-----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, GrvV+cF1VMlm9olt6+2Wqhv1ZxghH3J4JrK4j562fYzdTJ1cCOojNAJoImb6A5Rs GHmELezk7LLCClBQVwhptA== 0000031617-97-000009.txt : 19971111 0000031617-97-000009.hdr.sgml : 19971111 ACCESSION NUMBER: 0000031617-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971110 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: SEC FILE NUMBER: 001-03985 FILM NUMBER: 97711777 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 SEP 27, 1997 Page 1 of 12 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 27, 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.) 60 East 42nd Street, Suite 5010, New York, NY 10165 (Address of principal executive offices) (Zip Code) Telephone Number (212) 716-2000 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. 27, 1997 Common shares, par value $1 per share 6,326,194 Page 2 EDO CORPORATION INDEX Page No. Face Sheet 1 Index 2 Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets - September 27, 1997 and December 31, 1996 3 Consolidated Statements of Operations - Three Months Ended September 27, 1997 and September 28, 1996 4 Consolidated Statements of Operations - Nine Months Ended September 27, 1997 and September 28, 1996 5 Consolidated Statements of Cash Flows - Nine Months Ended September 27, 1997 and September 28, 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 Sept. 27, 1997 Dec. 31, 1996 (unaudited) Current assets: Cash and cash equivalents $ 32,462 $ 20,745 Accounts receivable 34,378 32,518 Inventories 7,828 7,994 Prepayments 2,579 2,678 --------- --------- Total current assets 77,247 63,935 Property, plant and equipment, net 12,870 12,968 Notes Receivable 3,225 3,900 Cost in excess of fair value of net assets acquired, net 6,884 7,159 Other assets 7,613 6,261 --------- --------- $107,839 $ 94,223 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 24,505 $ 21,517 Contract advances and deposits 10,720 4,809 Net liabilities of discontinued operations - 227 --------- --------- Total current liabilities 35,225 26,553 Long-term debt 29,317 29,317 ESOT loan obligation 10,695 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 65,346 in 1997, 67,832 in 1996) 65 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 32,772 35,438 Retained earnings 26,191 22,368 --------- --------- 67,482 66,328 Less: Treasury shares at cost 2,127,708 shares in 1997 and 2,409,136 shares in 1996 (29,565) (34,240) ESOT loan obligation (10,695) (11,676) Deferral under long-term incentive plan (1,074) (589) --------- --------- Total shareholders' equity 26,148 19,823 --------- --------- $107,839 $ 94,223 ========= ========= Page 4 EDO Corporation and Subsidiaries Consolidated Statements of Operations (in thousands except per share amounts) For the three months ended Sept. 27, 1997 Sept. 28, 1996 (unaudited) Continuing operations: Income Net Sales $ 23,246 $ 23,107 Other 30 70 --------- --------- 23,276 23,177 Costs and expenses Cost of sales 17,073 17,442 Selling, general and administrative 3,642 3,652 Research and development 645 216 Post retirement health care curtailment gain - ( 7,120) --------- --------- 21,360 14,190 Earnings from continuing operations 1,916 8,987 Non-operating income (expense) Interest income 535 331 Interest expense (553) (539) --------- --------- Other, net (20) (25) --------- --------- ( 38) (233) Earnings from continuing operations before Federal income taxes 1,878 8,754 Provision for Federal income taxes - - --------- --------- Earnings from continuing operations 1,878 8,754 Loss from discontinued operations - (7,619) --------- --------- Net earnings 1,878 1,135 Dividends on preferred shares 281 293 --------- --------- Net earnings available for Common Shares $ 1,597 $ 842 ========= ========= Earnings (Loss) per Common Share: Primary: Continuing operations $ 0.25 $ 1.38 Discontinued operations - (1.24) --------- --------- $ 0.25 $ 0.14 ========= ========= Fully Diluted: Continuing operations $ 0.22 $ 1.18 Discontinued operations - (1.06) --------- --------- $ 0.22 $ 0.12 ========= ========= Average shares outstanding (Primary) 6,502 6,141 ========= ========= Page 5 EDO Corporation and Subsidiaries Consolidated Statements of Operations (in thousands except per share amounts) For the nine month ended Sept. 27, 1997 Sept. 28, 1996 (unaudited) Continuing operations: Income Net Sales $ 70,143 $ 71,547 Other 83 361 --------- --------- 70,226 71,908 Costs and expenses Cost of sales 52,252 55,365 Selling, general and administrative 10,992 10,708 Research and development 1,447 558 Post retirement health care curtailment gain - (7,120) --------- --------- 64,691 59,511 Earnings from continuing operations 5,535 12,397 Non-operating income (expense) Interest income 1,296 1,092 Interest expense ( 1,639) ( 1,646) Other, net (50) (75) --------- --------- (393) (629) Earnings from continuing operations before Federal income taxes 5,142 11,768 Provision for Federal income taxes - - --------- --------- Earnings from continuing operations 5,142 11,768 Loss from discontinued operations - (8,637) --------- --------- Net earnings 5,142 3,131 Dividends