Federal Screw De-Lists NASDAQ Stock

Jason Sandefur

Citing overwhelming regulation costs, Federal Screw Works announced it would terminate registration of its common stock on the NASDAQ Stock Market. Likewise, the company is delisting its stock starting March 2, 2005. \
The St. Clair Shores, MI-based fastener manufacturer is eligible to deregister stock because the company has fewer than 300 shareholders. As of September 2004, the company had 296 shareholders of record, according to Securities and Exchange Commission filings. The ZurSchmiede family, including CEO Thomas ZurSchmiede, owns about 30% of company stock.
Federal Screw”s board unanimously approved the move reportedly to help save costs and management time related to compliance with SEC regulations and other federal guidelines.
“The board concluded & that the burdens associated with operating as a registered public company currently outweigh any advantages to the company and its shareholders,” Federal Screw stated in a press release.
The company”s stock was trading at $31.5 when the announcement was made. In the past year, Federal Screw stock has lost about 16% in value.
Federal Screw will continue to trade its shares in the over-the-counter market known as the “Pink Sheets.” The company will also continue its annual shareholders meeting, along with quarterly reports and audited financial statements.
A decline in auto sales has hurt demand at Federal Screw. The company reported six-month sales for the first half of fiscal 2005 declined 4.2% to $40.4 million. The company declared a loss of $2.4 million during the period compared with a $115,000 profit during the first half of fiscal 2004. Federal Screw citied decreased demand from primary customers Ford and General Motors as a reason for declining sales.
The company said surging steel surcharges have caused a 10.4% increase in cost of goods sold during the second quarter of fiscal 2005. Q2 sales dropped 6.3% to $20.45 million, while net income plummeted to a loss of $1.36 million compared with a $103,000 profit during the second quarter of fiscal 2004.
“The principal reason for (Federal Screw”s) loss this quarter and in the first six months of this fiscal year is the dramatic increase in the price of steel, a major cost component of the company”s operations,” according to SEC filings.
Federal Screw has been unable to increase prices, despite a significant surge in steel costs.
The company plans to continue repurchasing common stock. So far it has purchased about 56,000 shares, and is authorized to repurchase 128,000 more.
Tough Times in Recent Years
Federal Screw is being pinched by “precipitous” steel prices and uncompromising customers, according to company statements.
According to its annual report for fiscal 2004, Federal Screw sold 93% of its product to automotive customers. Federal Screw”s primary customers are Ford (33% of sales), TRW Automotive (15%) and General Motors (12%).
Unable to pass on cost increases, Federal Screw”s balance sheet has taken a hit in recent years.
In fiscal 2004, sales slid 4.9% to $90.7 million, while net profit dipped 62% to $1.25 million. The company trimmed its workforce 11% to 376 hourly and salaried employees.
Over the past five years, sales have declined 25%, and the company has cut its workforce by nearly 20%.
In fiscal 2004, Federal Screw increased its long-term debt by $2.5 million to $8.2 million.
In October 2004, Comerica Bank approved a one-year extension of Federal Screw”s $25 million revolving credit agreement to 2007. As of December 31, 2004, Federal Screw had borrowed $15.5 million through the deal.
Founded in 1917, Federal Screw produces specialty fasteners, cold formed and machine parts in seven facilities throughout Michigan. Products include locknuts, bolts, piston pins and bushings, all made primarily to OEM specifications. �2005 FastenerNews.com