-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eX/eE9spscORCTttDpskKsnyJcloIUeoA11qQWiVzmsbBIPmu3gHvtEa2eER/nJP Cgh5R6MCw52Fhqa7fm5v2g== 0000915512-95-000004.txt : 19950615 0000915512-95-000004.hdr.sgml : 19950615 ACCESSION NUMBER: 0000915512-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950131 FILED AS OF DATE: 19950316 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENGINEERED SUPPORT SYSTEMS INC CENTRAL INDEX KEY: 0000772891 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 431313242 STATE OF INCORPORATION: MO FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13880 FILM NUMBER: 95521282 BUSINESS ADDRESS: STREET 1: 1270 N PRICE RD CITY: ST LOUIS STATE: MO ZIP: 63132 BUSINESS PHONE: 3149935880 MAIL ADDRESS: STREET 1: 1270 N PRICE RD CITY: ST LOUIS STATE: MO ZIP: 63132 10-Q 1 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarter ended January 31, 1995 Commission file number 0-13880 ENGINEERED SUPPORT SYSTEMS, INC. (Exact name of Registrant as specified in its charter) Missouri 43-1313242 (State of Incorporation) (IRS Employer Identification Number) 1270 North Price Road, St. Louis, Missouri 63132 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (314) 993-5880 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 The number of shares of the Registrant's common stock, $.01 par value, outstanding at February 28, 1995 was 3,167,304. 2 ENGINEERED SUPPORT SYSTEMS, INC. INDEX Page ---- Part I - Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of January 31, 1995 and October 31, 1994 3 Condensed Consolidated Statements of Income for the three months ended January 31, 1995 and 1994 4 Condensed Consolidated Statements of Cash Flows for the three months ended January 31, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Items 1-6 9 Signatures 10 Exhibits 11 3 ENGINEERED SUPPORT SYSTEMS, INC. Condensed Consolidated Balance Sheets
January 31 October 31 1995 1994 ------------ ------------ (Unaudited) ASSETS Current Assets Cash $ 26,911 $ 417,748 Accounts receivable 3,508,846 5,614,224 Contracts in process and inventories 9,709,828 9,544,444 Other current assets 689,106 612,666 ------------ ------------ Total Current Assets 13,934,691 16,189,082 Property, plant and equipment, less accumulated depreciation of $10,500,227 and $10,127,359 14,986,497 15,289,970 Intangible assets 1,622,449 1,693,163 Other assets 1,240,865 1,213,544 ------------ ------------ Total assets $ 31,784,502 $ 34,385,759 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable $ 3,451,368 $ 5,042,399 Current maturities of long-term debt 832,373 855,897 Accounts payable 4,395,835 4,705,367 Other current liabilities 1,687,995 2,464,999 ------------ ------------ Total Current Liabilities 10,367,571 13,068,662 Long-term debt 3,618,640 3,848,419 Deferred income taxes 2,834,818 2,834,818 ESOP guaranteed bank loan 1,266,900 1,303,800 Shareholders' Equity Common stock, par value $.01 per share; 10,000,000 shares authorized; 3,391,898 shares issued 33,919 33,919 Additional paid-in capital 7,670,152 7,670,152 Retained earnings 8,102,978 7,773,365 ------------ ------------ 15,807,049 15,477,436 Less ESOP guaranteed bank loan 1,266,900 1,303,800 Less treasury stock at cost, 224,594 shares 843,576 843,576 ------------ ------------ 13,696,573 13,330,060 ------------ ------------ Total Liabilities and Shareholders' Equity $ 31,784,502 $ 34,385,759 ============ ============
See notes to condensed consolidated financial statements. 4 ENGINEERED SUPPORT SYSTEMS, INC. Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended January 31 ----------------------------------- 1995 1994 ------------ ------------ Net revenues $ 15,343,691 $ 11,433,038 Cost of revenues 13,139,770 9,694,668 ------------ ------------ Gross profit 2,203,921 1,738,370 Selling, general and administrative expense 1,450,023 1,536,189 ------------ ------------ Income from operations 753,898 202,181 Interest expense 204,285 153,286 ------------ ------------ Income before income taxes 549,613 48,895 Income tax provision 220,000 20,000 ------------ ------------ Net income $ 329,613 $ 28,895 ============ ============ Net income per share $ .10 $ .01 ===== =====
See notes to condensed consolidated financial statements. 5 ENGINEERED SUPPORT SYSTEMS, INC. Condensed Consolidated Statements of Cash Flow (Unaudited)
