-----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, P/Hpzy9VnyLK77yhT5HvHUphX7747ZiSLmdXflX5dIfri7fFCNS8GHdLSf3wIU2I 8B3YeA/QMpcI6ybQvHqnLw== 0000031617-96-000011.txt : 19960813 0000031617-96-000011.hdr.sgml : 19960813 ACCESSION NUMBER: 0000031617-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDO CORP CENTRAL INDEX KEY: 0000031617 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [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: 96608677 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 FORM 10-Q FOR QUARTER ENDED JUN 29 1996 Page 1 of 11 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 June 29, 1996 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 June 29, 1996 Common shares, par value $1 per share 6,018,285 Page 2 EDO CORPORATION INDEX Page No. Face Sheet 1 Index 2 Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets - June 29, 1996 and December 31, 1995 3 Consolidated Statements of Earnings - Three Months Ended June 29, 1996 and June 30, 1995 4 Consolidated Statements of Earnings - Six Months Ended June 29, 1996 and June 30, 1995 5 Consolidated Statements of Cash Flows - Six Months Ended June 29, 1996 and June 30, 1995 6 Other Financial Information 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 Part II Other Information 10 Signature 11 Page 3 PART I - FINANCIAL INFORMATION Item I. Financial Statements EDO Corporation and Subsidiaries Consolidated Balance Sheets (in thousands) Assets June 29, 1996 Dec. 31, 1995 (unaudited) Current assets: Cash and cash equivalents $ 23,112 $ 25,609 Accounts receivable 28,454 26,786 Inventories 10,973 10,330 Prepayments 3,298 1,381 ---------- ---------- Total current assets 65,837 64,106 Property, plant and equipment, net 14,667 14,133 Assets held for sale, net - 8,700 Cost in excess of fair value of net assets acquired, net 9,970 10,258 Other assets 9,587 6,302 ---------- ---------- $100,061 $103,499 ========== ========== Liabilities and Shareholders' Equity - ------------------------------------ Current liabilities: Accounts payable and accrued liabilities $ 18,318 $ 20,581 Contract advances and deposits 3,635 5,853 ---------- ---------- Total current liabilities 21,953 26,434 Long-term debt 29,317 29,317 ESOT loan obligation 12,281 12,887 Postretirement obligation 12,058 12,348 Environmental Obligation 3,769 3,769 Minority interest 4,319 4,582 Shareholders' Equity - -------------------- Preferred shares, par value $1 per share, (liquidation preference $213.71 per share), authorized 500,000 shares (68,413 issued in 1996 and 71,001 issued in 1995) 68 71 Common shares, par value $1 per share, authorized 25,000,000 shares, (issued 8,453,902 in both periods) 8,454 8,454 Additional paid-in capital 35,729 37,847 Retained earnings 20,516 19,116 ---------- ---------- 64,767 65,488 Less: Treasury shares at cost 2,435,617 shares in 1996 and 2,645,863 shares in 1995 <34,617> <37,604> Translation adjustment <842> <835> ESOT loan obligation <12,281> <12,887> Deferral under long-term incentive plan <663> - ---------- ---------- Total shareholders' equity 16,364 14,162 ---------- ---------- $100,061 $103,499 ========== ========== Page 4 EDO Corporation and Subsidiaries Consolidated Statements of Earnings (in thousands except per share amounts) For the three months ended June 29, 1996 June 30, 1995 (unaudited) Income Net sales $28,556 $24,879 Other 144 129 ---------- ---------- 28,700 25,008 Costs and Expenses Cost of Sales 22,511 19,670 Selling, general and administrative 4,781 4,049 Research and development 292 336 ---------- ---------- 27,584 24,055 Operating Earnings 1,116 953 ---------- ---------- Non-Operating Income (Expense) Interest income 389 248 Interest expense <555> <568> Other, net <25> <25> ---------- ---------- <191> <345> Earnings before Federal income taxes 925 608 Provision for Federal income taxes - - ---------- ---------- Net earnings before minority interest 925 608 Minority interest 118 <18> ---------- ---------- Net earnings 1,043 590 Dividends on preferred shares 293 307 ---------- ---------- Net earnings available for Common Shares $ 750 $ 283 ========== ========== Net earnings per Common Share $ 0.12 $ 0.05 ========== ========== Average shares outstanding 6,118 5,708 ========== ========== Page 5 EDO Corporation and Subsidiaries Consolidated Statements of Earnings (In thousands except per share amounts) For the six months ended June 29, 1996 June 30, 1995 (unaudited) Income Net sales $ 54,837 $ 45,797 Other 185 293 ---------- ---------- 55,022 46,090 Costs and Expenses Costs of sales 43,260 35,406 Selling, general and administrative 9,118 8,440 Research and development 558 658 ---------- ---------- 52,936 44,504 Operating Earnings 2,086 1,586 ---------- ---------- Non-Operating