-----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, IaXpvjKkXN7hDaol6sS4GWi9sHx1AN8VOWpGive/qVOC9KnpuwAOTEWL7H1yRVr2 IGDJ5MCo6rTiGqRu/7NRpA== 0000087744-97-000026.txt : 19971114 0000087744-97-000026.hdr.sgml : 19971114 ACCESSION NUMBER: 0000087744-97-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970928 FILED AS OF DATE: 19971112 SROS: NYSE 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: SEC FILE NUMBER: 001-12821 FILM NUMBER: 97713965 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 September 28, 1997 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 - 59,834,210 shares Outstanding at November 3, 1997 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. SCI Systems, Inc. Condensed Consolidated Balance Sheets September 28, June 30, 1997 1997 (In thousands of dollars) (Unaudited) (*) - -------------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 256,787 $ 290,809 Accounts receivable 716,522 630,867 Inventories 678,836 569,846 Refundable and deferred federal and foreign income taxes 44,197 43,950 Other current assets 13,026 12,582 ------------------------------------ Total Current Assets 1,709,368 1,548,054 Property, Plant, and Equipment (Less accumulated depreciation of $364,796 at September 28,1997, and $347,943 at June 30, 1997) 317,570 300,997 Other Noncurrent Assets 20,334 20,801 ------------------------------------ Total Assets $2,047,272 $1,869,852 ==================================== * 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 28, June 30, 1997 1997 (Unaudited) (*) - -------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current Liabilities Accounts payable and accrued expenses $ 853,307 $ 713,377 Accrued payroll and related expenses 34,667 28,084 Federal, foreign and state income taxes 59,449 47,977 Current maturities of long-term debt 1,894 4,394 ------------------------------------ Total Current Liabilities 949,317 793,832 Deferred Income Taxes 10,149 9,901 Noncurrent Pension Liability 5,133 5,133 Deferred Compensation 12,881 12,015 Long-term Debt - Note C Industrial revenue bonds 21,288 21,310 Long-term notes 135,725 150,801 Convertible subordinated notes 282,366 282,197 ------------------------------------ Total Long-term Debt 439,379 454,308 Shareholders' Equity Preferred stock, 500,000 shares authorized but unissued -0- -0- Common stock, $.10 par value: authorized 100,000,000; issued 59,794,590 shares at September 28, 1997, and 59,774,790 shares at June 30,1997 5,979 5,978 Capital in excess of par value 173,441 172,910 Retained earnings 457,246 420,863 Currency translation adjustment (5,912) (4,747) Treasury stock of 59,366 shares, at cost (341) (341) ------------------------------------ Total Shareholders' Equity 630,413 594,663 ------------------------------------ Total Liabilities and Shareholders' Equity $2,047,272 $1,869,852 ==================================== * 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: September 28, September 29, (In thousands of dollars except per share data) 1997 1996 - -------------------------------------------------------------------------------- Net sales $1,741,765 $1,420,005 Costs and expenses 1,676,386 1,372,516 ------------------------------------ Operating Income 65,379 47,489 Other income (expense): Interest expense (net of interest income of $3,526 in fiscal year 1998 and $1,008 in fiscal year 1997) (4,212) (5,784) Other, net (20) 353 ------------------------------------ Income before Income Taxes 61,147 42,058 Income taxes - Note B 24,764 17,033 ------------------------------------ Net Income $ 36,383 $ 25,025 ==================================== Earnings per share - Note A: Primary $.59 $.42 Fully diluted $.53 $.38 Weighted average number of shares used in computation: Primary 61,358,347 60,306,898 Fully diluted 73,279,158 72,562,378 See notes to condensed consolidated financial statements. SCI Systems, Inc. Condensed Consolidated Statements Of Cash Flows (Unaudited) Quarter Ended: September 28, September 29, (In thousands of dollars) 1997 1996 - -------------------------------------------------------------------------------- Operating Activities Net income $ 36,383 $ 25,025 Adjustments to reconcile net income to cash provided by (used for) operations: Depreciation and amortization 22,047 18,078 Changes in current assets and liabilities: Accounts receivable (87,179) (282,629) Inventories (110,219) (86,229) Other current assets (165) 431 Accounts payable and accrued expenses 148,569 247,285 Income taxes 11,612 16,631 Other non cash items - net 1,107 98 ------------------------------- Net Cash Provided by (Used for) Operating Activities 22,155 (61,310) ------------------------------------ Investing Activities Purchase of property, plant, and equipment (33,555) (19,717) Other 776 1,899 ------------------------------- Net Cash Used for Investing Activities (32,779) (17,818) ------------------------------- Financing Activities Payments on long-term debt (17,276) (37,303) Proceeds from long-term debt -0- 134,822 Issuance of common stock 399 1,183 ------------------------------- Net Cash (Used for) Provided by Financing Activities (16,877) 98,702 ------------------------------- Effect of exchange rate changes on cash (6,521) (168) ------------------------------- Net (decrease) increase in cash and cash equivalents (34,022) 19,406 Cash and cash equivalents at beginning of period 290,809 46,493 ------------------------------- Cash and Cash Equivalents at End of Period $256,787 $ 65,899 =============================== 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 28, 1997 (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 September 28, 1997 are not necessarily indicative of the results of operations for the year ending June 30, 1998. 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, 1997. 