UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-1
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1994
Commission file number 1-4416
SPS TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its Charter)
PENNSYLVANIA 23-1116110
(State of incorporation) (I.R.S. Employer
101 Greenwood Avenue, Suite 470 Identification No.)
Jenkintown, Pennsylvania 19046
(Address of principal executive offices) (Zip Code)
(215) 517-2000
(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. Yes X . No .
The number of shares of Registrant's Common Stock
outstanding on May 2, 1994 was 5,108,148.
2
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
PART 1
FINANCIAL INFORMATION
Item 1. Index to Financial Statements
Report of Independent Accountants
Condensed Statements of Consolidated Operations -
Three Months Ended March 31, 1994 and 1993
(Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1994 and December 31, 1993
(Unaudited)
Condensed Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1994 and 1993
(Unaudited)
Notes to Condensed Consolidated Financial Statements
3
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors
SPS Technologies, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet
of SPS Technologies, Inc. and Subsidiaries as of March 31, 1994, the
related condensed consolidated statements of operations for the three-month
periods ended March 31, 1994 and 1993 and the related statements of cash
flows for the three-month periods ended March 31, 1994 and 1993. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated financial
statements for them to be in conformity with generally accepted accounting
principles.
As discussed in Note 3, the financial statements for the quarter ended
March 31, 1994 have been restated from amounts previously reported to defer
until the second quarter recognition of the $1.6 million gain on sale of
the net assets of the Assembly Systems Division.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of SPS Technologies,
Inc. and Subsidiaries as of December 31, 1993, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year
then ended (not presented herein); and in our report dated March 2, 1994,
except as to Note 12 for which the date is March 21, 1994, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1993, is fairly stated, in
all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 12, 1994, except for the third paragraph of Note 3
as to which the date is November 9, 1994.
4
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited-Thousands of dollars except per share data)
Three Months Ended
March 31,
1994 1993
Net sales $ 81,581 $ 87,283
Cost of goods sold 68,553 73,162
Gross profit 13,028 14,121
Selling, general and administrative expense 10,820 11,383
Unusual items:
Restructuring credit (1,500) (500)
Loss on disposal 6,600
Operating earnings (loss) (2,892) 3,238
Other income (expense):
Interest income 105 221
Interest expense (1,718) (1,534)
Equity in earnings (loss) of affiliates 210 (150)
Other, net 455 295
(948) (1,168)
Earnings (loss) before income taxes (3,840) 2,070
Provision for income taxes 300 440
Net earnings (loss) $ (4,140) $ 1,630
Net earnings (loss) per share $ (.81) $ .32
Cash dividends per share $ .32
Average shares outstanding 5,106,961 5,105,429
See accompanying notes to condensed consolidated financial statements.
The 1993 amounts have been reclassified (see Note 3).
5
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited-Thousands of dollars)
March 31, December 31,
1994 1993
Assets
Current assets
Cash and cash equivalents $ 6,889 $ 6,852
Accounts and notes receivable,
less allowance for doubtful
receivables of $1,285 (1993-$1,185) 51,875 48,968
Inventories 80,953 80,604
Deferred income taxes 13,676 13,667
Prepaid expenses 2,741 2,300
Net assets held for sale 8,619 8,619
Total current assets 164,753 161,010
Investments in affiliates 12,681 12,475
Property, plant and equipment, net of
accumulated depreciation of $92,511 84,506 86,958
(1993 - $93,214)
Other assets 27,045 25,536
Total assets $ 288,985 $ 285,979
Liabilities and shareholders' equity
Current liabilities
Notes payable $ 6,678 $ 7,339
Accounts payable 19,883 19,657
Accrued expenses 40,975 38,885
Income taxes payable 566 646
Total current liabilities 68,102 66,527
Deferred income taxes 9,457 9,445
Long-term debt, less current
installments 83,703 81,828
Retirement obligations 27,675 25,352
Shareholders' equity
Preferred stock, par value $1 per share,
Authorized 400,000 shares, Issued none
Common stock, par value $1 per share,
Authorized 30,000,000 shares,
Issued 6,361,606 shares 6,362 6,362
Additional paid-in-capital 59,714 59,704
Retained earnings 56,376 60,516
Minimum pension liability (1,780) (1,780)
Common stock in treasury, at cost
1994 - 1,254,314 shares
1993 - 1,254,977 shares (10,139) (10,144)
Cumulative translation adjustments (10,485) (11,831)
Total shareholders' equity 100,048 102,827
Total liabilities and
shareholders' equity $ 288,985 $ 285,979
See accompanying notes to condensed consolidated financial statement.
