-----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, JayDPdlHQqbuC3ESIeU4BE3jampb80Xy5GqXveELdB9M8ctVHKpCV/ez6vh4M89D XcAheibRVwapecCGGlEZrA== 0000073864-98-000008.txt : 19981030 0000073864-98-000008.hdr.sgml : 19981030 ACCESSION NUMBER: 0000073864-98-000008 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19981029 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OEA INC /DE/ CENTRAL INDEX KEY: 0000073864 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 362362379 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-06711 FILM NUMBER: 98732936 BUSINESS ADDRESS: STREET 1: 34501 E QUINCY AVE CITY: DENVER STATE: CO ZIP: 80250 BUSINESS PHONE: 3036931248 MAIL ADDRESS: STREET 1: P O BOX 100488 CITY: DENVER STATE: CO ZIP: 80250 10-Q/A 1 QUARTER ENDED OCTOBER 31, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A [X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarterly period ended October 31, 1997 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934 For the transition period from to Commission file number 1-6711 OEA, INC. - ------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 36-2362379 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) P. O. Box 100488, Denver, Colorado 80250 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (303) 693-1248 (Former name, former address and former fiscal year, if changed since last report) 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 latest practicable date. 20,576,257 Shares of Common Stock at December 10, 1997. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Index to Financial Statements Page No. Consolidated Condensed Balance Sheets October 31, 1997 (unaudited) and July 31, 1997.............................. 2 Consolidated Condensed Statements of Earnings (unaudited) Three Months Ended October 31, 1997 and 1996................ 3 Consolidated Condensed Statements of Cash Flows (unaudited) Three Months Ended October 31, 1997 and 1996................ 4 Notes to Consolidated Condensed Financial Statements (Unaudited)......................... 5 OEA, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands) ASSETS October 31, July 31, 1997 1997 --------- -------- Current Assets: (Unaudited) Cash and Cash Equivalents $ 4,554 $ 4,138 Accounts Receivable, Net 46,524 45,099 Unbilled Costs and Accrued Earnings 4,109 4,062 Income Taxes Receivable 1,449 2,568 Inventories Raw Material and Component Parts 41,861 39,786 Work-in-Process 21,521 21,107 Finished Goods 11,000 9,513 -------- -------- 74,382 70,406 Prepaid Expenses and Other 2,007 1,046 -------- -------- Total Current Assets 133,025 127,319 -------- -------- Property, Plant and Equipment 256,882 238,545 Less: Accumulated Depreciation 58,913 54,651 -------- -------- Property, Plant and Equipment, 197,969 183,894 Net Cash Value of Life Insurance 317 317 Long-Term Receivable 3,000 3,000 Investment in Foreign Joint Venture 2,323 2,323 Deferred Charges --- 13,527 Other Assets 1,201 1,176 -------- -------- Total Assets $ 337,835 $ 331,556 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 17,714 $ 27,043 Interest Payable 1,714 1,431 Dividends Payable 6,800 --- Accrued Expenses 4,388 6,251 Federal and State Income Taxes 1,306 1,306 -------- -------- Total Current Liabilities 31,922 36,031 Long-term Bank Borrowings 120,000 93,200 Deferred Income Taxes 9,388 14,562 Other 985 985 -------- -------- Total Liabilities 162,295 144,778 -------- -------- Stockholders' Equity: Common Stock - $.10 par value, Authorized 50,000,000 shares: Issued - 22,019,700 shares 2,202 2,202 Additional Paid-In Capital 13,030 12,956 Retained Earnings 164,340 176,547 Less: Cost of Treasury Shares, (2,176) (2,164) 1,447,443 and 1,467,531 Equity Adjustment from Translation (1,856) (2,763) -------- -------- Total Stockholders' Equity 175,540 186,778 -------- -------- Total Liabilities and $ 337,835 $ 331,556 Stockholders' Equity ======== ========
OEA, INC. CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (in thousands except share data) Three Months Ended October 31, 1997 1996 -------- -------- Net Sales $ 57,335 $ 45,340 Cost of Sales 47,171 30,825 -------- -------- Gross Profit 10,164 14,515 General and Administrative Expenses 1,885 1,574 Research and Development Expenses 301 1,183 -------- -------- Operating Profit 7,978 11,758 Other Income (Expense): Interest Income 131 44 Interest Expense (975) (13) Other, Net 154 (114) -------- -------- (690) (83) -------- -------- Earnings Before Income Taxes 7,288 11,675 Federal and State Income Tax Expense 2,656 4,570 -------- -------- Net Earnings Before Cumulative Effect of a Change in Accounting Principle $ 4,632 $ 7,105 Cumulative Effect of a Change in Accounting (10,040) --- Principle -------- -------- Net Earnings (Loss) $ (5,408) $ 7,105 ======== ======== Earnings per Share Before Cumulative Effect of a Change in Accounting Principle $ 0.23 $ 0.35 Cumulative Effect of a Change in (0.49) --- Accounting Principle -------- -------- Earnings (Loss) per Share $ (0.26) $ 0.35 ======== ======== Weighted Average Number of Shares Outstanding 20,557,178 20,520,151 ======== ========
