UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
|
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
|
SECURITIES
EXCHANGE ACT OF 1934
|
|
|
|
|
|
For
the quarterly period ended March 31, 2008
|
|
|
|
|
|
OR
|
|
|
|
o
|
|
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:
001-13924
SIMCLAR,
INC.
(Exact
name of registrant as specified in its charter)
Florida
|
|
59-1709103
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
|
|
|
2230
West 77
th
Street, Hialeah, FL
|
|
33016
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(305)
556-9210
(Registrant’s
telephone number, including area code)
[None]
(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
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or smaller reporting company. See
definition of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
o
Accelerated
filer
o
Non-accelerated
filer
o
Smaller
reporting company
x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
x
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Class
|
|
Outstanding
at March 31, 2008
|
Common
Stock, $.01 par value per share
|
|
6,465,345
shares
|
SIMCLAR,
INC.
Form
10-Q
For
the
quarter ended March 31, 2008
TABLE
OF
CONTENTS
PART
I
—
FINANCIAL
INFORMATION
|
|
|
|
|
|
Item
1. Condensed Consolidated Financial Statements
|
|
|
|
|
|
1)
Consolidated Balance Sheets as of March 31, 2008 (unaudited) and
December
31, 2007
|
|
3
|
|
|
|
2)
Consolidated Statements of Operations for the three months ended
March 31,
2008 and March 31, 2007 (unaudited)
|
|
5
|
|
|
|
3)
Consolidated Statements of Cash Flows for the three months ended
March 31,
2008 and March 31, 2007 (unaudited)
|
|
6
|
|
|
|
4)
Notes to Consolidated Financial Statements as of March 31, 2008
(unaudited)
|
|
7
|
|
|
|
Item
2. Management's Discussion and Analysis of Financial Condition and
Results
of Operations
|
|
11
|
|
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
|
18
|
|
|
|
Item
4T. Controls and Procedures
|
|
19
|
|
|
|
PART
II
—
OTHER
INFORMATION
|
|
|
|
|
|
Item
6. Exhibits
|
|
20
|
|
|
|
Signatures
|
|
20
|
PART
I -
FINANCIAL INFORMATION
Item
1
Financial Statements
SIMCLAR,
INC.
AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
March
31,
|
|
December
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(UNAUDITED)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,563,887
|
|
$
|
428,538
|
|
Accounts
receivable, less allowances of $165,000
|
|
|
|
|
|
|
|
and
$236,000 at March 31, 2008 and December 31, 2007
respectively
|
|
|
18,200,009
|
|
|
20,804,552
|
|
Amounts
receivable from major stockholder, net
|
|
|
675,259
|
|
|
904,627
|
|
Inventories,
less allowances for obsolescence of $2,305,000 at March
31,
|
|
|
|
|
|
|
|
2008
and $2,364,000 at December 31, 2007
|
|
|
20,648,979
|
|
|
21,664,442
|
|
Prepaid
expenses and other current assets
|
|
|
673,409
|
|
|
654,509
|
|
Prepaid
income taxes
|
|
|
16,224
|
|
|
107,091
|
|
Deferred
income taxes
|
|
|
1,214,160
|
|
|
1,214,160
|
|
Total
current assets
|
|
|
42,991,927
|
|
|
45,777,919
|
|
|
|
|
|
|
|
|
|
Property
and equipment:
|
|
|
|
|
|
|
|
Land
and improvements
|
|
|
547,511
|
|
|
547,512
|
|
Buildings
and building improvements
|
|
|
1,235,904
|
|
|
1,235,904
|
|
Machinery,
computer and office equipment
|
|
|
15,493,762
|
|
|
15,342,401
|
|
Tools
and dies
|
|
|
366,347
|
|
|
366,347
|
|
Leasehold
improvements
|
|
|
1,964,881
|
|
|
1,957,170
|
|
Construction
in progress
|
|
|
83,958
|
|
|
259,829
|
|
Total
property and equipment
|
|
|
19,692,363
|
|
|
19,709,163
|
|
Less
accumulated depreciation and amortization
|
|
|
10,199,454
|
|
|
9,922,589
|
|
Net
property and equipment
|
|
|
9,492,909
|
|
|
9,786,574
|
|
|
|
|
|
|
|
|
|
Deferred
expenses and other assets, net
|
|
|
286,681
|
|
|
366,265
|
|
Goodwill
|
|
|
9,410,704
|
|
|
9,410,704
|
|
Intangible
assets, net
|
|
|
811,815
|
|
|
904,841
|
|
Total
assets
|
|
$
|
62,994,036
|
|
$
|
66,246,303
|
|
See
notes
to consolidated financial statements
SIMCLAR,
INC.
AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Continued)
|
|
March
31,
|
|
December
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(UNAUDITED)
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Line
of credit
|
|
$
|
8,380,346
|
|
$
|
8,145,987
|
|
Accounts
payable
|
|
|
19,641,483
|
|
|
21,447,560
|
|
Accrued
expenses
|
|
|
1,928,862
|
|
|
1,907,472
|
|
Current
portion of long-term debt
|
|
|
3,350,000
|
|
|
3,575,148
|
|
Total
current liabilities
|
|
|
33,300,691
|
|
|
35,076,167
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
8,300,000
|
|
|
9,600,000
|
|
Deferred
trade accounts payable
|
|
|
108,637
|
|
|
349,257
|
|
Deferred
income taxes
|
|
|
515,283
|
|
|
515,283
|
|
Other
long term liabilities
|
|
|
400,000
|
|
|
400,000
|
|
Total
liabilities
|
|
|
42,624,611
|
|
|
45,940,707
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
Common
stock, $.01 par value, authorized 10,000,000 shares; issued
and
|
|
|
|
|
|
|
|
outstanding
6,465,345 shares at March 31, 2008 and December 31, 2007
|
|
|
64,653
|
|
|
64,653
|
|
Capital
in excess of par value
|
|
|
11,446,087
|
|
|
11,446,087
|
|
Retained
earnings
|
|
|
8,788,444
|
|
|
8,747,959
|
|
Accumulated
other comprehensive income
|
|
|
70,241
|
|
|
46,897
|
|
Total
stockholders' equity
|
|
|
20,369,425
|
|
|
20,305,596
|
|
|
|
$
|
62,994,036
|
|
$
|
66,246,303
|
|
See
notes
to consolidated financial statements
SIMCLAR,
INC.
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Sales
|
|
$
|
29,922,815
|
|
$
|
31,407,512
|
|
Cost
of goods sold
|
|
|
27,216,025
|
|
|
27,581,733
|
|
Gross
Margin
|
|
|
2,706,790
|
|
|
3,825,779
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
2,393,452
|
|
|
2,378,026
|
|
Income
from operations
|
|
|
313,338
|
|
|
1,447,753
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
335,797
|
|
|
496,121
|
|
Interest
and other income
|
|
|
(81,560
|
)
|
|
(16,002
|
)
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
59,101
|
|
|
967,634
|
|
|
|
|
|
|
|
|
|
Income
tax provision
|
|
|
18,616
|
|
|
328,995
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
40,485
|
|
$
|
638,639
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
$
|
0.01
|
|
$
|
0.10
|
|
See
notes
to consolidated financial statements
SIMCLAR,
INC.
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
Operating
activities:
|
|
|
|
|
|
Net
income
|
|
$
|
40,485
|
|
$
|
638,639
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
provided
by operating activities:
|
|
|
|
|
|
|
|
Depreciation
& amortization
|
|
|
449,656
|
|
|
530,940
|
|
Loss
on disposal of property & equipment
|
|
|
4,575
|
|
|
-
|
|
Changes
relating to operating activities from:
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
2,604,542
|
|
|
1,590,311
|
|
Amounts
receivable / (payable) to major stockholder, net
|
|
|
229,368
|
|
|
(2,780,442
|
)
|
Inventories,
net
|
|
|
1,015,462
|
|
|
(1,382,913
|
)
|
Prepaid
expenses and other current assets
|
|
|
(18,900
|
)
|
|
(81,518
|
)
|
Accounts
payable
|
|
|
(1,806,077
|
)
|
|
1,499,796
|
|
Accrued
expenses
|
|
|
100,976
|
|
|
(196,471
|
)
|
Income
taxes refundable
|
|
|
90,867
|
|
|
149,477
|
|
Net
cash provided from (used in) operating activities
|
|
|
2,710,954
|
|
|
(32,181
|
)
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
Additions
to property and equipment
|
|
|
(74,040
|
)
|
|
(396,237
|
)
|
Proceeds
from sale of property and equipment
|
|
|
6,500
|
|
|
525,000
|
|
Net
cash (used in) provided by investing activities
|
|
|
(67,540
|
)
|
|
128,763
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
Borrowing
on bank line of credit
|
|
|
1,845,826
|
|
|
5,021,682
|
|
Repayments
on bank line of credit
|
|
|
(1,611,467
|
)
|
|
(2,583,246
|
)
|
Payments
on long-term borrowings
|
|
|
(1,765,768
|
)
|
|
(2,256,011
|
)
|
Net
cash (used in) provided by financing activities
|
|
|
(1,531,409
|
)
|
|
182,425
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate fluctuations on cash
|
|
|
23,344
|
|
|
(26,226
|
)
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
1,135,349
|
|
|
252,781
|
|
Cash
and cash equivalents at beginning of period
|
|
|
428,538
|
|
|
82,154
|
|
Cash
and cash equivalents at end of period
|
|
$
|
1,563,887
|
|
$
|
334,935
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest expense
|
|
$
|
304,471
|
|
$
|
487,835
|
|
See
notes
to consolidated financial statements
NOTE
1 - Basis of Presentation
The
accompanying interim consolidated financial statements include the accounts
of
Simclar, Inc. (“Simclar”) and its subsidiaries, including Simclar (Mexico), Inc.
(“Simclar Mexico”), Simclar de Mexico, S.A. de C.V. (“Simclar de Mexico”),
Simclar (North America), Inc. (“SNAI”), Simclar Interconnect Technologies, Inc.
(“SIT”), and Techdyne (Europe) Limited (“Techdyne (Europe)”) collectively
referred to as the “company.” All material intercompany accounts and
transactions have been eliminated in consolidation. The company is a 73.2%
owned
subsidiary of Simclar Group Limited (“Simclar Group”), a company incorporated in
the United Kingdom.
These
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Article 8 of Regulation
S-X and have not been audited by an independent registered public accounting
firm. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, such
interim financial statements reflect all normal recurring adjustments considered
necessary to present fairly the financial position and the results of operations
and cash flows for the interim periods presented. The results of operations
for
the interim periods are not necessarily indicative of the results to be expected
for the full fiscal year. These financial statements should be read in
conjunction with the audited consolidated financial statements and footnotes
included in the company's Annual Report on Form 10-K for the year ended December
31, 2007.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
consolidated financial statements. Actual results could differ from those
estimates.
