, the company has applied the accounting policies as
disclosed in the Notes to the Consolidated Financial Statements contained in the
company's annual report on Form 10-K for the year ended December 31, 2002.
Preparation of the company's financial statements requires company management to
make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results may differ from those estimates.
The company considers the policies discussed below as critical to an
understanding of its financial statements because their application places the
most significant demands on management's judgment, with financial reporting
results relying on estimates about the effect of matters that are inherently
uncertain. Specific risks for these critical accounting estimates are described
in the following paragraphs. The impact and any associated risks related to
these estimates on the company's business operations are discussed throughout
this Management's Discussion and Analysis of Financial Condition and Results of
Operations where such estimates affect reported and expected financial results.
The impact of changes in the estimates and assumptions pertaining to
15
restructuring, impairment, and business combinations is directly reflected in
the financial results of the individual segment. The impact of change in
estimates and assumptions related to pension and postretirement healthcare
benefit plans affect segment results through an allocation of corporate expense.
For a detailed discussion of the application of these and other accounting
policies, see "Summary of Significant Accounting Policies" in the Notes to the
Consolidated Financial Statements contained in the company's annual report on
Form 10-K for the year ended December 31, 2002. Management has discussed the
development and selection of the critical accounting estimates and the related
disclosure included herein with the Audit Committee of the Board of Directors.
ALLOWANCE FOR DOUBTFUL ACCOUNTS-The company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of customers
to make required payments. Based on historical information, the company believes
that our allowance is adequate. However, changes in general economic, business
and market conditions could affect the ability of customers to make their
required payments; therefore, the allowance for doubtful accounts is reviewed
monthly and changes to the allowance are updated as new information is received.
ALLOWANCE FOR INVENTORY OBSOLESCENCE- The company maintains an
allowance for inventory obsolescence for losses resulting from inventory items
becoming unusable in the manufacturing operations due to loss of a specific
customer or a customer's product changes or discontinuations. Based on
historical and projected sales information and concentration of customers, the
company believes that the allowance is adequate. However, changes in general
economic, business and market conditions could cause customers to cancel, reduce
or reschedule orders. These changes could affect the company inventory turn
over; therefore, the allowance for inventory obsolescence is reviewed monthly
and changes to the allowance are updated as new information is received.
INCOME TAXES-Deferred income taxes at the end of each period are
determined by applying enacted tax rates applicable to future periods in which
the taxes are expected to be paid or recovered to differences between the
financial accounting and tax basis of assets and liabilities.
LONG-LIVED ASSETS- In accordance with Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," long-lived assets to be held and used are reviewed for
impairment whenever events or circumstances indicate that the carrying amount
may not be recoverable. When required, impairment losses on assets to be held
and used are recognized based on the fair value of the asset. The fair value of
these assets is determined based upon estimates of future cash flows, market
value of similar assets, if available, or independent appraisals, if required.
In analyzing the fair value and recoverability using future cash flows, the
company makes projections based on a number of assumptions and estimates of
growth rates, future economic conditions, assignment of discount rates and
estimates of terminal values. An impairment loss is recognized if the carrying
amount of the long-lived asset is not recoverable from its undiscounted cash
flows. The measurement of impairment loss is the difference between the carrying
amount and fair value of the asset. Long-lived assets to be disposed of and/or
held for sale are reported at the lower of carrying amount or fair value less
cost to sell. The company determines the fair value of these assets in the same
manner as described for assets held and used. See "Long-Lived Asset Impairment"
in Note 1 to the consolidated financial statements included in this report.
REVENUE RECOGNITION- The company's sales are primarily derived from
product manufacturing including, but not limited to, finished molded and
non-molded cables, wiring harnesses, printed circuit board assemblies,
electro-mechanical and electronic assemblies. Revenue is recognized upon
shipment of the product to the customer, under contractual terms, which are
generally FOB shipping point. Upon shipment, title transfers and the customer
assumes the risks and rewards of ownership of the product. The selling price of
the product is fixed and the ability to collect for the sale to the customer is
reasonably assured when the product is shipped.
16
RESULTS OF OPERATIONS
Consolidated sales increased approximately $290,000 for the three
months ended September 30, 2003, compared to the same period of the preceding
year. Consolidated sales decreased approximately $167,000 for the nine months
ended September 30, 2003, compared to the same period of the preceding year.
During the quarter ended September 30, 2003, sales were increased $2,416,000 by
the acquisition of Simclar Mexico, while sales decreases were caused by price
decreases in memory components, which required the company to reduce its selling
price to one of its major customers.
Interest and other income increased by approximately $63,000 and
$66,000 for the three and nine months ended September 30, 2003, compared to the
same period of the preceding year. This increase is due to the insurance claim
settlement for the building located in Scotland destroyed by fire on April 2,
2003.
