-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, mUAzwBY7f87SnbUJ9u1UMYE9IDnDPoRINoCHMQtdqu7/qBL6xJu1buuidEbedlKu ipCY2cBP0vPReZDbPgFm/g== 0000087744-94-000025.txt : 19941129 0000087744-94-000025.hdr.sgml : 19941129 ACCESSION NUMBER: 0000087744-94-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940925 FILED AS OF DATE: 19941109 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCI SYSTEMS INC CENTRAL INDEX KEY: 0000087744 STANDARD INDUSTRIAL CLASSIFICATION: 3670 IRS NUMBER: 630583436 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02251 FILM NUMBER: 94558350 BUSINESS ADDRESS: STREET 1: 2101 W CLINTON AVE STREET 2: C/O SCI SYSTEMS (ALABAMA) INC CITY: HUNTSVILLE STATE: AL ZIP: 35805 BUSINESS PHONE: 3029980592 MAIL ADDRESS: STREET 1: P.O. BOX 1000 CITY: HUNTSVILLE STATE: AL ZIP: 35807 FORMER COMPANY: FORMER CONFORMED NAME: SPACE CRAFT INC DATE OF NAME CHANGE: 19720517 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 quarterly period ended September 25, 1994 or [ ] 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 0-2251 SCI SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 63-0583436 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) c/o SCI Systems (Alabama), Inc. 2101 West Clinton Avenue Huntsville, Alabama 35805 (Address of principal executive offices) (Zip Code) ______________________________________________ (302) 998-0592 (Registrant's telephone number, including area code) _______________________________________________ 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. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.10 par value - 27,350,382 Shares Outstanding as of November 2, 1994 SCI Systems, Inc. Condensed Consolidated Balance Sheets September 25, June 30, 1994 1994 (In thousands of dollars) (Unaudited) (*) Assets Current Assets Cash and cash equivalents $ 26,470 $ 35,822 Accounts receivable 224,344 247,004 Inventories 438,077 400,595 Refundable and deferred federal and foreign income taxes 7,808 7,811 Assets associated with discontinued operations - Note E 2,818 12,504 Other current assets 14,297 17,749 --------- -------- Total Current Assets 713,814 721,485 Property, Plant and Equipment (Less accumulated depreciation of $224,672 at September 25, 1994 and $216,466 at June 30, 1994 187,845 182,768 Goodwill (Less accumulated amortization of $8,436 at September 25, 1994 and $8,239 at June 30, 1994) 3,485 3,682 Deferred Compensation Assets Held in Trust 4,025 3,548 Other Noncurrent Assets- Note E 13,655 8,729 --------- -------- Total Assets $922,824 $920,212 ========= ========= * Derived from audited financial statements but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. SCI Systems, Inc. Condensed Consolidated Balance Sheets September 25, June 30, 1994 1994 (In thousands of dollars except per share data) (Unaudited) (*) Liabilities and Shareholders' Equity Current Liabilities Accounts payable and accrued expenses $273,045 $292,351 Accrued payroll and related expenses 18,540 18,997 Federal, foreign, and state income taxes 12,912 6,697 Accrued liabilities relating to plant and business unit disposals- Note E 947 1,930 Current maturities of long-term debt 5,734 5,882 --------- -------- Total Current Liabilities 311,178 325,857 Deferred Income Taxes 1,091 1,091 Pension Liability, less current portion 6,681 6,681 Deferred Compensation 4,025 3,548 Long-term Debt - Note C Industrial revenue bonds 22,939 23,306 Long-term notes 222,244 216,202 Convertible subordinated debentures 38,902 38,893 --------- -------- Total Long-term Debt 284,085 278,401 Commitments and Contingencies - Note D Shareholders' Equity Preferred stock, 500,000 shares authorized but unissued -0- -0- Common stock, $.10 par value: authorized 50,000,000 shares; issued 27,345,382 shares at September 25,1994 and 27,335,782 shares at June 30, 1994 2,735 2,734 Capital in excess of par value 125,001 124,926 Retained earnings 192,009 181,952 Currency translation adjustment (3,640) (4,637) Treasury stock of 29,683 shares at cost (341) (341) --------- -------- Total Shareholder's Equity 315,764 304,634 --------- -------- Total Liabilities and Shareholders' Equity $922,824 $920,212 ========= ======== * Derived from audited financial statements but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. SCI Systems, Inc. Condensed Consolidated Statements of Income (Unaudited) (In thousands of dollars except for per share data) Quarter Ended: September 25, September 26, 1994 1993 Net sales - Note A $618,421 $420,986 Cost and expenses - Note A and E 598,064 403,329 Goodwill amortization 197 298 -------- -------- Operating Income 20,160 17,359 Other income/(expense): Interest expense (4,348) (3,923) Other income (expenses), net 675 468 -------- -------- Income from Continuing Operations Before Income Taxes 16,487 13,904 Income taxes - Note B 6,430 4,730 -------- -------- Income from Continuing Operations 10,057 9,174 Discontinued