-----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, OgK0S6Lfd58kV/j4YlKb9Vh45qxjpRB/nK0a16CfomXM9Jzp+OiI9WqQmf6fdmFW lNgRWQ0hg+6kGJ8BLro4Kg== 0000031617-98-000007.txt : 19980513 0000031617-98-000007.hdr.sgml : 19980513 ACCESSION NUMBER: 0000031617-98-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980512 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: 98616787 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 28, 1998 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 28, 1998 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 March 28, 1998 Common shares, par value $1 per share 6,469,678 Page 2 EDO CORPORATION INDEX Page No. Face Sheet 1 Index 2 Part I Financial Information Item 1. Financial Statements Consolidated Balance Sheets - March 28, 1998 and December 31, 1997 3 Consolidated Statements of Earnings - Three Months Ended March 28, 1998 and March 29, 1997 4 Consolidated Statements of Cash Flows - Three Months Ended March 28, 1998 and March 29, 1997 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 (Dollars in thousands, except per share amounts) Assets March 28, 1998 Dec. 31, 1997 (unaudited) Current assets: Cash and cash equivalents $ 19,447 $ 20,351 Marketable securities 14,562 13,851 Accounts receivable 34,316 32,421 Inventories 8,371 6,816 Prepayments and other 3,101 5,564 --------- --------- Total current assets 79,797 79,003 Property, plant and equipment, net 12,996 12,865 Notes receivable 3,000 3,000 Cost in excess of fair value of net assets acquired, net 6,698 6,792 Other assets 7,223 7,141 --------- --------- $109,714 $108,801 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 22,586 $ 21,773 Contract advances and deposits 11,258 12,753 --------- --------- Total current liabilities 33,844 34,526 Long-term debt 29,317 29,317 ESOT loan obligation 10,015 10,368 Postretirement benefits obligation 3,526 3,526 Environmental obligation 2,929 2,929 Shareholders' Equity: 8% convertible preferred shares, par value $1 per share(liquidation preference $213.71 per share or $13,858 in the aggregate in 1998)authorized 500,000 shares (64,843 issued in both periods) 65 65 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 32,146 32,546 Retained earnings 29,107 27,641 --------- --------- 69,772 68,706 Less: Treasury shares at cost 1,984,224 shares in 1998 and 2,054,474 shares in 1997 (28,203) (29,201) ESOT loan obligation (10,015) (10,368) Deferred compensation under Long-Term Incentive Plan (1,471) (1,002) --------- --------- Total shareholders' equity 30,083 28,135 --------- --------- $109,714 $108,801 ========= ========= Page 4 EDO Corporation and Subsidiaries Consolidated Statements of Earnings (in thousands except per share amounts) For the three months ended March 28, 1998 March 29, 1997 (unaudited) Income Net sales $ 23,301 $ 23,704 Other 21 8 --------- --------- 23,322 23,712 Costs and expenses Cost of sales 17,056 17,915 Selling, general and administrative 3,601 3,700 Research and development 722 313 --------- --------- 21,379 21,928 Operating earnings 1,943 1,784 Non-operating income (expense) Interest income 545 325 Interest expense (558) (543) Other, net (25) ( 5) --------- --------- ( 38) (223) --------- --------- Earnings before Federal income taxes 1,905 1,561 Federal income tax expense - - --------- --------- Net earnings 1,905 1,561 Dividends on preferred shares 277 290 --------- --------- Net earnings available for common shares $ 1,628 $ 1,271 ========= ========= Earnings per common share: Basic $ 0.25 $ 0.21 ========= ========= Diluted $ 0.22 $ 0.18 ========= ========= Average shares outstanding: Basic 6,448 6,131 ========= ========= Diluted 7,623 7,363 ========= ========= Page 5 EDO Corporation and Subsidiaries Consolidated Statements of Cash Flows (in thousands) For the three months ended March 28, 1998 March 29, 1997 (unaudited) Operating activities: Net earnings $ 1,905 $ 1,561 Adjustments to net earnings to arrive at cash provided by operations: Depreciation and amortization 1,124 1,660 Common shares issued for employee benefits and directors' fees 129 71 Changes in: Accounts receivable (1,895) 749 Inventories (1,555) 189 Prepayments, other current assets and other assets 2,336 (2,380) Accounts payable and accrued liabilities 813 (503) Contract advances and deposits (1,495) 5,765 --------- --------- Cash provided by operations 1,362 7,112 Investing activities: Purchase of property, plant and equipment (1,116) (1,377) Purchase of marketable securities (711) - --------- --------- Cash used by investing activities (1,827) (1,377) Financing activities: Payments received on notes receivable - 88 Payment of common share cash dividends (162) (154) Payment of preferred share cash dividends (277) (290) --------- --------- Cash used by financing activities (439) (356) Net increase (decrease) in cash and cash equivalents (904) 5,379 Cash and cash equivalents at beginning of year 20,351 20,745 --------- --------- Cash and cash equivalents at end of period $19,447 $26,124 ========= ========= Supplemental disclosures: Cash paid for: Interest $ 0 $ 0 Income taxes 272 226 Page 6 Other Financial Information Item 1. Unaudited Financial Statements The accompanying unaudited, consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in financial statements prepared in conformity with generally accepted accounting principles. They should be read in conjunction with the consolidated financial statements of EDO Corporation (the "Company") for the fiscal year ended December 31, 1997, filed by the Company on Form 10-K with the Securities and Exchange Commission on March 20, 1998. The accompanying financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments and accruals) that management considers necessary for a fair presentation