SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
20549
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FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 2001
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From to
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Commission file number 001-01416
SAMES CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 36-0808480
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9201 WEST BELMONT AVENUE, FRANKLIN PARK, ILLINOIS 60131
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(Address of principal executive offices)
Registrant's telephone number, including area code 847-737-5970
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Class Outstanding as of April 30, 2001
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Capital Stock, $1.00 par value per share 2,934,602
SAMES CORPORATION
AND CONSOLIDATED SUBSIDIARIES
Form 10-Q Index
Part I. Financial Information
PAGE
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Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2001 (unaudited) and December 31, 2000 2
Consolidated Statements of Operations (unaudited)
Three months ended March 31, 2001 and
March 31, 2000 3
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 2001 and March 31, 2000 4
Notes to Consolidated Financial Statements 5-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
Information Regarding Forward Looking Statements 16
Part II. Other Information
Item 1. Legal Proceedings 17-18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
-1-
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Company or group of companies for which report is filed:
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2001 (Unaudited), and December 31, 2000
(in thousands, except share amounts)
March 31, Dec 31,
2001 2000
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ASSETS
Current assets:
Cash $ 1,458 2,020
Receivables, net 29,733 38,942
Inventories 12,070 12,066
Other current assets 1,386 1,065
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Total current assets 44,647 54,093
Other noncurrent assets 2,714 2,600
Property, plant and equipment, at cost 10,605 11,398
Less accumulated depreciation 6,065 6,345
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Net property, plant and equipment 4,540 5,053
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$ 51,901 61,746
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, bank overdrafts
and current maturities of long-term debt $ 8,081 11,409
Accounts payable 21,040 26,387
Other current liabilities 10,805 9,570
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Total current liabilities 39,926 47,366
Deferred compensation 3,714 3,825
Note payable, net of discount of $606 and $673, respectively 1,591 1,909
Deferred income taxes 19 22
Long-term debt, less current maturities 1,192 1,047
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Total liabilities 46,442 54,169
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Stockholders' equity:
Common stock, $1.00 par value. Authorized 12,000,000
shares; issued 2,966,837 shares at
March 31, 2001 and December 31, 2000 2,967 2,967
Additional paid-in capital 19,660 19,661
Accumulated deficit (13,243) (11,457)
Accumulated other comprehensive loss --
foreign currency translation adjustments (3,416) (3,083)
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5,968 8,088
Treasury stock, at cost, 32,235 and 32,369
shares at March 31, 2001 and December 31, 2000,
respectively (509) (511)
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Total stockholders' equity 5,459 7,577
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$ 51,901 61,746
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-2-
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share amounts)
For the three
months ended
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March 31, March 31,
2001 2000
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Net sales $ 14,391 22,614
Cost of goods sold 9,396 14,814
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Gross profit 4,995 7,800
Selling, general and administrative expenses 5,534 6,489
Research and development costs 596 642
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Operating income (loss) (1,135) 669
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Other expense:
Interest expense 270 263
Other expense 334 49
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604 312
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Income (loss) from continuing operations
before income taxes (1,739) 357
Income tax expense (benefit) (228) 114
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Income (loss) from continuing operations,
net of tax (1,511) 243
Loss from discontinued operations, net of tax (275) (484)
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Net loss $ (1,786) (241)
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Income (loss) per share - basic
Continuing operations $ (.52) .08
Discontinued operations (.09) (.16)
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Net loss $ (.61) (.08)
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Income (loss) per share - diluted
Continuing operations $ (.52) .08
Discontinued operations (.09) (.16)
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Net loss $ (.61) (.08)
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Weighted average shares:
Basic 2,934 2,932
Effect of stock options - 5
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Diluted 2,934 2,937
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-3-
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands of dollars)
For the three
months ended
--------------------------------
March 31, March 31,
2001 2000
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Cash flows from operating activities:
Continuing operations:
Income (loss) from continuing operations $ (1,511) 243
Adjustments to reconcile income (loss) from continuing operations to net
cash provided by operating activities:
Depreciation and amortization 269 228
Payments of previously deferred compensation, net (81) (84)
Other, net 19 8
Cash provided (used) by changes in:
Receivables 6,771 1,557
Inventories (515) 978
Other current assets (450) (149)
Accounts payable (3,935) (1,085)
Accrued expenses 1,876 (178)
Income taxes (13) 20
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Net cash provided by continuing operations 2,430 1,538
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Cash flows from investing activities:
Purchases of property, plant and equipment (43) (305)
Other investments and assets (138) (3)
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Net cash used by investing activities (181) (308)
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Cash flows from financing activities:
Net decrease in short term borrowings (2,512) (2,085)
Repurchase of capital stock, net -- (63)
Proceeds from borrowings -- 157
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Net cash used by financing activities (2,512) (1,991)
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Net cash provided (used) by discontinued operations (247) 501
Effect of exchange rate changes on cash (52) (8)
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Net decrease in cash (562) (268)
Cash at beginning of period 2,020 4,006
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Cash at end of period $ 1,458 3,738
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-4-
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001 (Unaudited) and December 31, 2000
NOTE 1
The accompanying consolidated financial statements are unaudited, but in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments except where indicated, necessary for a fair presentation
of the results of operations and financial position for the periods presented.