Three Months Ended January 31 ---------------------------- 1995 1994 ------------- ------------- From operating activities: Net income $ 329,613 $ 28,895 Depreciation and amortization 472,677 501,571 ------------- -------------- Cash provided (used) before changes in operating assets and liabilities 802,290 530,466 Net (increase) decrease in non-cash current assets 1,863,554 (102,601) Net increase (decrease) in non-cash current liabilities (1,086,536) (1,047,153) (Increase) decrease in other assets (53,871) (264,592) ------------- -------------- Net cash provided by (used in) operating activities 1,525,437 (883,880) ------------- -------------- From investing activities: Additions to property, plant and equipment (140,790) (525,472) Disposal of property, plant and equipment 68,850 ------------- -------------- Net cash provided by (used in) investing activities (71,940) (525,472) ------------- -------------- From financing activities: Net borrowing (payments) under line-of-credit agreements (1,591,031) 1,460,872 Proceeds of long-term debt 1,500,000 Payments of long-term debt (253,303) (1,723,072) Exercise of stock options 53,262 ------------- -------------- Net cash provided by (used in) financing activities (1,844,334) 1,291,062 ------------- -------------- Net increase (decrease) in cash (390,837) (118,290) Cash at beginning of period 417,748 265,015 ------------- -------------- Cash at end of period $ 26,911 $ 146,725 ============== ==============
See notes to condensed consolidated financial statements. 6 ENGINEERED SUPPORT SYSTEMS, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) January 31, 1995 Note A - Basis of Presentation The accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended January 31, 1995 are not necessarily indicative of the results to be expected for the entire fiscal year. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report to shareholders for the year ended October 31, 1994. Note B - Net Income per Share Net income per share for the three months ended January 31, 1995 and 1994 is based on the weighted average number of common and common equivalent shares outstanding of 3,370,632 and 3,567,999, respectively. Common equivalent shares represent common stock options as computed based on the treasury stock method. Primary and fully diluted earnings per share are substantially the same for each of the periods presented. Note C - Long-Term Debt In December 1994, the Company retired the outstanding balance of the Industrial Development Refunding Revenue Bonds with proceeds generated upon restructuring its existing bank term loan. As a result, the balance of the term loan increased from $865,091 at October 31, 1994 to $2,768,088. The restructured term loan bears interest at 1.75% above the bank's prime rate and is payable in 45 monthly installments of $60,402 plus interest commencing January 1, 1995. 7 Note D - Contracts in Process and Inventories Contracts in process and inventories are comprised of the following:
January 31, 1995 October 31, 1994 ---------------- ---------------- Raw materials $1,856,290 $1,790,459 Work-in-process 65,848 91,945 Finished goods 335,733 241,730 Inventories substantially applicable to government contracts in process, less progress payments of $13,200,979 and $11,682,475 7,451,957 7,420,310 ---------- --------- $9,709,828 $9,544,444 ========== ==========
The contracts in process and inventories of EASI represent accumulated contract costs, estimated earnings thereon based upon the percentage of completion method and contract inventories reduced by the contract value of delivered items. ESP inventories are valued at the lower of cost or market using the first-in, first-out method. 8 ENGINEERED SUPPORT SYSTEMS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues increased 34% in the first quarter of 1995 to $15.3 million from $11.4 million in the first quarter of 1994. The increase in revenues was generated primarily by the Company's defense subsidiary, Engineered Air Systems, Inc. (EASI). After several years of significant first article testing and development, EASI is now in full production on several major contracts, primarily its MA-3D and C-5 flight line air conditioners. Gross profit for the first quarter of 1995 increased $0.5 million, or 27%, over the amount for the comparable 1994 period primarily reflecting an increase in production volume at EASI. The gross margin for the first quarter of 1995 was 14.4% as compared to 15.2% for the first quarter of 1994. Selling, general and administrative expense was $1.45 million and $1.54 million in the first quarter of 1995 and 1994, respectively. The 5% decrease in 1995 is due to expense reductions at ESP. Net interest expense increased $51,000, or 33%, in the first quarter of 1995 as compared with the first quarter of 1994. This was primarily the result of increased borrowing levels due to significant capital expenditures by ESP in 1994. Liquidity and Capital Resources