Operations - Note E: Loss from operations (net of income tax benefit of $604 in 1993) -0- (1,325) -------- -------- Net Income $ 10,057 $ 7,849 ========= ========== Earnings (loss) per share - Note A: From continuing operations $ .36 $ .33 From discontinued operations -0- (.05) ----- ----- $ .36 $ .28 ===== ===== Weighted average number of shares used in computation 27,775,619 27,692,581 See notes to condensed consolidated financial statements. SCI Systems, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Quarter Ended: September 25, September 26, (In thousands of dollars) 1994 1993 Operating Activities Net income $ 10,057 $ 7,849 Adjustments to reconcile net income to cash provided by (used for) operations: Depreciation and amortization 11,805 11,901 Effect of property, plant and equipment disposals (34) 25 Unrealized foreign currency exchange gain (381) (162) Changes in current assets and liabilities: Accounts receivable 23,142 (19,574) Inventories (36,907) 2,553 Refundable and deferred income taxes -0- 108 Discontinued and other current assets 13,296 (9,571) Accounts payable and accrued expenses (20,987) (11,763) Income taxes 6,213 960 ---------- ---------- Net Cash Provided by (Used for) Operating Activities 6,204 (17,674) ---------- ---------- Investing Activities Purchase of property, plant, and equipment (16,115) (13,643) Proceeds from sale of property, plant and equipment 38 -0- Increase in noncurrent assets (4,956) (362) ---------- ---------- Net Cash Used for Investing Activities (21,033) (14,005) ---------- ---------- Financing Activities Net increase in commercial paper and other short-term notes 272 49,431 Payments on long-term debt (1,719,400) (793,078) Proceeds from long-term debt 1,724,614 782,077 Issuance of common stock 76 114 ---------- ---------- Net Cash Provided by Financing Activities 5,562 38,544 ---------- ---------- Effect of exchange rate changes on cash (85) (106) ---------- ---------- Net increase (decrease) in cash and cash equivalents (9,352) 6,759 Cash and cash equivalents at beginning of period 35,822 15,846 ---------- ---------- Cash and Cash Equivalents at End of Period $ 26,470 $ 22,605 ========== ======== Cash equivalents consist of short-term deposits and liquid marketable securities which are stated at cost that approximates market value. See notes to condensed consolidated financial statements. Notes to Condensed Consolidated Financial Statements September 25, 1994 (Unaudited) Note A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of significant intercompany accounts and transactions. The financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The statements (and all other information in this report) have not been examined by independent auditors, but in the opinion of the Company all adjustments, which consist of normal recurring accruals necessary for a fair presentation of the results for the period, have been made. The results of operations for the period ended September 25, 1994, are not necessarily indicative of the results of operations for the year ending June 30, 1995. For further information, refer to the financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended June 30, 1994. Fiscal year 1994 first quarter's income statement has been reclassified to correspond to current presentation for discontinued operations (see Note E). Primary earnings per share are based on the weighted average number of common stock and dilutive common stock equivalents outstanding during each period. Common stock equivalents consist of stock options whose exercise price is less than the stipulated market price using the Treasury-stock method for both primary and fully diluted earnings per share. The fully diluted computation, when required, assumes the dilutive conversion of the Company's outstanding convertible debenture issues, after adding back the debentures' after-tax interest expense. Note B - Income Taxes The Company provides U.S. income taxes on that portion of its foreign subsidiaries' earnings that it does not consider permanently invested. U.S. income taxes are not provided on certain undistributed earnings of foreign subsidiaries aggregating approximately $52,000,000 at September 25, 1994. Otherwise, approximately $15,000,000 of cumulative deferred income taxes would have been provided. Income tax provision for the first quarter of fiscal year 1995 differs from the U.S. statutory income tax rate primarily due to state income taxes. Note C - Changes in Amount Outstanding of Securities or Indebtedness Outstanding borrowings under the Company's Revolving Credit and Commercial Paper agreements were approximately $10,000,000 greater at September 25, 1994, than at June 30, 1994, to support increased business. Total unused credit facilities available to the Company at September 25, 1994, approximated $128,000,000. Note D - Termination of A-12 Aircraft Program Subcontracts The