on preferred shares 852 889 --------- --------- Net earnings available for Common Shares $ 4,290 $ 2,242 ========= ========= Earnings (Loss) per Common Share: Primary: Continuing operations $ 0.68 $ 1.80 Discontinued operations - (1.43) --------- --------- $ 0.68 $ 0.37 ========= ========= Fully Diluted: Continuing operations $ 0.60 $ 1.53 Discontinued operations - (1.21) --------- --------- $ 0.60 $ 0.32 ========= ========= Average shares outstanding (Primary) 6,350 6,060 ========= ========= Page 6 EDO Corporation and Subsidiaries Consolidated Statements of Cash Flows (in thousands) For the nine months ended Sept. 27, 1997 Sept. 28, 1996 (unaudited) Operating activities: Earnings from continuing operations $ 5,142 $ 11,768 Adjustments to earnings from continuing operations: Depreciation and amortization 4,463 4,245 Post retirement health care curtailment gain - (7,120) Deferred compensation expense and Directors' fees 1,524 283 Changes in: Accounts receivable (1,860) (7,725) Inventories 166 (360) Prepayments, other assets and other (2,305) (105) Accounts payable and accrued liabilities 2,534 1,124 Contract advances and deposits 5,911 (1,693) --------- --------- Cash provided by continuing operations 15,575 417 Net cash provided (used) by discontinued operations 227 (1,095) Investing activities: Purchase of property, plant and equipment (3,001) (2,950) Net proceeds from sale of assets - 2,000 --------- --------- Cash used by investing activities (3,001) (950) Financing activities: Payments received on notes receivable 238 - Payment of common share cash dividends (467) - Payment of preferred share cash dividends (852) (889) Other, net (3) (3) --------- --------- Cash used by financing activities (1,084) (892) Increase (decrease) in cash and cash equivalents 11,717 (2,520) Cash and cash equivalents at beginning of year 20,745 22,918 --------- --------- Cash and cash equivalents at end of period $ 32,462 $ 20,398 ========= ========= Supplemental disclosures: Cash paid for: Interest $ 1,026 $ 1,055 Income taxes 777 150 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 liabilities of these entities have been reported as "Net 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 nine months ended September 27, 1997 and September 28, 1996. Backlog Data The dollar amount of backlog of firm orders at September 27, 1997 was $111,954,000 compared to $81,754,000 at September 28, 1996. Inventories Inventories are summarized by major classification as follows: Sept. 27, 1997 Dec. 31, 1996 (in thousands) Raw material and supplies $ 3,457 $ 4,226 Work in process 3,966 3,380 Finished goods 405 388 ------- ------- $ 7,828 $ 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 Nine Months of 1997 compared with First Nine Months of 1996 Sales in the first nine months of 1997 were $70.1 million, 2% less than the $71.5 million reported in 1996. Sales in the Defense and Space Systems segment decreased 1% to $47.8 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 3% to $22.3 million. Sales increases in the Ceramics and Fiber Science business units were offset by lower sales in the Acoustic Products business unit. Earnings from operations (before general corporate expense allocations) in the first nine months of 1997 were $9.1 million, compared with $8.3 million in 1996 (excluding the post retirement health care curtailment gain of $7.1 million). Operating earnings in the Defense and Space Systems segment increased to $5.7 million in the first nine months of 1997 from $4.8 million for the same period in 1996. Increased earnings from both the Marine and Aircraft Systems and Combat Systems business units were partially offset by a decrease in earnings at the Electro-Optics business unit. The Industrial Products segment recorded operating earnings of $3.4 million in the first nine months of 1997, compared with $3.5 million for the same period in 1996. Increased earnings at the Ceramics business unit were offset by lower earnings at the Fiber Science and Acoustic Products business units. Selling, general and administrative expenses in the first nine months of 1997 were $11.0 million, compared with $10.7 million reported in the first nine months of 1996. Company sponsored research and development expenditures increased 159% from the like 1996 period to $1.4 million. While this increase was recorded principally in the Defense and Space Systems segment, each of our business units recorded higher funding levels in the first three quarters of 1997 compared with 1996. This increased level of expenditure of Company funds is consistent with the Company's current strategy of increased investment in product development for products that will contribute to future growth. Interest expense, net of interest income was $0.3 million in the first nine months of 1997, compared with $0.6 million in the like period of 1996. This reduction was due to increased interest income as a result of higher levels of invested cash. The Company reported net earnings available for common shares of $4,290,000 or $0.68 per share in the first nine months of 1997, compared to net earnings