UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended March 31, 1998
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OR
[ ] 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: O-1837
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FEDERAL SCREW WORKS
(Exact name of registrant as specified in its charter)
Michigan 38-0533740
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
535 Griswold Street, Suite 2400, Detroit Michigan 48226
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, and area code (313) 963-2323
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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 require-
ments for the past 90 days. YES__X__ NO____
At March 31, 1998, the Company had one class of common stock outstanding,
$1.00 par value common stock. There were 1,086,412 shares of such common
stock outstanding at that time.
(continued)
<PAGE>
Part I FINANCIAL INFORMATION
FEDERAL SCREW WORKS
CONDENSED BALANCE SHEETS (UNAUDITED)
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31 June 30
1998 1997
-------- -------
ASSETS
<S> <C> <C>
Current Assets:
Cash ................................................ $ 106 $ 1,176
Accounts Receivable, Less Allowance of $50 .......... 13,210 11,893
Inventories:
Finished Products ................................... 2,808 3,872
In-Process Products ................................. 5,818 5,018
Raw Materials And Supplies .......................... 1,732 2,350
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10,358 11,240
Prepaid Expenses And Other Current Accounts ......... 191 276
Deferred Income Taxes ............................... 889 909
------- -------
Total Current Assets ............................. 24,754 25,494
Other Assets:
Intangible Pension Asset ............................ 2,550 2,550
Cash Value Of Life Insurance ........................ 5,147 5,065
Miscellaneous ....................................... 1,650 1,407
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9,347 9,022
Property, Plant And Equipment ......................... 84,015 79,348
Less Accumulated Depreciation ....................... 48,398 45,706
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35,617 33,642
------- -------
Total Assets .......................................... $69,718 $68,158
======= =======
</TABLE>
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<PAGE>
Part I FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>
March 31 June 30
1998 1997
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LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts Payable .................................. $ 5,198 $ 5,394
Payroll And Employee Benefits ..................... 6,216 7,072
Dividends Payable ................................. 109 109
Federal Income Taxes .............................. 385 849
Taxes, Other Than Income Taxes .................... 1,153 1,429
Accrued Pension Contributions ..................... 0 429
Other Accrued Liabilities ......................... 251 375
Current Maturities Of Long-Term Debt .............. 400 400
-------- --------
Total Current Liabilities ...................... 13,712 16,057
Long Term Liabilities:
Long-Term Debt .................................... 1,100 600
Unfunded Pension Obligation ....................... 1,526 1,526
Postretirement Benefits Other Than Pensions ....... 7,845 6,746
Deferred Income Taxes ............................. 1,775 1,564
Employee Benefits ................................. 1,052 1,105
Other Liabilities ................................. 584 479
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Total Long-Term Liabilities .................... 13,882 12,020
Stockholders' Equity:
Common Stock, $1.00 Par Value, Authorized
2,000,000 Shares; 1,086,412 Shares Outstanding
at March 31, 1998 and 1,086,512 at June 30, 1997 . 1,086 1,087
Additional Capital ................................ 3,076 3,066
Retained Earnings ................................. 39,460 37,426
Unfunded Pension Costs ............................ (1,498) (1,498)
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Total Stockholders' Equity ..................... 42,124 40,081
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Total Liabilities and Stockholders' Equity .......... $ 69,718 $ 68,158
======== ========
<FN>
See Accompanying Notes.
</TABLE>
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<PAGE>
FEDERAL SCREW WORKS
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(Thousands of Dollars, Except Per Share)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31 March 31
l998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales ............................ $28,536 $27,536 $78,636 $75,001
Costs And Expenses:
Cost of Products Sold ............. 23,951 23,178 67,475 64,484
Selling And Administrative Expenses 1,805 1,676 4,829 4,360
Interest Expense .................. 37 90 113 365
------- ------- ------- -------
Total Costs and Expenses ....... 25,793 24,944 72,417 69,209
------- ------- ------- -------
Earnings Before Federal
Income Taxes ...................... 2,743 2,592 6,219 5,792
Federal Income Taxes ................. 933 880 2,114 1,968
------- ------- ------- -------
Net Earnings ......................... $ 1,810 $ 1,712 $ 4,105 $ 3,824
======= ======= ======= =======
Per Share Of Common Stock:
Basic and Diluted Earnings Per Share . $ 1.67 $ 1.58 $ 3.78 $ 3.52
======= ======= ======= =======
Cash Dividends Per Share ............. $ .10 $ .10 $ 1.90 $ 1.10
======= ======= ======= =======
<FN>
See Accompanying Notes.