NOTE
2 - Recently Issued Accounting Pronouncements
In
May
2008. the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”
The
new
standard is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with U.S.
generally accepted accounting principles. SFAS No. 162 establishes that
the GAAP hierarchy should be directed to entities because it is the entity
(not
its auditor) that is responsible for selecting accounting principles for
financial statements that are presented in conformity with GAAP. Statement
162 is effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board Auditing amendments to AU Section 411,
“The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.” The company has not evaluated the potential impact of this
statement on its financial statements.
In
March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities - an amendment of FASB Statement No. 133.” SFAS No. 161
changes disclosure requirements for derivative instruments and hedging
activities. Entities will be required to provide enhanced disclosures about
(a)
how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS No. 133 and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. This statement is effective for fiscal years beginning after
November 15, 2008. The company has not evaluated the potential impact of this
statement on its financial statements
.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements,” an amendment of ARB No. 51, which we will
adopt on January 1, 2009. This standard will significantly change the accounting
and reporting related to noncontrolling interests in a consolidated subsidiary.
The
company has not evaluated the potential impact of this statement on its
financial statements
.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of SFAS
No.
115.” SFAS No. 159 permits companies to choose to measure certain financial
instruments and other items at fair value. The company did not choose the fair
value measurement option permitted by SFAS No. 159 for any of its assets and
liabilities. Therefore, adoption of SFAS No. 159 did not impact the company’s
financial statement.
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value
Measurements” (“SFAS No. 157”) to clarify the definition of fair value,
establish a framework for measuring fair value and expand the disclosures on
fair value measurements. SFAS No. 157 defines fair value as the price that
would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (an exit price).
SFAS No. 157 also stipulates that, as a market-based measurement, fair value
measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability, and establishes a
fair
value hierarchy that distinguishes between (a) market participant assumptions
developed based on market data obtained from sources independent of the
reporting entity (observable inputs) and (b) the reporting entity’s own
assumptions about market participant assumptions developed based on the best
information available in the circumstances (unobservable inputs). As of January
1, 2008, the company adopted SFAS No. 157, however, the adoption of SFAS No.
157
did not impact the company’s financial statements.
In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations.” SFAS No.
141R will replace SFAS No. 141 and provides new rules for accounting for the
acquisition of a business. This statement is effective for fiscal years
beginning after December 15, 2008. Generally, the effects of SFAS No. 141R
will
depend on future acquisitions.
NOTE
3 - Inventories
Inventories
are comprised of the following:
|
|
March
31,
|
|
December
31,
|
|
|
|
2008
|
|
2007
|
|
Raw
materials and supplies
|
|
|
18,602,671
|
|
$
|
19,285,200
|
|
Work
in process
|
|
|
2,544,468
|
|
|
2,841,656
|
|
Finished
goods
|
|
|
1,806,845
|
|
|
1,902,052
|
|
Allowance
for obsolescence
|
|
|
(2,305,005
|
)
|
|
(2,364,466
|
)
|
|
|
$
|
20,648,979
|
|
$
|
21,664,442
|
|
NOTE
4 - Earnings per share
Following
is a reconciliation of amounts used in the computations:
|
|
Three
Months Ended
March
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Net
income - numerator basic computation
|
|
$
|
40,485
|
|
$
|
638,639
|
|
|
|
|
|
|
|
|
|
Weighted
average shares - denominator basic computation
|
|
|
6,465,345
|
|
|
6,465,345
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
$
|
0.01
|
|
$
|
0.10
|
|
Net
income for the three months ended March 31, 2008, includes costs of
approximately $797,000 arising from the closure of the company’s North Carolina
facility, comprising of costs for the facility clearance, the transfer of
customer programs to Mexico and employee related costs.
NOTE
5 - 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. Below is a detail of comprehensive income for the three months
ended March 31, 2008 and 2007:
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
Net
Income
|
|
$
|
40,485
|
|
$
|
638,639
|
|
Foreign
currency translation income / (loss)
|
|
|
23,344
|
|
|
(26,226
|
)
|
Comprehensive
income
|
|
$
|
63,829
|
|
$
|
612,413
|
|
NOTE
6 - Indebtedness
Effective
January 26, 2007, we entered into amendments of the two working capital
facilities with Bank of Scotland (“BoS”). The term of the $1 million working
capital facility of SIT, originally entered into in December 2005, was extended
to January 28, 2008. The Simclar, Inc. $5 million working capital facility,
last
amended in December 2005, was increased to $7.5 million, and its maturity date
was extended to January 28, 2008. No other material changes were made to either
facility by the amendments. Effective March 27, 2008, the facilities were
further amended to extend the maturity dates of each to March 17, 2009. No
other
material changes were made to either facility by the 2008 amendments, except
that the default interest rate under both facilities was increased from 1.5%
to
2.0% and the interest rate under the $7.5 million facility was increased from
1.5% over LIBOR to 1.75% over LIBOR.
On
August
17, 2006, Simclar (Mexico) and Simclar entered into an agreement with Winsson
Enterprises Co., Ltd. (“Winsson”) and its affiliate, Computronics International
Corp. This agreement replaced a deferred trade payables agreement that expired
on July 14, 2006. The agreement is a non-cash refinance of approximately
$2,495,000 of trade accounts payable to long-term debt to be repaid within
a
three year period with an interest rate of 3% per annum. The agreement calls
for
quarterly payments of principal and interest of $225,000 commencing August
15,
2006, with a final payment of approximately $123,400 payable on May 15, 2009.
