-----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, FUnzs1a7Hm1WFzXZxPZwGVOPPkJACUhgn5P2kQnbFbHEIdnFofNGNE4lB2xG0Dxq hck0/xgmOPPrt355Omsu9A== 0000950169-97-000386.txt : 19970506 0000950169-97-000386.hdr.sgml : 19970506 ACCESSION NUMBER: 0000950169-97-000386 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970505 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED RESEARCH CORP CENTRAL INDEX KEY: 0000003952 STANDARD INDUSTRIAL CLASSIFICATION: ORDNANCE & ACCESSORIES, (NO VEHICLES/GUIDED MISSILES) [3480] IRS NUMBER: 042281015 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11376 FILM NUMBER: 97594973 BUSINESS ADDRESS: STREET 1: 8000 TOWERS CRESCENT DR STREET 2: STE 750 CITY: VIENNA STATE: VA ZIP: 22182 BUSINESS PHONE: 7038475268 MAIL ADDRESS: STREET 1: 8000 TOWERS CRESCENT DRIVE STREET 2: STE 750 CITY: VIENNA STATE: VA ZIP: 22182 FORMER COMPANY: FORMER CONFORMED NAME: ALLIED RESEARCH ASSOCIATES INC DATE OF NAME CHANGE: 19880601 10-Q 1 ALLIED RESEARCH UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q Mark one (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) of the Securities Exchange Act of 1934 For the period ended March 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________________ to _____________________ Commission File Number 0-2545 -------------------- Allied Research Corporation -------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 04-2281015 - ------------------------------ ----------------------- (State or other jurisdiction of (I.R.S. Employer Number) incorporation or organization) 8000 Towers Crescent Drive, Suite 750 Vienna, Virginia 22182 ________________________________________ _________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (703) 847-5268 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 March 31, 1997: 4,528,058. ALLIED RESEARCH CORPORATION INDEX - --------------------------------------------------------------------------------
PAGE PART I. FINANCIAL INFORMATION - UNAUDITED NUMBER Item 1. Financial Statements Condensed Consolidated Balance Sheets December 31, 1996 and March 31, 1997.............................................2,3 Condensed Consolidated Statements of Earnings Three months ended March 31, 1997 and 1996.........................................4 Condensed Consolidated Statements of Cash Flows Three months ended March 31, 1997 and 1996.........................................5 Notes to Condensed Consolidated Financial Statements........................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................10 PART II. OTHER INFORMATION...................................................................................13
Allied Research Corporation CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) ASSETS (Unaudited) - --------------------------------------------------------------------------------
March 31, 1997 December 31, 1996 -------------- ----------------- CURRENT ASSETS Cash and equivalents, including restricted cash $21,621 $32,860 Accounts receivable 21,043 11,889 Costs and accrued earnings on uncompleted contracts 7,321 14,694 Inventories 6,069 7,171 Prepaid expenses and deposits 3,209 3,880 ------- ------- Total current assets 59,263 70,494 PROPERTY, PLANT AND EQUIPMENT - AT COST Buildings and improvements 12,431 13,316 Machinery and equipment 30,716 33,030 ------- ------- 43,147 46,346 Less accumulated depreciation 31,210 33,106 ------- ------- 11,937 13,240 Land 1,311 1,412 ------- ------- 13,248 14,652 OTHER ASSETS Intangibles, net of amortization 5,732 6,124 Other 689 678 ------- ------- 6,421 6,802 ------- ------- $78,932 $91,948 ======= =======
The accompanying notes are an integral part of these statements. 2 Allied Research Corporation CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED (Thousands of Dollars) LIABILITIES (Unaudited) - --------------------------------------------------------------------------------
March 31, 1997 December 31, 1996 -------------- ----------------- CURRENT LIABILITIES Notes payable $ 1,022 $ 3,318 Current maturities of long-term debt 12,336 14,099 Accounts and trade notes payable 14,489 18,571 Accrued liabilities 4,389 4,702 Customer deposits 5,252 10,935 Income taxes 1,343 805 -------- -------- Total current liabilities 38,831 52,430 LONG-TERM DEBT, less current maturities 6,999 7,443 DEFERRED INCOME TAXES 599 628 STOCKHOLDERS' EQUITY Preferred stock, no par value; authorized, 10,000 shares; none issued - - Common stock, par value, $.10 per share; authorized 10,000,000 shares; issued and outstanding, 4,528,058 in 1997 and 4,443,092 in 1996 453 444 Capital in excess of par value 11,508 10,846 Retained earnings 19,465 17,482 Accumulated foreign currency translation adjustment 1,077 2,675 -------- -------- 32,503 31,447 -------- -------- $78,932 $91,948 ======= =======
The accompanying notes are an integral part of these statements. 3 Allied Research Corporation CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Thousands of Dollars) (Unaudited) - --------------------------------------------------------------------------------
