-----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, MTWP2uTj4uqBt+u7vrpGffZ3GIKe6LNPxUoEqkF5yYybTSKaTkafzvuvro5T8QCm kpZfWCMkafW+EgB9JPns/A== 0000031617-97-000008.txt : 19970731 0000031617-97-000008.hdr.sgml : 19970731 ACCESSION NUMBER: 0000031617-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970730 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: 97648242 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 28, 1997 Page 1 of 13 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 28, 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 June 28, 1997 Common shares, par value $1 per share 6,285,368 Page 2 EDO CORPORATION INDEX Page No. Face Sheet 1 Index 2 Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets - June 28, 1997 and December 31, 1996 3 Consolidated Statements of Operations - Three Months Ended June 28, 1997 and June 29, 1996 4 Consolidated Statements of Operations - Six Months Ended June 28, 1997 and June 29, 1996 5 Consolidated Statements of Cash Flows - Six Months Ended June 28, 1997 and June 29, 1996 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 11 Signature 12 Page 3 PART I - FINANCIAL INFORMATION Item I. Financial Statements EDO Corporation and Subsidiaries Consolidated Balance Sheets (in thousands) Assets June 28, 1997 Dec. 31, 1996 (unaudited) Current assets: Cash and cash equivalents $ 32,422 $ 20,745 Accounts receivable 32,639 32,518 Inventories 7,220 7,994 Prepayments 3,908 2,678 -------- -------- Total current assets 76,189 63,935 Property, plant and equipment, net 13,128 12,968 Notes Receivable 3,450 3,900 Cost in excess of fair value of net assets acquired, net 6,976 7,159 Other assets 6,811 6,261 -------- -------- $106,554 $ 94,223 ======== ======== Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 22,840 $ 21,517 Contract advances and deposits 13,236 4,809 Net liabilities of discontinued operations - 227 -------- -------- Total current liabilities 36,076 26,553 Long-term debt 29,317 29,317 ESOT loan obligation 11,022 11,676 Postretirement obligation 3,995 3,995 Environmental Obligation 2,459 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 (issued 65,725 in 1997, 67,832 in 1996) 66 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 33,342 35,438 Retained earnings 24,752 22,368 -------- -------- 66,614 66,328 Less: Treasury shares at cost 2,168,534 shares in 1997 and 2,409,136 shares in 1996 (30,761) (34,240) ESOT loan obligation (11,022) (11,676) Deferral under long-term incentive plan (1,146) (589) -------- -------- Total shareholders' equity 23,685 19,823 -------- -------- $106,554 $ 94,223 ======== ======== Page 4 EDO Corporation and Subsidiaries Consolidated Statements of Operations (in thousands except per share amounts) For the three months ended June 28, 1997 June 29, 1996 (unaudited) Continuing operations: Income Net Sales $ 23,193 $ 24,771 Other 45 211 -------- -------- 23,238 24,982 Costs and expenses Cost of sales 17,264 18,707 Selling, general and administrative 3,650 4,364 Research and development 489 173 -------- -------- 21,403 23,244 Earnings from continuing operations 1,835 1,738 Non-operating income (expense) Interest income 436 376 Interest expense (543) (555) Other, net (25) (25) -------- -------- (132) (204) -------- -------- Earnings from continuing operations before Federal income taxes 1,703 1,534 Provision for Federal income taxes - - -------- -------- Earnings from continuing operations 1,703 1,534 Loss from discontinued operations - (491) -------- -------- Net earnings 1,703 1,043 Dividends on preferred shares 281 293 -------- -------- Net earnings available for Common Shares $ 1,422 $ 750 ======== ======== Earnings (Loss) per Common Share: Primary: Continuing operations $ 0.23 $ 0.20 Discontinued operations 0 (0.08) -------- -------- $ 0.23 $ 0.12 ======== ======== Fully Diluted: Continuing operations $ 0.20 $ 0.18 Discontinued operation 0 (0.07) -------- -------- $ 0.20 $ 0.11 ======== ======== Average shares outstanding (Primary) 6,295 6,118 ======== ======== Page 5 EDO Corporation and Subsidiaries Consolidated Statements of Operations (in thousands except per share amounts) For the six months ended June 28, 1997 June 29, 1996 (unaudited) Continuing operations: Income Net Sales $ 46,897 $ 48,440 Other 53 291 -------- -------- 46,950 48,731 Costs and expenses Cost of sales 35,179 37,185 Selling, general and administrative 7,350 7,794 Research and development 802 342 -------- -------- 43,331 45,321 Earnings from continuing operations 3,619 3,410 Non-operating income (expense) Interest income 761 761 Interest expense (1,086) (1,107) Other, net (30) (50) -------- -------- (355) (396) -------- -------- Earnings from continuing operations before Federal income taxes 3,264 3,014 Provision for Federal income taxes - - -------- -------- Earnings from continuing operations 3,264 3,014 Loss from discontinued operations 0 (1,018) -------- -------- Net earnings 3,264 1 996 Dividends on preferred shares 571 596 -------- -------- Net earnings available for Common Shares $ 2,693 $ 1,400 ======== ======== Earnings (Loss) per Common Share: Primary: Continuing operations $ 0.43 $ 0.40 Discontinued operations 0 (0.17) -------- -------- $ 0.43 $ 0.23 ======== ======== Fully Diluted: Continuing operations $ 0.37 $ 0.35 Discontinued operation 0 (0.14) -------- -------- $ 0.37 $ 0.21 ======== ======== Average shares outstanding (Primary) 6,273 6,019 ======== ======== Page 6 EDO Corporation and Subsidiaries Consolidated Statements of Cash Flows (in thousands) For the six months ended June 28, 1997 June 29, 1996 (unaudited) Operating activities: Earnings from continuing operations $ 3,264 $ 1,996 Adjustments to earnings from continuing operations: Depreciation and amortization 3,149 3,204 Deferred compensation expense and Directors' fees 826 206 Changes in: Accounts receivable (121) (1,226) Inventories 774 (489) Prepayments, other assets and other (2,848) 2,625 Accounts payable and accrued liabilities 696 (2,507) Contract advances and deposits and other 8,427 (2,137) -------- -------- Cash provided by continuing operations 14,167 1,672 Net cash provided (used) by discontinued operations 629 (1,025) Investing activities: Purchase of property, plant and equipment (2,400) (2,568) Net proceeds from sale of assets - 2,000 -------- -------- Cash used by investing activities (2,400) (568) Financing activities: Payments received on notes receivable 163 - Payment of common share cash dividends (309) - Payment of preferred share cash dividends (571) (596) Other, net (2) (3) -------- -------- Cash used by financing activities (719) (599) Increase (decrease) in cash and cash equivalents 11,677 (520) Cash and cash equivalents at beginning of year 20,745 22,918 -------- -------- Cash and cash equivalents at end of period $ 32,422 $ 22,398 ======== ======== Supplemental disclosures: Cash paid for: Interest $ 1,026 $ 1,055 Income taxes 767 102 Page 7 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. Subsequent thereto, on May 13, 1997, EDO (Canada) Limited made a voluntary assignment in bankruptcy pursuant to the Bankruptcy and Insolvency Act of Canada. The terms of the EDO-ANGI sale and the EDO (Canada) Limited filings 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 provided (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 six months ended June 28, 1997 and June 29, 1996. Backlog Data The dollar amount of backlog of firm orders at June 28, 1997 was $124,797,000 compared to $83,832,000 at June 29, 1996. Inventories Inventories are summarized by major classification as follows: June 28, 1997 Dec. 31, 1996 (in thousands) Raw material and supplies $ 3,532 $ 4,226 Work in process 3,144 3,380 Finished goods 544 388 ------- ------- $ 7,220 $ 7,994 ======= ======= Page 8 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 Six Months of 1997 compared with First Six Months of 1996 Sales in the first six months of 1997 were $46.9 million, 3% less than the $48.4 million reported in 1996. Sales in the Defense and Space Systems segment decreased 2% to $31.8 million. Higher sales in the Marine and Aircraft Systems and Combat Systems business units were offset by lower sales in the Electro-Optics business