Company was a subcontractor to General Dynamics Corporation (GD) and McDonnell Aircraft Company (McDonnell) for development of certain subsystems for the U.S. NAVY A-12 Aircraft. The Government in January 1991 announced termination (for default) of the A-12 prime contracts. GD terminated for convenience its two subcontracts with the Company. Additionally, terminations for convenience were received from McDonnell and another A-12 Aircraft subcontractor on an additional nine subcontracts. Settlements have been concluded for all subcontracts terminated for convenience, at the approximate amounts previously accrued by the Company. In October 1991, McDonnell filed a sealed suit in Federal Court in St. Louis, Missouri claiming default on seven other subcontracts, with a remaining exposure of approximately twenty-two million dollars. Based upon the advice of special counsel, the Company believes it has meritorious defenses, although no assurance can be given to that effect, and is pursuing counter claims against McDonnell through the courts. Note E - Plant Closure and Discontinued Operations The previously announced planned closure of a domestic plant associated with the Company's government business was completed during the quarter. No significant costs associated with this closure beyond those provided for in fiscal year 1994's third quarter were incurred or are anticipated to be incurred. During March 1994, the Company adopted plans for sale of certain business units. These units generally manufacture and sell proprietary products to consumer and commercial end-users. These business units are accounted for as discontinued operations, and accordingly, their operations are segregated in the accompanying statement of income. Net sales, operating costs and expenses, other income and expense, and income taxes for fiscal year 1994's first quarter have been reclassified for amounts associated with the discontinued operations. Sales, related losses and income tax benefits associated with the discontinued business units for fiscal year 1994's first quarter were as follows: (In thousands of dollars) Sales $5,658 ====== Loss from operations before income tax benefit ($1,929) Income tax benefit 604 ------ Loss from operations ($1,325) ====== On August 26, 1994, the Company entered into an agreement for the sale of Cambridge Computer, Ltd. (a substantial part of the discontinued operations) for approximately $7,000,000 plus future royalties. Of this amount, $3,080,000 was received at closing with the remaining amount to be paid over three years. Other noncurrent assets include $4,392,000 for the accrual of the unpaid sales proceeds and estimated royalties to be received beyond the next twelve months. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Sales for the first quarter of fiscal year 1995 were a record $618.4 million, 46.9% over $421.0 million in 1994's first quarter. A substantial portion of increase resulted from increased finished product assembly. Geographically, domestic sales during fiscal year 1995's first quarter increased 37% over a year ago, while foreign sales increased 61.5%. Domestic and foreign sales remained at approximately the same percentages of total sales as that experienced in fiscal year 1994. Exchange rate fluctuations over the past year, especially in Europe, have had a minor impact on the Company's revenue and profits. The Company uses the U.S. Dollar as the functional currency of a majority of its foreign operations. Operating income for fiscal year 1995's first quarter was $20.2 million compared to $17.4 million in the preceding year. The somewhat lower operating margin largely resulted from increased sales of finished product assembly which yields lower operating margins accompanied by higher asset turnover. Additionally, several foreign plants experienced reduced operating margins as a result of local market conditions. Interest expense for the first quarter of fiscal year 1995 increased 10.8% ($.4 million) over the prior year's first quarter in spite of a 46.9% sales increase. The increase resulted from higher average debt outstanding and increased interest rates. Other income increased in the first quarter of fiscal year 1995 from the corresponding prior fiscal year's amount as a result of increased investment income. Fiscal year 1995's estimated effective income tax rate differs from the U.S. statutory rate primarily due to the effects of state income taxes. The estimated effective income tax rate for the first quarter was 39% as compared to 34% in the prior year. This increase mainly resulted from higher state income taxes, and higher foreign income taxes as certain tax holidays expired. No material adjustments are currently anticipated to the estimated disposal losses on discontinued operations previously provided for by the Company in fiscal year 1994. Average asset turnover was 2.7 times in fiscal year 