-----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, jUx+Xm5b7W+RUujxvc2RMkJ2HOjgF690D/wZAU8xERERYjX65zmP56SuJg++UBrY CUOVE2wdrxq8LsyJuHGrDg== 0000031617-94-000016.txt : 19941117 0000031617-94-000016.hdr.sgml : 19941117 ACCESSION NUMBER: 0000031617-94-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940924 FILED AS OF DATE: 19941107 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDO CORP CENTRAL INDEX KEY: 0000031617 STANDARD INDUSTRIAL CLASSIFICATION: 3812 IRS NUMBER: 110707740 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03985 FILM NUMBER: 94557938 BUSINESS ADDRESS: STREET 1: 14 04 111TH ST CITY: COLLEGE POINT STATE: NY ZIP: 113561434 BUSINESS PHONE: 7183214000 MAIL ADDRESS: STREET 1: 14 04 111TH ST CITY: COLLEGE POINT STATE: NY ZIP: 11356-1434 10-Q 1 Page 1 of 14 Pages FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended September 24, 1994 Commission File Number 1-3985 EDO CORPORATION (Exact name of registrant as specified in its charter) New York No. 11-0707740 (State or other jurisdiction (I.R.S Employer of incorporation or organization) Identification No.) 14-04 111th Street, College Point, New York 11356-1434 (Address of principal executive offices) (Zip Code) Telephone Number (718) 321-4000 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 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class Outstanding at Sept. 24, 1994 Common shares, par value $1 per share 5,589,333 Page 2 EDO CORPORATION INDEX Page No. Face Sheet 1 Index 2 Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets - Sept. 24, 1994 and December 31, 1993 3 Consolidated Statements of Operations - Three Months Ended Sept. 24, 1994 and Sept. 25, 1993 4 Consolidated Statements of Operations - Nine Months Ended Sept. 24, 1994 and Sept. 25, 1993 5 Consolidated Statements of Cash Flows - Nine Months Ended Sept. 24, 1994 and Sept. 25, 1993 6 Other Financial Information 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 Part II Other Information Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8K 11-12 Signature 13 Exhibit Index 14 Page 3 PART I - FINANCIAL INFORMATION Item I. Financial Statements EDO Corporation and Subsidiaries Consolidated Balance Sheets (in thousands) Assets Sept. 24, 1994 Dec. 31, 1993 (unaudited) Current assets: Cash and cash equivalents $ 7,881 $ 9,284 Recoverable Federal income taxes 5,250 2,322 Accounts receivable 34,879 38,283 Inventory 13,136 18,155 Prepayments 2,025 1,139 -------- -------- Total current assets 63,171 69,363 -------- -------- Property, plant and equipment, at cost 88,402 92,389 Less accumulated depreciation and amortization 60,387 58,512 -------- -------- Net property, plant and equipment 28,015 33,877 Cost in excess of fair value of net assets acquired 10,988 11,415 Deferred Federal and foreign taxes - 1,011 Other assets 11,853 7,739 -------- -------- Total assets $114,027 $123,405 ======== ======== Liabilities and Shareholders' Equity Current liabilities: Accounts payable & accrued liabilities $ 21,313 $ 21,019 Contract advances and deposits 3,046 7,279 -------- -------- Total current liabilities 24,359 28,298 -------- -------- Long-term debt 29,317 29,317 ESOT loan obligation 14,266 15,045 Environmental obligation 4,548 - Postretirement obligation 13,832 13,492 Minority interest 2,967 2,967 Shareholders' Equity Preferred shares, par value $1 per share, authorized 500,000 shares, issued 76,518 shares at 9/24/94 and 80,056 shares at 12/31/93 77 80 Common shares, par value $1 per share, authorized 25,000,000 shares, issued 8,453,902 shares (both periods) 8,454 8,454 Additional paid-in capital 40,109 41,784 Retained earnings 31,908 42,350 -------- -------- 80,548 92,668 Less: Treasury shares at cost (2,864,569 shares at 9/24/94 and 2,982,853 shares at 12/31/93) (40,712) (42,393) Translation adjustment (786) (749) ESOT loan obligation (14,266) (15,045) Deferral under Long-Term Incentive Plans (46) (195) -------- -------- Total shareholders' equity 24,738 34,286 -------- -------- Total liabilities & shareholders' equity $114,027 $123,405 ======== ======== Page 4 EDO Corporation and Subsidiaries Consolidated Statements of Operations (in thousands except per share amounts) For the three months ended Sept. 24, 1994 Sept. 25, 1993 (unaudited) Income Net sales $ 22,677 $ 22,450 Other 179 59 -------- -------- 22,856 22,509 Costs and Expenses Cost of sales 26,714 17,130 Selling, general and administrative 3,583 4,361 Research and development 795 1,544 -------- -------- 31,092 23,035 Operating Loss (8,236) (526) -------- -------- Non-Operating Income (Expense) Interest income 41 93 Interest expense (588) (594) Other, net 84 (111) -------- -------- (589) (612) Loss before Federal income taxes (8,825) (1,138) Recovery of Federal income taxes (2,322) (527) -------- -------- Net loss before minority interest (6,503) (611) Minority interest (241) 214 -------- -------- Net loss (6,744) (387) Dividends on preferred shares 327 346 -------- -------- Net