Three months ended March 31 --------------------------- 1997 1996 ----- ---- Revenue $ 29,765 $ 23,527 Cost and expenses Cost of sales 24,275 18,395 Selling and administrative 3,322 3,464 Research and development 367 411 ------------ ------------ 27,964 22,270 Operating income 1,801 1,257 Other income (deductions) Interest expense (508) (678) Interest income 253 397 Other - net 639 (116) ------------ ------------ 384 (397) Earnings before income taxes 2,185 860 Income taxes 201 224 ------------ ------------ NET EARNINGS $ 1,984 $ 636 ============ ============ Net income per common share $ .44 $ .14 ============== ============= Weighted average number of shares 4,472,340 4,422,634
The accompanying notes are an integral part of these statements. 4 Allied Research Corporation CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars) (Unaudited) - -------------------------------------------------------------------------------
Three months ended March 31 ---------------------------- Increase (decrease) in cash and equivalents 1997 1996 ---- ---- Cash flows from operating activities Net earnings $ 1,983 $ 636 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities Depreciation and amortization 403 352 Changes in assets and liabilities Accounts receivable (9,176) 1,879 Costs and accrued earnings on uncompleted contracts 6,316 (2,174) Inventories 590 (234) Prepaid expenses and other assets 375 (340) Accounts payable, accrued liabilities and customer deposits (7,943) (1,212) Income taxes 608 361 -------- ---------- Net cash (used in ) operating activities (6,844) (732) Cash flows (used in) investing activities Capital expenditures (326) (114) -------- ---------- Net cash (used in ) investing activities (326) (114) Cash flows from financing activities Principal payments of long-term debt - (1,291) Net increase (decrease) in short-term borrowings (2,700) (924) Stock award/stock plan 494 32 Options exercised 176 - Deposits - restricted cash - 2,340 -------- ---------- Net cash (used by) provided by financing activities (2,030) 157 Effects of exchange rate changes on cash (2,038) (694) -------- ---------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS (11,238) (1,383) Cash and equivalents at beginning of year 32,859 15,744 -------- ---------- Cash and equivalents at end of period $ 21,621 $14,362 ======== ========== Supplemental Disclosures of Cash Flow Information Cash paid during the period for Interest 220 $ 516 Taxes 150 60
The accompanying notes are an integral part of these statements. 5 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 (Thousands of Dollars) (Unaudited) - -------------------------------------------------------------------------------- NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheets as of March 31, 1997 and December 31, 1996, the condensed consolidated statements of earnings and the condensed consolidated statements of cash flows for the three months ended March 31, 1997 and 1996, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flow at March 31, 1997 and 1996 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1996 Form 10-K filed with the Securities and Exchange Commission, Washington, D.C. 20549. The results of operations for the period ended March 31, 1997 and 1996 are not necessarily indicative of the operating results for the full year. NOTE 2 - PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements include the accounts of Allied Research Corporation (a Delaware Corporation) and the Company's wholly-owned subsidiaries, Mecar, S.A. (a Belgian Company), Allied Research Corporation Limited (a United Kingdom Company), Barnes & Reinecke, Inc. (a Delaware Corporation). Mecar, S.A.'s wholly-owned Belgian subsidiaries include, Sedachim, S.I., Tele Technique Generale and VSK Electronics N.V. and its wholly-owned subsidiaries, Classics, B.V.B.A. Dectectia, N.V., IDCS, N.V. and Belgian Automation Units, N.V. (collectively "The VSK Group"). Significant intercompany transactions have been eliminated in consolidation. NOTE 3 - RESTRICTED CASH Mecar is generally required under the terms of its contracts with foreign governments to provide performance bonds, advance payment guarantees and letters of credit. The credit facility agreements used to provide these financial guarantees generally place restrictions on cash deposits and other liens on Mecar's assets. Cash totaling approximately $17,729 at March 31, 1997 ($20,116 at December 31, 1996) are restricted or pledged as collateral for various bank agreements and are comprised as follows:
1997 1996 ---- ---- Cash Credit facility and related term loan agreements $12,163 $18,382 Other bank guarantees and letters of credit 1,306 1,734 Notes payable - - ------- ------- $13,469 $20,116 ======= =======