Results of operations for any interim period are not necessarily indicative of
results for any other period or for the full year. These interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements contained in the Annual Report on Form 10-K for the year
ended December 31, 2000.
NOTE 2
On September 15, 1999 Sames Corporation ("the Company") announced a share
repurchase program authorizing the Company to repurchase up to 150,000 shares of
its outstanding capital stock. The shares can be repurchased from time to time
in the open market as market conditions warrant. Under the terms of the
repurchase program, the shares may be reissued to employees under the Company's
stock option and employee stock purchase plans. Through March 31, 2001, the
Company repurchased a total of 37,000 shares at a cost of $.6 million and a
total of 4,765 shares were reissued to employees under the Company's employee
stock purchase plan.
On April 25, 2000, the Sames stockholders approved the adoption of the Sames
Employee Stock Purchase Plan, effective January 1, 2000, pursuant to which
employees of the Company have the opportunity to acquire shares of the capital
stock of the Company at a 15% discount. The purpose of the Plan is to advance
the interests of the Company and its stockholders by providing employees of the
Company and certain designated subsidiaries with an opportunity to acquire an
ownership interest in the Company. With respect to employees who reside in the
United States, the Plan is intended to qualify as an employee stock purchase
plan under Section 423 of the Internal Revenue Code.
Effective April 1, 2001, the Sames Board of Directors, under rules of the Plan,
suspended the offer and grant of options to purchase shares of common stock of
the Company pursuant to the Plan to any participant in the Plan. This action was
taken due to low employee involvement and the possibility that the Company will
be sold.
-5-
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001 (Unaudited) and December 31, 2000
NOTE 3
As part of the original sale agreement with Illinois Tool Works (ITW), dated
August 31, 1998, the Company assigned and transferred to ITW all of the accounts
receivable related to the "Binks Business". The agreement required the Company
to repurchase such accounts receivable which were not collected within 180 days.
On September 23, 1999, the Company agreed to repurchase certain receivables for
approximately $1.0 million, which was paid to ITW on September 28, 1999 and ITW
transferred back to the Company accounts receivable in the aggregate amount of
approximately $3.7 million. Through March 31, 2001, the Company had collected
approximately $.7 million of the accounts receivable.
The receivables repurchased from ITW and transferred back to the Company include
a receivable from Haden Drysys International Limited ("Haden"), a United Kingdom
corporation, in the amount of Pounds 434,885. On March 10, 2000, Haden filed an
arbitration claim in the International Court of Arbitration of the International
Chamber of Commerce in Paris, which proceedings are being litigated in London,
United Kingdom against Binks Limited ("Binks UK"), a former subsidiary of the
Company that was sold to ITW as part of the sale of the Binks Business, in the
amount of Pounds 3,300,000. The claim alleges that Binks UK breached its
agreements with Haden relating to automotive paint shop equipment for an
automobile plant. Pursuant to the original sale agreement with ITW, the Company
has agreed to indemnify ITW with respect to the claim and to assume the defense
of the claim on behalf of ITW. On April 13, 2000, the Company filed an answer
denying the claim and making a counterclaim seeking to collect the receivable.
-6-
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001 (Unaudited) and December 31, 2000
NOTE 3 (continued)
For additional information relating to legal matters involving the Company,
reference is made to "Item 3 - Legal Proceedings" in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000 and to "Part II, Item 1 -
Legal Proceedings" in this report.