</TABLE>
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<PAGE>
FEDERAL SCREW WORKS
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months
Ended March 31
1998 1997
---- ----
<S> <C> <C>
Operating Activities
Net Earnings .................................... $ 4,105 $ 3,824
Adjustments to Reconcile Net Earnings to Net Cash
Provided By (Used In) Operating Activities:
Depreciation and Amortization ............... 3,072 2,852
Increase In Cash Value of Life Insurance .... (82) (82)
Change In Deferred Income Taxes ............. 231 66
Employee Benefits ........................... (53) (74)
Amortization of Restricted Stock ............ 0 18
Other ....................................... 970 1,106
Changes In Operating Assets And Liabilities:
Accounts Receivable ........................ (1,317) (1,092)
Inventories And Prepaid Expenses ........... 967 1,799
Accounts Payable And Accrued Expenses ...... (2,345) 891
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Net Cash Provided By Operating Activities ......... 5,548 9,308
Investing Activities
Purchases of Property, Plant And Equipment-Net .. (5,047) (3,460)
Financing Activities
Proceeds and Repayments on Bank Borrowings ...... 700 (5,105)
Principal Payments on Lease Purchase Obligations (200) (200)
Purchase of Common Stock ........................ (5) 0
Dividends Paid .................................. (2,065) (1,195)
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Net Cash Used In Financing Activities ............. (1,570) (6,500)
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Decrease In Cash .................................. (1,069) (652)
Cash At Beginning Of Period ....................... 1,175 782
------- -------
Cash At End Of Period ............................. $ 106 $ 130
======= =======
<FN>
See Accompanying Notes.
</TABLE>
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<PAGE>
FEDERAL SCREW WORKS
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for the nine
months ended March 31, 1998, are not necessarily indicative of the results to
be expected for the fiscal year ending June 30, 1998.
Note B - Debt
The Company has a $25,000,000 Revolving Credit and Term Loan Agreement with a
Bank. Under the agreement the Company has the option to convert borrowings
thereunder (classified as long-term debt) to a term note through October 31,
2000, the expiration date of the agreement. Payments under the term note, if
the conversion option is exercised, would be made quarterly commencing three
months following conversion until maturity of the term note on October 31,
2002. As of March 31, 1998, there was $700,000 in outstanding borrowings
under the Revolving Credit and Term Loan Agreement.
Note C - Dividends
Cash dividends per share are based on the number of shares outstanding at the
respective dates of declaration.
Note D - Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants,
and convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share.
Statement No. 128 has had no impact on the Company's calculation of average
shares outstanding or earnings per share for any of the years presented.
Item 2. Management's Discussion and Analysis of Financial
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Condition and Results of Operations
-----------------------------------
RESULTS OF OPERATIONS: Net sales for the Company's third quarter ended March
31, 1998, increased $1,000,000, or 3.6%, compared with net sales for the
third quarter of the prior year. Net sales for the nine month period ended
March 31, 1998, increased $3,635,000, or 4.8%, compared with the nine month
period of the prior year. The increase is attributable to new product
development and the steady growth of sales to Tier I suppliers in the
automotive industry.
Gross profit for the three month period ended March 31, 1998,
increased $227,000, or 5.2%, as compared with gross profit for the third
quarter of the prior year. Gross profit for the nine month period ended March
31, 1998, increased $644,000,
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<PAGE>
or 6.1%, as compared with the nine month period ended March 31, 1997. The
increase is attributable mainly to efficiencies related to additional volume
and an improved product mix.
