-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QmjSu5l/+5KtazYCmZfPT7EUBk84Zot6/2n1Dj6+kBBfrCOohWQgwiUZ2VuTZqKe uLlN/6Im39MDQCmc39RT5Q== 0000087744-96-000014.txt : 19960509 0000087744-96-000014.hdr.sgml : 19960509 ACCESSION NUMBER: 0000087744-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960324 FILED AS OF DATE: 19960508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCI SYSTEMS INC CENTRAL INDEX KEY: 0000087744 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [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: 96558133 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 FORM 10-Q FOR SCI SYSTEMS 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 March 24, 1996 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 incorporation or organization) Identification No.) 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 - 29,543,145 Shares Outstanding at April 30, 1996 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. SCI Systems, Inc. Condensed Consolidated Balance Sheets
March 24, June 30, 1996 1995 (In thousands of dollars) (Unaudited) (*) - ---------------------------------------------------------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 17,753 $ 10,277 Accounts receivable 308,674 259,308 Inventories 650,665 456,107 Refundable and deferred federal and foreign income taxes 7,627 7,869 Other current assets 11,058 11,491 ----------------------------------- Total Current Assets 995,777 745,052 Property, Plant and Equipment (Less accumulated depreciation of $280,686 at March 24, 1996, and $242,953 at June 30, 1995) 233,884 214,025 Other Noncurrent Assets 14,156 22,215 ----------------------------------- Total Assets $1,243,817 $ 981,292 =================================== * 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
March 24, June 30, 1996 1995 (In thousands of dollars except share data) (Unaudited) (*) - ---------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current Liabilities Accounts payable and accrued expenses $ 453,259 $ 417,495 Accrued payroll and related expenses 24,346 22,634 Federal, foreign and state income taxes 15,750 19,079 Current maturities of long-term debt 5,803 5,720 ---------------------------------- Total Current Liabilities 499,158 464,928 Deferred Income Taxes 1,134 509 Pension Liability, less current portion 4,669 4,669 Deferred Compensation 6,723 5,040 Long-term Debt - Note C Industrial revenue bonds 21,240 21,306 Long-term notes 264,080 96,138 Convertible subordinated debentures -0- 38,926 ---------------------------------- Total Long-term Debt 285,320 156,370 Commitments and Contingencies - Note E Shareholders' Equity Preferred stock, 500,000 shares authorized but unissued -0- -0- Common stock, $.10 par value: authorized 100,000,000; issued 29,539,945 shares at March 24, 1996 and 27,465,675 shares at June 30,1995 2,954 2,747 Capital in excess of par value 167,350 126,123 Retained earnings 283,584 227,195 Currency translation adjustment (6,734) (5,948) Treasury stock of 29,683 shares, at cost (341) (341) ---------------------------------- Total Shareholders' Equity 446,813 349,776 ---------------------------------- Total Liabilities and Shareholders' Equity $1,243,817 $ 981,292 ================================== * 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)
Quarter Ended: March 24, March 25, (In thousands of dollars except per share data) 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------- Net sales $1,112,744 $591,465 Costs and expenses 1,073,251 570,920 Goodwill amortization 209 197 ------------------------------------- Operating Income 39,284 20,348 Other income (expense): Interest expense (7,246) (4,110) Other income, net 79 1,701 ------------------------------------- Income before Income Taxes 32,117 17,939 Income taxes - Note B 13,007 6,996 ------------------------------------- Net Income $ 19,110 $ 10,943 ===================================== Earnings per share - Note A $.63 $.39 Weighted average number of shares used in computation 30,131,917 27,775,166 See notes to condensed consolidated financial statements.
SCI Systems, Inc. Condensed Consolidated Statements of Income (Unaudited)
Nine Months Ended: March 24, March 26, (In thousands of dollars except per share data) 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------- Net sales $3,192,873 $1,831,431 Costs and expenses 3,080,766 1,769,291 Goodwill amortization 627 590 ------------------------------------- Operating Income 111,480 61,550 Other income (expense): Interest expense (17,861) (13,334) Other income, net 1,153 2,927 ------------------------------------- Income before Income Taxes 94,772 51,143 Income taxes - Note B 38,383 19,946 ------------------------------------- Net Income $ 56,389 $ 31,197 ===================================== Earnings per share - Note A $1.88 $1.12 Weighted average number of shares used in computation 30,094,608 27,789,250 See notes to condensed consolidated financial statements.
