FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1997
Commission File Number 0-14299
SECOM GENERAL CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 87-0410875
-------- ----------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
26600 HEYN DRIVE, P.O. BOX 705 48376
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (810-305-9410)
--------------
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 requirement for the past 90 days.
YES __ X ___ NO ________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Title of Class Number of Shares Outstanding
Common Stock 5,357,800
(par value $.10 per share)
<PAGE>
SECOM GENERAL CORPORATION
FORM 10-Q
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Notes to Interim Consolidated Financial Statements 4
Item 2. Management's Discussion & Analysis of Financial Condition
and Results of Operations 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
<TABLE>
<CAPTION>
ASSETS
JUN 30 1997 SEP 30 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash ..................................... $ 408,600 $ 319,600
Accounts receivable, net ................. 6,409,600 4,130,700
Other receivables ........................ 112,000 33,200
Inventories .............................. 6,171,500 5,170,500
Prepaids and other ....................... 421,200 547,400
Deferred tax asset ....................... 511,200 569,800
----------- -----------
TOTAL CURRENT ASSETS ................ 14,034,100 10,771,200
Cash restricted for equipment ............ 1,042,100 4,089,000
Property, plant & equipment, net ......... 26,826,000 17,758,600
Intangible asset ......................... 1,891,700 1,994,100
Other assets ............................. 958,000 341,600
----------- -----------
TOTAL ASSETS ....................... $44,751,900 $34,954,500
=========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
JUN 30 1997 SEP 30 1996
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long term obligations .. $ 3,662,400 $ 2,121,400
Trade accounts payable ....................... 3,179,700 2,856,800
Accrued liabilities .......................... 1,775,800 884,800
Deferred income .............................. 333,300
------------ ------------
TOTAL CURRENT LIABILITIES .................. 8,951,200 5,863,000
Long term obligations ........................ 20,177,600 13,724,300
Deferred tax liabilities ..................... 1,331,300 1,331,300
------------ ------------
TOTAL LIABILITIES .......................... 30,460,100 20,918,600
------------ ------------
Stockholders' equity common stock, $.10 par
value 10,000,000 shares authorized:
June 30, 1997 - 5,357,800 shares issued
September 30, 1996 - 5,342,200 shares issued 535,800 534,200
Additional paid-in capital ................... 18,460,400 18,457,100
Accumulated deficit .......................... (4,704,400) (4,955,400)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ................. 14,291,800 14,035,900
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...... $ 44,751,900 $ 34,954,500
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Jun 30 1997 Jun 30 1996 Jun 30 1997 Jun 30 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 12,964,500 $ 8,253,900 $ 35,760,400 $ 23,042,900
COST OF SALES 10,722,800 6,448,500 29,798,200 18,370,300
------------ ------------ ------------ ------------
GROSS PROFIT 2,241,700 1,805,400 5,962,200 4,672,600
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,594,900 1,457,900 4,567,200 3,800,400
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 646,800 347,500 1,395,000 872,200
OTHER INCOME (EXPENSE)
Interest (347,800) (199,800) (899,900) (602,000)
Other, net (18,900) (95,600) (37,100) 9,900
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 280,100 52,100 458,000 280,100
INCOME TAX EXPENSE (123,000) (11,600) (207,000) (94,800)
------------ ------------ ------------ ------------
NET INCOME $ 157,100 $ 40,500 $ 251,000 $ 185,300
============ ============ ============ ============
EARNINGS PER COMMON SHARE $ 0.03 $ 0.01 $ 0.05 $ 0.04
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 5,460,000 4,879,300 5,474,200 4,742,400
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Jun 30 1997 Jun 30 1996 Jun 30 1997 Jun 30 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from operations $ 157,100 $ 40,500 $ 251,000 $ 185,300
Adjustments to reconcile net income to net cash used in