Selling and administrative expenses increased $129,000, or 7.7%, for the
third quarter ended March 31, 1998, as compared with the third quarter of the
prior year. Selling and administrative expenses increased $469,000, or 10.8%,
as compared with the nine month period ended March 31, 1997. The increase is
mainly attributable to increases in compensation necessary to support the
Company's expanded sales volume.
DIVIDENDS: The Board of Directors, in February 1998, declared a $.10 per
share dividend paid April 1, 1998, to shareholders of record March 6, 1998.
LIQUIDITY AND CAPITAL RESOURCES: Working capital increased by $1,605,000 from
$9,437,000 at June 30, 1997, to $11,042,000 at March 31, 1998.
At March 31, 1998, the Company had available $24,300,000 under its bank
credit agreement.
Capital expenditures for the nine month period ended March 31, 1998, were
approximately $5.1 million, and, for the year, are expected to approximate
$8.0 million, of which approximately $1.9 million has been committed as of
March 31, 1998.
There have been no material changes concerning environmental matters since
those reported in the Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1997. The Registrant was designated by the Federal
Environmental Protection Agency (the "EPA") as a Potentially Responsible
Party ("PRP") with respect to a site located in Springfield Township, Oakland
County, Michigan, and two other related dump sites located in Oakland County,
Michigan. The PRPs have reached agreement with the EPA on the terms of a
settlement which provides for the remediation of the Springfield Township
site. The PRPs, including the Registrant, have signed a Consent Decree
embodying the settlement terms and the EPA is in the process of having the
court review and enter the Consent Decree. Remediation costs for which the
Registrant may become liable are not expected to have a material effect on
the Registrant's financial statements. The Registrant has reached agreement
with the other PRPs involved with this site to settle all remaining
identified claims for a cost to the Registrant of approximately $173,000. The
Registrant previously paid $48,000 as its share of an interim response
action. The Company has fully accrued management's estimate of the exposure
to these environmental matters which includes the full cost outlined in the
Consent Decree with respect to the Springfield Township site. The Registrant
has also paid a total of $41,000 to settle cost reimbursement claims for this
site and the Rose Township Site that were asserted by the Michigan Department
of Natural Resources.
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<PAGE>
PART II OTHER INFORMATION
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Item 1. Legal Proceedings
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The information set forth at the conclusion of the Liquidity and
Capital Resources discussion in Item 2 of Part I concerning environmental
matters is incorporated by reference.
Item 6. Exhibits and Reports on Form 8-K
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(a) Reports on Form 8-K. There was no SEC Form 8-K filed this
quarter. There were no unusual charges or credits to income, nor
a change in independent accountants.
SIGNATURES
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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.
Federal Screw Works
---------------------------------
Date May 14, 1998 /s/ W. T. ZurSchmiede, Jr.
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W. T. ZurSchmiede, Jr.
Chairman, Chief Executive Officer
and Chief Financial Officer
Date May 14, 1998 /s/ John M. O'Brien
-------------- ---------------------------------
John M. O'Brien
Vice President
Exhibit Index:
Exhibit 27 Financial Data Schedule
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE COMPANY'S
FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD
ENDING MARCH 31, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> $ 106
<SECURITIES> 0
<RECEIVABLES> 13,210
<ALLOWANCES> 0
<INVENTORY> 10,358
<CURRENT-ASSETS> 24,754
<PP&E> 84,015
<DEPRECIATION> 48,398
<TOTAL-ASSETS> 69,718
<CURRENT-LIABILITIES> 13,712
<BONDS> 400
<COMMON> 1,086
0
0
<OTHER-SE> 41,038
<TOTAL-LIABILITY-AND-EQUITY> 69,718
<SALES> 78,636
<TOTAL-REVENUES> 78,636
<CGS> 67,475
<TOTAL-COSTS> 72,304
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113
<INCOME-PRETAX> 6,219
<INCOME-TAX> 2,114
<INCOME-CONTINUING> 4,105
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,105
<EPS-PRIMARY> 3.78
<EPS-DILUTED> 3.78
</TABLE>
