-----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, HsItPCWoDfm66wNNqjqpmNWbwybd0pqCT9GWE00mv9mX6BXdBo1JY2XyGZJQQOtE MSlG5J10FyC3qWxKfm1eJg== 0000950114-97-000121.txt : 19970306 0000950114-97-000121.hdr.sgml : 19970306 ACCESSION NUMBER: 0000950114-97-000121 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970305 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: 97550770 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 ENGINEERED SUPPORT SYSTEMS, INC. FORM 10-Q 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, 1997 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, 1997 was 3,188,507. 2 ENGINEERED SUPPORT SYSTEMS, INC. INDEX
Page ---- Part I - Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of January 31, 1997 and October 31, 1996 . . . . . . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Income for the three months ended January 31, 1997 and 1996 . . . . . . . . . . . 4 Condensed Consolidated Statements of Cash Flows for the three months ended January 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 . . . . . . . . . . 7 Part II - Other Information Items 1-6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2 3 ENGINEERED SUPPORT SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
January 31 October 31 1997 1996 ---------- ---------- (Unaudited) ASSETS Current Assets Cash and cash equivalents. . . . . . . . . $ 2,327,657 $ 1,415,773 Accounts receivable . . . . . . . . . . . 6,971,445 4,855,330 Contracts in process and inventories . . . 5,267,989 10,014,627 Other current assets . . . . . . . . . . . 1,320,763 1,149,054 ------------ ------------ Total Current Assets . . . . . . . . 15,887,854 17,434,784 Property, plant and equipment, less accumulated depreciation of $13,579,175 and $13,176,403 13,825,374 14,096,927 Intangible assets . . . . . . . . . . . . . . . 903,034 966,234 Other assets . . . . . . . . . . . . . . . . . 1,625,644 1,594,186 ------------ ------------ Total Assets . . . . . . . . . . . . . $ 32,241,906 $ 34,092,131 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt . . . $ 786,802 $ 786,802 Accounts payable . . . . . . . . . . . . . 4,025,100 5,834,454 Other current liabilities . . . . . . . . 1,727,473 2,459,315 ------------ ------------ Total Current Liabilities . . . . . . 6,539,375 9,080,571 Long-term debt . . . . . . . . . . . . . . . . 1,740,409 1,937,805 Deferred income taxes . . . . . . . . . . . . 2,801,639 2,801,639 ESOP guaranteed bank loan . . . . . . . . . . 984,000 1,020,900 Shareholders' Equity Common stock, par value $.01 per share; 10,000,000 shares authorized; 3,737,773 and 3,687,273 shares issued . . . . . . 37,378 36,873 Additional paid-in capital . . . . . . . . 9,321,869 8,998,489 Retained earnings . . . . . . . . . . . . 14,231,504 13,465,694 ------------ ------------ 23,590,751 22,501,056 Less ESOP guaranteed bank loan . . . . . . 984,000 1,020,900 Less treasury stock at cost, 541,266 and 522,313 shares . . . . . . . . . . . . . 2,430,268 2,228,940 ------------ ------------ 20,176,483 19,251,216 ------------ ------------ Total Liabilities and Shareholders' Equity . . . . . . . . . . . . . . $ 32,241,906 $ 34,092,131 ============ ============ See notes to condensed consolidated financial statements.
3 4 ENGINEERED SUPPORT SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended January 31 ----------------------------- 1997 1996 ------------ ------------ Net revenues . . . . . . . . . . . . . . . . $ 20,730,840 $ 17,047,573 Cost of revenues . . . . . . . . . . . . . . 17,615,553 14,567,185 ------------ ------------ Gross profit . . . . . . . . . . . . . . . . 3,115,287 2,480,388 Selling, general and administrative expense . . . . . . . . . 1,744,628 1,535,673 ------------ ------------ Income from operations . . . . . . . . . . . 1,370,659 944,715 Interest expense . . . . . . . . . . . . . . 37,828 135,887 ------------ ------------ Income before income taxes . . . . . . . . . 1,332,831 808,828 Income tax provision . . . . . . . . . . . . 530,000 323,000 ------------ ------------ Net income . . . . . . . . . . . . . . . . . $ 802,831 $ 485,828 ============ ============ Net income per share . . . . . . . . . . . . $ .24 $ .15 ===== ===== See notes to condensed consolidated financial statements.
4 5 ENGINEERED SUPPORT SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended January 31 ----------------------------- 1997 1996 ------------ ------------ From operating activities: Net income . . . . . . . . . . . . . . $ 802,831 $ 485,828 Depreciation and amortization . . . . . 473,146 467,836 ------------ ------------ Cash provided (used) before changes in operating assets and liabilities . . 1,275,977 953,664 Net (increase) decrease in non-cash current assets . . . . . . . . . . . . 2,458,814 (2,593,377) Net increase (decrease) in non-cash current liabilities . . . . . . . . . (2,541,198) 3,199,210 (Increase) decrease in other assets . . (23,192) (42,997) ------------ ------------ Net cash provided by (used in) operating activities . . . . . . . . 1,170,401 1,516,500 ------------ ------------ From investing activities: Additions to property, plant and equipment . . . . . . . . . . . . . . (131,219) (268,155) ------------ ------------ Net cash provided by (used in) investing activities . . . . . . . . (131,219) (268,155) ------------ ------------ From financing activities: Net payments under line-of-credit agreement . . . . . . . . . . . . . . (1,084,715) Payments of long-term debt . . . . . . . (197,396) (201,756) Purchase of treasury stock . . . . . . . (205,255) Exercise of stock options . . . . . . . 312,372 29,375 Cash dividends . . . . . . . . . . . . . (37,019) (29,811) ------------ ------------ Net cash provided by (used in) financing activities . . . . . . . . (127,298) (1,286,907) ------------ ------------ Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . 911,884 (38,562) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 1,415,773 386,609 ------------ ------------ Cash and cash equivalents at end of period $ 2,327,657 $ 348,047 ============ ============ See notes to condensed consolidated financial statements.