unit. The Industrial Products segment sales decreased 5% to $15.1 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 six months of 1997 were $6.1 million, compared with $5.5 million in 1996. Operating earnings in the Defense and Space Systems segment increased to $3.8 million in the first six months of 1997 from $3.4 million for the same period in 1996. Increased earnings from both the Marine and Aircraft Systems and Combat Systems business units were offset partially by a decrease in earnings at the Electro-Optics business unit. The Industrial Products segment recorded operating earnings of $2.3 million in the first six months of 1997, compared with $2.0 million for the same period in 1996. Increased earnings at the Ceramics business unit was partially offset by lower earnings at the Fiber Science and Acoustics business units. Selling, general and administrative expenses in the first six months of 1997 were $7.4 million, compared with $7.8 million in the first six months of 1996. Company sponsored research and development expenditures increased 135% from the like 1996 period to $0.8 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 $0.3 million in the first six months of 1997, the same as in the like period of 1996. The Company reported net earnings available for common shares of $2,693,000 or $0.43 per share in the first six months of 1997, compared to net earnings of $1,400,000, or $0.23 per share a year ago. Prior year results were negatively impacted by the losses recorded in the discontinued operations. Earnings per share calculations were based on a weighted average of 6.3 million shares outstanding for the first six months of 1997 and 6.0 million shares for the like period in 1996. Page 9 Liquidity and Capital Resources The Company's cash and cash equivalents increased $11.7 million from December 31, 1996 to $32.4 million at June 28, 1997, due primarly to the receipt of contract advance payments. The Company has an ESOT loan obligation that is currently $11.0 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 cash borrowing and letters of credit (the "Agreement"). Under the Agreement, the potential cash borrowings are limited to $5.0 million. There have been no cash borrowings under the Agreement. The Company and its bank are currently negotiating a proposed renewal of the line of credit Agreement which expires on September 30, 1997. Capital expenditure in the first six months of 1997 amounted to $2.4 million as compared to $2.6 million in the comparable period. The total expenditure 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 Board of Directors declared a first quarter cash dividend of $0.025 per common share. In April 1997, the Board of Directors declared a second 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 June 28, 1997 stood at $124.8 million compared with $83.8 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 10 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 11 PART II - OTHER INFORMATION Item 4. Submissions of Matters to a Vote of Security Holders. At the Company's Annual Meeting of Shareholders held on April 22, 1997, the following actions were taken. a. Messrs. Robert E. Allen, Robert Alvine and Michael J. Hegarty were elected as directors each receiving 5,434,409 votes. b. The Company's 1997 Non-Employee Director Stock Option Plan was approved: there were 4,917,249 votes cast in favor of the proposal, 858,842 votes cast against, and 135,996 abstentions. c. The appointment of KPMG Peat Marwick LLP as independent auditors for the Company for the year 1997 was ratified: there were 5,739,775 votes cast in favor, 97,523 votes cast against, and 74,790 abstentions. Item 6.(a) Exhibits 27 - Financial Data Schedule Page 12 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: July 24, 1997 EX-27 2 ART. 5 DFS FOR 1997 6 MOS. 10-Q
5 1,000 6-MOS DEC-31-1997 JUN-28-1997 32,422 0 32,639 373 7,220 76,189 60,949 47,821 106,554 36,076 40,339 8,454 0 66 15,165 106,554 46,897 46,950 35,179 43,331 30 24 1,086 3,264 0 2,693 0 0 0 2,693 .43 .37
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