The debt is subordinated to the BoS credit facilities. The balance at March
31,
2008 was approximately $1,008,000 and is reflected as subordinated long-term
debt on the face of the balance sheet, net of $675,000 reflected in current
portion of long-term debt
NOTE
7 - Amounts Due to Major Stockholder and Other Related Party
Transactions
The
company’s parent, Simclar Group, provides certain financial and administrative
services to the company under a service agreement. The amount of expenses
incurred under the service agreement totaled $120,000 in the first 3 months
of
both 2008 and 2007.
SIT
pays
a monthly management fee to Simclar Interconnect Technologies Limited, a related
party to Simclar Group, based on 2% of sales. The purpose of the fee is to
support global research and development and sales and marketing management.
The
charges for the three months ended March 31, 2008 and March 31 2007 are
approximately $264,000 and $269,000 respectively.
The
company had a net receivable due from its parent, Simclar Group, certain of
its
subsidiaries and a related party at March 31, 2008 and December 31, 2007 of
approximately $675,000 and $905,000 respectively. Amounts receivable accrue
interest at the rate of LIBOR plus 1.5%.
In
connection with the acquisition of the Litton backplane assembly business in
February 2006, Simclar Group has provided a guarantee to BoS in respect of
loans
advanced to Simclar up to a maximum amount of $10,000,000; likewise, Simclar
has
guaranteed certain Simclar Group loans from BoS also up to a maximum amount
of
$10,000,000. In both cases this maximum amount reduces, subject to certain
ratios of borrowing to EBITDA being achieved.
Note
8 - Income Taxes
The
company adopted the provisions of Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”)
on January 1, 2007. As required by FIN 48, which clarifies SFAS No. 109
“Accounting for Income Taxes,” the company recognizes the financial statement
benefit of a tax position only after determining that the relevant tax authority
would more likely than not sustain the position following an audit. For tax
positions meeting the more-likely-than-not threshold, the amount recognized
in
the financial statements is the largest benefit that has a greater than 50
percent likelihood of being realized upon ultimate settlement with the relevant
tax authority. At the adoption date, the company applied FIN 48 to all tax
positions for which the statute of limitations remained open. As a result of
the
implementation of FIN 48, the company was not required to record any liability
for unrecognized tax benefits as of January 1, 2007. There have been no material
changes in unrecognized tax benefits since January 1, 2007.
The
company is subject to income taxes in the U.S. federal jurisdiction, as well
as
various other jurisdictions. Tax regulations within each jurisdiction are
subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply. With few exceptions, the company is
no
longer subject to U.S. federal, state, and local, or non-U.S. income tax
examinations by tax authorities for years before 2003.
The
company is currently under examination by the Internal Revenue Service for
the
year ended December 31, 2005. The company expects this examination to be
concluded and settled in the next 12 months without material adverse affect
to
the consolidated financial statements.
The
company will recognize, if applicable, interest accrued related to unrecognized
tax benefits in interest expense and penalties in other expense. At March 31,
2008, the company had no unrecognized tax benefits.
The
company files federal and state income tax returns separately from Simclar
Group, and its income tax liability is therefore 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 provided income tax expense of approximately $19,000 and $329,000 for
the three months ended March 31, 2008 and 2007.
Net
income tax receipts amounted to approximately $91,000 and $150,000 for the
three
months ended March 31, 2008 and 2007..
NOTE
9 - Commitments and Contingencies
The
company leases several facilities which expire at various dates through 2010
with renewal options for periods of up to five years at the then fair market
rental value. The company sponsors two 401(k) profit sharing plans covering
substantially all of its employees, excluding Techdyne (Europe) and Simclar
Mexico.
The
company is involved in various legal actions arising in the ordinary course
of
business. In the opinion of management, the finalization of these matters will
not have a material effect on the company's financial position.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Simclar,
Inc. has over the past years demonstrated strong annual revenue growth of
existing products and customers as well as adding new products and customers.
Our strategy remains to (1) leverage our relationship with Simclar Group to
expand our reach globally, (2) depend upon our long-term relationships with
major OEMs to increase our business with our existing customer base and to
grow
our customer base with other OEMs, and (3) seek strategic acquisitions and
alliances.
We
strive
to build on our integrated manufacturing capabilities, final system assemblies
and testing.
The
combination of our advanced backplane interconnect solutions with our
capabilities to supply printed circuit board (“PCB”) assemblies, metal
fabrication, cabling solutions and higher level assemblies provides a valuable
one-stop-shop for OEM system design and integration needs.
In
addition, vertical integration provides us with greater control over quality,
delivery and cost.
Our
products are manufactured to customer specifications for OEMs in a variety
of
markets including the data processing, telecommunications, instrumentation,
and
food preparation equipment industries. The company has five manufacturing plants
and numerous sales offices and has approximately 820 employees.
