-----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, THNvM84byXHYIE5idF+0Dr/5Q1rosu1VKTfNs/S3/eaJCs8hg9TKX2/eXiywkNt9 8vaPaw2uK1AwKK4RPNerpg== 0000031617-97-000005.txt : 19970514 0000031617-97-000005.hdr.sgml : 19970514 ACCESSION NUMBER: 0000031617-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 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: 97602247 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 MAR 29, 1997 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 March 29, 1997 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 Employee 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 March 29, 1997 Common shares, par value $1 per share 6,146,766 Page 2 EDO CORPORATION INDEX Page No. Face Sheet 1 Index 2 Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets - March 29, 1997 and December 31, 1996 3 Consolidated Statements of Operations - Three Months Ended March 29, 1997 and March 30, 1996 4 Consolidated Statements of Cash Flows - Three Months Ended March 29, 1997 and March 30, 1996 5 Other Financial Information 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 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 March 29, 1997 Dec. 31, 1996 (unaudited) Current assets: Cash and cash equivalents $ 26,124 $ 20,745 Accounts receivable 31,769 32,518 Inventories 7,805 7,994 Prepayments 4,206 2,678 ---------- ---------- Total current assets 69,904 63,935 Property, plant and equipment, net 13,140 12,968 Notes Receivable 3,900 3,900 Cost in excess of fair value of net assets acquired, net 7,067 7,159 Other assets 6,366 6,261 ---------- ---------- $100,377 $ 94,223 ========== ========== Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 20,789 $ 21,517 Contract advances and deposits 10,574 4,809 Net liabilities of discontinued operations 156 227 ---------- ---------- Total current liabilities 31,519 26,553 Long-term debt 29,317 29,317 ESOT loan obligation 11,349 11,676 Postretirement obligation 3,995 3,995 Environmental Obligation 2,859 2,859 Shareholders' Equity ESOP Convertible Cumulative Preferred Shares Series A, par value $1 per share, (liquidation preference $213.71 per share), authorized 500,000 shares (67,832 issued in both periods) 68 68 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 34,717 35,438 Retained earnings 23,485 22,368 ---------- ---------- 66,724 66,328 Less: Treasury shares at cost 2,307,136 shares in 1997 and 2,409,136 shares in 1996 <32,820> <34,240> ESOT loan obligation <11,349> <11,676> Deferral under long-term incentive plan <1,217> <589> ---------- ---------- Total shareholders' equity 21,338 19,823 ---------- ---------- $100,377 $ 94,223 ========== ========== Page 4 EDO Corporation and Subsidiaries Consolidated Statements of Operations (in thousands except per share amounts) For the three months ended March 29, 1997 March 30, 1996 (unaudited) Continuing operations: Income Net Sales $ 23,704 $ 23,669 Other 8 80 ---------- ---------- 23,712 23,749 Costs and expenses Cost of sales 17,915 18,478 Selling, general and administrative 3,700 3,430 Research and development 313 169 ---------- ---------- 21,928 22,077 Earnings from continuing operations 1,784 1,672 Non-operating income (expense) Interest income 325 385 Interest expense <543> <552> Other, net < 5> < 25> ---------- ---------- <223> <192> ---------- ---------- Earnings from continuing operations before Federal income taxes 1,561 1,480 Provision for Federal income taxes - - ---------- ---------- Earnings from continuing operations 1,561 1,480 Loss from discontinued operations 0 <527> ---------- ---------- Net earnings 1,561 953 Dividends on ESOP Convertible Cumulative Preferred Shares Series A 290 303 ---------- ---------- Net earnings available for Common Shares $ 1,271 $ 650 ========== ========== Earnings (Loss) per Common Share: Primary: Continuing operations $ 0.20 $ 0.20 Discontinued operations 0 <0.09> ---------- ---------- $ 0.20 $ 0.11 ========== ========== Fully Diluted: Continuing operations $ 0.17 $ 0.17 Discontinued operation 0 <0.07> ---------- ---------- $ 0.17 $ 0.10 ========== ========== Average shares outstanding (Primary) 6,245 5,923 ========== ========== Page 5 EDO Corporation and Subsidiaries Consolidated Statements of Cash Flows (in thousands) For the three months ended March 29, 1997 March 30, 1996 (unaudited) Operating activities: Earnings from continuing operations $ 1,561 $ 953 Adjustments to net earnings to arrive at cash provided by continuing operations: Depreciation and amortization 1,660 1,706 Treasury shares used for employee benefits and payment of Directors' fees 71 45 Changes in: Accounts receivable 749 649 Inventories 189 <1,251> Prepayments, other assets and other <2,084> <849> Accounts payable and accrued liabilities <503> 1,136 Contract advances and deposits 5,765 <1,464> ---------- ---------- Cash provided by continuing operations 7,408 925 Net cash used by discontinued operations <296> <525> Investing activities: Purchase of property, plant and equipment <1,377> <672> Net proceeds from sale of assets - 2,000 ---------- ---------- Cash (used) provided by investing activities <1,377> 1,328 Financing activities: Payments received on notes receivable 88 - Payment of common share cash dividends <154> - Payment of ESOP Convertible Cumulative Preferred Shares Series A cash dividends <290> <303> ---------- ---------- Cash used by financing activities <356> <303> Increase in cash and cash equivalents 5,379 1,425 Cash and cash equivalents at beginning of year 20,745 22,918 ---------- ---------- Cash and cash equivalents at end of period $ 26,124 $ 24,343 ========== ========== Supplemental disclosures: Cash paid for: Interest $ 0 $ 5 Income taxes 226 7 Page 6 Other Financial Information Item 1. Discontinued Operations In October 1996, the Company announced its decision to discontinue its energy related businesses, consisting of the Company's 50.4% interest in EDO (Canada) Limited, EDO Automotive Natural Gas Inc.("EDO ANGI"), and EDO Energy Corporation. On April 14, 1997 the Company announced the sale of the EDO Angi business unit to Hurricane Compressors, Inc., an established manufacturer and supplier of natural gas fueling stations. On April 25, 1997 EDO (Canada) Limited filed for protection from creditors under the Companies' Creditors Arrangement Act of Canada. The terms of EDO-ANGI sale and the EDO (Canada) Limited filing did not result in a change to the reserves established in the third quarter of 1996. The net operating results of these entities have been reported as "Loss from discontinued operations"; the net assets (liabilities) of these entities have been reported as "Net assets (liabilities) of discontinued operations"; and the cash flows of these entities have been reported as "Net cash used by discontinued operations." 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 three months ended March 29, 1997 and March 30, 1996. Backlog Data The dollar amount of backlog of firm orders at March 29, 1997 was $113,320,000 compared to $91,280,000 at March 30, 1996. Inventories Inventories are summarized by major classification as follows: March 29, 1997 Dec. 31, 1996 (in thousands) Raw material and supplies $ 3,657 $ 4,226 Work in process 3,661 3,380 Finished goods 487 388 --------- --------- $ 7,805 $ 7,994 Page 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion relates only to the continuing operations of EDO Corporation in its two business segments: Defense and Space Systems; and Industrial Products. Results of Operations First Three Months of 1997 compared with First Three Months of 1996 Sales in the first three months of 1997 were $23.7 million, the same amount reported in 1996. Sales in the Defense and Space Systems segment increased 3% to $16.3 million. Higher sales in the Electro-Optics and Combat Systems business units were partially offset by lower sales in the Marine and Aircraft business unit. The Industrial Products segment sales decreased 6% to $7.4 million. Increases in Ceramic business unit sales were offset by lower sales in the Fiber Science and Acoustics business units. Earnings from operations (before general corporate expense allocations) in the first three months of 1997 were $3.0 million, compared with $2.7 million in 1996. Operating earnings in the Defense and Space Systems segment increased to $1.9 million in the first quarter of 1997 from $1.7 million for the same period in 1996. This increase resulted primarily from an improvement at the Marine and Aircraft business unit. The Industrial Products segment recorded operating earnings of $1.1 million in the first three months of 1997, compared with $1.0 million for the same period in 1996. Selling, general and administrative expenses in the first three months of 1997 were $3.7 million, compared with $3.4 million in the first three months of 1996. Company sponsored research and development expenditures increased 85% from the like 1996 period to $0.3 million. This increase was recorded principally in the Defense and Space Systems segment. The expenditure for Company sponsored research and development in 1997 is expected to be higher than what was spent in 1996. Interest expense, net of interest income was $0.2 million in the first three months of 1997, the same as in the like period of 1996. The Company reported net earnings available for common shares of $1,271,000 or $0.20 per share in the first quarter of 1997, compared to net earnings of $650,000, or $0.11 per share a year ago which was negatively impacted by the losses recorded in the discontinued operations. Earnings per share calculations were based on a weighted average of 6.2 million shares outstanding for the first quarter of 1997 and 5.9 million shares for the like period in 1996. Page 8 Liquidity and Capital Resources The Company's cash and cash equivalents increased $5.4 million from December 31, 1996 to $26.1 million at March 29, 1997, due primarly to the receipt of a contract advance payment from a foreign customer. The Company has an ESOT loan obligation that is currently $11.3 million. The repayment of this obligation is funded principally through dividends on the Company's ESOP Convertible Cumulative Preferred Shares Series A. 