OEA, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended October 31, 1997 1996 -------- -------- Operating Activities: Net Earnings $ (5,408) $ 7,105 Adjustments to reconcile net earnings to net cash provided by operating activities: Undistributed earnings of foreign joint --- (50) venture Cumulative effect of a change in accounting 10,040 --- principal Depreciation and amortization 5,066 3,618 Increase in deferred compensation payable --- 31 Loss on disposal of property, plant and 2 --- equipment Changes in operating assets and liabilities: Accounts receivable (1,099) 1,633 Unbilled costs and accrued earnings (47) (1,412) Inventories (3,862) (3,556) Prepaid expenses and other (1,018) (203) Accounts payable and accrued expenses (11,266) (8,813) Income taxes payable 1,902 3,782 -------- -------- Net cash provided by/(used in) (5,690) 2,135 operating activities Investing activities: Capital expenditures (20,587) (7,077) Proceeds from sale of property, plant, and --- --- equipment Increase in deferred charges --- (752) Increase in other assets, net (35) (8) -------- -------- Net cash used in investing (20,622) (7,837) activities Financing activities: Purchases of common stock for treasury (43) --- Proceeds from issuance of treasury stock 105 210 Increase in borrowings, net 26,800 8,000 -------- ------- Net cash provided by financing 26,862 8,210 activities Effect of exchange rate changes (134) 16 on cash -------- -------- Net increase/(decrease) in cash 416 2,524 and cash equivalents Cash and cash equivalents at beginning of 4,138 2,560 period -------- -------- Cash and cash equivalents at end of period $ 4,554 $ 5,084 ======== ========
Notes to Consolidated Condensed Financial Statements (Unaudited) Note 1 - Basis of Presentation The unaudited financial statements furnished above have been restated to reflect the early adoption of the AICPA's Statement of Position 98-5 "Reporting on the Costs of Start-up Activities" (see Note 3 below). Additionally, the unaudited financial statements reflect all other adjustments (consisting primarily of normal recurring accruals) which are, in the opinion of OEA's management, necessary for a fair statement of the results for the three-month period ended October 31, 1997. Refer to the Company's annual financial statements for the year ended July 31, 1997, for a description of the accounting policies, which have been continued without change, except for the company's policy with respect to deferred start-up costs, as discussed at Note 3 below. Also, refer to the footnotes with those financial statements for additional details of the Company's financial condition, results of operations, and changes in financial position. The details in those notes have not changed except as a result of normal transactions in the interim. Note 2 - Earnings per Share Earnings per share of common stock is computed on the basis of the weighted average number of shares outstanding during the year. The effect on reported earnings per share from the assumed exercise of stock options outstanding during the three months ended October 31, 1997 and 1996 would be insignificant. In February 1997, the FASB issued Statement No. 128, Earnings per Share. The statement simplifies the standards for computing earnings per share ("EPS"), and requires the presentation of both basic and diluted EPS on the face of the statement of earnings with supplementary disclosures. Statement No. 128 will be effective for financial statements issued for periods ending after December 15, 1997, including interim periods. The Company will adopt Statement No. 128 in the second quarter of fiscal 1998 and does not expect the impact on the calculation of primary earnings per share and fully diluted earnings per share to be material. Note 3 - Start-up Costs In April 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 98-5, "Reporting on the Costs of Start-up Activities." This Statement requires entities to expense costs of start-up activities as they are incurred and to report the initial adoption as a cumulative effect of a change in accounting principle as described in Accounting Principles Board Opinion No. 20, "Accounting Changes." Statement of Position No. 98-5 is effective for fiscal years beginning after December 15, 1998. However, in July 1998, the Company elected to adopt Statement of Position 98-5 retroactively to the first quarter of fiscal 1998. This election required the restatement of fiscal 1998 quarterly financial statements to reflect a $10 million cumulative effect of a change in accounting principle in the first quarter and to expense start-up costs previously capitalized during the year. Note 4 - Recently Issued Pronouncements In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income. The Statement establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Statement No. 130 will be effective for fiscal years beginning after December 15, 1997. The Company will adopt Statement No. 130 during the first quarter of fiscal year 1999, and does not expect the impact to be material. In June 1997, the FASB issued Statement No. 131, Disclosures about Segments of an Enterprise and Related Information. The Statement requires public business enterprises to report certain information about operating segments in complete sets of financial statements of the enterprise and in condensed financial statements of interim periods issued to shareholders. It also requires that public business enterprises report certain information about their products and services, the geographic areas in which they operate, and their major customers. Statement No. 131 will be effective for fiscal years beginning after December 15, 1997. The Company will adopt Statement No. 131 in its fiscal year 1999. Note 5 - Bank Borrowings On December 18, 1996, the Company entered into an unsecured, four-year, $100 million Revolving Credit Agreement with a group of four banks. This agreement was amended on September 10, 1997 to increase the revolving credit facility to $130 million. The interest rate is .625% above the federal funds rate when total indebtedness is equal to or less than 30% of total capitalization and increases to .7% above the federal funds rate when total indebtedness exceeds 30% of total capitalization. Additionally, the Company pays an annual fee equal to .125% of the banks' total commitment. At the Company's discretion, it may convert all or part of the total debt to Eurodollar or Alternate Base Rate loan(s). The credit facility expires on December 18, 2000, and provides for annual twelve-month extensions to the termination date. At October 31, 1997, the total debt outstanding related to the revolving credit facility was $120 million. All debt relating to this facility is classified as long-term since no portion is either due or expected to be permanently repaid within the next twelve-month period. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS A summary of the period to period changes in the principal items included in the consolidated statements of earnings is shown below: Comparisons of Three Months Ended October 31, 1997 and 1996 Increase (Decrease) (in thousands) Net Sales 11,995 26.5% Cost of Sales 16,346 53.0% General and Administrative Expenses 311 19.8% Research and Development Expenses (882) (74.6%) Net Earnings Before Cumulative Effect of a Change in Accounting Principle (2,473) (34.8%) Net Earnings (12,513) (176.1%)
NET SALES The 26.5% increase in sales for the three months ended October 31, 1997, as compared to the prior-year period, was due to increased sales in both the automotive and nonautomotive segments. The automotive segment sales increased 23.7% ($8.6 million) to $45.0 million primarily due to 1) increased sales of OEA's first generation passenger side inflator, 2) sales of OEA's driver side, side-impact and second generation passenger side inflators, which began high-volume production late in the fourth quarter of fiscal year 1997, and partially offset by 3) a temporary reduction in initiator sales due to the timing of customer releases. This reflects continued strong customer acceptance of the Company's inflator program and increased demand for air bags from both domestic and foreign automobile manufacturers. The nonautomotive segment sales increased by 37.4% ($3.4 million) to $12.3 million for the first quarter, as compared to the prior-year period, primarily due to increases in engineering development contracts, the Delta satellite launcher program and the V-22 Osprey (tiltrotor aircraft) program. COST OF SALES Cost of sales increased by 53.0% for the three months ended October 31, 1997, as compared to the prior-year period. Gross margins were $10.2 million, or 17.7% of sales, for the first quarter as compared to the prior-year margin of $14.5 million, or 32.0% of sales. Gross margins in both initiators and inflators were below prior-year levels in the automotive segment. Initiator margins were down due to scheduled price reductions and lower leverage of fixed costs as a result of lower volume. Inflator costs were higher than in the prior-year period due to the ramp-up of four new production lines. The new lines will increase the annual production capacity for the Company's first generation passenger side inflator from 3 million to 5 million units and will add three new inflator product lines with an annual production capacity of 10 million units. These new product lines are 1) the driver's side inflator, 2) the side-impact inflator, and 3) the second-generation passenger side inflator. Production of the new inflator lines began late in the fourth quarter of fiscal 1997 and the production ramp-up will continue through the second quarter of fiscal 1998. Margins were further impacted by the continuing shift in product mix from initiators to inflators. In the first quarter of fiscal year 1997, initiator sales represented 46.2% of total automotive segment sales, whereas they represented only 26.3% of total automotive segment sales in the first quarter of fiscal year 1998. Initiators represent a more mature, higher margin product line, whereas inflators are in the early production and start-up stages of the products' life cycle. Additionally, inflator costs were higher than in the prior-year period due to the adoption of the AICPA's Statement of Position 98-5, "Reporting the Costs of Start-up Activities," which required that $2.6 million of previously capitalized start-up costs be expensed in the first quarter of fiscal 1998. This was partially offset by the reversal of $.3 million of capitalized start-up cost amortization, which previously had been expensed in the first quarter of fiscal 1998. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses increased by $0.3 million for the three months ended October 31, 1997, as compared to the prior-year period. This increase is primarily attributed to the increased activity in the Company's inflator division. The expenses, as a percentage of sales, were 3.3% in the first quarter of fiscal 1998 as compared to 3.5% for the prior-year period. RESEARCH AND DEVELOPMENT EXPENSES Research and development costs decreased by $0.9 million for the three months ended October 31, 1997, as compared to the prior-year period. The Company has shifted its resources from product research and development to product launch for its driver side, side-impact, and second-generation passenger side inflators. Development costs are not expected to increase significantly for the remainder of fiscal year 1998. NET EARNINGS BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE Net earnings before cumulative effect of a change in accounting