Income (Expense) Interest income 807 510 Interest expense <1,107> <1,136> Other, net <50> <50> ---------- ---------- <350> <676> ---------- ---------- Earnings before Federal income taxes 1,736 910 Provision for Federal income taxes - - ---------- ---------- Net earnings before minority interest 1,736 910 Minority interest 260 111 ---------- ---------- Net earnings 1,996 1,021 Dividends on preferred shares 596 629 ---------- ---------- Net earnings available for Common Shares $ 1,400 $ 392 ========== ========== Net earnings per Common Share $ 0.23 $ 0.07 ========== ========== Average shares outstanding 6,019 5,676 ========== ========== Page 6 EDO Corporation and Subsidiaries Consolidated Statements of Cash Flows (in thousands) For the six months ended June 29, 1996 June 30,1995 (unaudited) Operating Activities: Net earnings $ 1,996 $ 1,021 Adjustments to net earnings to arrive at cash from operations: Depreciation and amortization 3,204 2,990 Treasury shares used for employee benefits and payment of Directors' fees 206 - Changes in: Accounts receivable <1,668> 530 Inventories <643> 2,118 Prepayments, other assets and other 269 <667> Accounts payable and accrued liabilities <2,263> <1,210> Contract advances and deposits <2,218> 59 ---------- ---------- Cash provided (used) by operations <1,117> 4,841 Investing Activities: Purchase of property, plant and equipment <2,784> <1,250> Net proceeds from sale of assets 2,000 - ---------- ---------- Cash used by investing activities <784> <1,250> Financing Activities: Payment of preferred share cash dividends <596> <629> ---------- ---------- Cash used by financing activities <596> <629> Net increase (decrease) in cash and cash equivalents <2,497> 2,962 Cash and cash equivalents at beginning of period 25,609 18,076 ---------- ---------- Cash and cash equivalents at end of period $23,112 $21,038 ========== ========== Supplemental disclosures: Cash paid for: Interest $ 1,055 $ 1,076 Income taxes 102 209 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 six months ended June 29, 1996 and June 30, 1995. Backlog Data The dollar amount of backlog of firm orders at June 29, 1996 was $88,979,000 compared to $82,517,000 at June 30, 1995. Inventories Inventories are summarized by major classification as follows: June 29, 1996 Dec. 31, 1995 (in thousands) Raw material and supplies $ 6,079 $ 6,186 Work in process 3,754 3,023 Finished goods 1,140 1,121 --------- --------- $ 10,973 $ 10,330 Reclassifications Certain reclassifications of 1995 amounts have been made to conform with the 1996 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: Defense and Space Systems; and Industrial Products. Results of Operations - --------------------- Sales in the first six months of 1996 were $54.8 million compared with $45.8 million in 1995. Sales in the Defense and Space Systems segment increased 21% to $32.5 million. Higher sales in the Electro- Optics and Marine and Aircraft business units were partially offset by lower sales in the Combat Systems business unit. The Industrial Products segment sales increased 18% to $22.3 million. Higher sales in the Fiber Science and Ceramics business units were partially offset by lower sales in the Acoustic Products business unit. Earnings from operations (before general corporate expense allocations) in the first six months of 1996 were $4.1 million, compared with $3.4 million in 1995, (included in 1995 earnings was a pension plan curtailment gain of $645,000 resulting from reductions previously made in the Company's work force). Operating earnings in the Defense and Space Systems segment increased to $3.4 million in the first six months of 1996 from $1.9 million for the same period in 1995. This increase resulted primarily from an improvement at the Electro-Optics business unit. The Industrial Products segment recorded operating earnings of $0.7 million in the first six months of 1996, compared with $1.5 million for the same period in 1995. The six month results were negatively affected by losses in the Energy business units which continue to be hampered by the slow growth of their related markets and increases in selling, general and administrative expenses noted below. The Energy business units have adjusted their operations in response to this slower growth rate and the level of investment in these units continues to be evaluated. Selling, general and administrative expenses in the first six months of 1996 were $9.1 million, compared with $8.4 million in the first six months of 1995. The increase is primarily due to cost growth in the remediation of a Superfund site mentioned in note 17 of the Company's 1995 Annual Report. Company sponsored research and development expenditures