operations:
Depreciation and amortization 792,300 479,100 2,176,900 1,462,400
Provision for (benefit from) deferred taxes (400) (117,300) 58,600 (161,100)
(Gain) loss on sales of assets (2,800) 88,500 15,700 77,300
Increase (decrease) in allowance for doubtful accounts 25,000 27,000 31,000 11,000
Recognition of deferred income (250,100) (666,700)
Provision for defined benefit obligations 37,400 177,400
Other noncash expenses 83,200 83,200
Changes in assets and liabilities that provided (used)
cash:
Accounts and other receivables 635,200 (503,700) (2,388,600) 225,600
Inventories (183,600) (91,800) (561,000) (535,700)
Prepaids (51,400) 25,300 126,200 (68,300)
Other assets (461,400) (142,200) (439,300) (142,200)
Accounts payable (507,100) 472,200 323,000 354,400
Accrued liabilities (5,800) (2,700) 709,400 (285,500)
Net cash provided by discontinued operations 109,600 158,600
----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities 184,400 467,700 (186,400) 1,365,000
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the disposal of property,
plant & equipment 14,000 299,100 14,000 301,000
Collections on notes receivable 2,900 41,600 7,900 271,200
Capital expenditures (1,389,100) (2,629,700) (5,789,900) (3,554,000)
Acquisition of Milford 0 (1,212,000)
----------- ----------- ----------- -----------
Net cash used in investing activities (1,372,200) (2,289,000) (6,980,000) (2,981,800)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank line of credit 524,000 (665,900) 5,256,300 (1,799,300)
Proceeds from long-term obligations 503,500 380,000 503,500 1,138,100
Proceeds from refinancing 5,000 7,887,500 5,000 7,887,500
Proceeds from issuance of bonds 3,000,000 3,000,000
Proceeds from issuances of common stock 1,000,000
Principal payments due to refinancing (5,535,700) (5,535,700)
Retirements of common stock (20,800)
Payments on long-term obligations (553,700) (286,300) (1,556,300) (962,000)
Payments on capital lease obligations (11,700) (48,500)
----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities 478,800 4,767,900 4,208,500 4,659,300
----------- ----------- ----------- -----------
NET DECREASE IN CASH AND RESTRICTED CASH (709,000) 2,946,600 (2,957,900) 3,042,500
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD 2,159,700 109,600 4,408,600 13,700
----------- ----------- ----------- -----------
CASH AND RESTRICTED CASH, END OF PERIOD $ 1,450,700 $ 3,056,200 $ 1,450,700 $ 3,056,200
=========== =========== =========== ===========
OTHER CASH FLOW INFORMATION - INTEREST PAID $ 344,600 $ 217,500 $ 856,100 $ 643,200
=========== =========== =========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
SECOM GENERAL CORPORATION
Notes to Interim Consolidated Financial Statements
NOTE 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
General
The consolidated financial statements included herein have been prepared by
Secom General Corporation (the "Company") without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Company believes that the disclosures are
adequate so that the information presented is not misleading. In the opinion
of management, the financial statements as of June 30, 1997 reflect all
adjustments (normal recurring accruals) which are necessary to present a fair
statement of the results for the period then ended. These financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's 10-K for the
fiscal year ended September 30, 1996.
Business
The Company is a publicly traded holding company with five wholly owned
subsidiaries that operate in three business segments.
Metal Parts Forming
o Uniflow Corporation ("Uniflow")
Tooling
o Form Flow, Inc. ("Form Flow")
o L&H Die, Inc. ("L&H Die")
o Micanol, Inc. ("Micanol")
Production Machining
o Milford Manufacturing Corporation ("Milford")
Principles of consolidation
The interim consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions are eliminated.
Reclassifications
Certain reclassifications have been made to the prior period balances for
comparative purposes.
-4-
<PAGE>
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
Earnings (loss) per share
The earnings (loss) per share of common stock is computed by
dividing net income (loss) by the weighted average number of common shares
and common equivalent shares (primarily warrants and options to purchase
common stock that were outstanding during the periods presented).