loss available for Common Shares $ (7,071) $ (733) ======== ======== Loss per Common Share: Net loss available for Common Shares $ (1.26) $ (0.14) ======== ======== Average shares outstanding 5,600 5,450 ======== ======== Cash dividends per Common Share $ None $ 0.07 ======== ======== Page 5 EDO Corporation and Subsidiaries Consolidated Statements of Operations (in thousands except per share amounts) For the nine months ended Sept. 24, 1994 Sept. 25, 1993 (unaudited) Income Net sales $ 68,132 $ 76,687 Other 278 333 -------- -------- 68,410 77,020 Costs and Expenses Cost of sales 63,723 60,174 Selling, general and administrative 12,071 11,602 Research and development 3,155 4,610 Litigation settlement - 1,212 -------- -------- 78,949 77,598 Operating loss (10,539) (578) -------- -------- Non-Operating Income (Expense) Interest income 147 215 Interest expense (1,774) (1,859) Other, net 301 (265) -------- -------- (1,326) (1,909) Loss before Federal income taxes (11,865) (2,487) Recovery of Federal income taxes (3,200) (1,235) -------- -------- Net loss before cumulative effect of accounting change and minority interest (8,665) (1,252) Cumulative effect of change in accounting for postretirement health benefits (net of taxes of $4,000) - (9,400) -------- -------- Net loss before minority interest (8,665) (10,652) Minority interest - 495 -------- -------- Net loss (8,665) (10,157) Dividends on preferred shares 1,011 1,064 -------- -------- Net loss available for Common Shares $ (9,676) $(11,221) ======== ======== Loss per Common Share: Net loss available for Common Shares before accounting change $ (1.75) $ (0.34) Cumulative effect of change in accounting for postretirement health benefits - (1.74) -------- -------- Net loss $ (1.75) $ (2.08) ======== ======== Average shares outstanding 5,522 5,395 ======== ======== Cash dividends per Common Share $ 0.14 $ 0.21 ======== ======== Page 6 EDO Corporation and Subsidiaries Consolidated Statements of Cash Flows (in thousands) For the nine months ended Sept. 24, 1994 Sept. 25, 1993 (unaudited) Operating Activities: Net loss $ (8,665) $(10,157) Adjustments to net loss to arrive at cash from operations: Gain on sale of building (427) - Depreciation and amortization 5,470 5,046 Decrease in current and deferred income taxes (1,917) (4,091) Common shares issued for employee benefits 152 156 Cumulative effect of change in accounting for postretirement health benefits - 13,400 Changes in: Accounts receivable 3,404 11,219 Inventories 5,019 2,007 Prepayments, other assets and other 31 (2,504) Accounts payable and accrued liabilities 294 (1,643) Contract advances and deposits (4,233) (1,753) -------- -------- Cash provided (used) by operations (872) 11,680 Investing Activities: Purchase of property, plant and equipment (1,838) (1,919) Proceeds from sale of building 3,084 - -------- -------- Cash provided (used) by investing activities 1,246 (1,919) Financing Activities: Reduction of long-term debt - (1,261) Payment of Common Share cash dividends (766) (1,131) Payment of preferred share cash dividends (1,011) (1,064) Tax benefit on preferred dividends paid on unallocated ESOP preferred shares - 264 -------- -------- Cash (used) by financing activities (1,777) (3,192) Net increase (decrease) in cash and cash equivalents (1,403) 6,569 Cash and cash equivalents at beginning of period 9,284 4,597 -------- -------- Cash and cash equivalents at end of period $ 7,881 $ 11,166 ======== ======== Supplemental disclosures: Cash paid for: Interest $ 1,131 $ 1,147 Income taxes $ 290 $ 492 Page 7 Other Financial Information Unaudited Financial Statements The accompanying unaudited financial statements and other related financial information furnished reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the operating results for the nine months ended September 24, 1994 and September 25, 1993. Backlog Data The dollar amount of backlog of firm orders at September 24, 1994 was $77,738,000 compared to $83,766,000 at September 25, 1993. Inventories Inventories are summarized by major classification as follows: Sept. 24, 1994 Dec. 31, 1993 (in thousands) Raw material and supplies $ 6,220 $ 8,343 Work in process 5,560 8,713 Finished goods 1,356 1,099 -------- -------- $ 13,136 $ 18,155 ======== ======== Reclassifications Certain reclassifications of 1993 amounts have been made to conform with the 1994 presentation. Page 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion relates to the operations of EDO Corporation in its two business segments: Military Systems; and Commercial and Other Products. Results of Operations - - --------------------- First Nine Months of 1994 Compared with First Nine Months of 1993 - - ------------------------------------------------------------------- Sales in the first nine months of 1994 were $68.1 million compared with $76.7 million in 1993. The sales decrease of 11% reflects continuing reductions in military spending in general, and