principle decreased by $2.5 million, or 34.8%, for the three months ended October 31, 1997, as compared to the prior-year period. This reflects the higher costs associated with the product launch of the Company's three new inflator product lines, the expensing of inflator start-up costs incurred in the current period due to the adoption of the AICPA's Statement of Position 98-5 and the effects of the Company's changing product mix. CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE In April 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5). This Statement requires entities to expense costs of start-up activities as they are incurred and to report the initial adoption as a cumulative effect of a change in accounting principle as described in Accounting Principles Board Opinion No. 20, "Accounting Changes." Start-up activities are defined broadly as those one-time activities related to opening a new facility, introducing a new product or service, conducting business in a new territory, conducting business with a new class of customer or beneficiary, initiating a new process in an existing facility, or commencing some new operation. SOP 98-5 is effective for fiscal years beginning after December 15, 1998. However, in July 1998 the Company elected to adopt it retroactively to the first quarter of fiscal 1998. Accordingly, the fiscal 1998 first quarter financial statements have been restated to expense start-up costs in the net amount of $2.3 million (see "Cost of Sales" above). Additionally, the Company wrote off the net book value ($10.0 million) of its start-up and related costs included in the scope of SOP 98-5 as a one-time adjustment referred to as a Cumulative Effect of a Change in Accounting Principle. The total after-tax amount of these adjustments for the quarter is $11.5 million. NET EARNINGS Net earnings decreased by $12.5 million, or 176.1%, for the three months ended October 31, 1997, as compared to the prior-year period. This primarily reflects the adoption of SOP 98-5, "Reporting the Costs of Start-up Activities," and the operational and product mix issues discussed above. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital increased during the quarter to $101.1 million. During the three-month period ended October 31, 1997, the Company made capital expenditures totaling approximately $20.6 million, which were funded from bank borrowings. On December 18, 1996, the Company entered into a four-year, $100 million Revolving Credit Agreement with a group of four banks. The Company's principal bank is acting as agent for this agreement. On September 10, 1997, the agreement was amended to increase the revolving credit facility to $130 million. The Company had $120 million of long-term debt against this credit facility at October 31, 1997. Anticipated working capital requirements, capital expenditures, and facility expansions are expected to be met through bank borrowings under the revolving credit agreement and from internally generated funds. FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements with respect to the Company's sales, earnings, market penetration, plans, products, projections and other matters. These statements are based on assumptions as to future events and are therefore inherently uncertain. A number of factors, including those discussed below and elsewhere herein, may cause the Company's actual results to differ materially from those contemplated by these forward-looking statements. The Company's future sales in the automotive segment are expected to consist increasingly of passenger, driver and side-impact inflators that are being produced by the Company in new manufacturing facilities. These facilities are currently in operation and will have the ability to run at full capacity by the end of the fiscal year 1998. The Company's future inflator sales and market penetration will depend on its continued success in manufacturing inflators which meet the expectations of its customers in 1998 and beyond. The Company's expectations as to future sales are based upon annual blanket purchase orders received by customers in the automotive segment and governmental orders received in the nonautomotive segment. Annual blanket purchase orders are not binding on the Company's customers and actual quantities will depend upon weekly releases received from these customers. However, because the customers have designed the Company's products into their air bag modules and inflators, the Company believes the actual quantity sold will vary based on its customers sales. Governmental orders in the nonautomotive segment can be canceled or terminated for the convenience of the government. In addition, future technological developments could adversely impact sales of the Company's products. SIGNATURES 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. OEA, INC. (Registrant) October 27, 1998 /s/ J Thompson McConathy Date J. Thompson McConathy Vice President Finance (Principal Financialand Accounting Officer) October 27, 1998 /s/ Charles B Kafadar Date Charles B. Kafadar Chief Executive Officer (Principal Executive Officer) EX-27 2 FDS --
5 (Replace this text with the legend) 0000073864 OEA, INC./DE/ U.S. DOLLAR 3-MOS JUL-31-1998 AUG-01-1997 OCT-31-1997 1.00 4,554,000 0 46,524,000 0 74,382,000 133,025,000 256,882,000 58,913,000 337,835,000 31,922,000 0 0 0 2,202,000 173,338,000 337,835,000 57,335,000 57,335,000 47,171,000 49,357,000 690,000 0 975,000 7,288,000 2,656,000 4,632,000 0 0 (10,040,000) (5,408,000) (.26) (.26)
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