decreased 15% from the like 1995 period to $0.6 million. This reduction was recorded principally in the Defense and Space Systems segment where the present lower levels of research and development are consistent with the Company's current operational plans. Page 9 Interest expense, net of interest income, declined to $0.3 million in the first six months of 1996, compared with $0.6 million in the like period of 1995, resulting from higher interest income in 1996. The Company reported net earnings available for common shares of $1,400,000, or $0.23 per share in the first six months of 1996, compared to net earnings of $392,000 or $0.07 per share a year ago. Earnings per share calculations are based on a weighted average of 6.0 million shares outstanding for the first six months of 1996, and 5.7 million shares for the like period in 1995. Liquidity and Capital Resources The Company's cash and cash equivalents decreased $2.5 million from December 31, 1995 to $23.1 million at June 29, 1996. The reduction results from an increase in accounts receivable and decreases in accounts payable and contract advances, which were partially offset by the higher net earnings. The Company has an ESOT loan obligation that is currently $12.3 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 has previously acquired $5.7 million of such debentures. These debentures will be used to satisfy approximately three years of sinking fund requirements that commence in December of 1996. In June 1996, the Company's bank extended the maturity date of the $15 million line of credit agreement for both short term borrowings and letters of credit to June 30, 1997 and extended the option to cancel or refinance its ESOT borrowing to April 1, 2000. Capital expenditures in the first six months of 1996 amounted to $2.8 million principally to upgrade facilities for satellite related programs. The rate of expenditure for the next six months is expected to be lower than the rate expended in the first six months. In August 1994, the Board of Directors of the Company suspended payment of cash dividends on its common shares to preserve cash and to facilitate funding of the Company's strategic business plan. The Company believes it has adequate liquidity and sufficient capital resources to fund its plans. Backlog The backlog of unfilled orders at June 29, 1996 stood at $89.0 million compared with $82.5 million a year ago and $89.7 million at December 31, 1995. The increased backlog, in the comparative six month period, occurred primarily in the Company's Defense and Space Systems segment. Page 10 PART II - OTHER INFORMATION Item 5. Other Information None Item 6.(a) Exhibits 4(a) Amendment No. 10 to the Guarantee Agreement referred to in Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, effective as of June 30, 1996. 27 - Financial Data Schedule Page 11 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: K. A. Paladino ----------------------------- Vice President-Finance and Treasurer (Principal Financial Officer) Dated: August 12, 1996 EX-4.(A) 2 AMENDMENT NO. 10 TO GUARANTEE AGREEMENT AMENDMENT NO. 10 TO GUARANTEE AGREEMENT AMENDMENT NO. 10 (the "Amendment") dated as of June 30, 1996 to that certain Guarantee Agreement dated as of July 12, 1988 as amended by Amendment and Waiver dated as of April 12, 1990, Amendment No. 2 dated as of October 9, 1990, Amendment No. 3 dated as of April 8, 1991, Amendment No. 4 dated March 26, 1992, Amendment No. 5 dated June 9, 1992, Amendment No. 6 dated July 30, 1993, Amendment No. 7 dated March 3, 1994, effective as of December 31, 1993, Waiver and Amendment No. 8 to Guarantee Agreement dated February 10, 1995 and Amendment No. 9 to Guarantee Agreement dated as of June 30, 1995 (as so amended, the "Existing Guarantee") made by EDO CORPORATION, a New York corporation (the "Guarantor") in favor of FLEET BANK, N.A. (formerly NatWest Bank N.A. and hereinafter referred to as the "Bank") (as successor in interest to Manufacturers Hanover Trust Company ("Manufacturers"). W I T N E S S E T H : WHEREAS, the Guarantor and Manufacturers were parties to the Existing Guarantee; WHEREAS, the Bank succeeded to all of Manufacturers' right, title and interest under the Guarantee Agreement pursuant to that certain Assignment and Assumption Agreement dated as of June 8, 1990 between Manufacturers and the Bank; WHEREAS, the Guarantor has requested that the Bank amend certain provisions of the Existing Guarantee; WHEREAS, the Bank has agreed to such request subject to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. The Existing Guarantee is hereby amended as follows: (a) Subsection 10(b)(x) is deleted in its entirety and there is substituted therefor the following: "(x) Limitation