Approximately 20.1% and 21.1% of the company's consolidated sales for
the three and nine months ended September 30, 2003, respectively, were made to
one customer.
Cost of goods sold as a percentage of sales amounted to 88.3% and 86.6%
for the three and nine months ended September 30, 2003, respectively, and 85.7%
and 86.5% for the same period of the preceding year. The decrease in production
volume in two of our facilities during the quarter was the primary reason for
increase in our cost of goods sold as a percentage of sales compared to prior
periods for both the three months and nine months period.
Selling, general and administrative expenses increased by approximately
$80,000 and $6,000 for the three and nine months ended September 30, 2003,
respectively, compared to the same period of the preceding year. The selling,
general and administrative expenses of $96,000 for Simclar Mexico facilities for
the three months ended September 30, 2003, were higher than the total company's
increase for three and nine months period ended September 30, 2003, compared to
the prior year's periods, the reflecting the continual overall result of
management's various cost reduction programs These expenses include fees and
expenses of approximately $25,000 incurred in connection with the acquisition of
Simclar Mexico.
Interest expense decreased approximately $17,000 and $43,000 for the
three and nine months ended September 30, 2003, respectively, compared to the
same period of the preceding year, reflecting lower interest rates during the
2003 period. The LIBOR was 1.13% and 1.88% at September 30, 2003 and 2002,
respectively.
Income taxes increased by $125,000 and $419,000 for the three and nine
months ended September 30, 2003, respectively, compared to the same periods in
2002. This increase resulted from the company utilizing the benefits of tax loss
carryforwards benefits from prior years in the 2002 period.
SUBSEQUENT EVENT
During October 2003 the company settled its litigation with Nexans,
Inc. with a payment of $47,450 which was provided for in previous quarters'
results of operations. For additional information on this legal matter please
refer to page 19 of the company's 10-K report filed with the Securities and
Exchange Commission on March 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
The company's cash and cash equivalents balance at September 30, 2003,
was approximately $939,000 compared to approximately $1,537,000 at December 31,
2002. Net cash provided by operating activities was approximately $1,653,000 in
the nine months ended September 30, 2003, compared to approximately $1,800,000
provided in the same period of the preceding year. The decrease in cash provided
17
by operating activities was primarily due to the decrease in earnings for the
period compared to the prior year's period.
At September 30, 2003, the company's average days of sales outstanding
in accounts receivable for the quarter was 50 days as compared to 47 days at
September 30, 2002. The increase in average days of sales outstanding in
accounts receivable is primarily due to the acquisition of Simclar Mexico and
the reduced volume of business with a major customer during the quarter. Average
inventory turnover was 3.5 and 3.7 times for the nine months ended September 30,
2003 and 2002, respectively. The decrease in inventory turnover is due primarily
to the Simclar Mexico acquisition.
Cash used in investing activities was approximately $1,572,000 in the
nine months ended September 30, 2003, compared to approximately $173,000 used
for investing activities in the same period of the preceding year. Cash used in
investing activities was primarily for the acquisition of Simclar Mexico, less
the proceeds from the settlement of the insurance claim from the building in
Scotland.
Cash used in financing activities was approximately $706,000 in the
nine months ended September 30, 2003, compared to approximately $1,564,000 used
in the same period of the preceding year. Cash used in financing activities was
primarily for debt reduction. The company made all scheduled repayments on its
long term debt during the period.
On October 24, 2001, the company entered into two credit facilities
with Bank of Scotland in Edinburgh, Scotland for an aggregate borrowing of
$10,000,000. The financing included a $3,000,000 line of credit, which expired
July 19, 2003, with an interest rate at LIBOR plus 1.5% for a one, three or six
month period, at the company's election. The bank renewed the line of credit on
the same terms, which now expires on September 30, 2004. The company elected the
three-month interest period at 2.63% until October 24, 2003, after this date the
rate is 2.69% until January 24, 2004. This line of credit had an outstanding
balance of $1,750,000 at September 30, 2003. The financing also included a
seven-year term loan of $7,000,000 at the same interest rate as the line of
credit. The term loan specifies quarterly payments of $250,000 due in January,
April, July and October of each year, plus interest. The term loan had an
outstanding balance of $5,250,000 at September 30, 2003.
