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, 2000
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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.)
20229 Nine Mile Road, St. Clair Shores, Michigan 48080
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, and area code (810) 443-4200
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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 requirements for the past 90 days. YES X NO
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At March 31, 2000, the Company had one class of common stock outstanding,
$1.00 par value common stock. There were 1,047,761 shares of such common
stock outstanding at that time.
(continued)
Part I FINANCIAL INFORMATION
FEDERAL SCREW WORKS
CONDENSED BALANCE SHEETS (UNAUDITED)
(Thousands of Dollars)
Mar. 31 June 30
2000 1999
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ASSETS
Current Assets:
Cash ........................................... $ 3,263 $ 279
Accounts Receivable, Less Allowance of $50 ..... 17,236 15,727
Inventories:
Finished Products .............................. 7,888 4,815
In-Process Products ............................ 5,284 7,210
Raw Materials And Supplies ..................... 1,938 2,851
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15,110 14,876
Prepaid Expenses And Other Current Accounts .... 388 297
Deferred Income Taxes .......................... 1,004 958
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Total Current Assets ........................ 37,001 32,137
Other Assets:
Intangible Pension Asset ....................... 1,722 1,722
Cash Value Of Life Insurance ................... 5,393 5,312
Prepaid Pension Cost ........................... 3,405 3,622
Miscellaneous .................................. 1,092 992
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11,612 11,648
Property, Plant And Equipment .................... 93,821 94,527
Less Accumulated Depreciation .................. 53,023 53,607
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40,798 40,920
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Total Assets ..................................... $89,411 $84,705
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Part I FINANCIAL INFORMATION (Continued)
Mar. 31 June 30
2000 1999
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable .............................. $ 8,067 $ 4,143
Payroll And Employee Benefits ................. 6,552 8,612
Dividends Payable ............................. 105 108
Federal Income Taxes .......................... 1,020 585
Taxes, Other Than Income Taxes ................ 1,545 1,802
Accrued Pension Contributions ................. 1,108 0
Other Accrued Liabilities ..................... 295 31
Current Maturities Of Long-Term Debt .......... 0 200
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Total Current Liabilities .................. 18,692 15,481
Long Term Liabilities:
Long-Term Debt ................................ 0 2,100
Unfunded Pension Obligation ................... 1,321 1,321
Postretirement Benefits Other Than Pensions ... 11,126 9,865
Deferred Income Taxes ......................... 1,792 2,006
Employee Benefits ............................. 1,002 1,081
Other Liabilities ............................. 783 723
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Total Long-Term Liabilities ................ 16,024 17,096
Stockholders' Equity:
Common Stock, $1.00 Par Value, Authorized
2,000,000 Shares; 1,047,761 Shares Outstanding
at March 31, 1999 and 1,076,162 at June 30, 1999 1,048 1,076
Additional Capital ............................ 3,269 3,269
Retained Earnings ............................. 51,007 48,412
Unfunded Pension Costs ........................ (629) (629)
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Total Stockholders' Equity ................. 54,695 52,128
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Total Liabilities and Stockholders' Equity ...... $ 89,411 $ 84,705
======== ========
See Accompanying Notes.
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<TABLE>
<CAPTION>
FEDERAL SCREW WORKS
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(Thousands of Dollars, Except Per Share)
Three Months Ended Nine Months Ended
March 31 March 31
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net Sales ............................. $ 32,888 $ 31,327 $ 89,280 $ 86,310
Costs And Expenses:
Cost of Products Sold .............. 27,747 26,564 77,023 73,966
Gain on Sale of Steel Proc. Division (2,575) 0 (2,575) 0
Selling And Administrative Expenses 1,957 1,857 5,403 5,281
Interest Expense ................... (28) 22 62 132
-------- -------- -------- --------
Total Costs and Expenses ........ 27,101 28,443 79,913 79,379
-------- -------- -------- --------
Earnings Before Federal
Income Taxes ....................... 5,787 2,884 9,367 6,931
Federal Income Taxes .................. 1,967 980 3,186 2,357
-------- -------- -------- --------
Net Earnings .......................... $ 3,820 $ 1,904 $ 6,181 $ 4,574
======== ======== ======== ========
Per Share Of Common Stock:
Basic and Diluted Earnings Per Share .. $ 3.59 $ 1.75 $ 5.79 $ 4.21
======== ======== ======== ========
Cash Dividends Declared Per Share ..... $ .10 $ .10 $ 2.20 $ 2.10
======== ======== ======== ========
<FN>
See Accompanying Notes.