of its financial position and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year. Backlog Data The dollar amount of backlog of firm orders at March 28, 1998 was $98,818,000 compared to $113,320,000 at March 29, 1997. Inventories Inventories are summarized by major classification as follows: Mar. 28, 1998 Dec. 31, 1997 (in thousands) Raw material and supplies $ 4,347 $ 3,471 Work in process 3,888 3,120 Finished goods 136 225 --------- --------- $ 8,371 $ 6,816 Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: First Quarter 1998 1997 (in thousands) Numerator: Net earnings available for common shares, basic $1,628 $1,271 Impact of assumed conversion of preferredshares 25 28 ------- ------- Numerator for diluted calculation $1,653 $1,299 ======= ======= Denominator: Weighted average common shares outstanding, basic 6,448 6,131 Dilutive effect of stock options 192 119 Dilutive effect of conversion of preferred shares 983 1,113 ------- ------- Denominator for diluted calculation 7,623 7,363 ======= ======= Page 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations First Three Months of 1998 compared with First Three Months of 1997 Net sales for the first three months of 1998 were $23.3 million compared with $23.7 million reported in the same period in 1997. Sales increases from mine countermeasures systems, command and control and sonar systems were offset by decreases in satellite system sales. Earnings from operations in the first three months of 1998 were $1.9 million compared with $1.8 million in 1997. The increased operating earnings result from modest improvements in operating margins in substantially all of the Company's principal product lines, except for satellite systems. Selling, general and administrative expenses in the first three months of 1998 were $3.6 million compared with $3.7 million in the first three months of 1997. Company-sponsored research and development expenditures increased 131% to $0.7 million during the first three months of 1998 from the corresponding period in 1997. This increase is consistent with the Company's strategy of increased investment in product development that will contribute to future growth. Non-operating expense, net, was $0.04 million in the first three months of 1998, compared with $0.2 million in the corresponding period of 1997. This reduction was due to increased interest income as a result of higher levels of average invested cash. In the first three months of 1998 and 1997 the Company did not have a provision for Federal income taxes due to the utilization of tax loss carryforwards. The Company reported net earnings available for common shares of $1.6 million in the first three months of 1998 compared with $1.3 million a year ago. Basic net earnings per share were $0.25 in the first three months of 1998 compared with $0.21 in the corresponding period in 1997. Basic net earnings per share calculations are based on a weighted average of 6.4 million and 6.1 million common shares outstanding in the first three months of 1998 and 1997, respectively. Diluted earnings per share were $0.22 in the first three months of 1998 compared with $0.18 a year ago. Page 8 Financial Condition The Company's cash, cash equivalents and marketable securities decreased by $0.2 million during the quarter to $34.0 million at March 28, 1998. The decrease results from cash flow from operations of $1.4 million offset by $1.1 million for purchases of capital equipment and $0.4 million for payment of common and preferred dividends. The Company has outstanding $29.3 million of 7% Convertible Subordinated Debentures Due 2011. Commencing in 1996 and until their retirement, the Company is making annual sinking fund payments of $1.8 million. As of March 28, 1998 the Company had $2.2 million of these debentures remaining in treasury to be used for these annual requirements. The Company also has an ESOT loan obligation with a balance at March 28, 1998 of $10.0 million at an interest rate of 82% of the prime lending rate. The ESOT obligation agreement can be canceled or refinanced by the Company or the lender on or after April 1, 2000. The repayment of this obligation is funded through dividends on the Company's preferred shares and cash contributions. The Company recently announced that it is in final negotiations for a new $30 million secured multi-year revolving credit facility through Mellon Bank which will lead a syndicate of banks to provide the package. In addition to taking a portion of the revolving credit facility, Mellon Bank will also finance the remaining approximately $10.0 million balance of the Company's existing ESOT loan. This new credit facility will replace the Company's present $15.0 million secured line of credit which expires June 30, 1998. Capital expenditures in the first three months of 1998 totaled $1.1 million compared with $1.4 million in the same period in 1997. The total expenditures for 1998 are not expected to be significantly different than the $4.1 million in 1997. The Company believes that it has adequate liquidity and sufficient capital to fund its current operating plans. The backlog of unfilled orders at March 28, 1998 stood at $98.8 million compared with $113.3 million a year ago and $111.6 million at December 31, 1997. Page 9 "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 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 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 12, 1998 Page 12 EX-27 2 ART. 5 DFS FOR 1998 3 MOS. 10-Q
5 1,000 3-MOS DEC-31-1998 MAR-28-1998 19,447 14,562 34,316 361 8,371 79,797 62,489 49,493 109,714 33,844 39,332 8,454 0 65 21,564 109,714 23,301 23,322 17,056 21,379 25 12 558 1,905 0 1,628 0 0 0 1,628 .25 .22
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