NOTE 4
Comprehensive loss for the three months ended March 31, 2001 and March 31, 2000
consisted of the following (in thousands):
Three months Three months
ended March 31, ended March 31,
2001 2000
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Net loss $(1,786) (241)
Other comprehensive loss --
foreign currency translation adjustments ( 333) (493)
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Comprehensive loss $(2,119) (734)
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-7-
SAMES CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001 (Unaudited) and December 31, 2000
NOTE 5
The Company operates in one segment, the manufacture and distribution of
electrostatic spray finishing and coating application equipment. The Company's
products are sold to customers in North America, South America, Europe, Asia,
Africa, and Australia.
The table below presents the Company's consolidated continuing operations by
country: United States; Europe, primarily France; and Japan. Sales are presented
by originating area. Interarea transfers comprise transactions among the Company
and its subsidiaries in different geographic areas; these transfers are
eliminated in consolidation.
For the three
months ended
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March 31, March 31,
2001 2000
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Sales to unaffiliated customers (includes exports):
United States $ 4,930 6,043
Europe, primarily France 8,676 14,939
Japan 785 1,632
Interarea transfers from:
Europe, primarily France 2,962 2,899
Eliminations (2,962) (2,899)
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Total $ 14,391 22,614
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Operating income (loss):
United States $ (561) (92)
Europe, primarily France (503) 763
Japan (71) (2)
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Total $ (1,135) 669
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Identifiable assets of continuing operations at: March 31, March 31,
2001 2000
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United States $ 15,770 21,608
Europe, primarily France 33,711 40,276
Japan 2,343 5,086
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Total $ 51,824 66,970
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-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
In November 2000, Sames announced the proposed sale of the Company, citing
global industry trends that appear to favor vertical integration in the
automotive paint application market and integrators that are developing or
acquiring spray application equipment and technology in order to offer
"in-house" turnkey solutions. In addition, the Company noted that automotive
customers are rapidly migrating toward robotic solutions over machines, a
product that Sames has historically designed and installed. Although the
Company produces applicators both for machines and robots, the Company's
machine-related products resulted in significantly more revenue per
installation. The Company has received indications of interest from two
multi-national companies, and is currently in negotiations with one of these
companies, which has made a proposal to acquire the Company at a price that
is significantly below the current market price of the Company's stock. No
assurances can be given that the current negotiations will continue or result
in the ultimate sale of the Company, nor can the Company predict whether any
other offers to purchase the Company will be made or if made, that such
offers will be acceptable to the Company. Based on the Company's current
financial condition, especially the recent severe cash flow and liquidity
problems being experienced by the Company's French subsidiary, Sames, S.A.,
and as a result, by the Company on a consolidated basis, the downturn in the
worldwide automotive business, and the difficulty in quantifying a number of
"Binks business" liabilities which still remain, the Board believes that any
offers received could be significantly below the current market price of the
Company's stock.
Effective April 27, 2001, Mr. Arnold Dratt, the Company's Chairman, President
and Chief Executive Officer, retired from the Company and returned to his
consulting practice. He will remain as a consultant to the Company in connection
with the completion of the sale process and certain other matters, including
discontinued operations, until October 31, 2001. Directors Scott Flaig and Wayne
Edwards, a former Chairman, have assumed the role of interim co-Chairmen. They
will direct efforts to elect a new CEO and are working with senior management
globally to refine the 2001 operating plan.
-9-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)
RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended March 31, 2001 ("First Quarter 2001") were
$14.4 million compared to $22.6 million for the three months ended March 31,
2000 ("First Quarter 2000") a decrease of $8.2 million or 36%. Lower sales for
First Quarter 2001 as compared to the corresponding period in 2000 were
primarily attributable to Sames S.A., the Company's French subsidiary, and were
mainly the result of declining sales in large automotive engineered systems. Net
sales of Sames, S.A. represented approximately 58% and 63% of First Quarter 2001
and First Quarter 2000 consolidated net sales, respectively. The impact of a
declining French Franc from 2000 to 2001 reduced the U.S. dollar equivalent
First Quarter 2001 sales amounts, when compared to First Quarter 2000, by $1.0
million.