</TABLE>
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FEDERAL SCREW WORKS
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)
Nine Months
Ended
March 31
2000 1999
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Operating Activities
Net Earnings ....................................... $ 6,181 $ 4,574
Adjustments to Reconcile Net Earnings to Net Cash
Provided By (Used In) Operating Activities:
Depreciation and Amortization .................. 3,620 3,410
Increase In Cash Value of Life Insurance ....... (81) (82)
Gain On Sale of Steel Processing Division ...... (1,700) 0
Change In Deferred Income Taxes ................ (260) (389)
Employee Benefits .............................. (79) 41
Other .......................................... 1,438 1,646
Changes In Operating Assets And Liabilities:
Accounts Receivable ............................ (1,509) (3,243)
Inventories And Prepaid Expenses ............... (325) (615)
Accounts Payable And Accrued Expenses .......... 1,714 496
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Net Cash Provided By Operating Activities ............ 8,999 5,838
Investing Activities
Purchases of Property, Plant And Equipment-Net ..... (5,601) (5,458)
Cash Proceeds From Sale of Steel Processing Division 5,500 0
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Net Cash Used In Investing Activities ................ (101) (5,458)
Financing Activities
Proceeds & Repayments on Bank Borrowings ........... (2,300) 1,075
Purchase of Common Stock ........................... (1,251) 0
Dividends Paid ..................................... (2,363) (2,281)
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Net Cash Used In Financing Activities ................ (5,914) (1,206)
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Increase (Decrease) In Cash .......................... 2,984 (826)
Cash At Beginning Of Period .......................... 279 975
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Cash At End Of Period ................................ $ 3,263 $ 149
======= =======
See Accompanying Notes.
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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, 2000, are not necessarily indicative of the results to
be expected for the fiscal year ending June 30, 2000.
Note B - Debt
On October 13, 1999, Comerica Bank approved a one year extension of the
Company's $25,000,000 Revolving Credit and Term Loan Agreement. Under the
agreement the Company has the option to convert borrowings thereunder
(classified as long-term debt) to a term note through October 31, 2002, the
expiration date of the agreement. Payments under the term note, if the
conversion option is exercised, would be made quarterly and could extend to
October 31, 2004. As of March 31, 2000, there were no 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
Condition and Results of Operations
RESULTS OF OPERATIONS: Net sales for the Company's third quarter ended March
31, 2000, increased $1,561,000, or 5.0%, compared with net sales for the
third quarter of the prior year. Net sales for the nine month period ended
March 31, 2000, increased $2,970,000, or 3.4%, compared with the nine month
period of the prior year. The increase is attributable mainly to our
participation in a new truck program, and increased automotive and
refrigeration sales.
Gross profit for the three month period ended March 31, 2000, increased
$378,000, or 7.9%, as compared with gross profit for the third quarter of the
prior year. Gross profit for the nine month period ended March 31, 2000,
decreased $87,000, or 0.7%, as compared with the nine month period of the
prior year. The decrease is attributable mainly to increased manufacturing
costs and continual pricing pressures from our customers.
Selling and administrative expenses increased $100,000, or 5.4%, for the
third quarter ended March 31, 2000, as compared with the third quarter of the
prior year. Selling and administrative expenses increased $122,000, or 2.3%,
as compared with the nine month period ended March 31, 1999. The increase is
mainly attributable to increases in compensation and related expenses.
The Registrant's Shareholders are aware of the Registrant's dependence upon
sales to the two largest U.S. automobile manufacturers, a condition that has
existed for at least fifty years. Although the Registrant has purchase orders
from such customers, such purchase orders generally provide for supplying the
customer's requirements for a particular model or model year rather than for
manufacturing
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a specific quantity of products. The loss of any one of such customers or
significant purchase orders could have a material adverse effect on the
Registrant. These customers are also able to exert considerable pressure on
component suppliers to reduce costs, improve quality and provide additional
design and engineering capabilities. There can be no assurance that the
additional costs of increased quality standards, price reductions or
additional capabilities required by such customers will not have a material
adverse effect on the financial condition or results of operations of the
Registrant.