the slippage in U.S. Government contract awards due to changing Administration priorities. Sales in the Military Systems segment decreased by 20% to $41.1 million due primarily to reductions of sonar, ceramic and fiber reinforced composite sales. Sales in the Commercial and Other Products segment increased by 8% to $27.0 million. A decrease in satellite-system product sales at the Electro-Optics division was more than offset by increased natural gas vehicle tank sales and by sales at the EDO ANGI Division, which was acquired in the fourth quarter of 1993. There were no sales included in the comparable first nine months of 1993 for EDO ANGI. Results of operations (before general corporate expense allocations) in the first nine months of 1994 reflected a loss of $7.4 million compared with a profit of $2.6 million in the first nine months of 1993. The 1994 results reflect both the negative effect on earnings from the declining revenue base as well as charges to earnings primarily for non-recurring items that the Company has recorded in the Commercial and Other Products segment as it continues to evaluate its operations and assets. The nature of the more significant items are discussed below. Operating earnings in the Military Systems segment increased from $3.5 to $4.0 million where expense reductions and a better mix of high and low margin product sales more than offset additional costs associated with the consolidation of the College Point facilities. The Commercial and Other Products segment recorded an operating loss of $11.4 million compared with a $0.9 million profit for the same period in 1993. The loss in the segment occurred principally in the Electro-Optics division from lower sales levels, cost overruns on earth sensor development programs, costs associated with the development of new commercial instruments, and reserves established for obsolete inventories. Page 9 In addition to the losses that occurred in the Electro-Optics division there were other non-recurring charges associated with the commercial composites products where approximately $2.6 million was reserved for assets associated with products that will no longer be pursued, and a portion of foreign receivable. Additionally, adding to the loss in the Commercial Products segment was the second quarter charge associated with the curtailment of activities at EDO Sports which is estimated at $1.2 million, and less than anticipated sales at EDO Energy. Also included in the first nine months of 1994 was a $1.4 million pension plan curtailment gain, and a reduction in current year pension expense of approximately $0.6 million, resulting from personnel reductions as the Company reduces its work force in reaction to the declining sales volume. These benefits were primarily reflected in the Military Systems segment results. Selling, general and administrative expenses in the first nine months of 1994 were $12.1 million, compared with $11.6 million in the first nine months of 1993. This increase is primarily attributable to higher expenditures in the new commercial initiatives at EDO Energy. Additionally, this increase in selling, general and administrative expenses does not reflect reductions within the Military Systems segment where these expenses are generally reported in cost of sales. Company-sponsored research and development expenditures decreased 32% from the like 1993 period to $3.2 million. This reduction was approximately the same in each segment and reflects a more selective approach to development efforts. Interest expense, net of interest income was $1.6 million in the first nine months of 1994, the same as in the like period of 1993. The Company reported a net loss of $9,676,000, or $1.75 per share in the first nine months of 1994, compared to a net loss of $11,221,000, or $2.08 per share a year ago. The net loss per common share was $0.34 for the first nine months of 1993 before giving consideration to the cumulative effect of a change in accounting of $9.4 million net of taxes, equal to $1.74 per share, to reflect post- retirement benefits other than pensions. Earnings per share calculations were based on a weighted average of 5.5 million shares outstanding for the first nine months of 1994, and 5.4 million shares for the like period in 1993. Liquidity and Capital Resources - - ------------------------------- The Company's cash and cash equivalents decreased $1.4 million from December 31, 1993 to $7.9 million at September 24, 1994. Page 10 The Company has an ESOT obligation that is currently $14.5 million. The repayment of this obligation is funded principally through dividends on the Company's preferred shares. The Company also has outstanding $29.3 million of 7% Convertible Subordinated Debentures Due 2011. In accordance with authorization from the Board of Directors, the Company had acquired $5.7 million of such debentures as of June 25, 1994 at prevailing market prices. These debentures will be used