Some
of
the key highlights to be discussed further through this discussion and analysis
include:
·
|
2008
first quarter sales were approximately $29.9 million compared to
approximately $31.4 million in the same period in 2007, reflecting,
in the
main, the postponement of a key customer’s new programs until later in the
year.
|
·
|
Net
income was approximately $41,000 for the three months ended March
31, 2008
compared to $639,000 in the same period in 2007, however the 2008
results
includes costs of approximately $797,000 arising from the closure
of our
North Carolina plant.
|
·
|
Reported
EPS for the quarter ended March 31, 2008 is $0.01, compared to $0.10
in
the same period in 2007, however, this was after the inclusion of
the
above mentioned charges relating to the North Carolina plant closure.
|
·
|
Management
has implemented a cost-reduction program across each location to
mitigate
the effect of lower sales and reduced margins, in order to improve
profitability in future quarters, while retaining our competitive
advantage.
|
·
|
Bank
term loan repayments in the quarter were approximately $1.5 million,
of
which $750,000 were voluntary
payments.
|
Our
operations have continued to depend upon a relatively small number of customers
for a significant percentage of our net revenue. Significant reductions in
sales
to any of our 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 our
results of operations and financial condition, as has occurred in the past.
Our
results also depend to a substantial extent on the success of our OEM customers
in marketing their products. We continue to seek to diversify our customer
base
to reduce our reliance on our few major customers.
The
industry segments we serve, 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 our company
could
adversely affect our 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 could have a material adverse effect on our business,
financial condition and results of operations. During periods of recession
in
the electronics industry, our competitive advantages in the areas of
quick-turnaround manufacturing and responsive customer service may be of reduced
importance to electronic OEMs, who may become more price sensitive.
We
typically do not obtain long-term volume purchase contracts from our customers,
but rather we work with our customers to anticipate future volumes of orders.
Based upon such anticipated future orders, we will make commitments regarding
the level of business we want and can accomplish given the current timing of
production schedules and the levels of and utilization of facilities and
personnel. Occasionally, we purchase 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, which
orders are already made or anticipated. Any significant cancellations,
reductions or order delays could adversely affect our results of
operations.
We
use
Electronic
Data Interchange
(“EDI”)
with
both our customers and our suppliers in our efforts to continuously develop
accurate forecasts of customer volume requirements, as well as sharing our
future requirements with our suppliers.
We
depend
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 our results of operations.
It
is
important for us to efficiently manage inventory, proper timing of expenditures
and allocations of physical and personnel resources in anticipation of future
sales, the evaluation of economic conditions in the electronics industry and
the
mix of products, whether PCBs, wire harnesses, cables, or turnkey products,
for
manufacture.
We
must
continuously develop improved manufacturing procedures to accommodate our
customers’ needs for increasingly complex products. To continue to grow and be a
successful competitor, we must be able to maintain and enhance our 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 we
believe that our operations utilize the assembly and testing technologies and
equipment currently required by our customers, there can be no assurance that
our process development efforts will be successful or that the emergence of
new
technologies, industry standards or customer requirements will not render our
technology, equipment or processes obsolete or noncompetitive. In addition,
to
the extent that we determine 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.
Our
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 our operations, our 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. We generally have idle capacity
and
reduced operating margins during periods of lower-volume
production.
Key
Financial Performance Measures
We
manage
and assess the performance of our business primarily through the following
performance metrics:
Orders
booked and backlog
- the
ratio of orders booked to sales is reviewed on a monthly basis.
Sales
-
monthly sales are compared against budget and the same month in the previous
year.
Gross
margin
- the
gross margin achieved each month is compared against budget and the same month
in the previous year.
Selling,
general and administrative expenses -
the
ratio
of these expenses as a percentage of sales
each
month is compared against budget.
Working
capital
-
movements in the balance sheet amounts of inventory, accounts receivable and
accounts payable are reviewed on a monthly basis.
Bank
borrowings
-
movements in the company’s working capital facility with the bank are reviewed
on a weekly basis.
Weekly
business control
reviews
-
conference calls are conducted weekly by the president, CFO, and corporate
controller to review key performance metrics and general business update with
the general managers and financial controllers for each facility.
In
the
event that any of the above measures indicate unusual movements or trends,
further review is undertaken by management to ensure that satisfactory
explanations are obtained, and, where necessary, appropriate corrective action
is taken.
Cautionary
Statement Concerning Forward-Looking Statements
This
report includes certain forward-looking statements with respect to our company
and our business that involve risks and uncertainties. These statements are
influenced by our 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 you that our expectations will prove correct. Actual results and
developments may differ materially from those conveyed in the forward-looking
statements. For these statements, we claim the protections for forward-looking
statements contained in the Private Securities Litigation Reform Act of
1995.
Investors
are cautioned that forward-looking statements involve risks and uncertainties
that could cause actual results to differ materially from historical or
anticipated results due to many factors, including, but not limited to, the
potential effects of a loss of one or more key customers, covenants contained
in
our bank loan agreements, competition in the electronics manufacturing services
industry, the cyclical nature of our business, the lack of long-term agreements
with our customers, shortages of and price increases in the components of
devices we manufacture, our ability to keep up with technological changes in
our
industry, changes in interest rates, changes in cash flows from operations,
the
effectiveness of our internal controls, and other risks, uncertainties and
factors described in our most recent Annual Report on Form 10-K and other
filings from time to time with the Securities and Exchange Commission. These
documents are available free of charge at the Commission’s website at
http://www.sec.gov. Forward-looking statements speak only as of the date on
which they are made, and we undertake no obligation to update or revise any
forward-looking statements to reflect events or circumstances occurring after
the date of this report.