5 6 ENGINEERED SUPPORT SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 31, 1997 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, 1997 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, 1996. NOTE B - NET INCOME PER SHARE Net income per share for the three months ended January 31, 1997 and 1996 is based on the weighted average number of common and common equivalent shares outstanding of 3,332,995 and 3,221,091, 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:
January 31, 1997 October 31, 1996 ---------------- ---------------- Raw material $2,018,121 $ 1,643,824 Work-in-process 135,929 142,604 Finished goods 557,763 557,900 Inventories substantially applicable to government contracts in process, less progress payments of $19,050,508 and $17,619,487 2,556,176 7,670,299 ---------- ----------- $5,267,989 $10,014,627 ========== ===========
6 7 ENGINEERED SUPPORT SYSTEMS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenues increased 22% in the first quarter of 1997 to $20.7 million from $17.0 million in the first quarter of 1996. 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, Revetment Kits and Aviation Ground Power Units. Gross profit for the first quarter of 1997 increased $0.6 million, or 26%, over the amount for the comparable 1996 period reflecting an increase in production volume at Engineered Air and a significant margin expansion at Engineered Specialty Plastics, Inc. (ESP). The gross margin for the first quarter of 1997 was 15.0% as compared to 14.5% for the first quarter of 1996. Selling, general and administrative expense was $1.74 million and $1.54 million in the first quarters of 1997 and 1996, respectively. As a percent of net revenues, selling, general and administrative expense decreased from 9.0% in 1996 to 8.4% in 1997 as a result of management's continuing efforts to limit the growth of overhead expenses while increasing consolidated revenues. Interest expense decreased $98,000, or 72%, in the first quarter of 1997 as compared with the first quarter of 1996. This was the result of strong operational cash flow at both Engineered Air and ESP. LIQUIDITY AND CAPITAL RESOURCES At January 31, 1997, the Company's working capital and ratio of current assets to current liabilities were $9.3 million and 2.43 to 1 as compared to $8.4 million and 1.92 to 1 at October 31, 1996. As of January 31, 1997, the Company had $6.4 million of unused credit related to its loan agreement. BUSINESS AND MARKET CONSIDERATIONS As of January 31, 1997, EASI's funded backlog of defense orders was $77 million, with a related $154 million of government options. This compares to $102 million of funded backlog, with a related $87 million of government options at January 31, 1996. The Company is heavily dependent on the U.S. Government for business. Approximately 71% of consolidated net revenues for the three months ended January 31, 1997 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 marketplace. Management is continuing to pursue potential acquisitions, primarily within the defense industry. 7 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 33-77342 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. (iii) 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 quarter ended January 31, 1997. 8 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: March 14, 1997 By: /s/ MICHAEL F. SHANAHAN SR. ---------------- ---------------------------------------- MICHAEL F. SHANAHAN SR. Chairman of the Board, President and Chief Executive Officer Date: March 14, 1997 By: /s/ GARY C. GERHARDT ---------------- ---------------------------------------- GARY C. GERHARDT Executive Vice President and Chief Financial Officer 9 EX-11 2 COMPUTATION OF NET INCOME 1 EXHIBIT 11 ENGINEERED SUPPORT SYSTEMS, INC. STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE
Three Months Ended January 31 ----------------------------- 1997 1996 ------------ ------------ NET INCOME $ 802,831 $ 485,828 ============ ============ NET INCOME PER SHARE Average shares outstanding 3,182,114 2,983,443 ============ ============ Net income $ .25 $ .16 ============ ============ PRIMARY EARNINGS PER SHARE Average shares outstanding 3,182,114 2,983,443 Net effect of dilutive stock options 127,842 230,445 ------------ ------------ 3,309,956 3,213,888 ============ ============ Net income $ .24 $ .15 ============ ============ FULLY DILUTED EARNINGS PER SHARE Average shares outstanding 3,182,114 2,983,443 Net effect of dilutive stock options 150,881 237,648 ------------ ------------ 3,332,995 3,221,091 ============ ============ Net income $ .24 $ .15 ============ ============ Based on the treasury stock method
10 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS OCT-31-1997 NOV-01-1996 JAN-31-1997 2,327,657 0 7,252,772 281,327 5,267,989 15,887,854 27,404,549 13,579,175 32,241,906 6,539,375 2,724,409 37,378 0 0 20,139,105 32,241,906 20,730,840 20,730,840 17,615,553 17,615,553 1,734,301 10,327 37,828 1,332,831 530,000 802,831 0 0 0 802,831 .24 .24
-----END PRIVACY-ENHANCED MESSAGE-----