GROSS PROFIT
Gross profit of $5.0 million for First Quarter 2001 decreased by $2.8 million,
or 36% from the comparable 2000 period. Gross profit was 35% of net sales for
First Quarter 2001 and 35% for First Quarter 2000. The decrease in gross profit
between years was primarily due to the reduction in volume of large automotive
installations in the First Quarter 2001 compared to the prior year period.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative ("SG&A") expense was $5.5 million for First
Quarter 2001 compared to $6.5 million for First Quarter 2000, or a decrease of
15%. SG&A expense as a percentage of net sales was 39% for the First Quarter
2001 compared to 29% for First Quarter 2000.
The absolute amount of SG&A expense decreased from the prior period as a result
of effective cost management efforts begun in 2000. However, as a percentage of
sales, SG&A expense increased in the First Quarter 2001, compared to First
Quarter 2000, primarily as a result of high support costs for the automobile
engineered systems in relation to reduced sales.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)
RESEARCH AND DEVELOPMENT
Research and development ("R&D") expense was $.6 million for First Quarter 2001
and for the First Quarter 2000. The costs were incurred primarily at Sames S.A..
The Company is continually engaged in experimental work on various paint and
powder coating systems. The Company believes that a strong commitment to
research and development is necessary to drive long-term growth, consistent with
its objective to approve R&D projects that offer the most strategic value to the
Company.
INTEREST EXPENSE
Interest expense was $.3 million for First Quarter 2001 and First Quarter 2000.
Average borrowing levels in First Quarter 2001 remained approximately the same
when compared to the prior year period.
OTHER EXPENSE
Other expense was $334 thousand for First Quarter 2001 compared with other
expense of $49 thousand for First Quarter 2000. The First Quarter 2001 amount
includes an increase in foreign currency transaction losses of $243,000
thousand, principally at Sames, S.A. and Sames Japan, that arose due to the
weakening value of the French Franc versus the U.S. dollar.
INCOME TAXES
The Company recorded income tax benefit of $.2 million in First Quarter 2001
versus expense of $.1 million for First Quarter 2000. In First Quarter 2001, the
Company recorded state tax refunds that totaled $.2 million. The relationship
between consolidated income tax expense and pretax income or loss is a function
of the Company's geographical mix of pretax profitability, and, generally, the
utilization of available net operating loss carryforwards.
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)
LOSS FROM DISCONTINUED OPERATIONS -
NET OF TAX
The Company's loss from discontinued operations, net of tax, was $.3 million for
First Quarter 2001 versus $.5 million for the First Quarter 2000. The Company
incurred less legal costs in First Quarter 2001 related to various litigation
matters that were settled in 2000.
NET LOSS
As a result of all of the factors above, the Company recorded a net loss of $1.8
million ($.61 loss per diluted share) and $.2 million ($.08 loss per diluted
share) for First Quarter 2001 and for First Quarter 2000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations are the primary source of the Company's liquidity. In
First Quarter 2001, operating activities provided $2.4 million primarily due to
a significant reduction in accounts receivable, primarily collection of a large
past due receivable in Europe, and increases in accrued liabilities that were
recorded mostly in Europe. These were offset by payments of accounts payable and
the loss from continuing operations. Working capital was $4.7 million at March
31, 2001 compared to $6.7 million at December 31, 2000, a reduction of 30%. In
First Quarter 2000, the Company generated cash flow of $1.5 million from
operating activities primarily due to significant reductions in accounts
receivable and inventory offset by a reduction in accounts payable. Working
capital was $20.7 million at March 31, 2000 compared to $22.0 million at
December 31, 1999, a reduction of 5.5%.
Short-term funds are also provided for current operations through lines of
credit and overdraft facilities. There were no long-term borrowings in First
Quarter 2001 compared to $157 thousand of long-term borrowings in First Quarter
2000. At March 31, 2001, the Company had aggregate credit facilities of $13.5
million, borrowings under these facilities of $7.3 million, and amounts
available under these facilities of $6.2 million. At March 31, 2000, the Company
had aggregate credit facilities of approximately $17.8 million, borrowings under
these facilities of $7.6 million, and amounts available under these facilities
of $10.2 million.
During the First Quarter 2001 and First Quarter 2000 the Company decreased
short-term borrowing levels by $2.5 million and $2.1 million, respectively.