The credit facilities are collateralized by all the assets of the
company, excluding Techdyne (Europe), and require affirmative and negative
covenants be maintained by the company. Certain of the affirmative covenants
require maintenance of a consolidated adjusted net worth greater than
$10,500,000 and $11,000,000 after September 30, 2003; a ratio of consolidated
current assets to consolidated net borrowing not less than 1.75 to 1; a ratio of
consolidated trade receivables to consolidated net borrowings not less than .75
to 1; and a ratio of consolidated net income before interest and income taxes to
total consolidated interest costs not less than 2 to 1. Some of the negative
covenants, prohibit (1) granting or permitting a security agreement against the
consolidated assets of the companies other than permitted security agreements,
(2) declaring or paying any dividends or making any other payments on the
company's capital stock, (3) consolidating or merging with any other entity or
acquiring or purchasing any equity interest in any other entity, or assuming any
obligations of any other entity, except for notes and receivables acquired in
the ordinary course of business, (4) incurring, assuming, guaranteeing, or
remaining liable with respect to any indebtedness, except for certain existing
indebtedness disclosed in these financial statements, or (5) undertaking any
capital expenditure in excess of $1,000,000 in any one fiscal year. The
agreements also preclude changes in ownership in the companies, any material
change in any of the company's business objectives, purposes, operations and tax
residence or any other circumstances or events which will have a material
adverse effect as defined by the agreements. The Bank of Scotland consented to
the Simclar Mexico acquisition on July 15, 2003.
On October 11, 2001, Techdyne (Europe) entered into a credit facility
with Bank of Scotland for an amount of (pound)275,000 ($399,025). This facility
comprises an eight-year term loan repayable in quarterly payments of
(pound)8,594 ($13,788) due in January, April, July and October of each year,
with an interest rate of Bank of Scotland base rate plus 1.5% (effectively 5.4%
at December 31, 2002). This term loan in the amount of (pound)214,844($319,999)
was paid off on September 1, 2003.
18
The company's ability to comply with bank covenants may be affected by
changes in financial condition or results of operations, or other events beyond
the company's control. The breach of any of these covenants would result in
default under the company's credit facilities. At September 30, 2003, the
company was in compliance with the bank covenants.
The company indebtedness requires it to dedicate a substantial portion
of its cash flow from operations to payments of debt, which could reduce amounts
for working capital and other general corporate purposes. The restrictions in
the company's credit facility could also limit its flexibility in reacting to
changes in business and increases vulnerability to general adverse economic and
industry conditions.
The following table summarizes the company's significant contractual obligations
at September 30, 2003:
Total Less than 1-3 4-5 Over 5
In thousands Amounts 1 Year Years Years Years
------------------------------------------------------
Long-term debt $5,255 $1,005 $2,000 $2,000 $ 250
Operating leases
(non-cancelable) 2,536 565 844 758 369
Bank line of credit 1,750 1,750 -- -- --
-------------------------------------------------------
Total contractual $9,541 $3,320 $2,844 $2,758 $ 619
=======================================================
Management will continue to seek acquisitions that will add talent,
technology, and capabilities that advance the company's strategy and prospects.
Management believes that the combination of internally generated funds,
available cash reserves, and the credit facility are sufficient to fund the
company's operations over the next year.
OFF BALANCE SHEET ARRANGEMENTS
The company has no off balance sheet financing arrangements with
related or unrelated parties and no unconsolidated subsidiaries.
NEW PRONOUNCEMENTS
Effective January 1, 2003, the company adopted the provisions of
Statement of Financial Accounting Standards No. 145 ("SFAS No. 145"), which
updates and clarifies existing accounting pronouncements related to reporting
gains and losses from the extinguishment of debt and certain lease modifications
that have economic effects similar to sale-leaseback transactions. The adoption
of SFAS No. 145 did not have any material impact on the company's financial
position or results of operations.
Effective January 1, 2003, the company adopted the provisions of SFAS,
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3,
"Liability Recognition for Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under EITF Issue 94-3, a liability for an exit cost as defined in EITF
Issue 94-3 was recognized at the date of an entity's commitment to an exit plan.
The adoption of SFAS No. 146 did not have any material impact on the company's
financial position or results of operations.
19
Effective January 1, 2003, the company adopted the provisions of the
Financial Accounting Standards Board, ("FASB") issued Interpretation ("FIN") No.
45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires
that a guarantor must recognize, at the inception of a guarantee, a liability
for the fair value of the obligation that it has undertaken in issuing a
guarantee. FIN No. 45 also addresses the disclosure requirements that a
guarantor must include in its financial statements for guarantees issued. The
adoption of FIN No. 45 did not have any material impact on the company's
financial position or results of operations.
In December 2002, the FASB issued SFAS, No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS
Statement No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the prior disclosure guidance and requires prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The provisions of SFAS No. 148 are generally effective for
fiscal years ending after December 15, 2002. At this time, the company does not
plan to adopt the accounting provisions of SFAS No. 123 and will continue to
account for stock options in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees."