NOTE 2. INVENTORIES
Inventories at June 30, 1997 and September 30, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
JUNE 30, 1997 SEPT. 30, 1996
------------- --------------
<S> <C> <C>
Raw materials $ 1,556,300 $ 948,800
Work-in-process 2,568,700 2,394,100
Finished goods 2,046,500 1,827,600
------------ ------------
$ 6,171,500 $ 5,170,500
============ ============
</TABLE>
NOTE 3. ACQUISITION -- MILFORD MANUFACTURING CORPORATION
Effective November 1, 1996, the Company acquired the operations,
assets and certain liabilities of Varity Kelsey-Hayes Corporation's ("VKH")
Milford, Michigan brake fluid valve parts machining operation (renamed
Milford Manufacturing Corporation). The acquisition was accounted for as a
purchase. The Company also entered into a five-year agreement to supply VKH
with various machined brake parts. VKH paid $1 million to the Company at
closing, in lieu of a 10% product price increase for the first year of
operation. Net cash paid to Seller, assets acquired, liabilities assumed and
the deferred income recorded in connection with the transaction are estimated
as follows (in thousands):
<TABLE>
<S> <C>
Prepaids $ 75
Inventory and spare parts 888
Machinery and equipment 3,789
Land and buildings 1,300
-------
Total $ 6,052
=======
Net cash paid to Seller $ 1,081
Employee benefit plan
liabilities assumed (Note 7) 3,596
Other liabilities assumed 375
Deferred income 1,000
-------
Total $ 6,052
=======
</TABLE>
-5-
<PAGE>
NOTE 3. LONG TERM DEBT OBLIGATIONS
Long term obligations principally consist of a bank revolving line
of credit (borrowing availability which is based on accounts receivable and
inventory levels), real estate mortgages, equipment term notes, industrial
revenue bonds, equipment capital leases and post-retirement health care for
certain employees (Milford bargaining unit employees only).
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1997 and September 30,
1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1997 Sept. 30, 1996 Life
------------- -------------- ----
<S> <C> <C> <C>
Machinery $22,859 $18,144 2 to 20 years
Buildings and improvements 6,399 4,714 3 to 30 years
Land 897 540 n/a
Furniture and fixtures 1,559 478 5 to 7 years
Vehicles 145 263 3 years
Construction in progress/other 4,257 236 n/a
------- -------
Total 36,116 25,309
Accumulated depreciation (9,290) (7,550)
------- -------
Net property, plant and equipment $26,826 $17,759
======= =======
</TABLE>
NOTE 6. EMPLOYEE BENEFIT PLANS (MILFORD)
The Company's Milford hourly union employees have a defined benefit
pension plan, pursuant to a collective bargaining agreement. Benefits are
based on years of service and other factors. The Milford hourly pension plan
was underfunded by approximately $778,000 based on a preliminary estimate as
of November 1, 1996. The Company assumed $350,000 of the underfunded pension
obligation as part of its acquisition of Milford. The estimated funded status
of the Plan as of November 1, 1996 is as follows:
<TABLE>
<S> <C>
Projected Benefit Obligation ("PBO") $ 3,106,000
Market value of assets 2,328,000
-----------
PBO greater than market value of assets 778,000
Less: amount retained by Seller 428,000
-----------
Net amount assumed by the Company $ 350,000
===========
</TABLE>
Effective May 1, 1997, the Company and the Milford hourly employees'
union agreed to transfer the plan assets for the active employees to a union
sponsored retirement plan whereby the Company will contribute 40 cents per
straight-time hour worked. The transfer is expected to be completed later in
the year, at which time the Company anticipates contributing its underfunded
liability related to those employees assumed as part of the Milford purchase.