6
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited-Thousands of dollars)
Three Months Ended
March 31,
1994 1993
Net cash provided by operating activities $ 264 $ 2,492
Cash flows provided (used) by investing
activities
Additions to property, plant and equipment (3,358) (3,537)
Proceeds from sale of property, plant
and equipment 1,051
Other, net (76)
Net cash used by investing activities (2,383) (3,537)
Cash flows provided (used) by financing
activities
Proceeds from borrowings 3,766 9,700
Reduction of borrowings (1,707) ( 4,145)
Payments of cash dividends (1,634)
Other, net 16
Net cash provided by financing activities 2,075 3,921
Effect of exchange rate changes on cash 81 25
Net increase in cash and cash equivalents 37 2,901
Cash and cash equivalents at
beginning of period 6,852 2,879
Cash and cash equivalents at
end of period $ 6,889 $ 5,780
See accompanying notes to condensed consolidated financial statements.
7
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited-Thousands of Dollars)
1. Financial Statements
In the opinion of the Company's management, the
accompanying unaudited, condensed consolidated financial
statements contain all adjustments necessary to present
fairly the financial position as of March 31, 1994, the
results of operations for the three-month periods ended
March 31, 1994 and 1993, and cash flows for the three-month
periods ended March 31, 1994 and 1993. The December 31,
1993 condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures
required by generally accepted accounting principles. The
accompanying financial statements contain only normal
recurring adjustments. All financial information has been
prepared in conformity with the accounting principles
reflected in the financial statements included in the 1993
Annual Report filed on Form 10-K applied on a consistent
basis.
2. Inventories
March 31, December 31,
1994 1993
Finished goods $ 33,558 $ 37,323
Work-in-process 19,684 17,115
Raw materials
and supplies 27,711 26,166
$ 80,953 $ 80,604
3. Unusual Items
In April 1994, the Company decided to liquidate its
investment in its subsidiary, Ferre Plana, S.A., located in
Barcelona, Spain. The loss on disposal of $6.6 million is
included in the condensed statement of consolidated
operations as an unusual charge. This disposal charge was
for the write-off of the net assets associated with Ferre
Plana, including the related intangible assets and
cumulative translation adjustment account.
Included in the 1993 restructuring charge was a
provision for the liquidation of the Assembly Systems
Division (ASD), a fastener segment product line. During the
first quarter of 1994, the Company identified a buyer for
this product line. As a result of this modification of the
8
restructuring plan and the related change in estimate, and
because actual restructuring costs have been lower than
estimated costs, the Company recorded a $1.5 million credit
for the reversal of excess reserves associated with the 1993
restructuring charge.
The reversal of excess reserves was previously reported
as a credit of $3.1 million, which included a $1.6 million
gain on the sale of ASD's net assets. Since the sale closed
on April 22, 1994, the accompanying financial statements
have been restated to defer recognition of this gain until
the second quarter of 1994.
During the fourth quarter of 1993, the restructuring
plan was modified to retain certain businesses previously
held for sale. As a result of this modification, the
condensed statement of consolidated operations for the
three-month period ended March 31, 1993 has been
reclassified for comparative purposes.
4. Income Taxes
The Company's provision for income taxes resulted
principally from the inability to recognize a full tax
benefit on the liquidation loss of the Company's subsidiary
in Spain. The Company's effective tax rate for the first
quarter of 1993 is lower than the statutory tax rate due to
the tax benefits realized from the settlement of a long-term
receivable.
5. Earnings Per Share
Per share data was calculated using the weighted
average number of shares outstanding during the periods.
Common share equivalents in the form of stock options have
been excluded from the calculations as their dilutive effect
is not material, or their effect is anti-dilutive.
6. Cumulative Translation Adjustments
The following summarizes the changes in translation
adjustments during the three-month period ended March 31,
1994:
Beginning of period $ (11,831)
Changes during period:
Working capital 1,043
Property, plant and equipment 333
Other, net (30)
End of period $ (10,485)
9
7. Environmental Contingency
The Company has been identified as a potentially
responsible party by various federal and state authorities
for clean up or removal of waste from various disposal
sites. At March 31, 1994, the accrued liability for
environmental remediation represents management's best
estimate of the probable and reasonably estimable costs
related to environmental remediation. The measurement of
the liability is evaluated quarterly based on currently
available information. As the scope of the Company's
environmental liability becomes more clearly defined, it is
possible that additional reserves may be necessary.
Accordingly, it is possible that the Company's results of
operations in future quarterly or annual periods could be
materially affected. However, management believes that the
overall costs of environmental remediation will be incurred
over an extended period of time and, as a result, are not
expected to have a material impact on the consolidated
financial position of the Company.