SCI Systems, Inc. Condensed Consolidated Statements Of Cash Flows (Unaudited)
Nine Months Ended: March 24, March 26, (In thousands of dollars) 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------- Operating Activities Net income $ 56,389 $ 31,197 Adjustments to reconcile net income to cash provided by (used for) operations: Depreciation and amortization 44,402 35,778 Changes in current assets and liabilities: Accounts receivable (49,910) (9,779) Inventories (214,908) 46,376 Other current assets (621) 13,589 Accounts payable and accrued expenses 57,328 (32,393) Income taxes (2,480) 9,357 Other non cash items - net (282) (3,428) --------------------------------- Net Cash Provided by (Used for) Operating Activities (110,082) 90,697 --------------------------------- Investing Activities Purchase of property, plant and equipment (63,372) (36,251) Proceeds from sale of property, plant and equipment 281 537 Decrease (increase) in noncurrent assets 10,014 (3,249) --------------------------------- Net Cash Used for Investing Activities (53,077) (38,963) --------------------------------- Financing Activities Net increase (decrease) in commercial paper and other short-term notes 84,573 (73,035) Payments on long-term debt (9,474,439) (5,285,444) Proceeds from long-term debt 9,557,590 5,275,794 Issuance of common stock 2,609 265 --------------------------------- Net Cash Provided by (Used for) Financing Activities 170,333 (82,420) --------------------------------- Effect of exchange rate changes on cash 302 (667) --------------------------------- Net increase (decrease) in cash and cash equivalents 7,476 (31,353) Cash and cash equivalents at beginning of period 10,277 35,822 --------------------------------- Cash and Cash Equivalents at End of Period $ 17,753 $ 4,469 ================================= 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 ================================================================================ March 24, 1996 (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. Independent auditors have not examined the statements (and all other information in this report), 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 March 24, 1996 are not necessarily indicative of the results of operations for the year ending June 30, 1996. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended June 30, 1995. 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. Fiscal year 1995's fully diluted computations, when applicable, assumed the dilutive conversion of the Company's outstanding convertible debenture issue, after adding back their after-tax interest expense. Shares issued upon conversion of the 5 5/8% Convertible Subordinated Debentures on September 1, 1995 have been treated as outstanding from July 1, 1995 for purposes of the computation; fiscal year 1996's related after-tax interest expense for the converted debentures have been added back to net income for computational purposes. 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 $58,000,000 at March 24, 1996. Otherwise, approximately $14,500,000 of cumulative deferred income taxes would have been provided. Income tax provision for fiscal year 1996 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 at March 24, 1996 under the Company's Revolving Credit and Commercial Paper, and other long-term debt agreements increased approximately $129,000,000 from the June 30, 1995 balance. At March 24, 1996 the Company had $150,000,000 outstanding under its Asset Securitization Agreement, a $100,000,000 increase from the June 30, 1995 amount. Total unused credit facilities available to the Company at March 24, 1996 approximated $142,500,000. An additional $50,000,000 of availability was added subsequently to quarter end to the Company's asset securitization agreement bringing the total amount of accounts receivable eligible for sale to $200,000,000. Subsequently to quarter end, the Company privately placed in April 1996 $287,500,000 of 5% Convertible Subordinated Notes that will mature on May 1, 2006. The notes are convertible into common stock at $48.75 per share and are non-callable for three years. The $38,825,000 of 5 5/8% Convertible Subordinated Debentures outstanding at June 30, 1995 were substantially converted into 1,847,120 shares of the Company's common stock on September 1, 1995. Note D - Pending Purchase of Apple Computer, Inc. Plant In April 1996 the Company entered into an agreement with Apple Computer, Inc. (Apple) for the purchase of its Fountain, Colorado manufacturing facility, including certain related equipment and inventory. In conjunction with this purchase, the Company and Apple intend to enter into a three-year manufacturing agreement whereby the Company will produce certain products for Apple. The purchase is expected to be finalized by fiscal year-end. Note E - Termination of A-12 Aircraft Program Subcontracts The Company was a subcontractor 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. Terminations for convenience were received for eleven of the Company's A-12 subcontracts, of which the majority were with McDonnell Aircraft Company (McDonnell). 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, which have a remaining Company inventory exposure of approximately $22,000,000. 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 counterclaims against McDonnell through the courts. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Sales for the third quarter of fiscal year 1996 increased 88% to $1.113 billion from $591 million in fiscal year 1995's third quarter. Sales for fiscal year 1996's first nine months were $3.193 billion compared with $1.831 billion in fiscal year 1995's corresponding period, a 74% increase. Predominantly, the sales increase resulted from higher unit volumes, especially in finished product manufacturing services. Fiscal 1996 year-to-date sales were favorably impacted by fiscal second quarter seasonal factors and by nonrecurring pipeline filling for certain products during that quarter. Geographically, foreign sales increased 45% during fiscal year 1996's first nine months from that in the corresponding period of the prior fiscal year, with domestic sales increasing 95% during the same period. Foreign sales represented 35% of total sales for the first nine months of fiscal year 1996, compared with 41% for total fiscal year 1995. Operating income for fiscal year 1996's third quarter increased 93% to $39.3 million from $20.3 million in fiscal year 1995's third quarter. Fiscal 1996's first nine months operating profit of $111.5 million was an 81% increase from the year