-6-
<PAGE>
The Milford unit currently provides post-retirement health care and
life insurance benefits to eligible employees, pursuant to a collective
bargaining agreement. The Company accounts for these benefits in accordance
with the provisions of SFAS No. 106, "Employers' Accounting for
Post-Retirement Benefits Other Than Pensions" ("OPEB"), which requires the
accrual of such benefits during the years the employees provide services. Net
post-retirement benefit cost includes the following components:
<TABLE>
<S> <C>
Service cost $ 45,000
Interest cost on accumulated benefit obligation 73,000
--------
$118,000
========
</TABLE>
Benefit costs are estimated assuming retiree health care costs will
increase at a 7.0% annual rate, decreasing to an annual rate of increase of
5.0%. Post-retirement health care benefits were estimated at $3.25 million as
of October 31, 1996 (acquisition date).
Effective May 1, 1997, the Company negotiated an amendment to the
retiree health care plan as part of its three-year agreement with an existing
collective bargaining unit. As a result of the agreement, the recorded
post-retirement health care obligation of $3.25 million is now estimated at
$1.06 million with the change in the plan to be amortized over the estimated
service life of the eligible employees. The discount rate used to estimate the
accumulated post-retirement benefit obligation was 7.25%. Milford's policy is
to fund post-retirement benefits on a pay as you go basis; therefore the plan
has no assets as of November 1, 1996 or June 30, 1997.
The Milford hourly union employees are also eligible to participate
in a 401(k) Plan, pursuant to a collective bargaining agreement, under which
the Company contributes 35 cents per hour worked to each employee's account.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
This management's discussion and analysis of financial condition and
results of operations includes a number of forward-looking statements which
reflect the Company's current views with respect to future events and
financial performance. These forward-looking statements are subject to
certain risks and uncertainties, including those discussed below, that could
cause results to differ materially from historical results or those
anticipated. In this report, the words "expects", "anticipates", "believes",
and similar expressions identify forward-looking statements, which speak only
as to the date hereof.
The Company operates in three business segments: Metal Parts
Forming, Tooling and Production Machining. The Metal Parts Forming Segment
manufactures cold headed and cold forged parts; the Tooling Segment provides
production tooling for the cold heading industry; and, the Production
Machining Segment manufactures machined automotive brake parts as well as
other automotive parts.
Net sales for the quarter ended June 30, 1997 were $12,964,500
compared to $8,253,900 in the quarter ended June 30, 1996, for an increase of
57%. The increase was primarily attributable to the recently acquired Milford
unit (Nov. 1, 1996) and higher sales from Uniflow. The Company recorded net
income of $157,100 (three cents per share) for the quarter ended June 30,
1997, compared to net income of $40,500 (one cent per share) in the same
period of the prior year.
Effective November 1, 1996, the Company acquired the Milford,
Michigan machining operation of the Varity Kelsey-Hayes Corporation ("VKH"),
a business unit of Lucas-Varity Corporation (NYSE:LAV). VKH is a leading
supplier of braking systems to the automotive sector, and the Milford
operation supplies VKH with various machined aluminum brake fluid valve
parts. The business was renamed Milford Manufacturing Corporation
("Milford"). In connection with the purchase, Milford entered into a
five-year supply agreement with VKH covering the sale of various machined
brake parts from Milford to certain of its operations. Net cash of $1.1
million paid to VKH in connection with the transaction was provided from the
Company's $6 million bank lines of credit. Management expects the unit to be
profitable in fiscal 1997 with sales in excess of $12 million.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
SEGMENT REVIEW
<TABLE>
<CAPTION>
Metal Parts Forming (Uniflow)
(in thousands)
Three Months Ended Nine Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
Amount % Amount % Amount % Amount %
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (1) $ 5,155 100.0 $ 4,048 100.0 $ 13,959 100.0 $ 10,912 100.0
Gross profit 192 3.7 540 13.3 207 1.5 1,344 12.3
Operating expense 465 9.0 602 14.9 1,255 9.0 1,435 13.2
Operating profit (2) (273) (5.3) (62) (1.5) (1,047) (7.5) (91) (0.8)
<FN>
(1) Includes intercompany activity.