Results
of Operations - Three Months Ended March 31, 2008
Net
Sales
(dollars in thousands)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Net
Sales
|
|
$
|
29,923
|
|
$
|
31,408
|
|
|
|
|
|
|
|
|
|
Change
from prior year
|
|
$
|
(1,485
|
)
|
$
|
9,585
|
|
%
change from prior year
|
|
|
-4.7
|
%
|
|
43.9
|
%
|
Despite
forecasting growth within the first quarter, sales were approximately
$1.5million behind the same period in 2007, mainly due to a key customer
deferring new product introductions until later this year. The sales shortfall
was particularly felt within the telecom infrastructure sector, which accounts
for over 50% of the company’s revenue, and which has experienced the effects of
the economic slow-down. Despite this, the order backlog grew during this period
by approximately $1.7 million and forecasts indicate a stronger second
quarter.
Gross
Profit (dollars in thousands)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Gross
profit margin
|
|
$
|
2,707
|
|
$
|
3,826
|
|
|
|
|
|
|
|
|
|
Change
from prior year
|
|
$
|
(1,119
|
)
|
$
|
1,035
|
|
%
change from prior year
|
|
|
-29.2
|
%
|
|
37.1
|
%
|
|
|
|
|
|
|
|
|
%
of sales
|
|
|
9.0
|
%
|
|
12.2
|
%
|
The
main
factors that influence our gross margin percentage are material costs, product
mix and plant utilization, however, approximately $548,000 of the gross margin
reduction in the first quarter of 2008 relates to the closure of the North
Carolina plant. The reduction also reflects the effect of underutilization
of
fixed production costs caused by the sales shortfall. While margins are
continually under pressure from customer cost reductions programs, the company
actively seeks to mitigate the effect through production efficiency improvements
and procurement savings.
Selling,
General, and Administrative Expenses (dollars in thousands)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Selling,
general, and administrative expenses
|
|
$
|
2,393
|
|
$
|
2,378
|
|
|
|
|
|
|
|
|
|
Change
from prior year
|
|
$
|
15
|
|
$
|
777
|
|
%
change from prior year
|
|
|
0.6
|
%
|
|
48.5
|
%
|
|
|
|
|
|
|
|
|
%
of sales
|
|
|
8.0
|
%
|
|
7.6
|
%
|
Selling,
general, and administrative expenses were broadly in line with prior year
levels, however, the decrease in sales caused the percentage of sales to
increase slightly.
Interest
Expense (dollars in thousands)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Interest
expense
|
|
$
|
336
|
|
$
|
496
|
|
|
|
|
|
|
|
|
|
Change
from prior year
|
|
$
|
(160
|
)
|
$
|
209
|
|
%
change from prior year
|
|
|
-32.3
|
%
|
|
72.8
|
%
|
|
|
|
|
|
|
|
|
%
of sales
|
|
|
1.1
|
%
|
|
1.6
|
%
|
The
reduction in interest expense in 2008 reflects the fall in lending rates and
the
reduced level of debt compared to last year in line with the company’s strategy
to make where possible, advance repayments in order to continually reduce the
company’s bank’s borrowings. Average debt levels for the three month period
ended March 31, 2008 and same period for 2007 were approximately $20.5 million
and $25.7 million, respectively (including interest bearing debt owed to related
parties), while average interest rates in the quarter ended March 31, 2008
were
5.7% compared to 7.8% for the quarter ended March 31, 2007.
Income
Before Income Taxes
(dollars
in thousands)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Income
before taxes
|
|
$
|
59
|
|
$
|
968
|
|
|
|
|
|
|
|
|
|
Change
from prior year
|
|
$
|
(909
|
)
|
$
|
76
|
|
%
change from prior year
|
|
|
-93.9
|
%
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
%
of sales
|
|
|
0.2
|
%
|
|
3.1
|
%
|
The
decrease in income before tax in the first quarter of 2008 compared to the
same
period in 2007 is largely due to the closure costs of the North Carolina plant
discussed above. These costs were approximately $797,000 and were slightly
higher than previously forecast. Despite the closure being announced in the
last
quarter of 2007, current GAAP prevents, with certain exceptions, the provision
of future associated closure costs, instead requiring that these are recognized
in the period incurred. With the closure now complete however, management
anticipates the company will benefit in the future from both
improved
profits and cash flow.
Income
Tax Expense
(dollars
in thousands)
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Income
tax expense
|
|
$
|
19
|
|
$
|
329
|
|
|
|
|
|
|
|
|
|
Change
from prior year
|
|
$
|
(310
|
)
|
$
|
(58
|
)
|
%
change from prior year
|
|
|
-94.2
|
%
|
|
-15.0
|
%
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
32.2
|
%
|
|
34.0
|
%
|
Income
tax expense for the three months ended March 31, 2008 was approximately $18,000.
The lower effective tax rate reflects the lower tax rates borne by our Mexican
operation.
Liquidity
and Capital Resources
Cash
and
Cash Equivalents
(dollars
in thousands)
|
|
March
31,
2008
|
|
December
31,
2007
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,564
|
|
$
|
429
|
|
Cash
and
cash equivalents are approximately $1,135,000 higher as of March 31, 2008
compared to December 31, 2007. This is mainly due to high customer receipts
at
the quarter-end, rather than a sustained level of surplus cash, since as
previously discussed, any surplus funds are generally used to reduce bank
borrowings. Excess liquid funds are, however, invested in short-term
interest-bearing accounts at financial institutions.
