-----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, Hd5eNZqxzx9EcilWHROEdFDrl2tFLL0GQbn2ZjiPFXa6obxyEsFPVYtFaojwAzBJ CFUyKDEzFm+W+wxYnxDmeQ== 0000915512-96-000022.txt : 19960916 0000915512-96-000022.hdr.sgml : 19960916 ACCESSION NUMBER: 0000915512-96-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960731 FILED AS OF DATE: 19960913 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENGINEERED SUPPORT SYSTEMS INC CENTRAL INDEX KEY: 0000772891 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] 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: 96630125 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 nine months ended July 31, 1996 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 August 31, 1996 was 3,148,245. 2 ENGINEERED SUPPORT SYSTEMS, INC. INDEX Page ---- Part I - Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of July 31, 1996 and October 31, 1995 3 Condensed Consolidated Statements of Income for the three months and nine months ended July 31, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II - Other Information Items 1-6 8 Signatures 9 Exhibits 10 3 ENGINEERED SUPPORT SYSTEMS, INC. Condensed Consolidated Balance Sheets
July 31 October 31 1996 1995 ------------ ------------ (Unaudited) ASSETS Current Assets Cash $ 134,343 $ 386,609 Accounts receivable 4,822,979 3,510,596 Contract in process and inventories 10,443,435 12,117,479 Other current assets 874,882 614,295 ------------ ------------ Total Current Assets 16,275,639 16,628,979 Property, plant and equipment, less accumulated depreciation of $12,767,948 and $11,626,806 14,082,771 14,601,129 Intangible assets 1,030,099 1,219,699 Other assets 1,445,703 1,341,805 ------------ ------------ Total assets $ 32,834,212 $ 33,791,612 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable $ 11,889 $ 1,124,041 Current maturities of long-term debt 790,491 827,371 Accounts payable 5,824,832 7,702,941 Other current liabilities 2,344,410 2,274,919 ------------ ------------ Total Current Liabilities 8,971,622 11,929,272 Long-term debt 2,194,521 2,755,157 Deferred income taxes 2,722,059 2,722,059 ESOP guaranteed bank loan 1,057,800 1,168,500 Shareholders' Equity Common stock, par value $.01 per share; 10,000,000 shares authorized; 3,617,273 and 3,456,961 shares issued 36,173 34,570 Additional paid-in capital 8,651,730 7,917,844 Retained earnings 12,270,765 10,217,090 ------------ ------------ 20,958,668 18,169,504 Less ESOP guaranteed bank loan 1,057,800 1,168,500 Less treasury stock at cost, 502,528 and 475,835 shares 2,012,658 1,784,380 ------------ ------------ 17,888,210 15,216,624 ------------ ------------ Total Liabilities and Shareholders' Equity $ 32,834,212 $ 33,791,612 ============ ============
See notes to condensed consolidated financial statements. 4 ENGINEERED SUPPORT SYSTEMS, INC. Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended July 31 July 31 ---------------------- --------------------- 1996 1995 1996 1995 --------- ---------- --------- ---------- Net revenues $ 21,623,122 $ 15,453,962 $ 57,594,493 $ 48,452,631 Cost of revenues 18,359,046 12,739,072 48,881,762 40,674,201 ------------ ------------ ------------ ------------ Gross profit 3,264,076 2,714,890 8,712,731 7,778,430 Selling, general and administrative expense 1,661,494 1,334,492 4,821,127 4,275,007 ------------ ------------ ------------ ------------ Income from operations 1,602,582 1,380,398 3,891,604 3,503,423 Interest expense 77,188 243,357 363,174 690,539 ------------ ------------ ------------ ------------ Income before income taxes 1,525,394 1,137,041 3,528,430 2,812,884 Income tax provision 609,000 453,000 1,409,000 1,124,000 ------------ ------------ ------------ ------------ Net income $ 916,394 $ 684,041 $ 2,119,430 $ 1,688,884 ============ ============ ============ ============ Net income per share $ .28 $ .21 $ .65 $ .51 ============ ============ ============ ============