on Capital Expenditures. Make any capital expenditures or fixed asset acquisitions, or, without duplication, incur any obligation so to do or permit any Subsidiary so to do, with respect to the Guarantor and its Subsidiaries on a consolidated basis in an amount exceeding (i) $3,500,000 for the fiscal year ending December 31, 1995, (ii) $4,500,000 for the fiscal year ending December 31, 1996, and (iii) $4,000,000 in any fiscal year thereafter. Capital expenditures and fixed asset acquisitions shall be calculated on a non-cumulative basis so that amounts not expended in any fiscal year may not be carried over and expended in subsequent fiscal years." (b) Subsection 10(b)(xiv) is deleted in its entirety and there is substituted therefor the following: "(xiv) Limitations on Acquisitions. Acquire all or any substantial portion of the business, stock or assets of any company or permit any Subsidiary to do any of the foregoing, except that the Guarantor or any Subsidiary may acquire all or any substantial portion of the business, stock or assets of any company if and only if: (i) after giving effect thereto, no Event of Default under the Loan Agreement shall have occurred or would exist as a result of such purchase; (ii) each such acquisition shall be of assets utilized by the transferor thereof in a line of business related to the Guarantor's business or of capital stock of a corporation substantially all of whose properties consist of such assets; (iii) the Guarantor shall have given the Bank not less than thirty (30) days prior written notice of such proposed acquisition, such notice to include the proposed amount, date and form of the proposed transaction, a reasonable description of the assets or stock to be acquired, a description of the liabilities to be assumed (if any) and the location of all assets to be acquired; (iv) concurrently with the consummation of any such acquisition, the Guarantor or its Subsidiary, as the case may be, shall, as additional collateral security for any and all of their respective obligations to the Bank, grant to the Bank a first lien on all of its right, title and interest in and to the acquired assets, if any, by the execution and delivery to the Bank of such agreements, instruments and documents as shall be satisfactory in form and substance to the Bank; and (v) the amount of all such acquisitions with respect to the Guarantor and its Subsidiaries on a consolidated basis shall not exceed $10,000,000 in the aggregate and no single acquisition shall be in excess of $5,000,000." (c) Subsection 12(a) is amended by deleting the clause "At any time on or after April 1, 1997," and substituting therefor the clause "At any time on or after April 1, 2000,". 2. In order to induce the Bank to execute and deliver this Amendment No. 10, the Guarantor hereby represents and warrants to the Bank that the representations and warranties set forth in Section 9 of the Existing Guarantee are true and correct as if made on the date hereof except for changes in the ordinary course of business, none of which, singly or in the aggregate, have had a material adverse effect on the business, operations or financial condition of the Guarantor or on the ability of the Guarantor to perform its obligations under the Existing Guarantee and other than as has been publicly reported by the Guarantor in its announcements, releases or filings with the Securities and Exchange Commission; provided, however, that all references to the term "Guarantee" shall be deemed to be references to the Existing Guarantee as amended by this Amendment No. 10. 3. Defined terms used in this Amendment No. 10 not otherwise defined herein shall have the meanings set forth in the Existing Guarantee unless the context otherwise requires. Except as expressly amended hereby, all of the terms and conditions of the Existing Guarantee shall remain in full force and effect. 4. This Amendment No. 10 shall be governed by and construed in accordance with the laws of the State of New York and may be executed in any number of counterparts, all of which taken together, shall constitute one and the same document. IN WITNESS WHEREOF, the parties hereto have set their signatures as of the date first above written. EDO CORPORATION By: K. A. Paladino ----------------------------- Vice President-Finance and Treasurer Title FLEET BANK, N.A. By: Phillip H. Sorace ----------------------------- Vice President Title EX-27 3 ART. 5 DFS FOR 1996 6 MOS. 10-Q
5 1,000 6-MOS DEC-31-1996 JUN-29-1996 23,112 0 28,454 503 10,973 65,837 63,500 48,833 100,061 21,953 41,598 8,454 0 68 7,842 100,061 54,837 55,022 43,260 52,936 50 61 1,107 1,736 0 1,400 0 0 0 1,400 .23 .20
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