YEAR 2000 MATTERS: The Company completed a comprehensive review of its
operations related to the "Year 2000" issue during fiscal 1998 and calendar
1999. This review included an assessment of the Company's mainframe computer
system, operating and application systems, microcomputer and office systems,
facilities, and production equipment. This review also included
correspondence with major vendors and customers. Management believes it has
identified those systems that could be affected by the "Year 2000" issue.
Based on this review, the Company implemented a plan to resolve these issues.
The Company has not experienced any problems related to the "Year 2000"
issue, and management does not expect the Company to experience any
significant problems in the future. The total "Year 2000" project cost was
approximately $400,000, which included costs to acquire upgraded software
that was capitalized. These costs have been paid for with cash from
operations.
DIVIDENDS: The Board of Directors, in February, 2000, declared a $.10 per
share quarterly dividend paid April 3, 2000, to shareholders of record March
6, 2000.
LIQUIDITY AND CAPITAL RESOURCES: Working capital increased by $1,653,000 from
$16,656,000 at June 30, 1999, to $18,309,000 at March 31, 2000.
At March 31, 2000, the Company had available $25,000,000 under its bank
credit agreement.
Capital expenditures for the nine month period ended March 31, 2000, were
approximately $5.6 million, and, for the year, are expected to approximate
$7.1 million, of which approximately $2.4 million has been committed as of
March 31, 2000.
There have been no material changes concerning environmental matters since
those reported in the Registrant's Report on Form 10-K for the fiscal year
ended June 30, 1999.
FORWARD LOOKING STATEMENTS: The foregoing discussion and analysis contains a
number of "forward looking statements" within the meaning of the Securities
Act of 1933 and the Securities Exchange Act of 1934, both as amended, with
respect to expectations for future periods which are subject to various
uncertainties, including competition, Information Systems issues related to
the Year 2000, the loss of, or reduction in business with, the Company's
principal customers, work stoppages, strikes and slowdowns at the Company's
facilities and those of its customers; adverse changes in economic conditions
generally and those of the automotive industry, specifically.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk is limited to interest rate risk on its
revolving credit and term loan agreement. At March 31, 2000, the carrying
amounts reported in the balance sheets for cash, accounts receivable,
accounts payable, debt and investments approximate fair value. Accordingly,
management believes this risk is not material.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
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 5. Other Information
On January 26, 2000, the Company sold its Steel Processing Division
located at Romulus, Michigan, to Kreher Wire Processing Inc. The transaction
resulted in an after-tax gain of approximately $1,700,000, or $1.59 per
share. Management does not expect this transaction to affect the core
operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule.
(b) 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
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 May 12, 2000 /s/ W.T. ZurSchmiede, Jr.
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W. T. ZurSchmiede, Jr.
Chairman, Chief Executive Officer
and Chief Financial Officer
Exhibit Index:
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE COMPANY'S
AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE
PERIOD ENDING MARCH 31, 2000, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> MAR-31-2000
<CASH> $ 3,263
<SECURITIES> 0
<RECEIVABLES> 17,236
<ALLOWANCES> 0
<INVENTORY> 15,110
<CURRENT-ASSETS> 37,001
<PP&E> 93,821
<DEPRECIATION> 53,023
<TOTAL-ASSETS> 89,411
<CURRENT-LIABILITIES> 18,692
<BONDS> 0
<COMMON> 1,048
0
0
<OTHER-SE> 53,647
<TOTAL-LIABILITY-AND-EQUITY> 89,411
<SALES> 89,280
<TOTAL-REVENUES> 89,280
<CGS> 77,023
<TOTAL-COSTS> 2,828
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 9,367
<INCOME-TAX> 3,186
<INCOME-CONTINUING> 6,181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,181
<EPS-BASIC> 5.79
<EPS-DILUTED> 5.79
</TABLE>
