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 December 31, 1997
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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
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(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 December 31, 1997, the Company had one class of common stock outstanding,
$1.00 par value common stock. There were 1,086,512 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>
December 31 June 30
1997 1997
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ASSETS
<S> <C> <C>
Current Assets:
Cash ................................................ $ 121 $ 1,176
Accounts Receivable, Less Allowance of $50 .......... 11,720 11,893
Inventories:
Finished Products ................................... 2,762 3,872
In-Process Products ................................. 5,380 5,018
Raw Materials And Supplies .......................... 1,508 2,350
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9,650 11,240
Prepaid Expenses And Other Current Accounts ......... 382 276
Deferred Income Taxes ............................... 829 909
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Total Current Assets ............................. 22,702 25,494
Other Assets:
Intangible Pension Asset ............................ 2,550 2,550
Cash Value Of Life Insurance ........................ 5,119 5,065
Miscellaneous ....................................... 1,590 1,407
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9,259 9,022
Property, Plant And Equipment ......................... 81,647 79,348
Less Accumulated Depreciation ....................... 47,371 45,706
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34,276 33,642
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Total Assets .......................................... $66,237 $68,158
======= =======
</TABLE>
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<PAGE>
Part I FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
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LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts Payable .................................. $ 3,953 $ 5,394
Payroll And Employee Benefits ..................... 4,345 7,072
Dividends Payable ................................. 109 109
Federal Income Taxes .............................. 93 849
Taxes, Other Than Income Taxes .................... 1,325 1,429
Accrued Pension Contributions ..................... 43 429
Other Accrued Liabilities ......................... 203 375
Current Maturities Of Long-Term Debt .............. 400 400
-------- --------
Total Current Liabilities ...................... 10,471 16,057
Long Term Liabilities:
Long-Term Debt .................................... 3,080 600
Unfunded Pension Obligation ....................... 1,526 1,526
Postretirement Benefits Other Than Pensions ....... 7,478 6,746
Deferred Income Taxes ............................. 1,654 1,564
Employee Benefits ................................. 1,065 1,105
Other Liabilities ................................. 534 479
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Total Long-Term Liabilities .................... 15,337 12,020
Stockholders' Equity:
Common Stock, $1.00 Par Value, Authorized
2,000,000 Shares; 1,086,512 Shares Outstanding
at Dec. 31, 1997 and at June 30, 1997 ............. 1,087 1,087
Additional Capital ................................ 3,075 3,066
Retained Earnings ................................. 37,765 37,426
Unfunded Pension Costs ............................ (1,498) (1,498)
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Total Stockholders' Equity ..................... 40,429 40,081
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Total Liabilities and Stockholders' Equity .......... $ 66,237 $ 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 Six Months
Ended Ended
December 31 December 31
l997 1996 1997 1996
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<S> <C> <C> <C> <C>
Net Sales ............................ $25,384 $23,759 $50,100 $47,465
Costs And Expenses:
Cost of Products Sold ............. 21,930 20,176 43,524 41,306
Selling And Administrative Expenses 1,363 1,441 3,024 2,684
Interest Expense .................. 56 143 76 275
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Total Costs and Expenses ....... 23,349 21,760 46,624 44,265
------- ------- ------- -------
Earnings Before Federal
Income Taxes ...................... 2,035 1,999 3,476 3,200
Federal Income Taxes ................. 692 679 1,181 1,088
------- ------- ------- -------
Net Earnings ......................... $ 1,343 $ 1,320 $ 2,295 $ 2,112
======= ======= ======= =======
Per Share Of Common Stock:
Net Earnings Per Share ............... $ 1.23 $ 1.21 $ 2.11 $ 1.94
======= ======= ======= =======
Cash Dividends Per Share ............. $ .10 $ .10 $ 1.80 $ 1.00
======= ======= ======= =======
<FN>
See Accompanying Notes.