Net
Cash
Provided from (Used In) Operating Activities
(dollars
in thousands)
|
|
March
31,
2008
|
|
March
31,
2007
|
|
|
|
|
|
|
|
Net
cash provided from (used in) operating activities
|
|
$
|
2,711
|
|
$
|
(32
|
)
|
Net
cash
provided from operating activities for the three months ended March 31, 2008
was
approximately $2,711,000 compared to cash used in operating activities of
approximately $32,000 for the same period last year. The main reason for this
swing was the inclusion in 2007 of a repayment of approximately $2.8 million
of
indebtedness to Simclar Group.
Accounts
Receivable
(dollars
in thousands)
|
|
March
31,
2008
|
|
December
31,
2007
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
18,200
|
|
$
|
20,805
|
|
|
|
|
|
|
|
|
|
Average
days sales outstanding
|
|
|
54.7
|
|
|
54.9
|
|
Accounts
receivable as of March 31, 2008 decreased by approximately $2.6 million compared
to December 31, 2007 due to collections on the higher sales in the fourth
quarter. The implementation of new collection procedures has resulted in
improvements in the collection of overdue receivables.
Inventory
(dollars
in thousands)
|
|
March
31,
2008
|
|
December
31,
2007
|
|
|
|
|
|
|
|
Inventory
|
|
$
|
20,649
|
|
$
|
21,664
|
|
|
|
|
|
|
|
|
|
Average
inventory turnover
|
|
|
5.3
|
|
|
5.6
|
|
Inventory
as of March 31, 2008 decreased by approximately $1.0 million compared to
December 31, 2007. Despite this reduction, lower sales in the quarter results
in
a reduction in average inventory turns which reflects the inclusion of
approximately $0.5million of aged inventory due to the postponement of a
customer project in the first quarter of 2008. The company continues to seek
improvements in inventory turnover through smaller order quantities and vendor
managed inventories, and is actively managing the liquidation of its excess
inventory balances.
Net
cash
(used in) provided by investing activities
(dollars
in thousands)
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Net
cash (used in) provided by investing activities
|
|
$
|
(68
|
)
|
$
|
129
|
|
Investing
activities for the three months ended March 31, 2008 related, in the main,
to
the installation in Mexico of equipment transferred from our closed facility
in
North Carolina, while investing activities in the first quarter of 2007,
included sales of surplus production equipment.
Net
cash
(used in) provided by financing activities
(dollars
in thousands)
|
|
Three
Months Ended
March
31,
|
|
|
|
2008
|
|
2007
|
|
Net
cash (used in) provided by financing activities
|
|
$
|
(1,531
|
)
|
$
|
182
|
|
Net
cash
used in financing activities in the three months ended March 31, 2008 was
approximately $1,531,000 compared to cash provided from financing activities
of
approximately $182,000 in the same period of 2007. This fluctuation is caused
by
the 2007 amount including approximately $2.5 million of cash inflow from the
increase in the company’s working capital line of credit with BoS.
Our
near-term cash requirements are primarily related to funding our operations,
investing in acquisitions, and servicing the company’s bank debt obligations.
We believe that the combination of internally-generated funds, available
cash reserves, and our existing credit facilities are sufficient to fund our
operating, investing and financing activities.
In
December 2005, we entered into two amended and one new credit facilities with
Bank of Scotland in Edinburgh, Scotland consisting of:
Borrower
|
|
Type
of facility
|
|
Original
amount
|
|
Balance
at
March
31, 2008
|
|
Simclar,
Inc.
|
|
Working
capital
|
|
$
|
7,500,000
|
|
$
|
7,522,993
|
|
Simclar,
Inc.
|
|
Term
loan - four tranches (see detail of tranches below
)
|
|
$
|
21,650,000
|
|
$
|
10,750,000
|
|
Simclar
Interconnect Technologies, Inc.
|
|
Working
Capital
|
|
$
|
1,000,000
|
|
$
|
857,352
|
|
Effective
March 27, 2008, we entered into amendments of the two working capital
facilities. The term of the $1 million working capital facility of SIT,
originally entered into in December 2005, and amended in January 2007, was
extended to March 17, 2009. The maturity date of the Simclar, Inc. $7.5 million
working capital facility, last amended in January 2007, was extended to March
17, 2009. No other material changes were made to either facility by the
amendments, except that the default interest rate under both facilities was
increased from 1.5% to 2.0% and the interest rate under the $7.5 million
facility was increased from 1.5% over LIBOR to 1.75% over LIBOR.
Interest
on the Simclar, Inc. working capital facility
accrues
at an annual rate equal to LIBOR plus 1.5% (increasing to 1.75% after March
2008), plus an amount, rounded to the nearest eighth of a percent, to cover
any
increases in certain regulatory costs incurred by the bank. The company may
elect to pay interest on advances every one, three or six months, with LIBOR
adjusted to correspond to the interest payment period selected by the
company
.
The
interest rate for the working capital facility at March 31, 2008 was 4.9% based
on the one month election.
Interest
on the Simclar Interconnect Technologies, Inc. working capital facility will
is
a margin over LIBOR determined by a ratio of net borrowings to EBITDA for any
given test period. The margin percentage can range from 1.75% to 2.5%. The
interest rate for this working capital facility at March 31, 2008 was
5.6%.