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 commenced in December of 1996. The Company maintains a $15.0 million secured line of credit with a bank for short-term borrowing and letters of credit. The agreement expires on June 30, 1997 and limits the cash portion of potential borrowing to $5.0 million. There have been no borrowings under this agreement. Capital expenditures in the first three months of 1997 amounted to $1.4 million as compared to $0.7 million in the comparable period. The total expenditures for 1997 is not expected to be significantly higher than the $4.2 million spent in 1996. In the third quarter of 1994, the Board of Directors suspended cash dividends on the Company's common shares due to the financial circumstances at that time. In January 1997, the Company announced that the Board of Directors declared a first quarter cash dividend of $0.025 per common share. The Company believes it has adequate liquidity and sufficient capital resources to fund its plans. Backlog The backlog of unfilled orders at March 29, 1997 stood at $113.3 million compared with $91.3 million a year ago and $103.0 million at December 31, 1996. The increased backlog occurred primarily in the Company's Defense and Space Systems segment. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 The statements in this Quarterly Report on Form 10-Q and in oral statements which may be made by representatives of the Company relating to plans, strategies, economic performance and trends and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934. Forward-looking Page 9 information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to the following for each of the types of information noted. U.S. and international military program sales, follow-on procurement, contract continuance, future program awards and upgrades and spares support are subject to: U.S. and international military budget constraints and determinations; U.S. congressional and international legislative body discretion; U.S. and international government administration policies and priorities; changing world military threats, strategies and missions; changes in U.S. and international government procurement timing, strategies and practices; and the general state of world military readiness and deployment. Commercial satellite programs and equipment sales, follow-on procurement, contract continuance and future program awards are subject to: establishment and continuance of various consortiums for satellite constellation programs; delay in launch dates due to equipment, weather, or other factors beyond the control of the Company; development of sufficient customer base to support a particular satellite constellation program; Other commercial product sales are subject to: success of product development programs currently underway or planned; competitiveness of current and future product production costs and prices; market and customer base development for new product programs; Achievement of margins on sales, earnings and cash flow can be affected by unanticipated technical problems, government termination of contracts for convenience, decline in expected levels of revenues and underestimation of anticipated costs on specific programs. The Company has no obligation to update any forward-looking statements. Page 10 PART II - OTHER INFORMATION Item 5. Other Information None Item 6.(a) Exhibits 10.(a) EDO Corporation 1997 Non-Employee Director Stock Option Plan. Incorporated by reference to Appendix A to the Company's Definitive Proxy Statement dated March 21, 1997. 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 ------------------------------- K. A. Paladino - Vice President Finance and Treasurer (Principal Financial Officer) Dated: May 13, 1997 EX-27 2 ART. 5 DFS FOR 1997 3 MOS. 10-Q
5 1,000 3-MOS DEC-31-1997 MAR-29-1997 26,124 0 31,769 360 7,805 69,904 59,965 46,825 100,377 31,519 40,666 8,454 0 68 12,816 100,377 23,704 23,712 17,915 21,928 5 12 543 1,561 0 1,271 0 0 0 1,271 .20 .17
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