10
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Introduction
The net loss for the first quarter of 1994 is attributed to
unusual items which net to a charge of $5.1 million. This
includes a $6.6 million loss on disposal for the liquidation of
the Company's subsidiary in Barcelona, Spain, and a $1.5 million
credit for the reversal of reserves associated with the 1993
restructure charge. Sales and orders received in the first
quarter of 1994 indicated improvements in the aerospace and
industrial fastener markets of the fastener segment and growth in
the materials segment.
Sales and Operating Earnings by Segment
Sales
Net sales in the first quarter of 1994 were $81.6 million,
compared to $87.3 million for the same period a year ago. Sales
decreased $5.7 million, or 6.5 percent, compared to the first
quarter of 1993; however, sales increased $9.6 million, or 13.4
percent, compared to the fourth quarter of 1993.
Fastener segment sales were $58.1 million, compared to first
quarter of 1993 sales of $62.4 million, a decrease of $4.3
million, or 6.8 percent. Aerospace fastener sales decreased by
$1.8 million, or 6.2 percent; however, sales increased by $3.8
million, or 16.6 percent, from the fourth quarter of 1993.
Excluding the first quarter of 1993 sales of the Assembly Systems
Division and the Company's subsidiary in Spain, transportation
and industrial fastener sales in the first quarter of 1994
increased $1.7 million, or 5.8 percent, compared to the first
quarter of 1993.
Materials segment sales were $23.5 million in the first
quarter of 1994 compared to $24.9 million in the first quarter of
1993, a decrease of $1.4 million, or 5.8 percent. Higher sales
of magnetic materials were offset by a decline in the sales of
stainless steel and cobalt-based alloys. Compared to the fourth
quarter of 1993, first quarter sales in the materials market
increased by $2.5 million , or 12 percent.
11
Operating Earnings
The operating loss for the fastener segment of $5.0 million
in the first quarter of 1994 is due to the 1994 unusual items.
Excluding the 1994 unusual items, fastener segment operating
earnings decreased $1.1 million from the first quarter of 1993.
The decrease in operating profit is the result of lower sales
volume of aerospace fastener sales and certain material and
equipment problems experienced in the Company's Cleveland plant.
In the materials segment, operating earnings of $2.1 million
in the first quarter of 1994 improved slightly when compared with
the first quarter of 1993. Profits from higher sales of magnetic
materials and savings from an overhead reduction program were
offset by the reduced earnings associated with a decline in the
sales volume of superalloys.
Other Expense
Interest expense increased from $1.5 million in the first
quarter of 1993 to $1.7 million in the first quarter of 1994, due
to higher levels of corporate debt and an increase in interest
rates. The magnetic materials joint venture in Adelanto,
California and the Company's Brazilian affiliate reported net
earnings in the first quarter of 1994 compared to net losses in
the first quarter of 1993. As a result, the Company's equity in
earnings (loss) of affiliates improved by $360,000.
Income Taxes
The Company incurred a provision for income taxes despite a
first quarter of 1994 pre-tax loss from operations because of the
inability to recognize a full tax benefit on the liquidation loss
of the Company's subsidiary in Spain. The Company's effective
tax rate for the first quarter of 1993 is lower than the
statutory tax rate due to the tax benefits realized from the
settlement of a long-term receivable.
Earnings
The net loss for the first quarter of 1994 of $4.1 million,
or $.81 per share, compared to net earnings for the first quarter
of 1993 of $1.6 million, or $.32 per share. The unusual items in
1994 of $5.1 million compares to a $500,000 restructuring credit
in 1993 and accounts for the net loss in 1994. A gross profit
decrease of $1.1 million was offset by reductions to selling,
general and administrative expense, other expense and the
provision for income taxes.
12
Orders and Backlog
Incoming orders in the first quarter of 1994 were $92.3
million, compared to $94.9 million for the first quarter of 1993.
Compared to the fourth quarter of 1993, orders increased in both
segments for a total increase of $18.1 million, or 24.3 percent.
Excluding 1993 orders for the Assembly Systems Division and the
Company's subsidiary in Spain, orders received in the first
quarter of 1994 were 3 percent higher than the first quarter of
1993 and 28.5 percent higher than the fourth quarter of 1993.
The backlog at March 31, 1994 was $95.4 million, compared to
$90.7 million on the same date a year ago and $89 million at
December 31, 1993.