At January 31, 1995, the Company's working capital and ratio of current assets to current liabilities were $3.6 million and 1.34 to 1 as compared to $3.1 million and 1.24 to 1 at October 31, 1994. This improvement is primarily a result of the impact of quarterly earnings. As of January 31, 1995, the Company had $2.3 million of unused credit related to its loan agreement. Business and Market Considerations As of January 31, 1995, EASI's funded backlog of defense orders was $92 million compared to $59 million a year ago. Options to existing contracts total approximately $130 million as of the end of the first quarter. Historically, the Company has been heavily dependent on the U.S. Government for business. However, because of declining defense budgets and increased competition within the current defense market, the Company began a plan of diversification in 1993 with the acquisition of ESP. This acquisition provided expansion into the commercial marketplace. Management intends to continue to pursue new acquisitions and business opportunities to complement existing product lines and provide strategic diversification. 9 PART II Other Information Item 1-5 Not applicable Item 6 (a) Exhibits 4. (i) Indenture of Trust dated as of April 1, 1990 by and between the Industrial Development Authority of St. Louis County, Missouri (the Issuer) and Mark Twain Bank, and Loan Agreement dated April 1, 1990 by and between the Issuer and Engineered Air Systems, Inc. evidencing long-term debt of the Company is incorporated herein by reference from Form 10-K Annual Report filed January 29, 1991. (ii) Registration Statement Number 33-14504 on Form S-8 dated May 22, 1987 for the registration of 340,000 shares of Engineered Support Systems, Inc. common stock, $.01 par value, pursuant to the Amended and Restated Engineered Air Systems, Inc. Employee Equity Plan, is incorporated herein by reference. (iii) Registration Statement Number 33-36818 on Form S-8 dated October 3, 1990, for the registration of 150,000 shares of Engineered Support Systems, Inc. common stock, $.01 par value, pursuant to the Engineered Air Systems, Inc. 1990 Stock Equity Plan, is incorporated herein by reference. (iv) Registration Statement Number 33-77340 on Form S-8 dated March 25, 1994 for the registration of 150,000 shares of Engineered Support Systems, Inc. common stock, $.01 par value, pursuant to the Engineered Air Systems, Inc. 1991 Stock Equity Plan, is incorporated herein by reference. (v) Registration Statement Number 33-77342 on Form S-8 dated March 25, 1994 for the registration of 30,000 shares of Engineered Support Systems, Inc. common stock, $.01 par value, pursuant to the Engineered Support Systems, Inc. 1992 Stock Option Plan for Non-employee Directors, is incorporated herein by reference. (vi) Registration Statement Number 33-77338 on Form S-8 dated March 25, 1994 for the registration of 150,000 shares of Engineered Support Systems, Inc. common stock, $.01 par value, pursuant to the Engineered Support Systems, Inc. 1993 Stock Option Plan, is incorporated herein by reference. 11. Statement Re: Computation of Net Income Per Share. (b) No reports on Form 8-K were filed during the quarter ended January 31, 1995. 10 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. ENGINEERED SUPPORT SYSTEMS, INC. Date: March 15, 1995 By: /s/ MICHAEL F. SHANAHAN SR. -------------- -------------------------------------- MICHAEL F. SHANAHAN SR. Chairman of the Board, President and Chief Executive Officer Date: March 15, 1995 By: /s/ GARY C. GERHARDT -------------- -------------------------------------- GARY C. GERHARDT Executive Vice President and Chief Financial Officer 11 Exhibit 11 ENGINEERED SUPPORT SYSTEMS, INC. Statement Re: Computation of Net Income Per Share
Three Months Ended January 31 ---------------------------- 1995 1994 -------------- ------------- NET INCOME $ 329,613 $ 28,895 ============= ============ NET INCOME PER SHARE Average shares outstanding 3,167,304 3,358,947 ============= ============ Net income $ .10 $ .01 ============= ============ PRIMARY EARNINGS PER SHARE Average shares outstanding 3,167,304 3,358,947 Net effect of dilutive stock options (1) 203,328 208,925 ------------- ------------ 3,370,632 3,567,872 ============= ============ Net income $ .10 $ .01 ============= ============ FULLY DILUTED EARNING PER SHARE Average shares outstanding 3,167,304 3,358,947 Net effect of dilutive stock options (1) 203,328 209,052 ------------- ------------ 3,370,632 3,567,999 ============= ============ Net income $ .10 $ .01 ============= ============
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