The Company's capital expenditures were $43 thousand and $305 thousand in the
First Quarter 2001 and First Quarter 2000, respectively.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (continued)
Overall, cash and cash equivalents decreased in the First Quarter 2001 by $.6
million compared to $.3 million in First Quarter 2000.
The Company's wholly-owned French subsidiary, Sames, S.A., is currently
experiencing severe cash flow problems due primarily to an unexpected delay
in the shipment of certain equipment to one of its customers at the
customer's request, and the corresponding delay on the customer's part in
making payments due of approximately $4.0 million. The payments were expected
in early May 2001. Additional past due amounts of approximately $1.3 million
were due from this same customer prior to May 2001 and have not yet been
received. In addition, subsequent to March 31, 2001, Sames, S.A. has borrowed
the maximum amount available under its credit facilities. Neither the Company
nor any of its operating subsidiaries currently have sufficient liquidity or
borrowing capacity to remedy these cash flow problems being experienced at
Sames, S.A. As a result, the Company's cash resources on a consolidated
basis are presently not adequate for the Company to continue operating in the
near short-term. Unless Sames, S.A. receives these customer payments or the
Company is successful in negotiating a sale of the Company in the immediate
future or raises additional cash from outside sources, the Company will not
be able to satisfy its current operating obligations. These current cash flow
problems as well as the Company's recurring losses raise substantial doubt
about the Company's ability to continue as a going concern. The Company's
financial statements do not reflect any adjustments that might result from
the outcome of this uncertainty.
As discussed above under "Recent Developments," the Company is currently in
negotiations with one potential purchaser of the Company. However, no
assurances can be given that the Company will be successful in negotiating a
sale of the Company on a timely basis, or at all, or in raising additional
funds necessary for the Company to continue operating. The Company will
continue to pursue on behalf of Sames, S.A. various sources and alternatives
of financial support, including seeking short-term funds from potential
purchasers of the Company, strategic investors, lenders and/or industry
partners. However, the outcome of any such financing is uncertain, and if the
Company is unable to resolve these problems in a timely manner, the Company
will no longer be able to operate in the ordinary course of business.
QUARTERLY FLUCTUATIONS
The Company has experienced significant quarterly fluctuations in operating
results and anticipates that those fluctuations will continue. The fluctuations
have been primarily caused by periodic changes in the components of the
Company's sales mix. In particular, the Company's sales of large automotive
installations can fluctuate substantially and generally result in relatively
lower gross profit margins. Sales of standard products and spare parts typically
generate relatively higher gross profit margins. The Company therefore believes
that quarter-to-quarter comparisons of its results are not necessarily
meaningful and should not be relied upon as indications of future performance.
CONVERSION TO THE EURO
On January 1, 1999, eleven European Union member states adopted the Euro as
their common national currency. From that date until January 1, 2002, either the
Euro or a participating country's present currency will be accepted as legal
tender. Beginning on January 1, 2002, Euro-denominated bills and coins will be
issued, and by July 1, 2002, only Euro currency will be used.
The Company is evaluating the strategic, financial, legal, and systems issues
related to the various phases of transition to the Euro currency. While the
Company does not believe the ultimate costs of conversion will be material to
its results of operations, cash flow, or financial position, efforts will be
made to address customer and business needs on a timely basis and anticipate and
prevent any complications during the transition period.
-13-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (CONTINUED)
CONVERSION TO THE EURO (continued)
There can be no assurance, however, that all problems will be foreseen and
corrected, or that no material disruption of the Company's business will occur,
nor can the Company anticipate the competitive implications on its future
pricing and marketing strategies. Any conversion costs will expensed as
incurred.
- 14 -
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A substantial portion of the Company's non-U.S. transactions is denominated in
French Francs. Although Sames, S.A. is not typically subject to significant
foreign exchange transaction gains or losses, its financial statements are
translated into U.S. dollars as part of the Company's consolidated financial
reporting. Fluctuations in the French Franc/U.S. dollar exchange rate therefore
will affect the Company's consolidated balance sheets and statements of
operations. At March 31, 2001, the value of the French Franc versus the U.S.
dollar had depreciated by approximately 7.3% compared to its value at December
31, 2000. The average French Franc/U.S. dollar exchange rate remained
approximately the same in the First Quarter 2001 compared to the First Quarter
2000 period. The Company also has operations in Japan and Sweden, where
transactions are denominated in Japanese yen and Swedish krona. The fluctuations
in the yen and krona have a minimal impact on consolidated operations of the
Company.