</TABLE>
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<PAGE>
FEDERAL SCREW WORKS
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months
Ended December 31
1997 1996
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Operating Activities
<S> <C> <C>
Net Earnings .................................... $ 2,295 $ 2,112
Adjustments to Reconcile Net Earnings to Net Cash
Provided By (Used In) Operating Activities:
Depreciation and Amortization ............... 1,997 1,870
Increase In Cash Value of Life Insurance .... (54) (54)
Change In Deferred Income Taxes ............. 170 (50)
Employee Benefits ........................... (40) (58)
Amortization of Restricted Stock ............ 0 12
Other ....................................... 614 727
Changes In Operating Assets And Liabilities:
Accounts Receivable ........................ 173 201
Inventories And Prepaid Expenses ........... 1,484 1,197
Accounts Payable And Accrued Expenses ...... (5,587) (1,463)
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Net Cash Provided By Operating Activities ......... 1,052 4,494
Investing Activities
Purchases of Property, Plant And Equipment-Net .. (2,631) (1,977)
Financing Activities
Proceeds and Repayments on Bank Borrowings ...... 2,680 (1,775)
Principal Payments on Lease Purchase Obligations (200) (200)
Dividends Paid .................................. (1,956) (1,087)
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Net Cash Provided By (Used In) Financing Activities 524 (3,062)
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Decrease In Cash .................................. (1,054) (545)
Cash At Beginning Of Period ....................... 1,176 782
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Cash At End Of Period ............................. $ 121 $ 237
======= =======
<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 six months
ended December 31, 1997, 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 December 31, 1997, there was $2,680,000 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.
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 second quarter ended
Decmeber 31, 1997, increased $1,625,000, or 6.8%, compared with net sales for
the second quarter of the prior year. Net sales for the six month period
ended December 31, 1997, increased $2,635,000, or 5.6%, compared with the six
month period of the prior year. The increase is attributable to new product
development and the continued strong demand in North American automobile
sales.
Gross profit for the three month period ended December 31, 1997,
decreased $129,000, or 3.6%, as compared with gross profit for the second
quarter of the prior year. Gross profit for the six month period ended
December 31, 1997, increased $417,000, or 6.8%, as compared with the six
month period ended December 31, 1996. The increase is attributable mainly to
additional volume and product mix.
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<PAGE>
Selling and administrative expenses decreased $78,000, or 5.4%, for
the second quarter ended December 31, 1997, as compared with the second
quarter of the prior year. Selling and administrative expenses increased
$340,000, or 12.7%, as compared with the six month period ended December 31,
1996. The increase is mainly attributable to increases in compensation
related to product promotion.
DIVIDENDS: The Board of Directors, in October 1997, declared a $.10
per share dividend paid January 5, 1998, to shareholders of record December
5, 1997.
LIQUIDITY AND CAPITAL RESOURCES: Working capital increased by
$2,794,000 from $9,437,000 at June 30, 1997, to $12,231,000 at December 31,
1997.
At December 31, 1997, the Company had available $22,320,000 under its
bank credit agreement.
Capital expenditures for the six month period ended December 31,
1997, were approximately $2.6 million, and, for the year, are expected to
approximate $7.0 million, of which approximately $3.9 million has been
committed as of December 31, 1997.
There have been no material changes concerning environmental matters since
those reported in the Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997, except that the Registrant has entered into a
settlement with respect to the Springfield Township site. 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
$160,000. The Registrant previously paid $48,000 as its share of an interim
response action. The Registrant has also paid a total of $39,000 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
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
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Date February 13, 1998 /s/ W. T. ZurSchmiede, Jr.
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W. T. ZurSchmiede, Jr.
Chairman, Chief Executive Officer
and Chief Financial Officer
Date February 13, 1998 /s/ John M. O'Brien
------------------- --------------------
John M. O'Brien
Vice President
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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 DECEMBER 31, 1997, 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> DEC-31-1997
<CASH> $ 121
<SECURITIES> 0
<RECEIVABLES> 11,720
<ALLOWANCES> 0
<INVENTORY> 9,650
<CURRENT-ASSETS> 22,702
<PP&E> 81,647
<DEPRECIATION> 47,371
<TOTAL-ASSETS> 66,237
<CURRENT-LIABILITIES> 10,471
<BONDS> 400
<COMMON> 1,087
0
0
<OTHER-SE> 39,342
<TOTAL-LIABILITY-AND-EQUITY> 66,237
<SALES> 50,100
<TOTAL-REVENUES> 50,100
<CGS> 43,524
<TOTAL-COSTS> 46,548
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> 3,476
<INCOME-TAX> 1,181
<INCOME-CONTINUING> 2,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,295
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 2.11
</TABLE>