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. Fully diluted computations, assume the dilutive conversion of the Company's outstanding convertible subordinated notes, after adding back their after-tax interest expense. Note B - Income Taxes U.S. income taxes are not provided on certain undistributed earnings of foreign subsidiaries aggregating approximately $42 million at September 28, 1997, which are considered permanently invested. Otherwise, approximately $11 million of cumulative deferred income taxes would have been provided. Income tax provision for fiscal year 1998 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 At September 28, 1997 the Company had $32 million of certain accounts receivable sold under its asset securitization agreement, compared with $36 million at June 30, 1997. The Company can sell up to $250 million of certain accounts receivable with limited recourse under its asset securitization agreements. Total unused credit facilities available to the Company at September 28, 1997, including that available under the asset securitization agreements, approximated $677 million. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In compliance with such safe harbor terms, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from anticipated results or other expectations expressed in the Company's forward-looking statements or from past performances. The risks and uncertainties that may affect operations, performance, development and results of the Company's business include future cash use and other factors noted in Item 1. of the Company's Annual Report on Form 10-K for the year ended June 30, 1997. Results of Operations Revenue and net income reached record quarterly highs in fiscal year 1998's first quarter. Sales increased 22.7% to $1.74 billion from $1.42 billion in the same period a year earlier. Net income increased 45.4% to $36.4 million from $25.0 million in fiscal year 1997's first quarter. Increased volume, which more than offset reduced average selling prices for the Company's products, led to higher sales in fiscal year 1998 compared with fiscal year 1997. Lower average selling prices resulted principally from lower electronic component prices. Finished product assembly accounted for over one half of the Company's sales in the first quarter of fiscal year 1998. Domestic sales represented the same approximate ratio of consolidated sales in fiscal year 1998's first quarter as they did in total for fiscal year 1997. Operating margins for the first quarter of fiscal year 1998 improved to 3.75% from 3.34% for the prior fiscal year's first quarter. Improved cost efficiencies, especially in the Company's foreign operations, generated this improvement. Net interest expense for the quarter declined to .24% of sales from .41% for fiscal year 1997's first quarter. This decrease resulted from increased interest income earned on temporary investment of improved net cash provided by operations over the last four quarters. The Company anticipates that interest income will decline as the year progresses due to reduced short-term investments as cash is used to support anticipated growth. Estimated effective income tax rate differs from the U.S. statutory rate primarily due to the effects of state income taxes. Net income improved to 2.1% of sales from 1.8% a year earlier, as a result of improved operating margin and lower net interest expense. Return on average stockholder's equity for the quarter was 23.8% in fiscal 1998 compared with 20.6% in fiscal 1997. Fully diluted earnings per share increased to a lesser degree (39.5%) than net income (45.4%) because of increased weighted average number of shares outstanding. Capital Resources and Liquidity September 28, 1997's working capital of $760 million approximated June 30, 1997's $754 million. September 28, 1997's current ratio (1.8) declined slightly from June 30, 1997's ratio (2.0). September 28, 1997's available liquidity was $934 million, comprised of $677 million in unused credit facilities and $257 million in cash. Lower available liquidity is anticipated during the remainder of fiscal year 1998 as cash is used to fund working capital and capital expenditures in support of planned revenue growth. The Company believes that existing liquidity is sufficient to support near term growth. Fiscal year 1998's capital expenditures are currently estimated to be $150 million, $60 million more than estimated depreciation and amortization. Order backlog believed by the Company to be firm at September 28, 1997 was $3.15 billion, compared with $2.80 billion a year earlier and $3.19 billion a quarter 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 July 1, 1997 to September 28, 1997. 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 11, 1997 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: September 28, September 29, 1997 1996 ------------------------------- Primary Earnings Per Share Net income used in primary computation $36,383 $25,025 =============================== Weighted average number of shares outstanding during period 59,732,046 59,239,342 Applicable number of shares for common stock equivalents (stock options) outstanding for period using Treasury-stock method based on average market price for period 1,626,301 1,067,556 ------------------------------- Weighted average number of shares used in computation 61,358,347 60,306,898 =============================== Primary earnings per share $.59 $.42 =============================== Fully Diluted Earnings Per Share Net income $36,383 $25,025 Add back after-tax interest expense for outstanding convertible subordinated notes 2,239 2,238 ------------------------------- Adjusted net income used in fully diluted computation $38,622 $27,263 =============================== Weighted average number of shares outstanding during period 59,732,046 59,239,342 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 ending market price 1,752,240 1,528,164 Number of shares to be issued if outstanding convertible subordinated notes were converted 11,794,872 11,794,872 ------------------------------- Weighted number of shares used in computation 73,279,158 72,562,378 =============================== Fully diluted earnings per share $.53 $.38 =============================== EX-27 3 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER 28, 1997's BALANCE SHEET AND THE INCOME STATEMENT FOR THE THREE MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS 1,000 3-MOS JUN-30-1998 JUL-1-1997 SEP-28-1997 256,787 0 727,717 11,195 678,836 1,709,368 682,366 364,796 2,047,272 949,317 439,379 0 0 5,979 624,434 2,047,272 1,741,765 1,741,765 1,676,386 1,676,386 (3,506) 0 7,738 61,147 24,764 36,383 0 0 0 36,383 .59 .53
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