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities" (an interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements"), which becomes effective for the company in
October 2003. FIN No. 46 provides consolidation guidance for certain variable
interest entities ("VIE") in which equity investors of the VIE do not have the
characteristics of a controlling interest or do not have sufficient equity at
risk for the VIE to finance its activities independently. FIN No. 46 requires
each enterprise involved with a special purpose entity to determine whether it
provides financial support to the special purpose entity through a variable
interest. Variable interests may arise from financial instruments, service
contracts, minority ownership interests or other arrangements. If an entity
holds a majority of the variable interests, or a significant variable interest
that is considerably more than any other party's variable interest, that entity
would be the primary beneficiary and would be required to include the assets,
liabilities and results of operations of the special purpose entity in its
consolidated financial statements. The company does not expect the adoption of
FIN 46 to have a material impact on its financial position or results of
operations.
INFLATION
Inflationary factors have not had a significant effect on operations.
The company attempts to pass on increased costs and expenses by increasing
selling prices when and where possible and by developing different and improved
products for customers that can be sold at targeted profit margins.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------
The company is exposed to market risks from changes in interest rates
and foreign currency exchange rates.
Sensitivity of results of operations to interest rate risks on
investments is managed by conservatively investing liquid funds in short-term
government securities and interest-bearing accounts at financial institutions in
which the company had invested approximately $39,000 at September 30, 2003.
Interest rate risks on debt are managed by negotiation of appropriate
rates on new financing obligations based on current market rates. There is an
interest rate risk associated with the company's variable debt agreements, which
totaled approximately $7,005,000 at September 30, 2003.
20
The company has exposure to both rising and falling interest rates. A
1/2% decrease in rates on the company's investments at the end of the reporting
period would be insignificant. A 1% increase in rates on the company's variable
rate debt at the end of the reporting period would result in a negative impact
of approximately $18,000 on results of operations.
The company's exposures to market risks are impacted by changes in the
foreign currency exchange rates relates to the company's European subsidiary
whose results of liquidation, when translated into U.S. dollars, are impacted by
changes in foreign exchange rate. A 10% strengthening of the U.S. dollar against
the local Scottish currency, the pound, would have an insignificant impact on
three months earnings. The company has not incurred any significant realized
losses on exchange transactions and does not utilize foreign exchange contracts
to hedge foreign currency fluctuations. If realized losses on foreign
transactions were to become significant, the company would evaluate appropriate
strategies, including the possible use of foreign exchange contracts, to reduce
such losses.
ITEM 4. CONTROLS AND PROCEDURES
-----------------------
As of the end of the period covered by this report, the company carried
out an evaluation, under the supervision and with the participation of our
principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our principal executive officer and
principal financial officer concluded that our disclosure controls and
procedures are effective to provide reasonable assurance that the company's
disclosure controls and procedures will timely alert them to material
information required to be included in our periodic SEC reports.
As of the end of the period covered by this report, there has been no
change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended)
during the quarter to which this report relates that has materially affected or
is reasonably likely to materially affect, our internal control over financial
reporting.
21
PART II -- OTHER INFORMATION
------- -----------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
Simclar, Inc. held special shareholders meeting on August 29, 2003
where the shareholders approved amending the company's articles of incorporation
to change its name to "Simclar, Inc." The votes cast were 4,841,462 in favor,
and none opposed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits
Description
Exhibit 3.1 Amended and Restated Articles of Incorporation.
Exhibit 10.1 Stock Purchase Agreement dated as of July 15, 2003,
by and among Techdyne, Inc., as Buyer, and Ralph F.
Silvers, Steven M. Breen, Douglas Kvalvog and
Raymond Hill, as Sellers.
Exhibit 10.2 Service Agreement between the Company and Simclar
Group Limited, effective July 16, 2003
Exhibit 31.1 Certification of Chief Executive Officer pursuant
to section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer pursuant
to section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of Chief Executive Officer of
Periodic Financial Reports pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
Exhibit 32.2 Certification of Chief Financial Officer of
Periodic Financial Reports pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
(b) Reports on Form 8-K
Current Report on Form 8-K dated July 16, 2003, reporting the
acquisition of AG Technologies, Inc.
Current Report on Form 8-K dated July 17, 2003 (amended on July
18, 2003), reporting a change in the registrant's certifying
accountant.
Current Report on Form 8-K dated August 14, 2003, reporting
financial results for the quarter ending June 30, 2003.
Current Report on Form 8-K dated September 4, 2003 where the
company reported shareholders approval of the company's name
change to Simclar, Inc. and the change in its ticker symbol to
"SIMC."
ITEMS 1,2 3 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED
- ----------------------------------------------------------
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.
SIMCLAR, INC.
By /s/ Barry J. Pardon
---------------------------------------
BARRY J. PARDON, President
By /s/David L. Watts
---------------------------------------
DAVID L. WATTS, Chief Financial Officer
Dated: November 14, 2003