(2) Before interest, bad debt and unallocated corporate overhead expense.
</TABLE>
The Metal Parts Forming Segment (Uniflow Corporation), manufactures
metal parts from steel tube, bar and coil using cold forging and forming
techniques. Primary parts currently manufactured are automotive suspension
ball joint housings, automotive transmission shafts and housings, truck wheel
studs, airbag housings and various cold forged/formed aftermarket and OEM
parts.
Uniflow's sales increased 27.3% in the quarter, compared to the
prior year quarter, while for the nine-month comparative period sales
increased 27.9%. The increase in sales for the quarter and nine-month period
primarily reflect higher order volume for Uniflow's aftermarket truck wheel
studs, suspension ball joint housings and airbag housings.
Uniflow's gross profit for the quarter decreased to 3.7% of sales
compared to 13.3% for the same quarter last year. For the nine-month period,
the gross profit was 1.5% of sales compared to 12.3% in the prior year
period. The lower quarterly and year-to-date gross profit was primarily due
to increased indirect and direct labor associated with the development of new
production orders, the Company's QS-9000 initiative and other manufacturing
related projects. Management believes that the gross profit will improve
significantly as new production orders ramp up to projected levels. In June
1997, Uniflow began initial shipments of two new transmission parts that are
expected to contribute significantly to its gross profit as shipments
increase and the manufacturing process is stabilized.
Operating expense was 9.0% of sales for the quarter, compared to
14.9% of sales in the prior year quarter. For the nine-month comparative
period, operating expense was 9.0% of sales and 13.2% of sales, respectively.
The lower operating expense percentages for the current periods were due
primarily to lower administrative salaries and the higher sales volume.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
<TABLE>
<CAPTION>
Tooling Segment
(in thousands)
Three Months Ended Nine Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
Amount % Amount % Amount % Amount %
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (1) $ 4,592 100.0 $ 4,610 100.0 $13,793 100.0 $13,584 100.0
Gross profit 1,201 26.2 1,188 25.8 3,611 26.2 3,175 23.4
Operating expense 572 12.5 613 13.3 1,681 12.2 1,779 13.1
Operating profit (2) 629 13.7 575 12.5 1,930 14.0 1,396 10.3
<FN>
(1) Includes intercompany activity.
(2) Before interest, bad debt and unallocated corporate overhead expense.
</TABLE>
The Tooling Segment (Form Flow, L & H Die and Micanol) manufactures
production tooling for the cold heading/forming industry.
The Tooling Segment's sales were flat compared to the same quarter
last year, while for the nine month comparative period, sales increased 1.5%.
Management expects order volume to remain steady or increase modestly for the
coming months.
The Tooling Segment's gross profit percentage increased to 26.2% of
sales in the quarter and for the nine-month period, compared to 25.8% and
23.4% of sales, respectively, in the same quarter and nine-month period last
year. The higher quarterly and year-to-date gross profit percentages
primarily reflect an improved gross profit at Micanol.
The Tooling Segment's operating expense remained relatively stable,
as it was 12.5% of sales in the current quarter and 12.2% in the current nine
month period, compared to 13.3% and 13.1%, in the same quarter and nine month
period last year, respectively.
<TABLE>
<CAPTION>
Production Machining Segment
(in thousands)
Three Months Ended Nine Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
Amount % Amount % Amount % Amount %
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (1) $3,819 100.0 $9,379 100.0
Gross profit 715 18.7 1,745 18.6
Operating expense 325 8.5 910 9.7
Operating profit (2) 390 10.2 835 8.9
<FN>
(1) Includes intercompany activity.
(2) Before interest, bad debt and unallocated corporate overhead expense.
</TABLE>
The Production Machining Segment (Milford Manufacturing Corporation
- - acquired Nov. 1, 1996), primarily machines aluminum brake fluid valve parts
and other machined automotive parts.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Management expects the Milford unit to continue its profitability,
with sales in excess of $12 million for the current fiscal year. Although
sales consist primarily of brake components to one customer, Milford has
begun shipments of parts to two new customers, including machined starter
motor shafts to Delco Remy America.