See notes to condensed consolidated financial statements. 5 ENGINEERED SUPPORT SYSTEMS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended July 31 ---------------------------- 1996 1995 ------------- ------------- From operating activities: Net income $ 2,119,430 $ 1,688,884 Depreciation and amortization 1,352,261 1,451,732 ------------- -------------- Cash provided (used) before changes in operating assets and liabilities 3,471,691 3,140,616 Net (increase) decrease in non-cash current assets 101,074 638,068 Net increase (decrease) in non-cash current liabilities (1,808,618) (713,487) (Increase) decrease in other assets (83,231) 167,318 ------------- -------------- Net cash provided by (used in) operating activities 1,680,916 3,232,515 ------------- -------------- From investing activities: Additions to property, plant and equipment (622,784) (772,880) Disposals of property, plant and equipment 73,100 ------------- -------------- Net cash provided by (used in) investing activities (622,784) (699,780) ------------- -------------- From financing activities: Net payments under line-of-credit agreement (1,112,152) (1,068,403) Payments of long-term debt (597,516) (930,053) Purchase of treasury stock (250,544) (972,586) Exercise of stock options 715,568 175,873 Cash dividends (65,754) (29,337) ------------- -------------- Net cash provided by (used in) financing activities (1,310,398) (2,824,506) ------------- -------------- Net increase (decrease) in cash (252,266) (291,771) Cash at beginning of period 386,609 417,748 ------------- -------------- Cash at end of period $ 134,343 $ 125,977 ============== ==============
See notes to condensed consolidated financial statements. 6 ENGINEERED SUPPORT SYSTEMS, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) July 31, 1996 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 nine month period ended July 31, 1996 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, 1995. Note B - Net Income per Share Net income per share is based on the weighted average number of common and common equivalent shares outstanding of 3,269,781 and 3,184,918 for the three months ended July 31, 1996 and 1995, respectively, and 3,250,222 and 3,325,425 for the nine months ended July 31, 1996 and 1995, 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 - Contracts in Process and Inventories Contracts in process and inventories of Engineered Air Systems, Inc. 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. Inventories of Engineered Specialty Plastics, Inc. are valued at the lower of cost or market using the first- in, first-out method. Contracts in process and inventories are comprised of the following:
July 31, 1996 October 31, 1995 ---------------- ---------------- Raw materials $1,797,634 $1,594,199 Work-in-process 119,740 142,615 Finished goods 334,861 368,400 Inventories substantially applicable to government contracts in process, less progress payments of $20,190,315 and $15,182,542 8,191,200 10,012,265 ----------- ----------- $10,443,435 $12,117,479 =========== ===========
7 ENGINEERED SUPPORT SYSTEMS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues increased 40% in the third quarter of 1996 to $21.6 million from $15.5 million in the third quarter of 1995, and increased 19% to $57.6 million in the first nine months of 1996 from $48.5 million in the first nine months of 1995. The increase in revenues was generated primarily by the Company's defense subsidiary, Engineered Air Systems, Inc. (Engineered Air). Production levels remained high at Engineered Air, driven by its contracts for Flight Line Air Conditioners, Water Distribution Systems, Army Space Heaters, Revetment Kits and Aviation Ground Power Units. Gross profit for the third quarter of 1996 increased $0.5 million, or 20% over the amount for the comparable 1995 period, primarily reflecting the increase in production volume at Engineered Air. The gross margin for the third quarter of 1996 was 15.1% as compared to 17.6% for the third quarter of 1995. Selling, general and administrative expense was $1.67 million and $1.33 million in the third quarter of 1996 and 1995, respectively. As a percent of net revenues, selling, general and administrative expense decreased from 8.6% in the third quarter of 1995 to 7.7% in 1996. For the nine months ended July 31, 1996, this