of $2,242,000, or $0.37 per share a year ago. Prior year results were negatively impacted by the losses recorded in the discontinued operations, partially offset by a gain from curtailment of post-retirement health care benefits. Page 9 Earnings per share calculations were based on a weighted average of 6.4 million shares outstanding for the first nine months of 1997 and 6.1 million shares for the like period in 1996. Liquidity and Capital Resources The Company's cash and cash equivalents increased $11.7 million from December 31, 1996 to $32.5 million at September 27, 1997. The increase results from net cash flow from operations of $15.6 million offset by $3.0 million for purchases of capital equipment and $1.3 million for both common and preferred dividends. The Company has an ESOT loan obligation that is currently $10.7 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"). This Agreement expires on June 30, 1998 and limits the cash portion of potential borrowings to $10 million There have been no cash borrowings under the Agreement. Capital expenditures in the first nine months of 1997 amounted to $3.0 million, the same as reported in the comparable period in 1996. 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 1997, the Board of Directors declared quarterly cash dividends of $0.025 per common share in each of the first three quarters. The Company believes it has adequate liquidity and sufficient capital resources to fund its plans. Backlog The backlog of unfilled orders at September 27, 1997 stood at $112.0 million compared with $81.8 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 Page 10 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934. Forward-looking 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 6.(a) Exhibits 4(a) - Amendment No. 11 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, 1996, effective as of October 31, 1997 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: November 10, 1997 EX-4.A 2 AMENDMENT NO. 11 TO GUARANTEE AGREEMENT AMENDMENT NO. 11 TO GUARANTEE AGREEMENT AMENDMENT NO. 11 (the "Amendment") dated as of October 31, 1997 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, Amendment No. 9 to Guarantee Agreement dated as of June 30, 1995, Amendment No. 10 to Guarantee Agreement dated as of June 30, 1996 and Letter Agreement dated May 12, 1997 (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) The definition of "Consolidated Total Liabilities" appearing in Schedule I is deleted in its entirety and the following is substituted therefor: "'Consolidated Total Liabilities': at a particular date, all items which would, in conformity with GAAP, be classified as liabilities on a consolidated balance sheet of the Guarantor and its Subsidiaries as at such date, but in any event including (a) indebtedness arising as a result of drawing(s) or the creation of acceptance(s) under letter(s) of credit issued by the Bank for the account of the Guarantor or any Subsidiary (except that portion, if any, of such liabilities which are fully cash collateralized), (b) all liabilities secured by any Lien on any property owned by the Guarantor or any Subsidiary even though such Person has not assumed or otherwise become liable for the payment thereof, and (c) any liability of the Guarantor or any Subsidiary or a Commonly Controlled Entity to a Multiemployer Plan." (b) The following new definitions are added in the appropriate alphabetical order in Schedule I: "'EBITDA': for any period, with respect to the Guarantor, on a consolidated basis, determined in accordance with GAAP, the sum of net income (or net loss) for such period plus, the sum of all amounts treated as expenses for: (a) interest, (b) depreciation, (c) amortization, and (d) all accrued taxes on or measured by income to the extent included in the determination of such net income (or net loss); provided, however, that net income (or net loss) shall be computed without giving effect to extraordinary losses or gains." "'Fixed Charge Ratio': as at the last day of any fiscal quarter, with respect to the immediately preceding four (4) fiscal quarters of the Guarantor ending on such date, the ratio of (x) EBITDA, to (y) the sum of Consolidated Interest Expense, cash dividends, capital expenditures, income taxes and scheduled payments in respect of Subordinated Debt." (c) A new subsection 10(b)(xvii) is added reading as follows: "(xvii) Fixed Charge Ratio. Permit, as of the last day of each fiscal quarter of the Guarantor, the Fixed Charge Ratio to be less than 1.4 to 1.0." 2. Defined terms used in this Amendment No. 11 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. 3. This Amendment No. 11 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__________________________ Title FLEET BANK, N.A. By__________________________ Title EX-27 3 ART. 5 DFS FOR 1997 9 MOS. 10-Q
5 1,000 9-MOS DEC-31-1997 SEP-27-1997 32,462 0 34,378 384 7,828 77,247 61,374 48,504 107,839 35,225 40,012 8,454 0 65 17,629 107,839 70,143 70,226 52,252 64,691 50 36 1,639 5,142 0 4,290 0 0 0 4,290 .68 .60
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