Corporate and Interest
Unallocated corporate overhead (included in general and
administrative expenses) was $238,300 for the quarter, compared to $245,300
in the same prior year quarter. For the nine-month period, unallocated
corporate expense was $736,800 compared to $594,600 for the same period last
year. The higher year-to-date corporate expense primarily reflects higher
personnel and other expense associated with a new corporate-wide computer
information systems implementation project.
Interest expense for the quarter was $347,800 compared to $199,800
for the same quarter last year. For the nine months year-to-date, interest
expense was $899,900 vs. $602,000 for the same period last year. The higher
interest expense reflects the Company's two industrial revenue bond
financings (for production equipment) completed late in the prior fiscal year
and, bank financing associated with the Milford operation.
FINANCIAL CONDITION AND LIQUIDITY
Net cash provided by operating activities was $184,400 in the
quarter, compared to $467,700 in the prior year quarter. Depreciation and
amortization increased to $792,300 from $479,100 in the prior year quarter,
reflecting the additional asset base at the Milford unit and machinery and
equipment added at the other segments. In the current quarter, accounts
receivable decreased $635,200, due primarily to improved collections. This
was offset by a decrease in accounts payable of $507,100, primarily related
to increased payments for steel and other items used in the manufacturing
process relating to the ramp-up of new sales orders. In the prior year
quarter, accounts receivable increased $503,700, offset by increased accounts
payable of $472,200. For the nine-month comparative period, net cash provided
(used) by operating activities was ($186,400) and $1,365,000 respectively.
The decrease in net cash provided (used) by for the current nine-month
comparative period was principally the result of higher accounts receivable
related to the Milford unit.
Net cash used in investing activities was ($1,372,200) in the
current quarter, which included $1,389,100 in equipment purchases (including
deposits on new equipment), primarily related to equipment for the machining
of starter motor shafts (Milford). The starter motor shafts began initial
production in the quarter ended June 30, 1997. The prior year comparative
quarter used ($2,289,000) in investing activities, primarily for increased
machining capacity for two automotive transmission shafts new to the Company
(Unilfow). These parts started initial production in June 1997. The
comparative nine-month periods used ($6,980,000) and
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
($2,981,800), respectively, in investing activities. The current nine-month
period includes significant expenditures for the starter motor shaft
machining production line (Milford), expenditures for the transmission shaft
machining equipment (Uniflow) and approximately $475,000 of equipment related
to the Tooling Segment. In the prior nine-month comparative period, capital
expenditures of $3,554,000 were primarily related to Uniflow's expanded
transmission machining parts business.
Net cash provided by financing activities was $478,800 in the
quarter compared to $4,767,900 in the prior year quarter. The current quarter
included proceeds of $503,500 from long term financing and $524,000 from
increased borrowings on the bank line of credit. At June 30, 1997, the Company
had $5,429,000 borrowed on its $6 million bank revolver/line of credit.
Scheduled payments on long-term obligations were $553,700 during the current
quarter. The prior year quarter included $7,887,500 in proceeds from a
refinancing that covered all of the Company's assets (offset by related
debt extinguishments of $5,535,700), and $3,000,000 in industrial revenue
bond financing for new equipment.
-12-
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Not applicable.
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SECOM GENERAL CORPORATION
(Registrant)
By: /s/ Robert A. Clemente Dated: August 14, 1997
-------------------------
Robert A. Clemente
Chairman, President & CEO
By: /s/ David J. Marczak Dated: August 14, 1997
-------------------------
David J. Marczak
Chief Financial Officer
-14-
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> $ 408,600
<SECURITIES> 0
<RECEIVABLES> 6,461,600
<ALLOWANCES> (52,000)
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<PP&E> 36,116,500
<DEPRECIATION> (9,290,500)
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0
0
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