6 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED March 31, 1997 (Thousands of Dollars) (Unaudited) - -------------------------------------------------------------------------------- NOTE 4 - INVENTORIES Inventories are composed of raw materials and supplies. NOTE 5 - NOTES PAYABLE Barnes and Reinecke has a $1,250 revolving line-of-credit agreement which had an outstanding balance at March 31, 1997 of $750. The outstanding borrowings under the similar line were $250 at December 31, 1996. The line-of-credit bears interest at the prime rate plus .5% and expires in June, 1997. Borrowings under the line-of-credit are secured by eligible accounts receivable, as defined in the agreement, and are guaranteed by the Company. The agreement contains covenants requiring the maintenance of certain financial ratios and other matters. Mecar has a $878 line-of-credit agreement with a foreign bank which has a balance of $272 at March 31, 1997 and no balance at December 31, 1996. The line is secured by a cash deposit pledge equal to the full amount of the line. NOTE 6 - CREDIT FACILITY The Company is obligated under a credit agreement (the old Agreement) with a banking pool comprised of four foreign banks that provided credit facilities primarily for letters of credit, bank guarantees, performance bonds and similar instruments required for specific sales contracts. The old Agreement provides for certain bank charges and fees as the line is used, plus an annual fee of approximately 2% of guarantees issued. As of March 31, 1997, the credit facility had been fully utilized and guarantees of $10,507 remain outstanding. The Company has a credit agreement (the new Agreement) with a banking pool comprised of five foreign banks that provide similar credit facilities for new contracts. The bank fee structure under the new Agreement and the old Agreement is similar. At March 31, 1997, advances under the old agreement were secured by deposits of $5,045, plus term deposits of $10,599. The term deposits correspond to the term loan agreement with two of the institutions in its foreign banking pool. The proceeds were place in deposit accounts as collateral for credit facility advances made by the pool under the old Agreement. Amounts outstanding are also collateralized by pledges of approximately $27,600 on Mecar's assets, letters of credit and certain funds received under the contracts financed. Both Agreements provide for restrictions on payments or transfers to Allied and ARCL for management fees, intercompany loans, loan payments, the maintenance of certain net worth levels and the payment of bank fees and charges. The Company is also liable for guarantees and other instruments issued on its behalf by other banks which approximate $1,734 at March 31, 1997, which are collateralized by $1,252 of time deposits. 7 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED March 31, 1997 (Thousands of Dollars) (Unaudited) - -------------------------------------------------------------------------------- NOTE 7 - LONG-TERM FINANCING Mecar is obligated on an approximately $5,000 mortgage on its manufacturing and administration facilities. As amended, the balance of the loan is payable in annual principal installments of approximately $600 and matures in 2004. The Company is also obligated on several mortgages on The VSK Group's buildings which has a balance of approximately $1,200 at March 31, 1997. The mortgages are payable in annual installments of approximately $250 plus interest. Barnes & Reinecke is obligated on two notes payable to its bank which have a total balance due of $183 at March 31, 1997 and $292 at December 31, 1996. Scheduled annual maturities of long-term obligations as of March 31, 1997 are approximately as follows: Year Amount ---- ------ 1997 $12,336 1998 1,700 1999 1,200 2000 1,200 2001 800 Thereafter 2,100 NOTE 8 - INCOME TAXES The Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). The provision for income taxes differs from the anticipated combined federal and state statutory rates due to operating losses and earnings from foreign subsidiaries. The Company's Belgian subsidiaries have unused net operating losses of approximately $2,200 at March 31, 1997, which under Belgian law cannot be carried back but may be carried forward indefinitely. As of March 31, 1997, the Company had unused foreign tax credit carryforwards of approximately $750 which expire through 2009. Deferred tax liabilities have not been recognized for bases differences related to investments in the Company's Belgian and United Kingdom subsidiaries. These differences, which consist primarily of unremitted earnings intended to be indefinitely reinvested, aggregated approximately $21,000 at March 31, 1997 and $18,800 at December 31, 1996. Determination of the amount of unrecognized deferred tax liabilities is not practicable. 8 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED March 31, 1997 (Thousands of Dollars) (Unaudited) - -------------------------------------------------------------------------------- NOTE 9 - EARNINGS (LOSS) PER SHARE Stock options outstanding have not been included in the per share computation because there would not be a material effect on earnings (loss) per share. 