percentage was 8.4% compared to 8.8% for the first nine months of 1995. Interest expense decreased $166,000, or 68%, in the third quarter of 1996 as compared with the third quarter of 1995. This was primarily the result of continuing strong cash flow at Engineered Air. Liquidity and Capital Resources At July 31, 1996, the Company's working capital and ratio of current assets to current liabilities were $7.3 million and 1.81 to 1 as compared to $4.7 million and 1.39 to 1 at October 31, 1995. As of July 31, 1996, the Company had $6.4 million of unused credit related to its loan agreement. Business and Market Considerations As of July 31, 1996, Engineered Air's funded backlog of defense orders was $92 million compared to $88 million a year ago. The Company is heavily dependent on the U.S. Government for business. (Approximately 70% of consolidated net revenues for the nine months ended July 31, 1996 were derived from contracts with the U.S. Government and its agencies). The Company began a plan of diversification in 1993 with the acquisition of ESP. This acquisition provided expansion into the commercial merketplace. Management continues to pursue new acquisitions and business opportunities to complement exisiting product lines and provide strategic diversification. 8 PART II Other Information Items 1-5 Not applicable. Item 6 (a) Exhibits 4. (i) 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. (ii) 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. (iii) 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. (iv) 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. (v) 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. 27. Statement Re: Summary Financial Information. (b) No reports on Form 8-K were filed during the nine months ended July 31, 1996. 9 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: September 6, 1996 By: /s/ MICHAEL F. SHANAHAN SR. ----------------- -------------------------------------- MICHAEL F. SHANAHAN SR. Chairman of the Board, President and Chief Executive Officer Date: September 6, 1996 By: /s/ GARY C. GERHARDT ----------------- -------------------------------------- GARY C. GERHARDT Executive Vice President and Chief Financial Officer 10 Exhibit 11 ENGINEERED SUPPORT SYSTEMS, INC. Statement Re: Computation of Net Income Per Share
Three Months Ended Nine Months Ended July 31 July 31 --------------------------- ----------------------- 1996 1995 1996 1995 ------------- ------------- ----------- ----------- NET INCOME $ 916,394 $ 684,041 $ 2,119,430 $ 1,688,884 ============= ============= =========== =========== NET INCOME PER SHARE Average shares outstanding 3,098,075 2,931,503 3,035,894 3,057,903 ============= ============= =========== =========== Net income $ .30 $ .23 $ .70 $ .55 ============= ============= =========== =========== PRIMARY EARNINGS PER SHARE Average shares outstanding 3,098,075 2,931,503 3,035,894 3,057,903 Net effect of dilutive stock options (1) 171,881 252,597 204,992 222,809 ------------- ------------- ----------- ----------- 3,269,956 3,184,100 3,240,886 3,280,712 ============= ============= =========== =========== Net income $ .28 $ .21 $ .65 $ .51 ============= ============= =========== =========== FULLY DILUTED EARNINGS PER SHARE Average shares outstanding 3,098,075 2,931,503 3,035,894 3,057,903 Net effect of dilutive stock options (1) 171,706 253,415 214,328 267,522 ------------- ------------- ----------- ----------- 3,269,781 3,184,918 3,250,222 3,325,425 ============= ============= =========== =========== Net income $ .28 $ .21 $ .65 $ .51 ============= ============= =========== ===========
(1) Based on the treasury stock method. EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE NINE MONTHS ENDED JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS OCT-31-1995 JUL-31-1996 134,343 0 5,007,931 184,952 10,443,435 16,275,639 26,850,719 12,767,948 32,834,212 8,971,622 3,252,321 36,173 0 0 17,852,037 32,834,212 57,594,493 57,594,493 48,881,762 48,881,762 4,792,427 28,700 363,174 3,528,430 1,409,000 2,119,430 0 0 0 2,119,430 .65 .65
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