The
term
loan interest is also determined by a margin over LIBOR related to the ratio
of
net borrowings to EBITDA for any given test period. The margin percentage varies
from 1.5% to 3.5%. The term debt interest rate was 4.2% for tranches A and
B,
5.2% for tranche C, and 6.3% for tranche D at March 31, 2008 based on the one
month election. The term loan is divided into four tranches each with its own
specific purpose and repayment schedule as shown in the following table:
Tranche
|
|
Principal
Amount
|
|
Purpose
|
|
Payments
|
|
A
|
|
$
|
4,250,000
|
|
Refinance
existing facilities
|
|
Seventeen
quarterly payments of $250,000 beginning October 2004 through October
2008
|
|
|
|
|
|
|
|
|
|
|
B
|
|
$
|
1,400,000
|
|
Dayton
property acquisition
|
|
Twenty-eight
quarterly payments of $50,000 beginning January 2005 through October
2011
|
|
C
|
|
$
|
13,000,000
|
|
Acquisition
of certain assets of the Litton Interconnect Technologies assembly
operations
|
|
Thirteen
quarterly payments of $500,000 beginning December 2006 through December
2009, four quarterly payments of $250,000 from March 2010 through December
2010, four quarterly payments of $750,000 from March 2011 through December
2011 and four quarterly payments of $625,000 from March 2012 through
December 2012
|
|
|
|
|
|
|
|
|
|
|
D
|
|
$
|
3,000,000
|
|
Acquisition
of certain assets of the Litton Interconnect Technologies assembly
operations
|
|
Single
payment due December 31, 2010
|
|
The
weighted average interest rate for the quarter ended March, 31 2008 was
5.4%.
Reference
should be made to the company’s annual report on 10-K report for the year ended
December 31, 2007 for details of the credit facilities, all of which continue
to
be effective.
Due
to
the results for the 3 months ended March 31, 2008 being significantly reduced
by
the closure costs of the North Carolina plant, the company did not satisfy
the
EBIT to total interest coverage covenant for that period. Given these particular
circumstances, BoS has agreed to waive the interest coverage covenant as at
March 31, 2008.
Our
indebtedness requires us to dedicate a substantial portion of our cash flow
from
operations to payments on our debt, which could reduce amounts for working
capital and other general corporate purposes. The restrictions in our credit
facility could also limit our flexibility in reacting to changes in our business
and increases our vulnerability to general adverse economic and industry
conditions.
We
have
no off-balance sheet financing arrangements with related or unrelated parties
and no unconsolidated subsidiaries. In the normal course of business, we enter
into various contractual and other commercial commitments that impact or can
impact the liquidity of our operations.
Critical
Accounting Policies
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, 2007.
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, and the
differences may be material. 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 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Critical Accounting Policies" contained in the company's annual
report on Form 10-K for the year ended December 31, 2007. There have been no
material changes to these accounting policies during the three months ended
March 31, 2008.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Not
applicable
Item
4T. Controls and Procedures
Overview
The
company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities
Exchange Act of 1934 is recorded, processed, summarized, and reported within
the
specified time periods. As a part of these controls,
our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f)
under the Exchange Act. The company’s internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, and
includes those policies and procedures that:
·
|
pertain
to the maintenance of records that, in reasonable detail accurately
reflect the transactions and dispositions of the assets of the
company;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with generally
accepted
accounting principles and, that receipts and expenditures of the
company
are being made only in accordance with authorization of management
and
directors of the company; and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company's assets
that
could have a material effect on the financial
statements.
|
Under
the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness
of
the design and operation of our disclosure controls and procedures as of March
31, 2008. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Act is
accumulated and communicated to our management, including our principal
executive and principal financial officers, as appropriate to allow timely
decisions regarding required disclosure. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of March
31, 2008, our disclosure controls and procedures were effective to provide
reasonable assurance that the information required to be disclosed by us in
the
reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the applicable
rules and forms
.
Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures will prevent all
errors and all improper conduct. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute assurance that the
objectives of the control systems are met. Further, a design of a control system
must reflect the fact that there are resource constraints, and the benefit
of
controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of improper conduct,
if
any, have been detected. These inherent limitations include the realities that
judgments and decision-making can be faulty, and that breakdowns can occur
because of a simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more persons,
or
by management override of the control. Further, the design of any system of
controls is also based in part upon assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Over time, controls
may
become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate. Because of the inherent
limitations and a cost-effective control system, misstatements due to error
or
fraud may occur and may not be detected.
Changes
in Control Over Financial Reporting
During
the quarter ended March 31, 2008, there were no changes in our internal controls
over financial reporting that materially affected, or are reasonably likely
to
materially affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
We
are,
from time to time, a party to litigation which arises in the normal course
of
our business. When a loss is deemed probable and reasonably estimable, an amount
is recorded in our financial statements. Although the ultimate resolution of
pending proceedings cannot be determined, in the opinion of management, the
unfavorable resolution of these proceedings in the aggregate will not have
a
material adverse effect on our business, financial position, results of
operations, or liquidity.
Items
1A has no material changes from the corresponding item reported in the Company’s
Form 10-K for the fiscal year ended December 31, 2007 and has been omitted.
Items 2, 3, 4 and 5 are not applicable and have been omitted.
Item
6. Exhibits
Exhibit
No.
|
|
Description
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
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
|
|
|
|
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
|
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.
|
|
|
|
Date: May 15, 2008
|
By
|
/s/ Barry J. Pardon
|
|
BARRY
J. PARDON,
President
|
|
|
|
Date: May 15, 2008
|
By
|
/s/ Stephen P. Donnelly
|
|
STEPHEN
P. DONNELLY, Chief Financial
Officer
|
Simclar (CE) (USOTC:SIMC)
過去 株価チャート
から 5 2024 まで 6 2024
Simclar (CE) (USOTC:SIMC)
過去 株価チャート
から 6 2023 まで 6 2024