earlier period's $61.6 million. The higher percentage increases in operating profit as compared with the corresponding sales increases are attributable to improved manufacturing efficiencies and greater absorption of fixed costs. Operating margins for fiscal year 1996's third quarter and first nine months improved to 3.5% from 3.4% in the prior fiscal year's corresponding periods in spite of product mix changes. Third quarter interest expense as a percentage of sales declined slightly to .65% in fiscal year 1996 from the .69% in fiscal year 1995. First nine months interest expense declined to .56% in fiscal 1996 compared with .73% in fiscal year 1995. The dollar amount increase in interest expense is mainly attributable to higher borrowing levels in support of increased sales levels. Fiscal year 1996 third quarter's asset turnover increased to 3.2 times (before impact of an asset securitization program begun in June 1995) compared with 2.8 times in fiscal year 1995's third quarter. The improved asset turnover is primarily correlated with the larger finished product manufacturing sales that inherently yield higher asset turnover to offset lower operating margins. Ending debt to annualized sales ratio for the first nine months of fiscal year 1996 declined to .07 from .08 in the first nine months of fiscal year 1995. Fiscal year 1996'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 increased to 40.5% for fiscal year 1996 from 39.0% for fiscal year 1995's first nine months, as a result of higher state income taxes and higher foreign income taxes as certain tax holidays expired. Capital Resources and Liquidity The Company had working capital of $497 million at March 24, 1996, compared with $280 million at June 30, 1995. March 24, 1996's ratio of current assets to current liabilities (current ratio) was 2.0 compared with 1.6 at June 30, 1995. The Company believes that, based on credit agreements existing as of April 30, 1996, issuance of convertible subordinated notes in April 1996, increase in the permitted amount of its asset securitization agreement in April 1996, and planned offering of up to $100,000,000 of senior unsecured notes, sufficient available funds exist for it to fund its planned growth. Fiscal year 1996's capital expenditures are currently estimated to be between $110 and $120 million after giving effect to the pending Apple plant acquisition. (See Note D to the condensed consolidated financial statements which is incorporated herein by reference). The dollar amount of order backlog at March 24, 1996, believed by the Company to be firm was $2.451 billion, as compared with $1.778 billion a year earlier. 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 The Company filed no reports on Form 8-K during the period of December 25, 1995 to March 24, 1996. 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: May 8, 1996 By: /s/ Olin B. King ----------- ---------------- Olin B. King Chairman of the Board and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer) EX-11 2 COMPUTATION OF EPS =================================================================================================================== =================================================================================================================== SCI Systems, Inc Exhibit 11 - Computation of Primary and Fully Diluted Earnings Per Share (In thousands of dollars except for number of shares and per share amounts)
Quarter Ended: Nine Months: March 24, March 26, March 24, March 26, 1996 1995 1996 1995 --------------- -------------- --------------- -------------- Primary Earnings Per Share Net income $19,110 $10,943 $56,389 $31,197 Add back after-tax interest for debentures converted during N/A N/A 218 N/A period --------------- -------------- --------------- -------------- Adjusted net income used in primary computation $19,110 $10,943 $56,607 $31,197 =============== ============== =============== ============== Weighted average number of shares outstanding during 29,493,375 27,333,404 29,439,307 27,322,527 period Applicable number of shares for common stock equivalents (stock options) outstanding for period using Treasury-stock 638,542 441,762 655,301 466,723 method based on average market price for period =============== ============== =============== ============== Weighted average number of shares used in computation 30,131,917 27,775,166 30,094,608 27,789,250 =============== ============== =============== ============== Primary earnings per share $.63 $.39 $1.88 $1.12 =============== ============== =============== ============== Fully Diluted Earnings Per Share Net income $19,110 $10,943 $56,389 $31,197 Add back after-tax interest for debentures converted during period N/A N/A 218 N/A Add back after-tax interest expense for outstanding convertible debentures: N/A 344 N/A 1,009 =============== ============== =============== ============== Adjusted net income used in fully diluted computation $19,110 $11,287 $56,607 $32,206 =============== ============== =============== ============== Weighted average number of shares outstanding during period 29,493,375 27,333,404 29,439,307 27,322,527 Applicable number of shares for common stock equivalents (stock options)outstanding for period, using Treasury-stock method based on the higher of average market price or 681,969 441,762 702,266 466,723 ending market price Number of shares to be issued if 5 5/8 % convertible debentures were converted: N/A 1,850,727 N/A 1,850,727 =============== ============== =============== ============== Weighted number of shares used in computation 30,175,344 29,625,893 30,141,573 29,639,977 =============== ============== =============== ============== Fully diluted earnings per share $.63 $.38 $1.88 $1.09 =============== ============== =============== ============== The additional dilution effect of the common stock equivalents and potential conversion of any outstanding convertible debentures represent less than 3%; consequently, fully diluted earnings per share are not presented on the income statement for the periods presented.
EX-27 3 EXHIBIT 27 (FDS) FILED WITH FORM
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 24, 1996'S BALANCE SHEET AND THE INCOME STATEMENT FOR THE NINE MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 1,000 9-Mos JUN-30-1996 JUL-1-1995 MAR-24-1996 17,753 0 312,941 4,267 650,665 995,777 514,570 280,686 1,243,817 499,158 285,320 0 0 2,954 4,443,859 1,243,817 3,192,873 3,192,873 3,081,393 3,081,393 (1,153) 0 17,861 94,772 38,383 56,389 0 0 0 56,389 1.88 1.88
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