Unusual Items
In April 1994, the Company decided to liquidate its
investment in its subsidiary, Ferre Plana, S.A., located in
Barcelona, Spain. Ferre Plana, S.A., which manufactured
commodity industrial fasteners, had lost $9.4 million since it
was acquired in 1990, and would have incurred additional losses
and required a substantial cash investment in 1994 if kept in
operation. The loss on disposal of $6.6 million is included in
the condensed statement of consolidated operations as an unusual
charge. This disposal charge was for the write-off of the net
assets associated with Ferre Plana, including the related
intangible assets and cumulative translation adjustment account,
and will have no effect on the Company's cash flow.
Included in the 1993 restructuring charge was a provision
for the liquidation of the Assembly Systems Division (ASD), a
fastener segment product line. ASD, which manufactured computer-
controlled fastener tightening equipment, had accumulated
operating losses totaling $11.6 million over the past five years.
During the first quarter of 1994, the Company identified a buyer
for this product line. As a result of this modification of the
restructuring plan and the related change in estimate, and
because actual restructuring costs have been lower than estimated
costs, the Company recorded a $1.5 million credit for the
reversal of excess reserves associated with the 1993
restructuring charge.
The reversal of excess reserves was previously reported as a
credit of $3.1 million, which included a $1.6 million gain on the
sale of ASD's net assets. Since the sale closed on April 22,
1994, the accompanying financial statements have been restated to
defer recognition of this gain until the second quarter of 1994.
13
Rollforward of the Restructure Accrual ($000s)
The 1993 consolidated statement of operations contained a pre-tax
restructuring charge of $32.4 million. At December 31, 1993, the Company
had a $9.9 million accrual on its consolidated balance sheet related to
various aspects of the restructuring plan. During 1994, the Company has
revised and completed various aspects of the restructuring plan as
described in the following table:
Charge (Credit) to Accrual
Plant Product
Termina- Consoli- Line
tion dation Disposal
Total Pay* Cost** Cost (ASD) Other**
December 31, 1993
Balance ($9,882) ($4,600) ($1,600) ($2,800) ($882)
Cash payments and
wind-down losses 2,582 1,800 500 100 182
Revision of estimated
costs to complete
restructuring 1,500 200 200 1,000 100
March 31, 1994
Balance ($5,800) ($2,600) ($900) ($1,700) ($600)
*The remaining termination pay relates to executive severance pay that is
payable over a 13 month period from the date of termination.
**The remaining costs will be incurred prior to December 31, 1994.
14
Liquidity and Capital Resources
Management considers liquidity to be the ability to generate
adequate amounts of cash to meet its needs and capital resources
to be the resources from which such cash can be obtained,
principally from operating and external sources. The Company
believes that capital resources available to it will be
sufficient to meet the needs of its business, both on a short-
term and long-term basis.
Cash flow provided or used by operating activities,
investing activities and financial activities is summarized in
the condensed statements of consolidated cash flows. The first
quarter 1994 cash flow provided by operating activities decreased
from the first quarter of 1993 due to lower earnings in 1994 and
cash expenditures in 1994 to fund severance payments related to
the 1993 restructuring accrual.
The decrease in the cash used by investing activities is
attributed to the first quarter 1994 net proceeds from the sale
of the Company's aircraft. The Company spent $3.4 million for
capital expenditures in the first quarter of 1994 and has
budgeted $13 million for the full year of 1994, as reported on
form 10-K for the year ended December 31, 1993.
The Company's total debt to equity ratio was 89 percent at
March 31, 1994, compared to 87 percent at December 31, 1993.
Total debt was $90.4 million at March 31, 1994 and $89.2 million
at December 31, 1993. As of March 31, 1994, the Company is
permitted to borrow an additional $16.6 million under its loan
agreements. As a result of the Company's decision to liquidate
its investment in its subsidiary in Spain, the Company amended
certain debt agreements to modify certain financial covenants
effective March 30, 1994.
15
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computation of Dilution (Anti-dilution) of Earnings Per
Share Resulting from Common Stock Equivalents.
15 Accountant's Awareness Letter.
(b) Form 8-K, dated January 5, 1994, was filed on January 6,
1994 stating that the Company was reducing its non-direct
work force by approximately 10 percent, and expected to
record a fourth quarter 1993 restructuring charge of $20 to
$25 million to reflect the costs associated with this
action, as well as other modifications to the previously
announced restructuring plan.
16
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
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.
SPS TECHNOLOGIES, INC.
(Registrant)
Date: November 14, 1994 /s/ William M. Shockley
William M. Shockley
Controller
Mr. Shockley is signing on behalf of the registrant and as the
chief financial officer of the registrant.
17
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit 11 - Computation of Dilution (Anti-dilution)
of Earnings per Share Resulting from
Common Stock Equivalents
Exhibit 15 - Accountant's Awareness Letter