In the three months ended March 31, 2001 the Company recognized an unrealized
loss of $.3 million as a result of the net change in the cumulative foreign
currency translation adjustment account, which is a component of stockholders'
equity. An unrealized foreign currency translation loss of $.5 million was
recorded in the three months ended March 31, 2000.
Foreign currency exchange transactions have not typically resulted in
significant periodic gains or losses, although the Company recorded a loss of
approximately $.2 million during the three months ended March 31, 2001 and a
gain of approximately $36 thousand during the three months ended March 31, 2000.
The losses in First Quarter 2001 were recorded mainly due to the depreciation of
the French Franc relative to the U.S. dollar during the periods. The Company
generally does not use derivative financial instruments to manage currency
exchange risks and no such instruments were outstanding at March 31, 2001.
-15-
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain statements regarding the Company's future
operating performance, product development and strategic alternatives, which
constitute "forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable,
there can be no assurance that such expectations will prove to be correct.
Important factors that could cause actual results to differ materially from
the Company's expectations include, without limitation, adverse changes in
the economy or the overall market generally, increased competition relating
to the Company's products and services both within the United States and
globally, lower than expected sales of the Company's products and services,
the Company's inability to successfully implement manufacturing and
cost-reduction programs, adverse results of the testing of the Company's
products and validation programs or the failure of such products or programs
to gain wide market acceptance, the inability of the Company to successfully
negotiate or to complete the previously announced potential sale of the
Company on a timely basis, if at all, the inability of the Company to use
any potential tax benefits, the inability of the Company to secure additional
sources of financial support sufficient to satisfy its current operating
obligations, the failure of the Company to implement its revised 2001
operating plan, including its shift in focus away from large automotive
systems and toward its standard products and component parts business,
continuing losses resulting from discontinued operations relating to the
resolution and conclusion of the matters relating to the sale of the Binks
business, fluctuation in sales revenues caused in part by currency
fluctuations and translations, uncertainty relating to economic and political
conditions in the countries and international markets in which the Company
operates and competes, and changes in accounting principles, policies and
guidelines.
-16-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has certain contingent liabilities resulting from litigation and
claims incident to the ordinary course of business. Management believes that the
probable resolution of such contingencies should not materially affect the
financial position or results of operations of the Company. However, if adverse
judgments are entered against the Company, the payment of such judgments could
have a material adverse effect on the Company's liquidity.
On February 24, 1997, Chester Baranowski, the former President of Binks Canada,
brought suit against the Company seeking $4.55 million claiming wrongful
dismissal, breach of contract and non-payment of certain salary and employee
benefits. The Company has denied all substantive allegations and filed a
counterclaim on November 28, 1997 against Baranowski for breach of fiduciary
duty and conspiracy with Burke B. Roche to injure the Company. The case went to
trial in the Superior Court of Justice at Toronto, Canada and reasons for
judgement were issued January 12, 2000, on which date Mr. Baranowski's claims
against the Company were dismissed. His claim against Binks Canada was allowed
and he was awarded damages equal to 36 months' salary which Binks Canada
estimated to be CND $410,844. He was also required to repay to Binks Canada a
loan less certain amounts that had been forgiven under arrangements between him
and the Company. The details of the judgment have not yet been settled, and both
parties are proceeding with appeals. The judgment is stayed without security
pending the disposition of the appeals by the Ontario Court of Appeal.
As part of the original sale agreement with Illinois Tool Works (ITW), dated
August 31, 1998, the Company assigned and transferred to ITW all of the accounts
receivable related to the "Binks Business". The agreement required the Company
to repurchase such accounts receivable that were not collected within 180 days.