1995's first quarter compared with 2.2 times experienced for all of fiscal year 1994. The improved asset turnover resulted primarily from increased finished product assembly business. Current deferred income taxes of approximately $6 million represent costs not currently deductible for income tax purposes. Current taxable income is available to realize those benefits. Capital Resources and Liquidity The Company's working capital of $402 million at September 25, 1994, approximated June 30, 1994, $396 million amount. The ratio of Current Assets to Current Liabilities (current asset ratio) was 2.3 at September 25, 1994, compared with 2.2 at June 30, 1994. "Available funds" at September 25, 1994, were approximately $154 million ($26 million in cash and $128 million in unused credit facilities). Fiscal year 1995's capital expenditures are currently budgeted at estimated depreciation and amortization for the fiscal year of $50 million. No significant impact is currently anticipated on the Company's liquidity as a result of the discontinued operations. Other Financial Information The dollar amount of order backlog at September 25, 1994, believed by the Company to be firm was approximately $1,171 million, as compared to $865 million a year earlier (after restatement for discontinued operations), and $1,235 million a quarter earlier. Backlog period reduction during the quarter was a planned event in the interest of customer satisfaction. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (1) Exhibit 11 - Computation of primary and fully diluted earnings per share. (2) Exhibit 27 - Financial Data Schedule (b) Reports No reports on Form 8-K were filed by the Company during the period of July 1, 1994, to September 25, 1994. 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. SCI Systems, Inc. ----------------- (REGISTRANT) Date: November 9, 1994 By: Olin B. King /s/ ---------------- Olin B. King Chairman of the Board and Chief Executive Officer (Principal Executive Officer) (Acting Principal Financial and Accounting Officer) EX-11 2 SCI Systems, Inc. EXHIBIT 11 - Computation of Primary and Fully Diluted Earnings Per Share (In thousands of dollars except number of shares and per share amounts) Quarter Ended: September 25, September 26, 1994 1993 Primary Earnings (Loss) Per Share - - ---------------------------------- Income from continuing operations $10,057 $9,174 Loss from discontinued operations -0- (1,325) ------ ----- Net income $10,057 $7,849 ======= ====== Weighted average number of shares outstanding during period 27,311,028 27,057,612 Applicable number of shares for common stock equivalents (stock options) outstanding for period, using Treasury Stock Method based on average market price for period 464,591 634,969 ---------- ---------- Weighted average number of shares used in computation 27,775,619 27,692,581 ========== ========== Primary earnings per share: From continuing operations $.36 $.33 From discontinued operations -0- (.05) ---- ---- Net income $.36 $.28 ==== ==== Fully Diluted Earnings (Loss) Per Share - - --------------------------------------- Income from continuing operations $10,057 $9,174 Loss from discontinued operations -0- (1,325) ------ ----- Net income 10,057 7,849 Add back after-tax interest expense for outstanding 5 5/8% convertible subordinated debentures 317 384 ------ ----- Adjusted net income used in fully diluted computation $10,374 $8,233 ====== ===== Weighted average number of shares outstanding during period 27,311,028 27,057,612 Applicable number of shares for common stock equivalents (stock options) outstanding for period, using Treasury Stock Method based on period ended market price 464,591 634,969 Number of shares to be issued if 5 5/8% convertible subordinated debentures were converted 1,850,727 1,850,727 ---------- ---------- Weighted average number of shares used in computation 29,626,346 29,543,308 ========== ========== Fully diluted earnings per share: From continuing operations $.35 $.32 From discontinued operations -0- (.04) ---- --- Net income $.35 $.28 ==== ==== (*) (*) (*) The potential conversion of the convertible debentures represented less than 3%; consequently, fully diluted earnings per share are not presented on the income statement. EX-27 3 EXHIBIT 27 (FDS) FILED WITH FORM 10-Q
5 This Schedule contains summary financial information extracted from the September 25, 1994's Balance Sheet and the Income Statement for the quarter then ended and is qualified in its entirety by reference to such statements. QTR-1 JUN-30-1995 SEP-25-1995 26,470 0 224,344 4,267 438,077 713,814 187,845 224,672 922,824 311,178 284,085 2,735 0 0 313,029 922,824 618,421 618,421 598,064 598,261 (675) 0 4,348 16,487 6,430 10,057 0 0 0 10,057 0.36 0.36 NET OF ALLOWANCES NET INCLUDED ALL OPERATING COSTS AND EXPENSES SUCH AS G&A, SELLING AND R&D REPRESENTS (NET OTHER INCOME)
-----END PRIVACY-ENHANCED MESSAGE-----