9 Allied Research Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 31, 1997 (Thousands of Dollars) (Unaudited) - -------------------------------------------------------------------------------- The Company conducts its business through its wholly-owned subsidiaries: Mecar, S.A., ("Mecar"), a Belgian corporation; Barnes & Reinecke, Inc. ("Barnes"), a Delaware corporation, headquartered in Illinois; Allied Research Corporation Limited ("Limited"), a U.K. company; as well as a group of Belgian corporations acquired by Mecar in 1994 and 1995 led by VSK Electronics, N.V., Teletechnique General, S.A. and IDCS, S.A. (collectively, the "VSK Group"). This discussion refers to the financial condition and results of operations of the company on a consolidated basis. Revenue Revenue for the first three months of 1997 was $29,765, an increase of 27% over the comparable period in 1996, principally due to increased revenue from Mecar. Mecar sales were $23,258, or up 47% compared to the period ended March 31, 1996. Barnes' revenue was $2,276, down 33% compared to the same period in 1996 principally due to delays in obtaining financing on a key contract. The VSK Group's revenue for the quarter was about the same as the prior period at approximately $4,250. Limited did not have revenue this period or in last year's comparable period. Backlog As of March 31, 1997, the Company's backlog was approximately $145,000 compared with $79,600 at December 31, 1996 and $60,333 at March 31, 1996. During the first quarter of 1997, Mecar received an order for $84 million from its principal customer. Operating Costs and Expenses Cost of sales for the first three months of 1997 were approximately $24,275, or 82% of sales, as compared to $18,395, or 78%, for the first three months of 1996. The increase is primarily due to the product mix. Selling and administrative expenses were approximately $3,322, or 11% of revenue, for the three months ended March 31, 1997 as compared to $3,464, or 15%, for the three months ended March 31, 1996. This decrease is a result of increased revenue. Research and Development Research and development expenses were 1% as a ratio of sales at March 31, 1997 and 2% as a ratio of sales for the three month period ended March 31, 1996, a decrease primarily due to an increase in volume. 10 Allied Research Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 31, 1997 (Thousands of Dollars) (Unaudited) - -------------------------------------------------------------------------------- Interest Expense Interest expense for the first three months of 1997 decreased, compared to the same period in 1996, as a result of decreased borrowing levels. Interest Income Interest income decreased as a result of a decrease in funds available for investment. Other - Net For the three months ended March 31, 1997, Other - Net represents primarily currency gains, net of currency losses, resulting from foreign currency transactions. Net Earnings The Company earned a $1,984 profit ($.44 per share) compared with a $0.636 profit ($0.14 per share) in the first three months of 1996. The increased net earnings was primarily attributable to an increased volume of business at Mecar. Liquidity and Capital Resources During the first three months of 1997 and throughout 1996, Allied funded its operations principally with internally generated cash and back-up credit facilities required for foreign government contracts. Mecar continues to finance its activities via credit facilities supplied by a foreign bank pool. Mecar is limited by its bank pool agreement in the amounts it may transfer to Allied or other affiliates. At March 31, 1997, the Company had unrestricted cash (i.e., cash not required by the terms of the bank pool agreement to collateralize contracts) of approximately $8,152, compared with approximately $12,000 at December 31, 1996. The decrease in unrestricted cash was caused in large part by substantial payments during the first quarter of 1997, of Company payables and other liabilities. The Company anticipates receiving a down payment on the large contract that was awarded in the first quarter 1997 of approximately $4,000 and upon receipt, that down payment will be pledged as collerateral. Accounts receivable at March 31, 1997 increased over December 31, 1996 by $9,153 and cost and accrued earnings on uncompleted contracts decreased by $7,372 from March 31, 1996 levels. Inventories decreased $1,102. Prepaid expenses and deposits decreased $673 primarily due to a decrease in prepaid expenses. Current liabilities decreased by $13,600 from December 31, 1996 levels as a result of decreases in accounts payable, notes payables, current maturities on long-term debt, accrued liabilities and customer deposits. In summary, working capital was approximately $20,433 at March 31, 1997, which is an increase of $2,369 from December 31, 1996. The increase is primarily attributable to operating activities at Mecar. 11 Allied Research Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS March 31, 1997 (Thousands of Dollars) (Unaudited) - -------------------------------------------------------------------------------- PART II. OTHER INFORMATION None. 12 Allied Research Corporation 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. ALLIED RESEARCH CORPORATION /s/ J. R. Sculley _________________________________ Date: May 2, 1997 J. R. Sculley Chairman of the Board, Chief Executive Officer and Chief Financial Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 MAR-31-1997 MAR-31-1997 $21,621,000 0 21,043,000 0 6,069,000 59,263,000 0 13,248,000 78,932,000 38,830,000 0 0 0 453,000 32,000,000 32,503,000 29,765,000 29,765,000 24,275,000 27,964,000 0 0 508,000 2,185,000 201,000 0 0 0 0 1,984,000 .44 .44
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