On September 23, 1999, the Company agreed to repurchase certain receivables for
approximately $1.0 million, which was paid to ITW on September 28, 1999 and ITW
transferred back to the Company accounts receivable in the aggregate amount of
approximately $3.7 million. Through March 31, 2001, the Company had collected
approximately $.7 million of the accounts receivable. An allowance for estimated
uncollected amount of $.2 million was charged to loss from discontinued
operations in fiscal 2000.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings (continued)
The receivables repurchased from ITW and transferred back to the Company include
a receivable from Haden Drysys International Limited ("Haden"), a United Kingdom
corporation, in the amount of Pounds 434,885. On March 10, 2000, Haden filed an
arbitration claim in the International Court of Arbitration of the International
Chamber of Commerce in Paris, which proceedings are being litigated in London,
United Kingdom, against Binks Limited ("Binks UK"), a former subsidiary of the
Company that was sold to ITW as part of the sale of the Binks Business, in the
amount of approximately Pounds 3,300,000. The claim alleges that Binks UK
breached its agreements with Haden relating to automotive paint shop equipment
for an automobile plant. Pursuant to the original sale agreement with ITW, the
Company has agreed to indemnify ITW with respect to the claim and to assume the
defense of the claim on behalf of ITW. On April 13, 2000, the Company filed an
answer denying the claim and making a counterclaim seeking to collect the
receivable.
On June 21, 2000, ten former executive employees of the Company filed suit
against the Company and ITW claiming breach of certain retirement contracts by
the Company, which include provisions for the payment of certain medical
insurance expenses by the Company on behalf of the retirees pursuant to the
terms of the contracts. The action alleges that the Company improperly amended
the terms of the contracts to provide for the payment of 10% of such retirees'
medical insurance expense versus the 90% reimbursement that the plaintiffs claim
the Company originally contracted to pay. The plaintiffs filed a declaratory
judgement action in the Circuit Court of Cook County, Illinois asking the court
to make a determination as to whether the Company properly amended the
contracts, and asking the court to reinstate the contracts as originally
executed. The plaintiffs are seeking unspecified damages. The Company removed
the action to the United States District Court for the Northern District of
Illinois since plaintiffs action is governed by the Employee Retirement Income
Security Act of 1974 ("Erisa"). Subsequent to the removal of the action,
plaintiffs filed an amended complaint. Plaintiff's amended complaint asserts
claims for violations of ERISA, breach of fiduciary duty and breach of federal
common law. The plaintiffs seek injunctive relief, damages and request the court
to clarify plaintiffs' future rights, if any, to benefits under the contracts.
The Company and ITW have filed an answer and affirmative defenses to the amended
complaint. The parties have exchanged written discovery responses and are
currently scheduling oral discovery.
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PART II - OTHER INFORMATION (CONTINUED)
Items 2. and 3.
4. and 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
3.1 Restated Certificate of Incorporation (filed
as an Exhibit to the Company's Form 10-K for
its fiscal year ended November 30, 1993 and
incorporated herein by reference).
3.2 Certificate of Amendment of Restated
Certificate of Incorporation (filed as an
exhibit to the Company's registration
statement on Form S-8 (File No. 333-30191)
and incorporated herein by reference).
3.3 Certificate of Amendment of Restated
Certificate of Incorporation (filed as an
exhibit to the Company's registration
statement on Form S-8 (File No. 333-92993)
and incorporated herein by reference).
3.4 By-laws of Sames Corporation, as amended and
restated through February 28, 2001 (filed as
an exhibit to the Company's Form 10-K for
its fiscal year end December 31, 2000 and
incorporated herein by reference).
4.1 Amended and Restated Rights Agreement, dated
as of February 2, 1990 and amended and
restated as of January 21, 1991, between the
Company and Harris Trust and Savings Bank,
as successor rights agent (filed as an
exhibit to the Company's Form 10-K for its
fiscal year ended November 30, 1993 and
incorporated herein by reference).
4.2 Second Amendment to Rights Agreement, dated
as of August 28, 1998, by and between the
Company and Harris Trust and Savings Bank
(filed as an exhibit to the Company's
current report on Form 8-K dated September
2, 1998 and incorporated herein by
reference).
(b) Reports on Form 8-K -
- Current report on Form 8-K dated March 29, 2001,
filed with the Securities and Exchange Commission
on March 29, 2001.
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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.
SAMES CORPORATION
/s/ Dr. Wayne F. Edwards
------------------------
Dr. Wayne F. Edwards - Interim Co-Chairman
/s/ Llewellyn Scott Flaig
------------------------
Llewellyn Scott Flaig - Interim Co-Chairman
/s/ Ronald A. Koltz
-------------------
Vice President - Controller Corporate Accounting
Principal Accounting and Financial Officer
Date May 15, 2001
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