to satisfy sinking fund requirements commencing in 1996. The Company has received a commitment from the bank holding its ESOT obligation to restructure the agreement to waive and or amend the covenants with which the Company was non-compliant and for the Company to provide security. In addition, the bank will provide the Company with a $5 million line of credit. Both obligations will be secured under terms of the formal agreements which are expected to be signed in the next month. Additionally, the Company has terminated its $15 million revolving credit agreement with a bank syndicate. There were no borrowings under this agreement as of September 24, 1994. Capital expenditures in the first nine months of 1994 amounted to $1.8 million. The total expenditure for 1994 is expected to be less than the amount spent in 1993. In August 1994, the Board of Directors of the Company suspended payment of cash dividends to preserve cash and to facilitate funding of the Company's strategic business plan. As explained in the Company's 1993 Annual Report, the Company is involved in an environmental matter for which management believes it is probable that it will recover all costs it incurs. The liability of the Company at September 24, 1994 associated with this matter is $6,548,000 and the total expected recovery of all costs is $9,728,000. Both items are reflected in the accompanying Balance Sheet. Approximately $4.4 million of the recovery is expected to be received before the end of 1994 based upon a recently executed settlement agreement with certain potentially responsible parties. Approximately $3.2 million of costs have been incurred to date. The Company believes it has adequate liquidity and sufficient capital resources to fund its plans. Backlog - - ------- The backlog of unfilled orders at September 24, 1994 stood at $77.7 million compared with $83.8 million at September 25, 1993 and $89.2 million at December 31, 1993. The reduced backlog reflects the overall decline in military spending. In order to offset these declines the Company is emphasizing its strategy of diversifying into commercial markets. Page 11 PART II - OTHER INFORMATION Item 5. Other Information None Item 6. (a) Exhibits 4(a) - Indenture dated December 1, 1986 between Manufacturers Hanover Trust Company, as Trustee, and EDO Corporation. Incorporated by reference to Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(b) - Certificate of Amendment of the Certificate of Incorporation, dated and as filed by the Department of State of the State of New York on July 22, 1988. This Certificate of Amendment adds provisions immediately following Paragraph A of Article THIRD of the Certificate of Incorporation. These provisions state the number, designation, relative rights, preferences and limitations of the EDO Corporation Employee Stock Ownership Plan Convertible Cumulative Preferred Shares, Series A. Incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989. 4(c) - Guarantee Agreement, dated as of July 22, 1988, as amended, made by the Company in favor of National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(d) - Term Loan Agreement, dated as of July 22, 1988, as amended between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(d) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(e) - Term Note, dated July 22, 1988, as amended, between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4(f) - Pledge and Security Agreement, dated as of July 22, 1988, as amended, between The Bank of New York, as trustee of the trust established under the EDO Corporation Employee Stock Ownership Plan, and National Westminster Bank USA as successor in interest to Manufacturers Hanover Trust Company. Incorporated by reference to Exhibit 4(f) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. Page 12 4(g) - Amendment No. 6 to the Guarantee Agreement referred to in Exhibit 4(c) above. Incorporated by reference to Exhibit 4(i) to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 26, 1993. 4(h) - Amendment No. 7 to the Guarantee Agreement referred to in Exhibit 4(c) above, effective March 3, 1994. Incorporated by reference to Exhibit 4(h) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 27 - Financial Data Schedule Item 6(b) Form 8-K Reports No current reports on Form 8-K were filed by the Registrant during the fiscal quarter for which this report is filed. Page 13 SIGNATURE 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. EDO Corporation (Registrant) by: M. J. Hegarty Vice President Finance and Treasurer (Principal Financial Officer) Dated: November 7, 1994 Page 14 EXHIBIT INDEX 27. Financial Data Schedule EX-27 2 ART. 5 DFS FOR 3RD QUARTER 10-Q
5 1,000 9-MOS DEC-31-1994 SEP-24-1994 1,594 6,287 34,879 399 13,136 63,171 88,402 60,387 114,027 24,359 43,583 8,454 77 0 16,207 114,027 68,132 68,410 63,723 78,949 0 2,235 1,774 (11,865) (3,200) (9,676) 0 0 0 (9,676) (1.75) 0
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